You Don’t Need a Flux Capacitor to Achieve Successful Canadian Business Financing
OVERVIEW – Information on business finance solutions and alternatives in Canada. Financing businesses involves the art and skill of searching out applicable debt / equity /traditional/alternative options
Financing businesses in Canada must often make the business owner/financial manager almost feel they need a ‘ FLUX CAPACITOR’ to make the right decisions around business finance. Debt? Equity? Asset Monetization? Those three choices are the ongoing conundrum for the business solutions. Let’s dig in.
A flux capacitor? Well, if you remember it’s the instrument used in the movie ‘ Back to the Future ‘ – allowing its stars to time travel back and forth into the past and future. That’s probably not far off from how owners/managers feel about what solutions to pick for their business financing needs – there are the old traditional solutions, and in recent years numerous alternative financing solutions have become popular.
Putting ‘ asset monetization’ aside temporarily the choice of debt or equity is an important one. Debt alters the balance sheet, and for some reason or other those lenders always wish to be repaid! Choosing the right debt term (or ‘ amortization’) also becomes very important. Payments are fixed and rates are set.
In Canada the SME (small to medium enterprise) sector can in fact take advantage of the Canada Small Business Financing Loan – while it is ‘ term debt ‘ it has no prepayment penalty, rates are offered as ‘ variable ‘ and outside collateral is not needed. It’s as safe a bet as you can pick given the choices.
No business owner wishes to give up ‘ equity ‘ when they don’t need to – but when debt or asset monetization strategies don’t make sense it then boils down to choosing the equity give up – that might be from as far minded a group as friends and family to those lesser than friendly VC’s – nice people, its just that they love that ownership control.
Equity investor’s aren’t as focused on cash flow and repayment as opposed to growing the overall value of the business. And it therefore goes without saying that outside collateral; personal guarantees and the like play very little into the equity raise.
Naturally the converse of that is the control the owner/manager gives up in the business – and reporting to or working with new owners is your new main ‘ to do ‘ task.
In practice the text books and top experts tell us that the right balance between equity and debt is in fact the right solution.
So if it isn’t debt or equity what about then those asset monetization strategies we spoke of? They include:
A/R Financing / Securitization facilities
Asset based credit lines
Revolving bank facilities
Purchase Order Financing
Tax credit loans (SR&ED)
Unsecured cash flow/mezzanine financing loans
So in fact you don’t need that ‘ FLUX CAPACITATOR ‘ to gravitate back and forth between traditional or alternative financing solutions. It’s a matter of picking the right financing for right now. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success Your business finance worries just might be over.
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 :
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