YOUR COMPANY IS LOOKING FOR BUSINESS REVOLVING CREDIT FACILITIES!
SMALL BUSINESS LINES OF CREDIT TO MANAGE YOUR CASH FLOW
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Financing & Cash flow are the most significant issues facing business today.
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
A line of credit business loan is an essential financial tool for businesses seeking flexible and ongoing access to funds.
Struggling to maintain steady cash flow? Discover how a line of credit business loan can provide the financial flexibility your business needs.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer LINE OF CREDIT BUSINESS LOAN solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
Canadian Business Financing with the intelligent use of experience
BUSINESS LINE OF CREDIT LOANS
Getting a business credit line loan in Canada can make Canada's business owner / financial manager feel somewhat ' highly fuzzy. ‘ It's easy to understand as commercial loans in Canada, specifically revolving credit facilities, come in different shapes and sizes! Let's dig in.
Understanding the Line of Credit Business Loan
Securing flexible financing options is important to run and grow a business. A line of credit business loan is a versatile solution, allowing companies to access funds as needed, manage cash flow effectively, and take advantage of opportunities promptly. Unlike traditional loans, lines of credit provide a revolving credit limit so businesses can borrow, repay, and borrow again, ensuring continuous financial support.
WHY DOES YOUR BUSINESS NEED A LINE OF CREDIT?
A credit line is needed for most businesses to maintain cash flow for business growth and ‘operating cycles.’ Those cycles are driven by seasonality, the level of current assets in a company (inventory and receivables) and the overall timing related to inflows and outflows in small businesses such as yours. It is important to differentiate between term loans and working capital, leading to a financing mismatch.
THE 'STATEMENT OF CASH FLOWS' TELLS YOUR TRUE CASH FLOW STORY!
While many business owners are somewhat purposely unfamiliar with Page 3 of their financial statement (the ' statement of cash flows ‘), this is perhaps the most telling document about their business. It's a classic case of what we old school types call ' where got/ where gone '!
2 REASONS FOR A LINE OF CREDIT?
So why do commercial loans for a credit facility make sense for a business needing to borrow money? Two words basically - Grow / Operate…
A business line offers small businesses access to flexible funding for various purposes, such as covering operations during slower months, without restrictions on usage and with quick approval and access.
DOES THE BANK SATISFY ALL YOUR CURRENT BUSINESS FUNDING NEEDS?
Our Canadian chartered banks are the natural corporate loans ‘go-to’ for most owners, entrepreneurs, and financial managers for a business bank loan related to a business credit line loan.
The criteria for approval are simple - but sometimes simply hard to achieve. They include profits, positive cash flows, and your business’s overall financial performance related to the balance sheet. That relates to the owner/owners balance sheets as banks emphasize outside collateral and personal creditworthiness of ownership of the firm.
The credit amount is determined based on personal credit rating, net worth, company performance, collateral, turnover, and the option to purchase a guarantee to obtain larger loan amounts.
A bank's credit line almost always has a limit, and it becomes the responsibility of owners/managers to ensure continual drawing down. Repayment of the loan is handled satisfactorily.
Sometimes, a bank might consider converting a part of the credit line into a term loan.
AN ALTERNATIVE BUSINESS CREDIT LINE VIA ASSET-BASED LENDING!
One healthy alternative in business bank loans (What? There are Alternatives?!) to that bank facility is a non-bank asset-based credit line.
These facilities allow your business to borrow, under one roof, funds against a combination of A/R, inventory and equipment. While bank credit lines are rigid and typically reviewed annually, the Asset credit facility can quickly fluctuate according to your needs and sales growth.
MATCHING SHORT TERM OBLIGATIONS WITH SHORT TERM WORKING CAPITAL FINANCING!
It is always important for the company to use these types of loans judiciously. They should rarely be used to purchase assets or make long-term investments in the business. That’s a classic mismatch of the intended use.
WHAT ARE SOME SUBSETS OF ASSET BASED LOANS? PROTECT YOUR BUSINESS FROM UNEXPECTED CASH SHORTFALLS WITH ANY OF THESE SOLUTIONS
We have called these ‘subsets‘ of a credit line - These are niche borrowing facilities specifically tailored to your firm’s or industry’s specific needs.
Business lines of credit, particularly small business lines, have specific qualification requirements that can be met online.
They include:
Inventory financing
Factoring/ Confidential Receivable Financing
Purchase Order/ Supply Chain finance
SR&ED tax credit monetization
Business Credit Card
Royalty financing
Sizes of borrowing will always vary specifically to a firm’s needs, and actual finance charges and the interest rate on small business loans will depend on whether your firm has chosen a traditional or alternative financial source. Most solutions will come with a fixed rate or variable rate - you decide what is best for your firm, subject to credit approval.
Some firms in the early and start-up stages will benefit from the Government of Canada Small Business Financing Program - a government-guaranteed loan that funds assets, leasehold improvements, and real estate.
Owners of small businesses always focus on interest rates, and the interest rate in the ‘SBL LOAN’ is desirable. This business loan comes with no prepayment penalties and flexible terms and conditions that include a limited personal guarantee -
A good credit score and personal credit history is required to access the program and achieve the reasonable commercial loan interest rate that comes with the program.
The government loan funds equipment, leasehold improvements, and real estate are not cash loans or lines of credit. The most common loan amount cap under the program is 350k, but real estate can be funded to 1 Million dollars. Changes to the government loan program in 2022 will allow you to finance working capital costs.
KEY TAKEAWAYS
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Interest Rates: Understanding the cost associated with borrowing through a line of credit, which can vary based on creditworthiness and market conditions.
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Revolving Credit: The ability to borrow, repay, and borrow again up to the credit limit, providing ongoing access to funds with no minimum monthly payments /lump sum payment on the facility Borrowers pay interest only on funds drawn down,
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Application Process: Steps required to apply, including documentation and eligibility criteria, which influence approval chances.
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Uses for Business Credit: Common scenarios where businesses utilize lines of credit, such as managing cash flow, purchasing inventory, or covering unexpected expenses.
CONCLUSION
If achieving business credit lines in the world of small business financing that makes sense for your firm is at the top of your ' TO DO ' list, call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your short term borrowing needs and small business loans that suit your business needs.
Talk to the 7 Park Avenue Financial team for real-world business advice about your business funding needs in business credit and business loan rates suited to your business credit profile.
FAQ
What is the difference between a business loan and a line of credit?
A business loan provides a lump sum of money repaid over a fixed term, while a line of credit offers revolving access to funds up to a predetermined limit.
Can I use a line of credit for any business expense?
Yes, a line of credit can be used for various business expenses, including inventory purchases, payroll, and unexpected costs, offering great flexibility.
What factors affect my eligibility for a line of credit?
Eligibility is influenced by factors such as credit score, business revenue, financial history, and the lender's specific requirements.
How quickly can I access funds from a line of credit?
Once approved, you can access funds from a line of credit almost immediately, providing a quick solution for urgent financial needs.
Are there any risks associated with using a line of credit?
Risks include potential debt accumulation if not managed properly and fluctuating interest rates that could increase borrowing costs over time.
How does a line of credit business loan differ from a term loan?
A line of credit business loan provides revolving credit, allowing repeated access to funds, unlike a term loan with a monthly payment or lump sum payment requirement, which offers a one-time lump sum with fixed repayment terms.
What documentation is typically required to apply for a line of credit?
Depending on the lender's requirements, documentation may include financial statements, tax returns, business plans, and personal credit information.
How can a line of credit improve my business's cash flow management?
A line of credit helps manage cash flow fluctuations by providing access to funds when needed. This ensures that you can cover expenses and seize business opportunities promptly.
How does account receivable financing work?
Account receivable financing allows businesses to sell their outstanding invoices to a lender for immediate cash. This helps improve cash flow and reduces the waiting period for invoice payments.
What are the benefits of account receivable financing?
Benefits include improved cash flow, quick access to funds, reduced collection times, and the ability to leverage outstanding invoices for immediate working capital.
Who can benefit from account receivable financing?
Account receivable financing can significantly benefit businesses with slow-paying customers or seasonal sales cycles. It provides steady cash flow and reduces financial stress.
Is account receivable financing expensive?
Costs can vary based on the type of commercial lender or financial institution, but fees are typically based on the invoice value and the creditworthiness of your customers. It's essential to compare different lenders to find the most favourable terms.
How does account receivable financing impact customer relationships?
Generally, it does not affect customer relationships as the financing company handles collections discreetly. However, choosing a lender that respects your customer relationships is crucial. Companies also have the option of choosing a Confidential a/r finanding solutions,which allows them to bill and collect their own receivables.
