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SMALL BUSINESS REFINANCE & RESTRUCTURING SOLUTIONS
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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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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
"Commercial loan refinancing can transform your business's financial architecture, providing substantial savings and improved cash flow management."
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer COMMERCIAL LOAN REFINANCING solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
Revitalize Your Business with Commercial Loan Refinancing
INTRODUCTION
Business refinance in Canada might often require some ‘financial engineering.’
If that is in the cards for your firm, what are the issues that might need to be addressed? What solutions for commercial refinancing loans, new debt, or asset monetization might make the most sense in your particular situation? Let’s dig in.
Understanding commercial refinancing is a critical aspect of financial engineering for businesses looking to refinance.
Commercial loan refinancing can often be a key finance strategy for companies aiming to optimize their debt structures. The refinancing process not only often facilitates better interest rates and terms but also adjusts the repayment schedule suited to the business's cash flow, thereby helping to ensure long-term financial stability.
With the potential to unlock lower payments and improve liquidity, commercial loan refinancing is an invaluable tool for businesses seeking to strengthen their financial footing and seize new growth opportunities.
GROWTH FINANCE OR RESTRUCTURING?
Whether it’s a turnaround situation or propelling your company to future growth, it’s all about knowing your financial options. Utilizing a commercial real estate loan or exploring various commercial real estate loans are common tools for business restructuring and growth finance.
HERE ARE 2 KEY OBJECTIVES
What then are the business owner/ financial manager’s objectives for assessing those finance alternatives? They include:
Refinancing commercial debt or property as a strategy within the broader context of assessing finance alternatives, understanding the amount and type of working capital you need, and the implications that come with those financing strategies.
There are various tools the owner/manager can utilize to analyze why some strategies might work while others might not. It’s difficult to undo the wrong financing strategies and expensive!
And by the way, how you manage your assets is equally as important as how you finance them. Understanding refinancing commercial real estate is crucial in comprehending financing strategies and their implications.
IS IT ALL ABOUT CASH FLOW?
Cash flow management is, of course, key in succeeding in business. When owners/managers have a handle on their cash flow cycle ‘ it’s almost as if they can visualize how cash is used and how changes in A/R and inventories and payables affect the inflows and outflows of cash. Business owners are also conscious of the interest rate on any transaction.
HERE ARE 5 WAYS TO RE-ENGINEER YOUR BUSINESS FINANCES
Finance re-engineering strategies for capital inflows to your business can only be accomplished in really 5 different ways.
Let’s take a look at those and determine which strategies might work for your firm.
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Taking on new debt of a long-term nature - This can be achieved via equipment financing, temporary bridge loans, sale-leaseback strategies, and consideration for working capital term loans. Here it’s important to ensure you have the right maturity on any loan. Your considerations should be around cost; any risk posed to the business, and the restrictions that some types of debt bring with them - i.e. covenants, personal guarantees, etc.
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Increasing equity capital - While long term equity is often desirable, it also dilutes ownership, and negotiations, discussions, and terms via Angel investors, VC’s, and Private Equity Groups can bring in significant capital its often a journey that most businesses can’t sustain - let along be worthy of
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Sales increase working capital - simple as that. Many business owners find out the hard way is that the build-up in receivables and inventories increases working capital; they do that by textbook definition only. That investment in receivables and goods decreases cash flow. That’s where the prudent management of current assets comes in.
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Decreasing current assets - It’s here the business owner/manager will find the most options around proper financing engineering of their business. They include:
- Canadian chartered bank credit lines/term loans
- ABL (Asset Based Lending) non-bank business lines of credit - ABL loans can also be used for commercial real estate transactions and via a bridge loan are an alternative to commercial mortgage financing for a company owner commercial property
- Tax credit loans (Primarily SR&ED tax credits)
- Sales/Royalty financing
- Receivables and/or inventory financing - these are subsets of the Asset-based lending solution.
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Selling fixed assets or utilizing a proper sale-leaseback strategy - Refinancing your commercial property can also be addressed via the lease back, and monthly payments are typically structured carefully to address your cash flow needs - Here, transactions are often ‘interest only ‘ with a balloon payment due at the end of a year - where refinancing may again be resumed for a new loan amount- Interest rates and closing closes should be considered with proper due diligence to ensure they meet your needs - some commercial lenders may also charge an origination fee - Interest rates may be at a fixed or variable rate. Monthly payment calculations will, of course, vary regarding the final amortization used. A typical loan to value will not exceed 75% as debt service is a key part of real estate financing on company-owned commercial facilities.
The leaseback is often a bridge loan on a short term versus 10 years, 25 years, or 30 years amortization in traditional mortgage finance.
KEY TAKEAWAYS
- Benefits of Refinancing: Understand how refinancing can reduce interest costs and extend repayment terms, enhancing financial stability.
- Eligibility Criteria for Refinancing: Learn which conditions businesses must meet to qualify for refinancing, such as credit scores and financial health indicators.
- Interest Rates in Refinancing: Grasping how interest rates affect refinancing outcomes is crucial for decision-making.
- Debt Restructuring: Recognize how restructuring debt through refinancing can improve balance sheets and operational cash flow.
- Refinancing Process: Familiarize yourself with the steps involved in refinancing a loan, from approval application.
CONCLUSION
If your company can, or needs to, benefit from a business refinance strategy that makes sense for your business/industry, call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can help ensure you that it is ‘in the cards’ that a financing re-engineering is around the corner.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATIO N
What benefits can refinancing offer to my business?
Refinancing may reduce your interest rates, extend your loan terms, and improve your overall cash flow.
How does the refinancing process work?
It involves assessing your current financial situation, finding a suitable lender, and negotiating terms that benefit your business's financial strategy around the existing loan or new loan.
What should I consider before refinancing my commercial loan?
Evaluate your current loan terms, potential prepayment penalties, and the economic environment to ensure refinancing provides a net benefit.
Can refinancing affect my business credit score?
Initially, it might cause a slight dip due to credit inquiries and changes in debt levels, but improved financial management can enhance your score over time.
Who is eligible for commercial loan refinancing?
Businesses with a strong credit history, stable income, and a track record of timely loan repayments are typically eligible.
What is debt restructuring?
Debt restructuring involves renegotiating the terms of existing debt to extend the maturity date, reduce the interest rate, or modify the principal amount to alleviate financial strain.
How do interest rates impact refinancing decisions?
When borrowers refinance or focus on debt consolidation lower interest rates make refinancing more attractive as they can significantly reduce the cost of borrowing and improve net operating income
What legal considerations should be noted during refinancing?
Legal aspects may include contract adjustments, prepayment clauses, and compliance with new lending regulations.
What is the role of credit scores in refinancing applications?
Credit scores are crucial as they influence the terms lenders offer, including interest rates and loan amounts.
How does industry type affect refinancing options?
Certain industries may have more favourable terms based on perceived risk levels and economic factors specific to that sector.
