OVERVIEW – Information on business financing . How does management choose the right credit and banking alternatives that are available
Business financing choices in Canada. To many business owners and financial managers it must seem like they spend a tremendous… aka ‘ too much’ time searching for the credit and banking alternatives they need to run and grow business.
What then are some of those decision points when your business is looking for capital of any type? Let’s dig in.
More often than not it’s about taking on the wrong kind, or too much debt and therefore risking business failure.
There are a number of ways in which business finances itself. They include:
Vendor / Supplier credit
Many business owners often underestimate the power of supplier finance. The terms and credit needs you’re able to negotiate contribute greatly to business cash flow. Supplier credit stems the outflows of cash. The bad news here is that everybody’s in the same boat at the end of the day, as everyone, including your clients attempt to stretch payment terms.
Instead of paying with cash for equipment and technology assets business can choose to lease those assets on a lease or rental basis. Terms of anywhere from 2-7 years, sometimes longer, are available to leases assets such as rolling stock, computers, heavy equipment, production machinery, etc. Bottom line… any asset can be financed.
Canadian commercial banks offer significant financing choices when your firm seeks business credit. The most desirable bank facility is typically the ‘ revolver’ allowing you to draw daily against the cash you need up to a set limit. The danger of breaking a bank arrangement often leads many businesses into a death spiral.
While in many cases it’s desirable to get new equity into your company the challenge here is that it dilutes ownership at the expense of current owners.
Many owners and finance managers who focus on getting new equity don’t fully realize that numerous ASSET MONETIZATION strategies exist as an alternative to equity in many cases.
Tax Credit Financing
SR&ED Tax credit monetization
Non bank asset based lines of credit
4 or 5 key issues typically should come up in your overall financing decision. They include:
Flexibility of the financial offering
Cash flow and profit concerns
Control exerted by the lender based on the finance offer
At certain times in any company’s history it can’t always get the financing it needs. Issues such as your overall leverage and your capital structure need to be addressed carefully. Growth, while always desired by almost all firms requires proper assessment of your financing needs.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with business credit and banking decisions that make sense today and tomorrow.
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