YOUR COMPANY IS LOOKING FOR WORKING CAPITAL SOLUTIONS!
WORKING CAPITAL LOAN FUNDING ALTERNATIVES
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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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EMAIL - sprokop@7parkavenuefinancial.com
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 ALTERNATIVE BUSINESS FINANCING OPTIONS and solutions that solve the issue of cash flow and working capital – Save time, and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Alternative Business Financing Options in Canada
Working Capital financing in Canada.
When business owners and financial managers are looking for financing in today’s challenging commercial financing environment, they often consider alternative finance solutions other than traditional Canadian chartered bank solutions.
Alternative financing refers to non-traditional funding options that can improve cash flow, support financial flexibility, and help navigate economic challenges.
Canadian businesses not qualifying for full-fledged bank operating lines can choose one or all three alternative working capital solutions: equipment financing, factoring, purchase order financing, and inventory financing.
BEYOND BANK LOANS - EXPLORING ALTERNATIVE FUNDING OPTIONS FOR YOUR BUSINESS.
It's no secret to you, the Canadian business owner, that traditional lending and conventional banking fall very short of meeting the needs of SME's in Canada. Alternative finance provides the flexibility and access to capital you seek.
If you are looking for business capital to fund daily operations and take advantage of growth opportunities, let the 7 Park Avenue Financial team show you how alternative finance is a major player in the Canadian business lending landscape.
WHAT COMPANIES IN CANADA ARE LOOKING FOR ALTERNATIVE FINANCING OPTIONS
So why are these companies looking for short-term alternative lending solutions? There is a fairly consistent solid profile that emerges in Canadian firms looking for alternate working capital solutions.
Alternative lenders provide quick access to capital without requiring extensive paperwork or lengthy approval processes.
Many companies, despite the difficult 2008 and 2009 financial-economic challenges, are encountering many opportunities to grow.
And let’s not even talk about COVID-19 / Vaccines, etc!! Yet as those growth opportunities emerge, they find themselves challenged by traditional debt-to-equity ratios and lower tangible net worths than are required by traditional financial institutions such as Canadian banks.
DOES YOUR FIRM QUALIFY FOR TRADITIONAL BANK LOANS
We quickly add that if Canadian businesses enjoy profit, a clean balance sheet, and adequate capital, they are absolute candidates for Canadian banks.
However, not all firms find themselves in this situation! Instead, firms are challenged by traditional bank loans that have been capped or constrained, debt covenants that restrict, and higher cash flow needs due to higher investments in accounts receivable and inventory required to fulfill those large new contracts and purchase orders.
THE TRIPLE THREAT SOLUTION IN ALTERNATIVE FINANCING!
So what’s the alternative? A triple-threat solution is available to many firms that may not even know this type of financing is available.
Various alternative lending options, such as online loans, lines of credit, and merchant cash advances, have gained popularity in recent years. These options offer flexibility but also potential risks. We will call them the ‘holy grail ‘of working capital financing because they cover purchase orders, inventory, and accounts receivable.
UNDERSTANDING THE OPERATING CYCLE
Business owners recognize those as key elements of their ‘operating cycle. That is to say, they get an order, purchase or manufacture a product, and convert the sale into an account receivable.
Venture capital can provide substantial capital, expertise, mentorship, and networks for high-growth startups. That’s the good news; the bad news is that that process probably takes 90 days, even more sometimes.
Cash flow is needed in the interim! Some firms can consider short-term working capital loans, also known as merchant cash advances. These solutions have become very popular for a number of reasons: they are easy to obtain, they rank behind other lenders, etc.
A/R FINANCING
Customers are turning to factoring or accounts receivable financing as the most immediate and obvious solution to their problems. By partnering with the right firm, they convert their receivables to cash the day they are able to invoice and recognize revenue.
Unlike traditional banks, which require extensive paperwork, lengthy approval processes, and collateral, factoring provides quick access to working capital.
This exact working capital allows the Canadian business owner to strengthen supplier relationships, which is critical in a negative economy. In some cases, your firm might be able to (for the first time ever, perhaps?!)
To take prompt payment discounts. It might not be obvious to some owners that the ability to take prompt pay discounts can offset a very substantial part of the higher cost of factoring.
P O FINANCING IN CANADA
We have talked of an interdependent combination of alternative financing solutions. Canadian business owners may not be aware that purchase orders can also be financed.
With good purchase orders from solid customers, financing can be obtained on the strength of the purchase order itself. This remains a relatively unknown financing concept in Canada that is gaining some popularity.
WHAT IS THE BEST FORM OF ACCOUNTS RECEIVABLE FINANCING /FACTORING
We spoke of receivable financing, a.k.a. factoring, purchase order financing, and inventory, the final piece of our puzzle.
Our recommended choice for factoring & A/R solutions is confidential receivable finance. Under that finance tool, you bill and collect your own accounts while generating same-day cash flow under A/R discounting.
FINANCING THE INVENTORY COMPONENT ON YOUR BALANCE SHEET TO IMPROVE CASH FLOW
Solid, financially stable businesses with a bank credit line of credit can obtain inventory financing or margining for long-term growth.
Many smaller and more 'frail' firms cannot and aren't aware of the growing number of inventory financing options. On balance, we can say that a reasonable commodity-type inventory (i.e. saleable) can be financed for anywhere from 40 cents to 80 cents on the dollar.
KEY TAKEAWAYS
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Invoice financing accelerates cash flow by leveraging unpaid invoices for immediate working capital.
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Crowdfunding platforms enable businesses to raise funds directly from a large pool of individual investors.
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Peer-to-peer lending connects borrowers with individual lenders, bypassing traditional financial institutions.
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Revenue-based financing provides capital in exchange for a percentage of future revenue streams.
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Equipment leasing allows companies to acquire necessary assets without large upfront investments.
CONCLUSION
In summary, Canadian businesses that do not qualify for full-fledged bank operating lines can choose one or all three of three different alternative working capital solutions: factoring, purchase order financing, and inventory financing.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can help you take your financial success to the next level.
FAQ
How do alternative financing options differ from traditional bank loans?
Alternative financing options often offer more flexible terms, faster approval processes, and may be accessible to businesses with limited credit history or collateral.
What types of businesses can benefit from alternative business lending?
Companies of all sizes and industries can benefit, especially startups, small businesses, and those with unique financing needs or challenges securing traditional loans for the small business owner.
Can solutions from alternative financing providers help improve cash flow?
Yes, many alternative financing options, such as invoice or revenue-based financing, are designed to enhance cash flow management when financing from traditional lenders is not available for SME's or small business owners. Many conventional financial institutions require a minimum credit score of 650.
Are alternative financing options more expensive than traditional loans?
While some alternative options may have higher costs, they often provide value through increased flexibility, speed, and accessibility that can outweigh the expense for many businesses.
How quickly can I access funds through alternative financing methods?
Many alternative financing options offer rapid funding, with some providing access to capital within days or even hours of approval.
What documentation is typically required for alternative financing applications?
Requirements vary by lender and financing type but may include financial statements, bank records, business plans, and revenue projections.
Are there any risks associated with alternative business financing?
As with any financial decision, there are potential risks such as higher costs, shorter repayment terms, or personal liability, depending on the financing option chosen.
How do I choose the right alternative financing option for my business?
Consider factors such as your business needs, financial situation, growth projections, and the specific terms offered by different financing options.
Can I use multiple alternative financing methods simultaneously?
Yes, many businesses use a combination of financing options to meet different needs, but it's important to manage overall debt and cash flow carefully.
Will using alternative financing affect my ability to secure traditional loans in the future?
While it may impact your debt-to-income ratio, successfully managing alternative financing can demonstrate financial responsibility and improve future loan prospects.
What are the most common types of alternative business financing options available today?
The most common types include invoice financing, crowdfunding, peer-to-peer lending, revenue-based financing, and equipment leasing. Each option serves different business needs and situations.
How do interest rates and repayment terms for alternative financing compare to traditional loans?
Interest rates and terms vary widely among alternative financing options. Some may have higher rates but offer more flexible repayment terms or faster access to funds. It's crucial to compare total costs and benefits when evaluating options.
What factors should businesses consider when choosing between alternative and traditional financing methods?
Key factors include the urgency of funding needs, credit history, collateral availability, desired repayment flexibility, and long-term financial strategy. Businesses should also consider how different options align with their growth plans and cash flow projections.
