OVERVIEW – Information on creative small business financing sources in Canada and how these solutions can help grow companies in the SME sector
Creative small business financing sources are often the ‘ secret sauce’ when it comes to the Canadian business owner and manager beating the competition when it comes down to the ability to grow a business and prosper… with profits.
It’s no secret to our clients when top experts still maintain we are still somewhat ‘ reeling ‘ from the 2008 global meltdown. That’s when even the big guys, banks included, couldn’t write some of the cheques they wanted, much less the little guy in the SME (Small Commercial Enterprise) sectors of Canadian business.
Being ‘ cut off’ from accessing capital has a major effect on any business, with the worst case of course being having to shut the doors.
Is there any good news in all of this? If there is one bright spot it’s the ability of Canadian business owners in SME (sales under 25 Million dollars? is a good definition) to adapt to and respond to creative financing mechanisms. Some of these are versions of traditional financing, others are simply brand new.
The challenge about using a new financing option is to ensure it’s not overly complex, and that it will provide that right financing that matches your needs. It should be not secret to the Canadian business person that creative and alternative financing structures often come at a higher cost – that cost should be warranted when it comes to matching benefits.
One example is the tremendous growth of RECEIVABLE FINANCING in Canada in the last number of years. While it has a higher carrying cost than commercial bank lines of credit it allows any small companies to take on larger sales opportunities, mend relationships with suppliers, and forget the daily strain of managing cash flow.
They key to using that type of financing is to understand that it alleviates the pressure of having to get a commercial bank line of credit, and that your business must be stable or growing – as any type of creative financing solutions is less likely to succeed if you don’t have growing or stable sales revenues .
Bottom line ‘ death spirals’ not welcome!
Receivable finance is a creative asset monetization strategy. When you are not monetizing assets you must consider debt options. Using asset financing strategies via equipment financing/leasing allows almost any firm to acquire assets they need to move their business forward.
While general cash flow, asset quality are important, almost any asset can be financed via the lease company’s ability to structure a deal that meets your asset acquisition needs. Lease finance is a great way to allow you to meet changing technology needs also, as a properly structured lease allows you to match cash flows with future benefits.
Many business owners in the SME sector spend a lot of time chasing equity via friends and family , angel investment, and the infamous ‘ VC ‘ we are pretty sure that only about 1% of them , if at all acquire the capital they need at a cost that often means giving up large ownership percentage . Giving up ownership equity in your early years is one of the most costly mistakes that any business owner can make.
By the way, the cost of many of the creative financing solutions we talk about with clients is often (not always) between 1-3% per month. Expensive? Not really if you consider the high cost of giving up equity ownership in the early years when your company valuation is small. You can check any finance text book on that one… or better still speak to a business owner who cashed out (for cash) way too early.
Other methods of creative small business financing sources include:
A/R Finance (already mentioned)
Equipment Leasing (already mentioned)
SR&ED tax credit financing
Non bank asset based lines of credit
PO/SUPPLY Chain financing
Unsecured cash flow loans
When you want the inside scoop on what method of business financing creativity works for your company seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success , allowing you to take your business to the next level of growth and profit .
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
Phone = 905 302 4171
Email = email@example.com
7 Park Avenue Financial
Canadian Business Financing