YOUR COMPANY IS LOOKING FOR BUSINESS FINANCING SOLUTIONS!
SMALL BUSINESS LOANS AND BUSINESS FINANCING
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest 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
THE IMPORTANCE OF BUSINESS FINANCING SOLUTIONS FOR CANADIAN BUSINESSES
Funding businesses in Canada often comes down to recognizing what type of business financing loans make sense for your firm. In fact, not properly ascertaining what type of finance or business loan is needed makes sense, or that your company is qualified for is what it's really all about - It's all about ways to finance your business. Let’s dig in.
UNDERSTANDING YOUR BUSINESS FINANCE NEEDS
"You can't build a reputation on what you are going to do." - Henry Ford
Let's dig in!
WHAT TYPES OF BUSINESS FINANCING ARE AVAILABLE IN CANADA - THE PROS AND CONS OF DIFFERENT BUSINESS FINANCING OPTIONS IN CANADA
It’s no secret that it's a challenge for small and medium-sized businesses in Canada to access capital in Canada. Canadian banks of course maintain that they do finance the SME sector in Canada but the traditional financial institutions' lending model has a lending process and rules and regulations that make bank financing a challenge for many businesses – The bank credit model for business lending focuses on established businesses with healthy balance sheets and firms who exhibit profitability and cash flow and can establish business credit.
IS ALTERNATIVE FINANCING THE SOLUTION – WHAT IS ALTERNATIVE FINANCING IN CANADA
Alternative financing solutions allow businesses to acquire capital outside of traditional banking and other regulated financial institutions. There are alternatives to traditional bank loans for Canadian entrepreneurs. In some cases even online finance is available. Businesses choose non-bank lenders and commercial finance companies for a variety of reasons :
Alternative lenders have different credit approval requirements when compared to banks
Qualification criteria are more accessible and timelines are much shorter compared to the amount of time banks and other financial institutions take to approve business credit
UNDERSTANDING CASH FLOW AND WORKING CAPITAL
Part of the confusion around picking the right type of business loans revolves around understanding the sometimes subtle ( and sometimes not so subtle !) differences between ' working capital, '' cash flow,' 'profits' and ' asset turnover. You may want to ensure you understand those differences.
PROFITS DON'T EQUAL CASH - HERE'S A FAMOUS EXAMPLE
We all should be familiar with the idea that profit isn’t cash, and many a great company has stumbled and fallen around missing that difference. They're a classic example of that in the U.S. used in textbook studies - it revolved around the dept store W.T. Grant.
It was a public company, seemed to be doing well (keyword = ' seemed ‘) and went under to the surprise of all, including shareholders! The reason - things on paper looked great; assets were huge. The problem - assets weren't turning, and there was no real cash. After the company went under, the accounting industry invented the ' cash flow ' statement, which is not a part of every financial statement.
GROWTH REQUIRES FURTHER INVESTMENT IN CURRENT ASSETS
The reasons that cash and profit don’t equate often come down to the asset turnover we have talked about. As your firm builds up inventory and sells products on credit terms, a huge gap develops between paper profits and cash in the bank.
WHAT ARE METHODS TO FINANCE WORKING CAPITAL
Companies finance working capital, which then becomes cash via short-term credit facilities. In Canada.
TYPES OF BUSINESS LOANS IN CANADA - UNLOCKING THE SECRETS TO SUCCESSFUL BUSINESS FINANCING
Bank Loans / Bank credit lines - Traditional bank loans and lines of credit
Commercial A/R financing facilities / Invoice Financing
Inventory financing arrangements
PO Financing
Tax Credit Financing
Non-Bank ABL Asset-based credit lines
Short Term Working Capital Loans / Business Credit Cards / Merchant Cash Advances
The ability to turn receivables and inventory into cash is the ultimate measure of a business's success.
GOVERNMENT-BACKED LOANS - GOVERNMENT PROGRAMS TO SUPPORT BUSINESS FINANCING IN CANADA
Some Canadian businesses look to the Canada Small Business Financing Program as a small business loan to fund equipment, leasehold improvements, and in some cases, even real estate. Helping small businesses get loans is what this government program is all about. The interest rate on the program is competitive. Startup financing options for small businesses are always a challenge for business loan applicants!
The ' SBL ' Program is one of the best low interest small business loans for startups in Canada via a financial institution, including franchise purchases.
In 2022 the Government of Canada made substantial changes to the program, as the program options and requirements had not changed for many years! All of these changes are very favourable for the Canadian SME sector.
Changes to the program include entirely new classes of financing that are offered, increased lending amounts, and a reduction in administrative burden to the financial institutions that support the program.
The new maximum loan amount for the SBL Loan has been increased to 1.1 Million $ - Along with financing equipment and other assets as well as leasehold improvements the program can now also offer financing for intangible asses and working capital – including a line of credit facility.
The previous focus of the program revolved entirely around equipment/leaseholds/commercial real estate.
Intangible assets include capitalized r&d and even franchise fees. Many entrepreneurs used the program for franchise financing.
Many aspects of the program now include extended amortization periods, thereby lowering monthly payments.
Interest rates under the program are based on a 3% over bank prime, which is a competitive rate for small business borrowing.
Many business owners and entrepreneurs can also access government crown corporation financing via bdc for access to small business financing options.
Businesses that have been in business for 2 years and who have business profits can access a variety of solutions for working capital and the purchase of assets and real estate. Financing can be used to acquire commercial real estate or buy a business or working capital via a term loan structure.
ELIGIBILITY CRITERIA FOR GOVERNMENT BUSINESS LOANS
It is probably the best bank loan an early-stage firm can achieve from traditional financial institutions such as banks or business-oriented credit unions. A business plan highlighting your products or services, financial needs, etc., is always recommended for many types of financing - 7 Park Avenue Financial business plans meet and exceed banks' and commercial lenders' requirements.
For most small business solutions, focus on repayment terms that suit your cash inflows and remember that a good credit score and personal credit history is most times ( but not all times ) a requirement for business owners.
KEY ASSET FINANCING STRATEGIES & ALTERNATIVE FINANCING OPTIONS
The business owner/ financial manager should also be watching cash availability and assets needed to run and grow the business. Here asset financing strategies are key - they include:
Equipment Financing Options for Canadian small businesses/equipment leasing
Bridge Loans
Sale-Leaseback strategies
MATCHING LONG-TERM FINANCING NEEDS WITH ... LONG-TERM FINANCING!
The key point owners/managers need to recognize in acquiring capital assets is that these assets will typically be used over several years, so it doesn’t make sense to deplete cash and credit lines today for benefits that will be received over time. It's all about matching small business loans or lease solutions to your specific needs via the right debt financing.
SOURCES OF STARTUP FINANCING - BYPASSING THE BANK!
Startup financing sources in Canada are another challenge facing the entrepreneur. Owners should also be aware that they must be able to demonstrate some source of their own equity capital in the business.
Startup companies / new or smaller businesses can rarely access needed capital, in part due to the lending process and regulations around the lack of an established credit profile requiring financial statements and tax information and personal net worth and suitable credit score of owners.
Financing startups can come from sources such as the owner’s personal investment, friends and family, government grants and government loans, or assistance from local business incubators.
Many entrepreneurs view venture capital firms as a potential source of funds, but the reality is that only the smallest portion of Canadian businesses are candidates for VC capital. These businesses are typically technology-type companies and are firms that already have revenue traction and are in high growth mode.
And of course venture capitalists and Private Equity firms demand a large portion of your equity in exchange for their significant investments. Often angel investors might be a potential source of capital and expertise for your business around areas such as financial planning and equity financing – again with the caveat that you are giving up partial ownership.
Many tech-type firms look to sources of funding such as CROWDFUNDING from a viewpoint of sourcing capital versus traditional loans.
Often local ‘ BUSINESS INCUBATORS ‘ are a welcome source of support for newer businesses, providing expertise and resources and shared services in the early stages of a business.
GRANT FINANCING
Grant financing / small business grants from federal and provincial government agencies is also available to assist many Canadian firms in help in raising capital, especially those involved in various levels of small business innovation research and development. Financing from grants will often help to cover certain levels of salaries and r&d.
Although business grants are not repayable they often come with challenging terms and often further matching funding is required. Talk to the 7 Park Avenue Financial team about grant financing strategies and Canadian government grants and loans for small businesses.
Many companies employ ‘ grant writers ‘ to source grant funding – as they are skilled and experienced at providing project descriptions and business plans, financial projections, and work plans, as well as completing government form requirements around the grant.
"It takes money to make money." - Titus Maccius Plautus
CONCLUSION - BUSINESS FINANCING AND LOANS IN CANADA
Remember to ensure that working capital and cash flow needs cover your ability to pay down debt and purchase or finance new assets needed in the business.
Tired of approaching family and friends and angel investors for raising money, and, dare we say it, the venture capital journey ? ! Sources of finance for small business rarely includes VC's.
If you're focused on properly recognizing the right type of business financing loans and asset monetization strategies for small businesses in Canada, speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in business funding that matches your needs and help you find final solutions to term loan or asset monetization finance solutions for your business's success.
Talk to the 7 Park Avenue Financial team for information and assistance on the financing options you need to grow your business to access loans from traditional lenders and alternative lenders.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What are financing options for small business?
Common financing options for small business to borrow funds include:
Self financing
Business Credit Cards
Small Business Loans
Government Guaranteed loans
Equipment Leasing
Community Development Futures Programs
Invoice Factoring
What are SBA Loans
SBA loans are government guaranteed loans from the U.S. Small business administration - These loans are not available to Canadian borrowers, but the program is similar to the Canada small business financing program which has federal government guarantees on loans made by banks to business borrowers who might not otherwise qualify for traditional financing.
What are business term loans / longer term loans?
Larger asset purchases around land and equipment are typically financed with business loans of a longer duration. Typical terms range from 3-7 years depending on asset category being financed.
What are the best financing options for a business?
The best financing options for a business will vary based on factors such as size and what stage of business maturity and growth the business is . In some cases the type of industry will dictate types of financing available.
Typical finance options to fund a busines include self funding via owner equity and shareholder loans - Some entrepreuers solicit capital form friend and family of angel investors.
Business loans can be achieved via banks or government loan programs such as the Canada Small Business Financing Program or government grants which often require mathcing funds .
What is the most common form of busines financing?
The most common form of business financing is debt financing via banks or alternative lenders. Banks and commercial financing companies and non bank alternative lenders offer a variety of loans inlcluding business lines of credit, asset based non bank credit facilities as well as government guaanteed federal loans.
Interest rates and loan terms vary based on the lender and the credit risk profile. Debt financing is often perceived as a better form of financing versus giving up equity.
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