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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Business Bank Loan Alternatives and working capital solutions – Save time, and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Business Bank Loan Alternatives: A Guide for Business Borrowers
Understanding Traditional Business Financing Dynamics
Traditional bank loans have long been a go-to financing option for businesses. However, many companies face challenges when attempting to secure these loans due to stringent requirements and lengthy credit approval processes. This has led to an increased interest in alternatives to traditional business bank loans.
Business loans and the value they provide often have business owners/mgrs on a journey of what we’re calling ‘happy/sad. ‘
The ability to successfully navigate a bank loan or an alternative finance loan from a commercial lender will often define how successful and fast your business will grow/profit.
So, are you still waiting for your ‘ ship to come in ‘ on business financing needs? Let’s explore how businesses can borrow money through various alternatives.
Breaking Free from Banking Barriers: Your Guide to Alternative Business Funding
With stringent requirements and lengthy approval processes, traditional bank loans are becoming increasingly difficult.
COMMON CHALLENGES WITH TRADITIONAL BUSINESS BANKING
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Strict Eligibility Criteria: Banks often require high credit scores, extensive financial documentation, and proven profitability, making it difficult for startups or businesses with fluctuating cash flow to qualify.
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Lengthy Approval Processes: The application and approval process can take weeks or months, which may not align with urgent funding needs.
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Collateral Requirements: Many banks require significant collateral, such as real estate or equipment, which not all businesses can provide.
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Limited Flexibility: Bank loans typically have rigid repayment terms, leaving little room for adjustment if your business encounters financial challenges.
Your business growth can't wait for banks to say "yes." Every delayed day means missed opportunities and potential revenue loss. Let the 7 Park Avenue Financial team show you Bank loan alternatives that offer flexible, faster funding solutions tailored to your business needs.
DID YOU KNOW?
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61% of small businesses seek alternative financing options
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The alternative lending market is growing at 16.7% annually
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82% faster approval time compared to traditional banks
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47% higher approval rates than conventional loans
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$24.5B alternative lending market size in Canada
Capital Requirements Across Business Lifecycles
Capital will always be needed whether you're a mature business with growth needs or in startup mode.
Cash businesses, such as retailers, need inventory and operating capital. The question of financing always becomes: How much, when, and from whom?
Common Business Loan Needs - Buying Assets!
In some cases, business loans are needed simply to buy a business! In most other cases, they must acquire specific assets to run the business. Those needs might be technology, such as computers or fixed assets for the shop floor, and rolling stock transportation needs.
Operating Needs vs Term Loans
Business loans, i.e., term loans with fixed terms, rates, and amortization, do not solve the business’s day-to-day operating needs. That’s the cash required to pay staff, rent, insurance, taxes, and acquire inventory/services.
Those needs are best served by bank credit lines or an asset-based business line of credit, commonly known by professionals as an ‘ ABL. ‘ Asset-based lending involves securing a loan based on the value of your business assets, such as inventory, accounts receivable, or equipment.
ABL offers greater flexibility and is often easier to qualify for than traditional bank loans.
It's also crucial to consider the implications of paying interest on these loans, as it can significantly impact your financial health.
Diverse Financing Solutions
Business loans come in various forms; we can correctly say that a ‘ mix and match’ solution is often required, as term loans can be for assets, leasehold improvements, etc.
Lease vs Loan Considerations
A loan is NOT a lease. In many cases, the business owner/financial manager might use equipment lease financing to acquire assets.
There are various reasons to consider the ' lease vs. loan' option.
Equipment financing enables businesses to purchase or lease equipment without large upfront payments. The equipment often serves as collateral, reducing the need for additional assets. This option can also provide tax benefits, as payments may be deductible.
It's often valuable to sit down with your accountant or, in some cases, your banker or business financing advisor to discuss those needs. It's helpful to perform, formally or otherwise, a ' lease vs. buy ' analysis to determine the best financing.
Government-Backed Financing Options
One type of business loan used by many early-stage or smaller firms is the Government of Canada Guaranteed Small Business Loan. Limits have been raised, and the rates, terms, and structures are very competitive when benchmarked against traditional financing. The loan only covers funding for equipment, leasehold improvements, working capital, and real estate.
Additionally, credit unions can provide competitive rates and terms for small business loans, making them a viable alternative to traditional banks.
BDC Solutions
Canada's Crown Bank Corporation also offers working capital term loans for cash flow needs and working capital purposes.
Collateral and Security Requirements
When considering a personal loan, it’s essential to understand the collateral and security requirements involved.
Collateral is an asset that a borrower offers to a lender as security for a loan. If the borrower fails to repay the loan, the lender can seize the collateral to recover their losses. This is a critical aspect to consider, as it directly impacts the risk you take on when borrowing.
Collateral and Security Requirements
Regarding SME COMMERCIAL FINANCE needs, business loans in Canada will almost always be secured by assets and the guarantee of the owner/owners.
It's also important to note that credit bureaus track your credit history, and any defaults on secured loans can negatively impact your credit score.
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Assessing Your Business Needs: Determine whether you need short-term cash flow support, long-term financing, or funding for a specific project.
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Comparing Costs and Terms: Evaluate interest rates, fees, and repayment terms to identify the most cost-effective solution.
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Risks to Consider: Understand the potential risks associated with each alternative, such as high interest rates or loss of equity.
Key Takeaways
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Alternative lending options typically offer faster approval than traditional banks, with decisions often made within 48 hours.
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Asset-based lending focuses on collateral value rather than credit history, opening doors for businesses with limited credit.
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Revenue-based financing allows repayment based on monthly income, creating flexible payment structures.
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Equipment financing enables growth without depleting working capital reserves.
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Invoice factoring converts receivables to immediate cash, solving short-term cash flow challenges - Businesses can access valuable cash flow tied up in unpaid invoices. Factoring, a subset of this, involves selling invoices to a third party at a discount in exchange for immediate funds. These options are beneficial for businesses with long payment cycles.
Conclusion
Business bank loan alternatives offer diverse and flexible solutions to meet various financial needs.
By understanding the options available and carefully evaluating your business’s requirements, you can choose the most suitable alternative to support your growth and success.
If you're looking for help navigating commercial business loans that make sense for your firm, call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with your bank loan or alternative finance needs.
FAQ
What is the MCA Short Term Working Capital Loan
This type of loan provides a lump sum of cash in exchange for a percentage of future sales. This alternative is well-suited for businesses with good sales, as well as retailers and hospitality businesses. However, it’s important to note that MCAs, while very accessible, often incur higher costs than other options.
What advantages do bank loan alternatives offer over traditional loans
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More flexible qualification criteria
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Multiple financing options are available
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There is less emphasis on perfect credit
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Customizable repayment terms
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Industry-specific solutions
How can alternative financing improve cash flow management
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Access to revolving credit lines
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Pay-as-you-grow options
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Seasonal payment adjustments
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Revenue-based repayment plans
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Quick access to working capital
What security requirements exist for alternative financing
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Personal guarantees may be required
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Business assets are often used as collateral
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Accounts receivable can secure funding
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Equipment may serve as security
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Real estate isn’t always necessary
How do alternative lenders evaluate applications
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Business revenue history reviewed
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Bank statement analysis
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Industry risk assessment
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Cash flow patterns examined
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Credit history is considered but not the primary factor
What makes bank loan alternatives increasingly popular
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Traditional lending restrictions
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Competitive interest rates
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Speed of funding access
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Flexible qualification criteria
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Innovative financing solutions
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Technology-driven processes
