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Best Business Financing Options for Your Growth
Financing Sources For Canadian Business
YOU WANT FINANCING OPTIONS FOR YOUR BUSINESS!
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Let us help your firm just like our hundreds of other satisfied clients.
Financing & Cash flow are the biggest issues facing businesses 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
Understanding the diverse business financing options is essential for the growth and stability of your business.
Struggling with finding the right financing for your business needs? Discover the options that can transform your financial future.
Exploring Business Financing Options
It's no secret that businesses need to finance their operations, and if the business owner or financial manager is not familiar with the financing options for a business that are available or how they work, then finding appropriate financing or commercial loans can be difficult.
Let's go through the key terms and issues and uncover what kind of financing might suit your business needs while balancing the whole issue of debt and owner-equity
Let’s break down the key terms and issues and uncover what kind of financing might suit your business needs while balancing debt and owner equity.
Understanding the various business financing options available to your company is critical - Business owners today are faced with many choices, each tailored to different needs and circumstances.
Whether you're a startup seeking initial capital, an established business looking to expand, or simply managing cash flow, knowing which financing option to choose can make all the difference.
THE GOLDEN RULE OF BUSINESS FINANCING
To decide what type of debt financing is right for your business, remember these basic rules: finance day-to-day operations with short-term loans and lines of credit, and finance long-term fixed assets and long-term investments with another longer loan or, sometimes, a mortgage for commercial real estate.
And by the way, there is no universal or magic formula to finding the ‘perfect’ financing for your business.
Every financial institution, commercial lender, bank, or alternative lender has different requirements and loan terms and conditions that vary depending on the financial institution and type of loan. Small business owners don’t have access to those venture capitalists and angel investors and any venture capital or other third party
BUSINESS CREDIT LINES
Business lines of credit are an excellent way to manage short-term cash needs. Some companies choose Invoice financing or factoring, where a third party service provider provides funding based on the overall quality and size of sales revenues and accounts receivable.
TERM LOANS
Term loans are a great option via traditional bank financing when you need access to long-term funds.
They're the right choice for financing long-term investments - with fixed monthly payments for uses such as the purchase or expansion of a business since they typically come with lower interest rates at fixed terms and longer amortizations.
Some term loan options might be as short as one year or 20 years ( real estate )
GOVERNMENT LOANS
You can get a small business loan through Industry Canada's Small Business Financing Program.
The federal government has approved lenders and financial institutions that offer these loans, which come with lender guarantees and lower down payments than other types of financing for your company - making them ideal if you're looking into buying property or even starting a business.
Many franchises are financed through the program, which has an upper limit of 1 million dollars in some instances, which is still significant for small business owners.
SBL loans are a great way to start a business. They're available through many participating banks and credit unions and have more accessible qualifications than most other types of small-business financing. The terms are generally longer for people wanting to own their business.
The Canadian government guarantees loans for borrowers with acceptable personal credit histories.
This type of financing can provide capital up to $1 million with low interest rates. It also secures it through real estate holdings; no personal collateral is taken as security!
The program is ideal for purchasing a commercial building or large equipment.
Contrary to some people's belief, the program is not a cash loan or line of credit and is not used for working capital needs.
COMMERCIAL REAL ESTATE LOANS
The availability of commercial property loans is an important decision for any business as they can be used to finance the purchase of office space or warehouses, factories, etc, Borrowers can also use the SBL government program for real estate financing for borrowers able to put down a down payment.
If you're looking to buy a building for your business, there are different loan options available including of course commercial mortgages or real estate financing through Canada's non bricks and mortar crown corporation.
EQUIPMENT LOANS / EQUIPMENT FINANCING
Equipment loans and equipment financing can be a great way to finance equipment and machinery, including specialized commercial vehicles and technology financing needs.
The terms usually range from two to five to ten years for certain long-term assets. Once again, SME borrowers in Canada can also utilize the federal loan guarantee program for equipment assets. An SBL government guarantee will increase your odds of getting approval for the loan you need!
SHORT-TERM WORKING CAPITAL LOANS / CASH FLOW
The advantage of using the popular short-term working capital loan is that it is an easy and quick way to get money, but there are also some disadvantages. For one thing, you'll need good credit for this option to work well with your business model and cash flow cycle because the interest rates can be higher than what traditional loans offer.
These loans are structured differently, and loan approvals are based on a formula based on a percentage of your annual sales and owner credit history. They are short-term solutions, not long-term investments in your business.
KEY POINT—Note that in Canadian business, not all traditional or alternative financing requires a business plan, but business plans can often assist in approving your financing request. 7 Park Avenue Financial prepares business plans that meet and exceed bank and commercial lender requirements for our clients.
PROFESSIONAL PRACTICE LOANS
If you are a healthcare professional with an idea of purchasing a practice, financing is likely available. In fact, many traditional and commercial lenders offer loans to help make this happen! The amounts vary depending on what type and purpose and may include:
Expansion/remodelling (practice acquisition),
Equipment purchases;
Interest-only payment plans
100% financing offered during startup periods, etc
Loan types for healthcare professionals who want to buy a medical, dental or veterinary practice can reasonably quickly be financed at excellent terms tailored to the business/industry.
TRADITIONAL BANK LOANS
START-UP FINANCING / SMALL BUSINESS LOAN
When you need funds for your business, the first thing on your mind is sources of financing. But remember that the primary investor in your business should also be yourself via some level of owner equity.
The advantages of a bank loan for your small business are numerous and varied, from customized service to repayment plans that fit your needs.
Regarding traditional financing solutions, borrowers should understand that banks seek sound businesses with excellent credit and history. The plan will not excite them about your prospects as much- so ensure you have both! Start-up loans also often require personal guarantees from entrepreneurs interested in starting or buying a business.
Canadian bankers first look at your business plan when applying for a loan. You need an excellent track record and solid credit if you want this type of funding, but there's no guarantee that financing will be approved.
ALTERNATIVE FINANCING SOLUTIONS
Many business owners in Canada are sometimes forced to look for business loan alternatives when they cannot access traditional bank loans and financing. They search for these solutions because alternative lenders often have lower credit requirements and less emphasis on business owners' net worth and credit history. Also, alternative financing is often approved much more quickly, with faster access to funding.
Some examples of alternative financing include:
Asset-based lending
Non-Bank business lines of credit
Purchase order Financing
Tax Credit Financing
Sale-leaseback of owned assets
Factoring / Invoice financing / Confidential Receivable Financing
Short Term working capital loans/merchant cash advance loans
Mezzanine Financing / Cash Flow Loan
KEY TAKEAWAYS
Types of Business Loans: Understand the various loan options such as term loans, Canadian Government Small Business 'sbl' loans, and microloans to find the right fit for your business.
Equity Financing: Learn how to attract investors by offering ownership stakes in your business, suitable for startups and high-growth companies.
Debt Financing: Explore traditional bank loans and lines of credit that require repayment with interest but do not dilute ownership.
Invoice Financing: Utilize unpaid invoices to secure immediate working capital, helping with cash flow management.
Alternative Financing: Discover non-traditional funding sources such as crowdfunding, peer-to-peer lending, and merchant cash advances for flexible financing solutions.
CONCLUSION - FINANCING OPTIONS FOR BUSINESS
Owners of medium-sized and small businesses often struggle to obtain the funds they need.
However, traditional financial institutions sometimes have outdated application timelines and long processes that make it difficult or impossible to achieve the financing you need. There are also demands for equity financing to meet financial ratios, etc. Furthermore, government regulations on traditional financing also pose significant barriers with regard to access to capital.
Speak to 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor for small business owners with advisory services and financing origination that can help you with the most challenging issues you will face in financing your business and growing business revenue for your business's success!
FAQ: FREQUENTLY ASKED QUESTIONS
What is the best financing option for a business?
Financing for a business can come from traditional financial institutions or alternative lenders that offer small business financing options such as loans and credit cards.
Some borrowers turn to government grants when they can't raise debt through government financing programs and term debt.
Credit unions focused on business financing can be a solid source of business capital for an existing business but also require an appropriate level of personal investment.
Owners of established businesses should be able to demonstrate proper financial projections and be willing to provide a personal guarantee when seeking funds with repayment terms tailored to their business.
Day-to-day operations for financing sales and accounts receivables can often be achieved via a quick application process for short-term financing needs.
Early-stage private corporations with limited revenue and assets face challenges in accessing financing options due to restricted business credit history, making the funding process time-consuming.
What are the most common types of business loans available?
Common types include term loans, Canadian government SBL loans, lines of credit, and short-term working capital loans. Each offers unique benefits depending on your business needs.
How can equity financing benefit my startup?
Equity financing can provide substantial capital without the need for repayment, though it involves giving up a portion of ownership in your business.
What is the difference between debt financing and equity financing?
Debt financing involves borrowing money to be repaid with interest, while equity financing involves raising money by selling your business shares.
How does invoice financing work?
Invoice financing allows businesses to get immediate cash by selling their unpaid invoices to a financing company at a discount.
What are some alternative financing options for businesses?
Alternative options include crowdfunding, peer-to-peer lending, and merchant cash advances, offering more flexible terms than traditional loans.
What is the role of venture capital in business financing?
Venture capital provides large sums of money to startups and early-stage businesses in exchange for equity, often supporting high-risk, high-reward ventures.
How do small business grants work?
Grants provide non-repayable funds to businesses, usually from government or private organizations, for specific purposes or projects.
What should I consider when choosing a financing option?
Consider factors such as the amount needed, repayment terms, impact on ownership, and overall cost of financing.
How can angel investors help my business?
Angel investors provide capital in exchange for equity or convertible debt, often bringing valuable expertise and networks to the business.
What is a merchant cash advance?
A merchant cash advance provides upfront cash in exchange for a percentage of future sales, offering quick but often expensive access to funds.
What are the benefits of using alternative financing over traditional loans?
Alternative financing can be more flexible, with faster approval processes and fewer stringent requirements than traditional bank loans.
How can a business improve its chances of securing financing?
Maintain a solid business plan, demonstrate strong financial health, build a good credit history, and explore multiple financing options.
What impact does financing have on business growth?
Proper financing supports expansion, improves cash flow, allows for investment in new opportunities, and can enhance overall business stability.
' Canadian Business Financing With The Intelligent Use Of Experience '
STAN PROKOP
7 Park Avenue Financial/Copyright/2024
Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil
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