What documents do I need for business line of credit?

Information required by lenders for business credit lines includes, but may not be limited to: Owner credit history and good personal credit score / personal guarantee availability Business bank account in good standing Bank statements Financial statements of the business - historical and interim financials Tax returns Articles of Incorporation and ownership Outside collateral

Business Credit Via Banking & Alternatives To The Bank Loan In Canada

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BANK LOANS AND ALTERNATIVE FINANCING - THE ULTIMATE SHOWDOWN FOR BUSINESS SUCCESS

Business credit access via banking and alternative finance solutions often has small business owners and their financial managers searching for optimal finance solutions for their ongoing business credit and funding and growth needs. These solutions include business credit lines, term loans ( longer in nature - typically 2-5 years), and short-term working capital loans.

Business credit comes from a variety of sources, even including trade credit from suppliers. Let's look at the pros and cons of alternative financing solutions versus Canada's historical ' go to ' - the bank loan.

THE SEARCH FOR BUSINESS CAPITAL - BUSINESS LOANS TO HELP YOUR BUSINESS GROW

7 Park Avenue Financial small business clients tell us it is often somewhat of a nightmare, or at minimum, a negative experience when searching for the right amount of capital at interest rates that make sense around your operating cost.

How, then, can the business owner successfully achieve the right financial solution for their company while simultaneously eliminating that 'negative' vibe from initial failures in securing capital?

"Banks have a social responsibility to help the economy in good times and bad." - Jamie Dimon

IT'S THE BANKER, NOT THE BANK! BENEFITS AND DRAWBACKS OF BANK LOANS

Because most business people consider 'the bank' as the premier lender in Canada, one piece of guidance we can provide is to choose the right banker, not the bank per se. An experienced commercial banker can provide financial and business guidance to solve almost any financial challenge and business loan requirement. Banks also offer numerous online banking/business credit cards and other attractive options to borrowers.

GAINING BANK CONFIDENCE IN YOUR BUSINESS

To gain the confidence of a commercial bank, or even a business financing advisor, the business owner / financial manager must properly present their current financial condition in the form of cash flow, business projections, and a clear overview of their business assets and financial potential. By the way, a good business plan can do all that well and help you secure the loan amount you require. That type of planning will also help you secure the most reasonable interest rate, whether a credit facility or a term loan.

Good information such as noted above will give your lender or advisor a solid idea of incoming and outgoing cash - and will often suggest how your firm can best 'bridge the gap.'

BANKS MAY REQUIRE PERSONAL GUARANTEES AND OUTSIDE COLLATERAL

Many business owners find personal guarantees a significant problem in their financial decisions around business credit. Of course, the majority of banks almost mandate personal guarantees on a business loan while at the same time mandating outside collateral. While alternative non-bank business lenders will often request guarantees, it is safe to say less emphasis is placed on that owner's promise to pay.

CAN PERSONAL GUARANTEES BE NEGOTIATED? THE ROLE OF GUARANTEES IN BANK LOANS

Also, it is essential to know that guarantees can be negotiated in many situations- they can be limited or, in rarer instances, waived - although these are generally exceptions, not the norm. The bottom line of guarantees is that your personal assets and credit history are a large part of traditional bank lending. At certain times in the economic cycle, banks pull in the reins on business credit - you, therefore, you need to know where the banks and your particular industry are in the credit cycle.

While the need to cultivate a positive relationship with a lender is important it's key to note that other 3rd party professionals such as lawyers, accountants, and credible business financing advisors can also steer you to the right lender or financial solution. Those introductions can be worth their weight in gold when establishing a relationship with a bank or commercial lender.

KEY CRITERIA FOR ACHIEVING BUSINESS CREDIT & BUSINESS LOAN SOLUTIONS

Business people often ask us what lenders look for when accessing loans or business credit lines. We can summarize that pretty concisely - depth and experience of management, a good business model, and the right amount of debt and equity in their business. In the new economy, companies can be either asset-intensive or service-based - it's about successfully marketing your service or product.

A final note on bank loans in Canada? Canada's banking system is smaller than the U.S., which has hundreds or thousands of different banks and even more independent non-bank finance firms. Bankable clients often focus on 'rates' - in our opinion, the rates will vary beyond some essential points from bank to bank.

You should focus on the banker and the structure, terms, and guarantees surrounding your bank loans or credit lines. That saving of a couple of basic points will be non-existent in your mind when you get locked into a structure or guarantee or ratio and covenant scenario that you can't get out of.

TYPES OF ALTERNATIVE FINANCING - A GUIDE FOR BUSINESS OWNERS

Traditional finance solutions provide almost unlimited capital to a profitable business, have good cash flow, and grow. Many firms don't necessarily meet all those criteria, so it's important to know that several key alternative financing solutions are available to run, grow, or even save your business.

WHICH FINANCING OPTIONS ARE RIGHT FOR YOUR BUSINESS?

A/R Financing - one of the most popular business cash flow solutions in Canada for small businesses in all industries for funding outstanding accounts receivable - Credit approval is almost always quicker than obtaining bank financing

Inventory Loans

Non-bank asset-based lines of credit - businesses pay interest on the amount of facility that is used - the credit limit fluctuates based on sales and levels of accounts receivable as margined in the credit agreement - Access to funds via an approved credit limit that grows as your business grows - Interest payments are typically higher than bank interest rates but these solutions provide more access to capital

Cash flow loans - monthly payments for short term working capital loans/lump sum loan solutions such as merchant cash advances, etc. - Quick access to funds is a hallmark of this type of short-term financing. Repayment terms are carefully tailored to sales and cash flow metrics.

Government Of Canada Small Business Loan Program - Guaranteed federal business loan via a government-authorized financial institution - A popular small business loan in Canada for a small business term loan structure and solution- A new business/startup is eligible for this type of financing as well as franchises and existing businesses - Leasehold improvements can also be financed under the loan program.

Government loans are excellent for small and early-stage companies to achieve growth and expansion capital -

A solid solution for franchise financing and start-up financing for a small business

Recent changes in 2022 significantly enhanced the amount businesses can borrow, as well as expanded the types of financing offered

WHAT IS GRANT FINANCING?

Many businesses investigate grant financing as a source of funding for specialized needs in the early stage of a business. Provincial and federal governments offer numerous grant programs in Canada - Although funding does not need to be paid back, many grant programs require matching funding from the business. Other benefits, such as support and training, are often key benefits of some grant programs.

The challenge in obtaining grant funding is that a serious amount of time and effort is often spent on the grant application process, and in some cases, a company will benefit from the assistance of grant writers in the preparation of submissions and applications. Talk to the 7 Park Avenue Financial team about the financing available for grant matching requirements.

CONCLUSION - SMALL BUSINESS LENDING

Can you avoid business credit nightmares in Canadian banking? We sure think so... consider talking to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor with a track record of business financial success in achieving some of the best business banking and alternative finance solutions in Canada, with rates commensurate with your firm's current credit quality.

Raising capital and borrowing money is challenging - talk to the 7 Park Avenue Financial team!

FAQ: FREQUENTLY ASKED QUESTIONS /PEOPLE ALSO ASK / MORE INFORMATION

Can a business get a line of credit?

All Canadian banks, as well as other traditional lenders, offer a business line of credit solution, as well as solutions offered by business-oriented credit unions - Many alternative lenders also offer non-bank business credit lines that allow a business to finance accounts receivable and inventory for day to day working capital needs with no negative ownership dilution based on current owner equity financing.

What do banks look for in a business loan?

Major financial institutions such as banks focus on business sales revenues in an established business, the business's cash flow, owner equity, and the owners' credit history / good credit score and net worth. Cash flow repayment ability is key to bank lending for a business's success. A business plan and financial projections will always help in loan approvals to secure funds for a business's needs.

What documents do I need for a business line of credit?

Can you get a business loan from the bank?

Numerous loan and line of credit financing options are available from Canadian banks. Financing can be in term loans, small business startup loans, equipment financing and lines of credit/business overdraft facilities.

Eligibility requirements for each type of bank finance solution vary based on the documentation and information required. Business owners should be prepared to demonstrate a reasonable net worth and a good credit score, as well as be able to provide proper financial statements or a business plan to increase approval chances; Banks offer the lowest interest rates and flexible repayment options for borrowers that qualify. Personal or business collateral may sometimes be required based on the size and type of financing needed.

Business credit scores vary based on whether the lender is a traditional financial institution such as a bank or an alternative lender. Business lenders who place emphasis on personal credit scores focus on a credit bureau score in the 650+ range, although other factors in business lending go beyond the personal credit history of business owners.

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