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FINANCING THE SMALL TO MEDIUM ENTERPRISE IN CANADA
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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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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Unlock your business potential: Discover the perfect financing solution tailored to your unique needs.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer CANADIAN BUSINESS FINANCING and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
Financing for small and medium enterprises in Canada is a classic business problem.
Many clients we talk to believe it doesn't exist; in other cases, it’s a business life of disappointment. Let's clarify some winning and some losing strategies in the SME sector in Canada when it comes to raising capital and financing assets for your business. Let's dig in.
FUNDING SOLUTIONS FOR THE CANADIAN SME
As a business owner, you will be pleased to hear that in today's economy, and there are more diverse and accessible financing options for the business capital or cash flow you need to run and grow a business. Whether it's traditional bank financing or any number of alternative lending solutions, let the 7 PARK AVENUE FINANCIAL team show you funding that suits your business needs.
Small Business Financing Options: Is It All About Size?
Part of the challenge of SME (small medium enterprise) financing is size.
To avoid the obvious ‘is size important’ joke, we were reading a column in yesterday’s Canadian Business Daily. The columnist was touting the benefits of a SMALL CAP (cap = capitalization) company.
Owners of small and medium-sized businesses in Canada will be shocked to know that a small-cap stock in Canada has a value of less than several hundred million dollars. Enough said… all of a sudden, financing your firm seems an even more significant challenge because it would appear you’re not even a small-cap!
However, there are thousands, perhaps hundreds of thousands of businesses in Canada in the SME sector with 1 -25 Million dollar range revenues. And guess what? These businesses are growing the Canadian economy, being acquired, merging with similar firms to get more scale, and requiring new operating credit.
Most statistics tell us that small businesses are the backbone of the economy, given that the big guys don’t seem to be hiring a lot these days unless you’re an outsourcing consultant! Small businesses often need to borrow money to sustain and grow their operations.
WHAT TYPE OF BUSINESS LOAN DOES YOUR COMPANY NEED
So what types of financing does the SME need for operational cash flow, and where can he or she successfully find it from traditional financial institutions at terms and conditions and an amortization period acceptable their overall credit profile? Financing needs include:
Term loans
Revolving credit facilities
Equipment Financing
Rental solutions
Equity capital/Venture Capital/Private Equity
Business loan
THE CHALLENGE OF ACCESSING BANK AND CONVENTIONAL FINANCIAL INSTITUTION FINANCING
The major challenge for SMEs in Canada is their ability to access traditional bank financing without a good credit score. Unlike the U.S., it is extremely difficult for SME business owners to access the loan products offered to larger established corporations.
THE CANADIAN BANK OFFERING
The main two traditional financing products banks offer to the SME sector are the federal Government of Canada Small Business Loan, which maxes out at 1,000,000.00$ (not bad, don’t you think?). This loan includes a one-time Federal Government registration fee of 2% of the loan amount, which may be included in the amount borrowed. Additionally, working capital, term and equipment loans are offered to eligible businesses via Canada’s crown corporation bank or Export Development Canada EDC.
ALTERNATIVE EQUITY FINANCING TO THE RESCUE
If there is one bright light in Canadian SMEs' business financing, it’s the alternatives non-bank commercial lenders offer. Understanding cash flow requirements is critical. Although they are always priced to risk, these solutions are varied and include:
A/R Financing -financing outstanding accounts receivable
Inventory Loans
Access to Canadian bank credit/cash flow term loans
Non bank asset-based lines of credit
SR&ED Tax credit financing
Equipment / fixed asset financing
Cash flow loans
Royalty finance solutions
Purchase Order Financing
Short Term Working Capital Loans/ Merchant Advance
Securitization
Business credit cards
KEY TAKEAWAYS FOR SMALL BUSINESSES
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Debt financing involves borrowing money that must be repaid with interest at a specified interest rate.
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Equity financing exchanges ownership stakes for capital injection
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Short-term loans address immediate cash flow needs
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Long-term financing supports significant investments and expansion
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Collateral-based options leverage business assets for better terms
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Government-backed programs offer favourable conditions and competitive interest rates and interest payments tailored to the needs of qualified businesses- funding leasehold improvements /intangible assets/ real property , franchise fees, working capital costs, equipment needs, etc
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Alternative lenders provide flexibility for those with less-than-perfect credit
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Online platforms streamline application processes and decision-making
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Personal guarantees may be required for unsecured financing options
HAVE YOU CONSIDERED THESE UNCOMMON TAKES ON BUSINESS FINANCING OPTIONS?
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Leveraging non-dilutive funding sources like revenue-based financing and SR&ED tax credit financing can provide capital without relinquishing equity. By aligning repayments with business income, this option minimizes the strain on cash flow during slower periods.
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Exploring supplier financing allows businesses to receive goods or services upfront while deferring payment. This method can significantly improve cash flow management and strengthen relationships with key suppliers.
CONCLUSION - SECURE THE BUSINESS CAPITAL YOU NEED TO TAKE YOUR BUSINESS TO THE NEXT LEVEL
The bottom line is that small businesses don’t necessarily have to have the external collateral, stellar financial statements, and impeccable personal credit histories that come with traditional financing solutions for a new loan.
For SME COMMERCIAL FINANCE solutions that make sense for your business, and whether you are small and medium-sized, or a start-up, seek out and speak to 7 PARK AVENUE FINANCIAL, a trusted, credible and experienced Canadian business financing advisor who can assist you with the SME problem and provide valuable business advice.
FAQ
What are the advantages of exploring multiple small business financing options?
Exploring various financing options allows entrepreneurs to find the most suitable solution for their specific needs, potentially securing better terms, lower interest rates, and more flexible repayment schedules.
How can small business financing options support long-term growth for business operations?
Appropriate financing can provide the necessary capital for expansion, equipment purchases, hiring skilled employees, and marketing investments, all of which contribute to sustainable long-term growth.
Why might alternative financing options be beneficial for new businesses?
Alternative financing options often have less stringent requirements than traditional bank loans, making them more accessible to startups and businesses with limited credit history or collateral.
What role does timing play in choosing small business financing options?
Selecting the right financing option at the appropriate time can help businesses capitalize on growth opportunities, manage cash flow effectively, and avoid costly delays in critical projects or expansions.
How can small business financing options help in managing seasonal fluctuations?
Certain financing options, such as lines of credit or short-term loans, can provide the flexibility needed to navigate seasonal cash flow variations, ensuring business stability throughout the year.Many companies choose short term working capital loans or merchant cash advances repayable via installment payments /lump sum payments.
What documentation is typically required when applying for small business financing?
Most lenders require financial statements, financial projections, tax returns, amortization schedules for any current long term debt ,a business plan, and detailed information about the company's ownership and operations when considering financing applications.
Are there financing options designed explicitly for minority-owned or women-owned businesses?
Some specialized programs and lenders focus on financing options tailored to these businesses, often offering more favourable terms or additional support.
How does my credit score affect my ability to secure small business financing?
Personal credit scores can significantly impact business financing options, especially for new businesses. Many lenders consider the owner's creditworthiness when evaluating loan applications.
What are the typical repayment terms for different trim business financing options?
Repayment terms vary widely depending on the type of financing. Short-term loans might require daily or weekly payments over a few months, while long-term loans could have monthly payments extending several years.
Can I use multiple financing options simultaneously for my small business?
Yes, many companies use a combination of financing options to meet different needs. However, it's crucial to carefully manage multiple obligations to avoid overextending the company's financial resources.
What factors should I consider when comparing different small business financing options?
When comparing financing options, consider the total cost of borrowing, repayment terms, eligibility requirements, funding speed, the potential personal guarantee requirement, and the impact on your business's cash flow and long-term financial health.
How have recent technological advancements affected small business financing options?
Technological advancements have led to the rise of online lenders, peer-to-peer platforms, and AI-driven underwriting processes, making financing more accessible and streamlined for small businesses.
What role do credit unions play in small business financing compared to traditional banks?
Credit unions often offer more personalized service, professional financing services, and potentially lower interest rates than conventional banks for aspiring entrepreneurs.They may also have more flexible lending criteria, making them an attractive option for some small businesses.
