OVERVIEW – Information on the role of bank and commercial financing companies in Canada for business loans and the search for a bank or non bank line of credit in Canadian business financing needs
Business loans or a bank line of credit have Canadian business owners and financial managers facing a double edged sword – We’re calling it ‘ choice ‘ and ‘ challenge ‘, and the current popularity of the phrase ‘ the elephant in the room ‘ begs the discussion around how business feels about bank and bank alternatives . Let’s dig in.
There is a lot of talk among (mostly older!) business people around the ‘ loyalty ‘ they have to Canadian banks and other commercial finance sources. Major studies and top experts clearly show that loyalty is declining and the overall experience business has with accessing financing is at a minimum ‘ troublesome ‘.
Automization, credit scoring, and digital forms of borrowing have continue to create a maze of both confusion and options for the business borrower. The SME COMMERCIAL FINANCE sector, as well as start ups faces challenges in sourcing a bank relationship manager that can provide capital and revolving credit facilities that meet the need.
While larger ‘ credit worthy ‘ customers have access to almost unlimited capital at incredibly low current rates , including the luxury of having banks compete for their business , the start up and SME Commercial Finance sector is often unable to access this capital for credit quality reasons .
This latter group has to gravitate to a number of non bank solutions that provide capital but often have a higher cost – that’s the ‘ trade off ‘ – Those solutions include A/R Financing, Inventory Finance, Asset based ABL business credit lines, Tax Credit Monetization Sale Leasebacks, and Purchase Order and Royalty Financing . Companies that have successfully sought these options have provided portions of their assets to acquire the capital they need, notwithstanding that banking is often the ‘preferred ‘ option. The simple bottom line – Canadian business borrowers are willing to consider options.
We’ve also dealt with many clients who simply want to change their bank because of either an account mgr relationship issue or loan covenants that don’t make sense. (To the bank they seem to make perfect sense!)
Price and costs of finance is often the key motivator in changing a bank relationship. The challenge of the bank relationship manager is to sell a total value added relationship , which can often be limited because of issues such as geographic coverage, etc.,
Timing of approval and access to capital is a big issue, many business borrowers simply can’t wait for the time it takes for a bank to make a decision – that allows many commercial finance companies that offer other solutions to be viewed as a viable alternative. In many cases such as ABL financing, tax credit finance, PO /Trade finance these firms are highly specialized and viewed as the expert in certain niches.
Many of these non bank alternative solutions also can co exist nicely with a bank relationship – however some can’t when it comes to collateral, etc.
If you’ve been reluctant to discuss the ‘ elephant in the room ‘ i.e. the bank or non bank financing solution seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with a total financing package, bank or non bank, that makes sense within your firm and industry.
Author: Stan Prokop – 7 Park Avenue Financial :
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :
7 PARK AVENUE FINANCIAL = CANADIAN BUSINESS LOAN EXPERTISE
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