Is The Ability To Grow Your Company Falling Apart Due to Lack Of Or Improper Business Finance?
OVERVIEW – Information on growth financing strategies when it comes to which business finance solutions meet the goal of the Canadian business owner/financial manager
Growth financing in Canada usually revolves around 2 key issues: Business finance solutions that are available and managing those solutions relative to their cost and structure. Those issues should not be the cause of your firms ‘ meltdown ‘.
Let’s dig in.
While every business in Canada isn’t obsessed with growth we can make a reasonable assumption that business owners and their financial managers do in fact want to increase the size and value of their business. We supposed the balance of the owners and entrepreneurs in Canada are obsessed with managing even worse matters, sales decline, operating losses etc. So we’re all for a focus on growth.
When it comes to financing and specifically in terms of growth the status quo rarely works. We constantly meet with clients who find themselves challenged as they strive to increase revenues – the old ways of financing their firm aren’t working. In some cases, remarkably, they have been self financing and didn’t even need external capital solutions.
What are those capital / cash flow/ and working capital solutions needed for? Typically they are for purchasing new assets (equipment lease financing) and current asset growth in receivables and inventory. (Bank credit lines, non bank asset based lines of credit).
Any new capital or working capital resources is going to come from 1 , or a combination of 3 things – new owner equity, some sort of debt financing, or one of our recommended favorites – monetizing assets .
Monetizing assets can come in the form of the bank and non bank credit lines we have mentioned. Other current assets that can be monetized are SR&ED tax credits. Two other options to consider are sale leaseback strategies of assets you have purchased and owned, but not subject to any liens or encumbrances; the final strategy is to explore a PO/Contract financing scenario.
All of these 3 different capital sources should come with the usual pros and cons analysis. That’s simply because of the following:
Debt financing is a long term permanent obligations that must be addressed with future cash flows
Equity financing and ownership dilution is expensive
Bank and commercial financing companies offer different rates terms and structures all of which must be assessed relative to cost and the obligations that come with them (ratios, loan covenants, external collateral, etc)
When it comes to both debt financing and bank and commercial finance company solutions the dreaded owner personal guarantee is always going to be an issue. Often it can be negotiated in some manner, but not always.
The general rule of thumb of course is that debt and asset monetization strategies are always going to be more expensive than equity, especially in the early years of your business when you’re building value.
When we sit down with a client to assess business financing alternatives the key issues on the table are as follows:
Asset valuation and quality
Profit and Loss status
Operating issues relative to asset turnover
If you don’t want your firm to face the growth meltdown challenge seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist in ensuring the ability to grow your business, without falling apart, with the right financial solution, is key.
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