OVERVIEW – Information on unsecured cash flow loans in Canada. Often called Mezzanine financing, this type of business loan can help many companies grow and prosper
Unsecured cash flow loans are an appealing segment of business financing in Canada. It’s this type of business loan that can allow a company to grow when traditional term loans don’t make sense from both your perspective… and the lenders. Let’s dig in.
That financing appeal arises when the business owner/ financial mgr realizes their company has the potential to grow sales and earnings but doesn’t necessarily qualify for funding from a regular bank type facility.
The typical weaknesses of the firm at this point in time revolve around absence of hard collateral and debt to equity ratios that just don’t work for traditional lending criteria. Enter unsecured cash flow financing!
Typical structures for these types of loans, often called ‘ mezzanine’ are three to five year terms. Typically at the end of the term there is a refinancing of the existing loan, or in many cases, a ‘ take out ‘ to more traditional finance solutions.
How does one recognize whether their company is a candidate for an unsecured cash flow loan? The essential requirement is your ability to prove strong cash flow – typically other financing is already in place and the company collateral is already pledged. That’s why cash flow is so critical.
What are some of the uses of this type of financing? Typical reasons your company might consider this type of business loan are:
Acquiring another company or exploring a mgmt buyout
Expanding into new markets
Refinancing the business
Enhancing working capital to support growth in sales, receivables, inventory, etc
Buying new assets
Naturally it goes with saying (but we’ll say it anyway) that not every business is a candidate for mezzanine unsecured financing. Start ups can’t really prove their cash flow satisfactorily, and this financing is not really ‘ equity’ finance. Companies that are severely challenged and in some sort of ‘ death spiral ‘ need not apply.
In many cases the current ‘ senior ‘ lender to your business will often suggest a complimentary unsecured cash flow loan as a part of your total financing package. You already might have a line of credit or asset based revolving facility in place – the unsecured cash flow loan provides a more long term working capital component.
If your firm would benefit from this type of cash flow financing seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your finance needs.
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Office = 905 829 2653
‘ Canadian Business Financing with the intelligent use of experience ‘