OVERVIEW – Information on different types of loans and asset financing in Canada . Various business finance solutions offer different rates, terms and structures when it comes to growth and survival.
Business finance loans in Canada require that the business owner/financial mgr has a clear understanding of the various types of asset financing that can bring survival and success to the company . In fact there are at least 5 types of business loans that can be tailored to company needs. Let’s dig in.
At the heart of the matter is the requirement that you understand whether the solution will be asset based or cash flow based.
The revolving business credit line is a common solution for most firms. These loans follow the ongoing growth of assets in your business – primarily those ‘ current assets ‘ – i.e. receivables, inventories. When it comes to these lines of credit Canadian banks look to stability in the assets and the overall health of the company.
When your firm cannot fully demonstrate that capability the alternative option is an ‘ABL ‘ – it’s the same asset based credit line, but focuses instead very much on the asset quality and turnover. Inventory is often the ‘ elephant in the room ‘ in revolving credit lines, given its true turnover and quality.
An offshoot of asset based financing is ‘ A/R Financing ‘, generally called ‘ factoring’. Its total focus is on your receivables and is utilized by thousands of firms in Canada – large and small.
Receivables are typically generated from contracts and purchase orders your firm receives. Not all owners/mgrs know that the actual Purchase Order itself can be financed. In PO Financing the focus shifts to the quality of your customer and your company’s ability to fully satisfy and complete the order. While typically a more expensive form of financing it allows many businesses to take on business much larger than their current financial profile will allow.
Commercial mortgages and sale leasebacks on existing properties are viable ways to bring cash flow into your business. In acquiring a property your company turns rent checks into real equity, and sale leasebacks on property already owned can generate valuable working capital while retaining ownership in the building or property.
True cash flow loans can also enhance a company’s liquidity and survival. They can be secured or unsecured but always come back to your firm’s ability to prove cash flow generation. Lenders call that ‘ cash flow coverage’. While in the past typically these loans have been for larger firms numerous short term working capital loans are available today that might fit your current cash flow conundrum.
When cash flow loans are ‘ unsecured’ they are often called ‘ mezzanine ‘ solutions. While they come with covenant and ratio requirements if your company has a track record of success this type of financing will enhance growth and profitability.
That’s the roundup. So would any of the following solutions help your company?
Business credit lines
Purchase Order financing
Cash flow loans
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with solutions that work.
Stan Prokop – founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years – Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Direct Line = 905 302 4171
Office = 905 829 2653
‘ Canadian Business Financing with the intelligent use of experience ‘