YOUR COMPANY IS LOOKING FOR ALTERNATIVE LENDING SOLUTIONS
SOURCES OF BUSINESS LENDING IN CANADA YOU CAN ACCESS TODAY
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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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Alternative financing options provide essential funding solutions for businesses unable to secure traditional bank loans.
Struggling to get a bank business loan? Discover flexible financing alternatives that can fuel your business growth today!
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Alternatives To Bank Loans & 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 to Bank Loans: Business Financing in Canada
Alternative financing and bank loan alternatives aren’t something that most business owners and their financial managers equate with ‘shopping.’
Still, the reality in today’s environment is that it’s a requirement for your company to know what traditional and non-traditional small business financing solutions are available to your company.
DISCOVER THE POWER OF ALTERNATIVES TO BANK LOANS
Securing traditional bank loans can be challenging for many business owners/entrepreneurs.
When seeking an alternative bank loan, business owners often face strict lending criteria from conventional financial institutions such as banks and have to address lengthy approval processes and inflexible terms. Thankfully, alternatives to bank loans offer viable financing options that can help businesses thrive without the red tape of conventional banking.
WHY ARE COMPANIES LOOKING FOR ALTERNATIVE LOAN SOLUTIONS
Every day, more and more companies are looking at types of alternative ‘non-bank solutions from credible lenders who can assist their business with lending options via cash flow, debt, and working capital financing solutions.
Companies often seek ways to borrow money through alternative solutions, such as personal loan alternatives, borrowing from a bank for business, or utilizing credit cards with flexible repayment options.
In some cases, it’s somewhat of a ‘forced’ situation as some companies find themselves in what the banks term as ‘special loan’ situations due to several events that have triggered a default in bank covenants, loan payments, etc.
TURNAROUND FINANCING
We'll examine different aspects of alternative finance solutions in Canada and refocus on key issues within the damaged bank relationship that sometimes occurs in the world of banks and traditional financing.
THE LURE OF BANK INTEREST RATES - ACCESS TO CAPITAL OR COST OF CAPITAL
It’s no real secret that interest rates in business lending for commercial business financing are at all-time lows in traditional banking.
So, even bank fees associated with business lines of credit and business loans are not all unreasonable. Nevertheless, damaged relationships with your bank can exist in specific scenarios that might even be about ‘personalities, ‘i.e. the human side of the business.
As an alternative financing option, a home equity loan, which uses your home as collateral, can offer lower interest rates and potential tax deductibility.
DOES YOUR BUSINESS QUALIFY FOR BANK CREDIT?
Of course, higher interest rates from alternative lenders are why many firms consider financial institutions such as Canadian banks the go-to solution if they qualify for business credit under bank lending criteria for a term loan, line of credit, or equipment loan.
For those who do not qualify for traditional bank credit, a personal loan can be a viable alternative.
As a business owner, you might often feel that Canadian banks, ie ‘traditional lending’, or your own banker does explicitly not ‘understand’ your business or industry. In fairness to Canadian bankers, they sometimes just challenge a client and should often be viewed as a ‘sounding board’ for challenges your business might face.
The limited amount of choice that owners/financial managers have when it comes to banks in Canada is, of course, a limited number of banks in a highly regulated environment.
That’s good for banks and the health of Canada as a whole, but it's not so good for your business or your industry's ability to achieve its financial and sales goals with the right amount of financing.
Of course, unlike the U.S., which has different commercial and business banking tiers, with hundreds if not thousands of individual bank lenders.
In some instances, your industry might be ‘out of favour.’ Traditional lenders are looking for ways to end relationships in specific economic sectors. With all due fairness to there being two sides to the story, we at 7 Park Avenue Financial can commiserate with Canadian firms that suddenly find their total future and destiny in the hands of a third party.
As a short aside, the best advice we can give a client is to choose a relationship-oriented banker with internal credibility within her or his bank. Our belief is that all banks are the same; all bankers are not the same.
WHAT ARE THE BANK LOAN ALTERNATIVES FOR CANADIAN BUSINESS FINANCING SOLUTIONS FROM ALTERNATIVE FINANCE LENDERS?
Using our ‘shopping analogy,’ there are some solid choices when it comes to business funding.
Alternative Financing For SMEs In Canada:
Solutions and financial products & Services include:
Asset-Based Finance Firms
Equipment Lessors - Sale-Leaseback Specialists
Accounts Receivable Financing / receivable loans/lines of credit
Inventory Financing
Purchase Order Financing / Alternative Sales Financing For Procurement
Royalty Financing
P2P Lending - online solutions - Popular in recent years, these loans use technology and ‘ algorithms that are geared toward small business loans and fast approval
Merchant Cash Advance - short-term working capital loans - good owner credit score/ personal credit history required - easily accessible but with a higher interest rate
Tax Credit Loans (Primarily SR&ED)
For those with poor credit, personal loan alternatives, such as salary advances, allow individuals to borrow against their future wages.
Key Point: Any alternative finance solutions can be combined in various manners to allow for full-scale financing of your sales revenues.
KEY TAKEAWAYS
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Peer-to-Peer Lending: Platforms connecting borrowers directly to individual lenders, bypassing traditional banks. Unlike a traditional bank loan, peer-to-peer lending often offers more flexible terms and faster approval processes.
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Invoice Financing: Selling unpaid invoices to a third party to improve cash flow without waiting for customer payments.
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Merchant Cash Advances are advances on future sales, providing quick capital for businesses based on daily credit card transactions.
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Private Lenders: Non-bank financial entities offering more flexible terms and faster approvals.
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Factoring: Selling accounts receivable at a discount to get immediate cash, enhancing liquidity.
CONCLUSION - ALTERNATIVE LENDING CANADA
Call7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor with a track record of business financing success who can assist you with achieving refinancing needs and financial advice and solutions that make sense.
FAQ: FREQUENTLY ASKED QUESTIONS
What is alternative lending?
Alternative lending is a form of financing that funds businesses without going through a traditional bank. Alternative lenders in the alternative lending industry can work with borrowers who have a shorter track record, no collateral, or simply need the money as soon as possible, often, but not always, in return for higher interest rates on the loans.
Alternative lending may offer different types of alternative lending, such as peer-to-peer loans, invoice financing and crowdfunding. Businesses can get an edge in the market by being open to alternative lending options when searching for funding when looking for a loan.
What are the types of alternative lending?
Alternative lenders offer simpler, faster application processes that require less effort. Many times you’ll be getting the money within the next few days or weeks. With flexible requirements and streamlined applications, alternative lenders make financing accessible to small businesses.
Each lender offers different product types, such as short-term loans, lines of credit, invoice financing, etc. Many different business lenders offer different types of alternative financing options, with some of the most common offerings. The best alternative lenders to small companies offer flexible requirements, streamlined applications, and simplified loan and credit applications.
What is A business line of credit?
Alternatives to a short-term line of credit may be a good option for a business. Non-bank lenders offer quick, easy and stable access to funding. The market terms vary widely depending on the company and its business needs.
What is invoice financing/factoring?
Invoice financing is a popular alternative to traditional banking loans. With invoice financing, a lender advances funds secured by accounts receivable, your unpaid invoices. The invoices themselves serve as collateral on the loan. Funding is typically 85%—90% of the value of the invoice. The remaining is paid to the business when customers pay. Invoice financing is a form of asset-based lending.
What are the most popular type of alternative loans in Canada?
Factoring and receivable financing are the most widely used forms of alternative finance from an alternative lender solution point of view. The best alternative lenders offer access to capital that would not be available from traditional banks or equity funders.
What are the benefits of peer-to-peer lending?
Peer-to-peer lending provides direct access to funding from individual investors, often resulting in quicker approval times and more flexible terms than traditional bank loans.
How does invoice financing work?
Invoice financing allows businesses to sell their unpaid invoices to a third party at a discount, providing immediate cash flow without waiting for customer payments.
What is a merchant cash advance?
A merchant cash advance is a lump sum of capital that businesses repay through a percentage of their daily credit card sales. It offers a quick and flexible financing option.
Who are private lenders?
Private lenders are non-bank financial entities that offer business loans with more lenient terms and faster approval processes than traditional banks.
How does factoring improve cash flow?
Factoring involves selling accounts receivable to a third party at a discount, giving businesses immediate access to cash and improving their liquidity.
How can equipment financing benefit my business?
Equipment financing allows businesses to acquire necessary equipment by spreading costs over time, preserving cash flow and working capital.
What are the advantages of using business credit cards?
Business credit cards offer a revolving line of credit to help manage cash flow, track expenses, and earn rewards, providing a flexible financing option.
What is venture capital?
Venture capital is funding investors provide to startups and small businesses with high growth potential, typically in exchange for equity.
How do alternative financing options compare to traditional bank loans?
Alternative financing options often offer more flexible terms, quicker approvals, and less stringent eligibility requirements than traditional bank loans. However, a business loan can provide substantial funding with potentially lower interest rates, though it may require extensive documentation and a strong business health profile.
Are alternative financing options suitable for all businesses?
Alternative financing options can benefit many businesses, especially those that have difficulty securing traditional bank loans or need faster capital access.
What factors should I consider when choosing an alternative financing option?
When selecting an alternative financing option, consider factors such as the cost of financing, repayment terms, impact on cash flow, and your business's specific needs.
