LOOKING FOR RELATIONSHIP ADVICE? TODAY’S TIP :Use the relationship between sales and receivables to measure your operating results and the
investment you have in receivables. Create a simple spreadsheet to show credit sales at the end of the quarter divided by a/r outstanding. You will have a solid understanding of your efficiency in collecting your accounts and it can help identify external financing needs such as A/R financing requirements.
OVERVIEW – Information on start up business financing in Canada. Funding start up business asset requirements is often achieved through equipment leasing but this options is not always available – one other alternative is
Start Up business financing in Canada . We are often asked by clients how assets can be financed in the startup funding stage. One obvious solution is generally not achievable, and you may have not considered one other option… which… works! Let’s dig in.
Canadian entrepreneurs who have committed some of their own personal capital to a business will almost always need to add additional financing to any new business launch. One of the most obvious asset financing ‘ go to’s’ in Canada is equipment financing.
But can equipment leasing satisfy the needs of business owner if a business is new, in start up mode, or very early stages of revenue generation. The answer? More often than not… it can’t.
So why does the equipment lease solution not work for a start up. The answer to that lies in the approval process and criteria of Canadian lessors. That’s because historical and present cash flow are often a key part of the approval criteria for an asset loan. Notwithstanding the fact that an asset is also the collateral a very large emphasis is placed on ‘ cash flow ‘ analysis for transactions that are deemed no longer ‘ small ticket’.
By the way, although it might be a mystery to some as to how the lessor calculates that cash flow it shouldn’t be, so in effect potential lessees can pre-qualify themselves by understanding that cash flow analysis formula. The lessor will more often than not take your net income, add depreciation, and that amount must typically cover 12 months of your lease payment in a positive manner, with hopefully some left over for other needs. So now you know!
But all of our discussion here has not provided an answer for the entrepreneur who needs assets to finance a business in start up mode.
So one solution that we constantly recommend to clients is a Canadian Small business loan, formally called the BIL, or CSBF program. We throw in our own acronym. The ‘ SBL ‘.
When traditional financing requires strong outside collateral or other compensating matters the SBL loan requires only your ‘ promise to pay ‘. Oh and by the way, that promise is even limited in some extent, as the guarantee required is only 25% of the total financing you receive.
Key benefits of the program are:
Long amortizations if needed – (5-7 years)
Limited 25% Personal guarantee of owners
No repayment penalty
No outside collateral required
All business assets, including technology assets and software, as well as even ‘ leasehold improvements can be financed under the program. Frankly you can even buy an existing business also under the same program.
Sometimes the obvious just doesn’t work in business. So while the experts tell us that over 80% of all businesses in Canada utilize lease financing startup firms can rarely achieve the financing they need in this manner.
Consider the SBL solution and seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can help you ‘ win’ the start up challenge.
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
7 Park Avenue Financial
Off. 905 829 2653
Cell 905 302 4171
7 Park Avenue Financial
Canadian Business Financing