OVERVIEW – Information on business financial solutions in Canada . Access to capital helps Canadian firms grow their business if proper financing is accessible
Business financial solutions in Canada (or lack thereof!) are the key in allowing business owners and financial managers to capitalize on growth initiatives. Let’s dig in.
The myriad of finance offerings in the SME Commercial Finance sector can be a double edged sword. That’s because lack of information , knowledge, of clarity around who is offering these solutions often confuse business people when in fact they are meant to solve growth problems That , coupled with the fact that many industries vary in the types of financial solutions that fit them best makes matters even more confusing .
A good example is a type of finance that’s often the most sought by small businesses and even retailers – Inventory financing. This type of capital need is driven by the need to purchase and turn over inventory and is a key part in the ‘ bridge ‘ between client order, delivered product, and the generation of receivables, which in turn still have to be collected!
Banks and many commercial lenders shy away from inventory as a financeable asset only because they simply don’t have the expertise to manage and fund such an asset class. However, this has created opportunities for other lenders to focus on this niche, and create an entire market around inventory financing.
The most common method is to make inventories a part of an overall business credit facility. While that can be a Canadian chartered bank if your company is ‘ credit worthy ‘ more often than not the proper solution is an asset based line of credit , known as the ‘ ABL ‘ which includes inventory as party of your financing margin , together with receivables and equipment .
Bank term loans are low cost and have great term amortizations, but because they are cash flow and covenant based in our banking system they are more difficult to achieve. While the Canadian govt backed loan program, (‘CSBF’) provides thousands of businesses a year with billions in financing it only finances two asset classes – equipment and leaseholds. Popular misconceptions that this loan can provide working capital or inventory financing – the simple answer – It does not.
We spoke of that bridge from the time your firm takes and order to when you get paid from clients. Receivables are a part of that bridge and this asset can typically be financed at 75-90% of total A/R value. Receivables financing is accomplished through a bank facility, or, as common these days, via invoice finance. Our recommended solutions to clients is ‘ CONFIDENTIAL RECEIVABLES FINANCE ‘ if only for the reason… you guessed it… is that it’s CONFIDENTIAL.
In Canada equipment lessors and commercial mortgage firms can satisfy the bulk of capital options for equipment and real estate. They are typically long term in nature, 5-20 years respectively.
While personal equity and outside equity capital aren’t often the most desirable methods to attract capital the best solution is simply choosing the right debt or asset monetization solution that meets your company and industry needs .
If you want to explore business financial solutions in more detail, with a view towards growth seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in tapping into second stage financing solutions.
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 FINANCE SOLUTIONS EXPERTISE
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