YOUR COMPANY IS LOOKING FOR BANK FINANCING!
Commercial Banking / Business Loans In Canada
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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Bank financing in Canada. Should it be a mystery to the Canadian business borrower seeking a commercial corporate banking facility? We don't think so, and here's why.
ARE CANADIAN BANKS THE ' GO TO ' FOR BUSINESS FINANCING IN CANADA
It's no secret that the Canadian chartered banks are typically the first ' go-to ‘solution for both debt and operating financing. Because of our strong centralized banking system, the product and service availability in Canada for commercial borrowers covers a broad spectrum - business lines of credit, term loans, etc.
THE CASH FLOW AND COLLATERAL ISSUE!
So what are some of the reasons that your firm’s ability to seemingly tap these great sources of capital seems unattainable? It comes down to understanding where the other side is coming from, and we can guarantee you that the ' other side' is focusing on first: CASH FLOW... and second ' Collateral. And those two items by the way are pretty well in order of priority!
Another point that needs to be mentioned and addressed in either your discussions or presentation (verbal or otherwise) is the concept that those cash flows must have some sort of level of predictability.
THE CANADIAN BANK PRODUCT AND SERVICE OFFERING IS TREMENDOUS
Many of the products and services offered by banks in Canada are also offered by what we term 'non-bank' commercial lenders. They are not regulated. Banks of course are strongly regulated in Canada (we hope!). The reason they take a bit more of a conservative approach is that they are constantly balancing their own capital, profits, and general liquidity. It would seem they have the same challenges as your firm!! Numerous other services are provided by banks, business credit cards, short term loans, etc.
Banks in Canada are able to provide all their service to large corporations and governments at all levels. Key products include revolving credit lines, acquisition financing, , asset-based loans, and asset-based lending facilities that are margined at significantly high levels. Trade finance services are also a key part of the banking environment.
Canadian banks are large real estate lenders providing both mortgages and securitization facilities for every industry in Canada, including key industries such as oil and gas. The power of the Canadian bank is that it can offer multiple types of financing across a broad line of industries, allowing services to increase as companies grow. When facilities are larger the banks syndicate loans.
LENDING CRITERIA FOR BANK FINANCING
The emphasis on those points we have mentioned above relates to how they address lending criteria when it comes to types of assets financed, cash flow coverage, and personal guarantees. The Canadian business borrower needs to understand that its bank criterion that determines your loan pricing, rates, and where you stand in the bank's credit scoring model. (Investment grade is good ... if you're in special loans that’s bad).
IS YOUR COMPANY IN SPECIAL LOANS - HAS YOUR DEMAND LOAN BEEN CALLED?
Many Canadian firms that accessed bank financing might in fact find themselves being placed in the ' special loan ' category we mentioned above. Your bank facilities are recorded as none performing, and in general, the bank wants you to leave. Not all the time... most of the time. Business borrowers who find themselves in special loans are very salvageable when it comes to exiting a bank relationship. Often they might simply be ' out of covenant ' and that can be addressed by altering the criteria of a non-bank lender.
We often speak to clients that are in Special Loans that are in fact courting other banks. It’s our experience that banks don’t purchase their competitor's problems; it’s as simple as that. So non-bank solutions are the best for the exiting of a Special loan scenario.
INTEREST RATES / COST OF FINANCING
Another key premise to get under your belt is the fact that bank pricing is pretty well the best and lowest priced financing in Canada. Banks don’t have an upside on your deal - they just want to get paid. So address your presentation, (again verbal or written) with a focus on repayment and stability and management experience. If you look at the financial statements of most banks we think you'd find that commercial borrowing isn’t the real profit center.
CONCLUSION
How do you find the best corporate bankers in business credit Canada? Please note we said bankers, not banks. You do that by developing a relationship with sources that know who these specific bankers are.
IT IS NOT ALL ABOUT THE RATE !
As a final note, because you're getting the lower rates in Canada we don’t recommend posturing for the last basis point in a rate reduction. Instead focus on covenants, guarantees, and relationships.
Bank financing and commercial corporate banking are great financing solutions. It's available to many, but not all. If you do qualify speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in forging a facility that makes sense for your firm.
