YOUR COMPANY IS LOOKING FOR ALTERNATIVE FINANCE SOLUTIONS!
LINE OF CREDIT OR BANK LENDING OPTIONS NOT AVAILABLE?
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
GUIDE TO UNDERSTANDING ALTERNATIVE FINANCING BASICS IN CANADA
Alternative financing in Canada is, in many ways, the new normal.
More and more business borrowings are looking to alternative financing companies that offer business finance beyond the traditional financial institutions such as our banks as they consider how much funding they need - Why is this trend occurring and how do you navigate the alternative lending landscape - Let's dig in.
Canadian business owners and financial managers are constantly seeking bank alternatives outside of the traditional finance system in Canada as they start and grow their businesses and look for a financing option such as a bank loan and additional business capital for short-term working capital loans for current needs and long term growth plans, as well as asset acquisition through effective equipment purchases.
There are numerous types of alternative finance providers emerging in the non-bank independent private finance landscape - Those solutions also provide more funding flexibility in choosing the business finance solutions they need to run and grow a business,
SEARCHING FOR THE RIGHT BUSINESS FINANCE OPTIONS
For business owners it's all about time as its often a race to find a business financing partner that will allow you to secure the capital you need - In a perfect world, it's all about knowledge and due diligence and getting the right advice and solution from a trusted finance business advisor who understands the lending criteria of business lenders.
While large corporations have access to all sorts of capital, in some ways unlimited, businesses in the SME COMMERCIAL sector struggle to find options that make sense and are balanced against what is usually a higher cost compared to traditional bank funding. Is alternative lending right for your firm? Let's dig in.
One author in the U.S. recently offered up that business owners must ' spank their banks ' when it comes to access to business capital. While we suppose there are a hundred reasons to ‘spank’ U.S. banks (anyone remember 2008), those reasons don't really exist in Canada, as we're known to have probably the strongest banking system in the world, even in Pandemic times.
So our Canadian banks tend not to go bankrupt, they don't go to jail, they do provide safe investment vehicles... and they have all the capital in the world :
IT'S JUST DIFFICULT TO ACCESS BUSINESS CAPITAL AND BANK LOANS AND QUALIFY FOR FINANCING!
So what's our point? Simply that the owner/manager in SME starts to look outside the box at non-bank alternatives.
SOLUTIONS FOR CANADIAN BUSINESS FINANCING / TYPES OF ALTERNATIVE FINANCING
OVERVIEW OF ALTERNATIVE LENDER FINANCING SOLUTIONS
A/R Financing Invoice Financing and Confidential Receivable Financing -
Invoice financing or factoring. This type of financing solution is for businesses that rely on accounts receivables (AR) with clients. It helps founders create smoother cash flow operations, to avoid payment delays. Invoice factoring allows a company to finance/sell its outstanding invoices to meet day-to-day cash flow needs to cover business expenses. Factoring companies purchase invoices at a discount and advance approximately 90% of the invoice value immediately when the invoice is generated - The company receives the remaining 10 percent, less financing costs when their customer pays.
Inventory Loans
Non-bank asset-based lines of credit
Non-bank lines of credit are used similarly to traditional bank lines of credit but they have less stringent approval requirements around covenants and general financial health - Asset-based lending solutions can be in the form of term loans and revolving lines of credit and allow the company to draw down funds as the asset base defined by a monthly borrowing certificate allows - Typeial assets financing under asset-based business lines of credit include accounts receivable, inventory, fixed assets, and any commercial real estate owned by the business.
SR&ED Tax credit financing / Grant Financing
Equipment Financing / fixed asset financing Over 80% of businesses in North America utilize lease finance for asset acquisition
Cash flow loans
Royalty finance solutions
Purchase Order Financing / Saas Financing / Recurring Revenue Finance
Revenue-based financing allows businesses to access capital based on the collateral around monthly or annual recurring sales . This provides valuable growth funding without diluting ownership equity. Software / Saas type companies use this type of funding extensively.
Short Term Working Capital Loans/ Merchant Cash Advances /p2p Peer LoansBusiness Credit Card
These newer financial products and loans, in some cases via online lending or crowdfunding platforms, come with a payment plan very tailored to your specific cash flow needs. The application process for these types of loans is simple and fast which appeals to many business owners.
Although fees and closing costs are high in some circumstances entrepreneurs balance that against quick access to capital. Repayment terms for these microloans or the merchant cash advance in the segment of the loan marketplace are based on algorithms around your actual cash flows through examination of your bank statements, etc., vis a vis inflows and outflows, as well as a reliance on the credit rating of owners.
These solutions are more expensive than traditional banks as noted but they provide cash flow to firms that need cash more quickly than the underwriting and approval practices of traditional lenders - Repayment is based on formulas around sales and the credit score of the business owners
Securitization
WHAT ARE THE REQUIREMENTS FOR BANK FINANCING / BUSINESS CREDIT UNION FINANCE IN CANADA
It's interesting to note that all of the above finance mechanisms are in fact available from Canadian chartered banks. But it will always come back to the criteria in place as to your ability to access the above solutions at low bank loan interest rates. The traditional pre-requisites for accessing bank lines of credit are :
Length of time in business,
Balance sheets that reference positive equity,
Profit history / Business credit rating
Cash flow coverage / down payment ability
Owner's personal credit score/ credit profile and credit history and collateral.
The absence of any one of those bank financing criteria can quickly derail your bank application. We almost find it humorous that business owners or their financial managers go from bank to bank only to be told the same response.
ALTERNATIVE LENDERS IN CANADA
Bank alternatives for small businesses in Canada are offered by commercial finance service firms. They might be small, large, Canadian, U.S.-owned, and in some cases geographically focused lending institutions. They provide all the solutions offered by banks and typically have a much higher risk appetite as they are motivated by profit and growth also. Almost all firms only specialize in certain loan/finance segments, so it’s important to seek out an advisor who can help you navigate the waters and speak the lingo! While higher interest rates come with non-traditional finance and the alternative lender it becomes a question of access to capital. In some cases, real estate might be part of a finance or refinancing need for the amount of money you need.
CONCLUSION - ALTERNATIVE FUNDING OPTIONS FOR BUSINESS
Alternative financing provides potential tools for your business to run day-to-day operations, avoid equity dilution, and focus on growth initiatives. Maximizing cash flows and working capital allows firms to focus on better cash management and provides options versus traditional financing solutions.
So, bottom line. The Canadian small business owner / financial manager can spend all their time blaming (spanking) their bank or they can choose to seek out real-world solutions that exist for the financing they need. All you need to do is understand basic underwriting and approval requirements and understand the cost and terms around different financing services - Work with a business advisor like 7 Park Avenue Financial to help guarantee your business success.
Don't be confused with the myriad of lending companies that tout small business loans that might not meet your day-to-day funding needs. Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in evaluating alternative financing and accessing the right financing source that will allow you to grow or start a business when traditional bank loans are not available for your business needs.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is alternative financing?
Alternative financing helps medium-sized companies and small business owners obtain financing outside the traditional bank loan - In some cases funding is available to businesses that banks judge as poor credit when it comes to a bank loan alternative - Most businesses aren't eligible for funding from the angel investor/angel investors or venture capitalists. Alternative financing is a bank loan alternative allowing companies to access capital from online lenders as a bank loan alternative - This alternative financing method of raising money via a small business loan can be a lump sum installment term loan or a business line of credit which is utilized by established businesses who do not require alternative lending options. Interest payments are often higher in the alternative financing and peer-to-peer lending space as companies cant access capital and financial assistance based on a lack of steady cash flow - Main alternative funding sources for raising money into the business include factoring, working capital loans, and business lines of credit.
What alternatives are there instead of bank financing?
Major financial alternatives to traditional lending solutions include non bank business lines of credit, short term working capital loans, equipment financing /equipment loans, accounts receivable financing and government loans .
Click here for the business finance track record of 7 Park Avenue Financial
