Corporate Line Of Credit Business Banking | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR CORPORATE CREDIT FACILITIES!

THE  LINE OF CREDIT FOR BUSINESSES

BUSINESS LINE OF CREDIT SOLUTIONS

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

WHAT YOU NEED TO KNOW ABOUT BUSINESS CREDIT LINES

Corporate line of credit needs? When it comes to business banking no tool is more valuable than a revolving credit line.  

It's an ongoing source of short-term cash flow and working capital when it comes to business survival- often with a credit limit involved.

COMMON REASONS WHY YOU NEED A BUSINESS CREDIT LINE 

Business Start-Up Financing In Your Overall capital structure

Financing day-to-day working capital needs more options / more flexibility

Covering gaps in cash flows around seasonality or lumpiness in your business

Growth financing to capitalize on opportunities

Emergency cash buffer

Making lease and loan payments on existing debt

Business line of credit rates are often lower and more competitive

Maintaining credit facilities in good standing builds a business's business credit score

HOW TO ACHIEVE A BUSINESS LINE OF CREDIT

 Most Canadian small business owners and financial managers we meet find that solution though, difficult to achieve. So how can you be your own Swat Team effectively? We're told that type of team uses 'specialized tactics in high-risk operations 'for success, and that's definitely what we're talking about here!  Let's dig in.

HERE ARE SOME OTHER TERMS FOR BUSINESS LINES OF CREDIT

Many business owners confuse the term  ' line of credit ‘relative to what We’re talking about today. They can be forgiven for that because in various circles it’s called a demand loan, overdraft protection, revolver, etc. We suppose that ' revolver' term ties in nicely with our Swat Team analogy!

DOES YOUR FIRM NEED A BUSINESS REVOLVING CREDIT FACILITY?

Canadian business needs lines of credit only because it's an ongoing source of funding that is utilized when needed. The key concept here is that you are only paying interest on what you use ... it's not a term business loan with a fixed rate and monthly fixed installments but a valuable tool for day-to-day funding.

WHAT COLLATERAL AND SECURITY IS INVOLVED IN CORPORATE CREDIT LINES  

The concept of security and collateral around the corporate line of credit is important to understand. In the SME sector in Canada, the first source of collateral is the current assets that the line of credit finances.

These are primarily accounts receivable and inventory. Typically though personal guarantees of owners are required for any significant amount, and one the providers of business credit facilities, Canada's chartered banks also register collateral financing statements against your firm to protect their lending to your business. Naturally, you only pay interest on what you have drawn down on your facility.

So why does business banking become so difficult to access when the business owner/financial manager is sourcing working capital? Top experts in fact tell us that almost 2/3 of business can't obtain any or all the financing it needs to grow and survive.  Larger corporations and private companies seem to have their own SWAT TEAMS and generally find it much easier to achieve credit facilities.

CANADIAN BANKS AND BUSINESS CREDIT - THE UNSECURED BUSINESS LINE

As far as banks are concerned we surmise that it's fairly costly and expensive to both approve and monitor these credit lines. The business line of credit interest rate from Canadian banks is one of the lowest and most competitive rates available. Also, a higher incidence of business failure in the SME sector makes it riskier to lend in this area - although that's certainly not what the bank TV commercial says.

In defence of our great Canadian banks remember also that many industries have nuances and challenges that not every business banker can be expected to fully know and understand. They deal with hundreds of clients.

REQUIREMENTS FOR BANK LINES OF CREDIT

Commercial funding by traditional financial institutions such as banks and other commercial finance firms varies - In general business owners should be prepared to provide information  from the lender's perspective to address business line of credit requirements  such as:

Incorporation details/time in business

Personal credit history and  good credit score of owners

Properly prepared financial statements preferably by an outside accountant

Bank statements/tax returns

Business plan

Details around any external collateral available

Copy of commercial lease/mortgage

Monthly statement summary of Accounts receivable / Accounts payable agings

Inventory list

One alternative to traditional bank lines is the non-bank ASSET BASED LINE OF CREDIT. This facility operates in the same manner as bank facilities, and an even bigger plus is the fact that it monetizes more assets of your business generously. Typical advance rates are 90% on A/R (Versus bank 75%), anywhere from 30-70% on inventory (depending on the quality and salability of your product), and also includes borrowing power against your fixed assets/equipment.

Invoice financing, business credit cards, and merchant cash advances are other types of Canadian business financing that are alternatives to a real business credit line.

DO BUSINESS CREDIT LINE FACILITIES REQUIRE A PERSONAL GUARANTEE?

The majority, but not all business loans and line of credit financing solutions in Canada do require a personal guarantee as security for the loan or line of credit facility. Less emphasis is placed on the personal guarantee if outside collateral is provided - asset-based lenders in Canada place less emphasis on personal guarantees.

ASSET BASED LENDERS OFFER SOLID CREDIT LINE SOLUTIONS

The asset-based lender typically has focused experienced and the overall monitoring of your account is more strenuous than the bank environment. Simply speaking you'' be required to provide more monthly reporting in the form of aged receivables, payables, inventory lists, etc. We've always thought though that if you can’t provide that info regularly your business is probably at risk, so it’s hardly an onerous requirement. The interest rates are generally higher in asset-based lending solutions but it becomes a question of the cost of capital versus access to capital. Interest rates for small businesses and startups or even franchises tend to be higher due to overall credit quality as perceived by banks and asset lenders. 

Your firm continues to use your same bank account in ' ABL ' facilities. Also, another benefit is that personal credit and credit history are less of a factor in asset-based lending - it's all about the assets! In general - easier to get approved!

The terms and conditions on non-bank credit lines tend to be more flexible, and facilities grow as your sales and assets grow. Any firm may apply, there is no upper dollar limit in asset-based lending, the smallest facilities are in the 250k range.

CONCLUSION - CREDIT LINE FOR BUSINESS SOLUTIONS 

The Canadian owner, armed ( there's that SWAT reference again!) with some basic knowledge of alternatives and the workings of the corporate line of credit can in fact access the cash flow they need.

  If you need a line of credit for business and solid business advice around financing alternatives speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your business banking needs.

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