Do You Need Status Quo Or Status Grow When It Comes To
Business Credit Facilities?
OVERVIEW – Information on business line of credit access in Canada . A revolving credit line is critical to business survival and growth
The business line of credit . When it comes to revolving credit facilities in Canada is the ‘ status quo ‘ good enough? That status quo is of course your ‘ existing state of affairs ‘ and more often than not that ‘ same old’ just isn’t good enough when you’re growing or expanding your business.
So we’ve decided to open the SUGGESTION BOX
today and see what’s happening in the world of corporate credit lines, including one solid alternative you might not be aware of. Let’s dig in.
Top experts agree this type of borrowing; the ‘ revolving facility ‘ is both valuable and critical to your business.
It of course does make sense that our Canadian chartered banks is the one ‘ go to ‘ when it comes to business borrowing.
(SPOILER ALERT – ‘ What, there’s another alternative?!) Bank credit is plentiful, flexible, and, top of mind for most business owners and financial managers, low cost! Commercial lending of course is big business when it comes to our Chartered banks.
So what factors determine your ability to get a business line of credit that works for your firm? There are a number, and some are more important than others. As simple as it sounds this includes clearly demonstrating you need one.
If you’re in an all cash business with no receivables or inventory, which is the case for many retailers, your company is going to have a hard time demonstrating the need for revolving credit. That’s simply because this type of financing typically funds current assets such as receivables, which don’t come into play in retail/cash.
The key to demonstrating your need for a corporate credit line is a cash flow forecast that shows proper assumptions in sales growth and build up in receivables and inventory. It’s those assets that typically make up your borrowing base. By the way, we hate to be the bearer of bad news but it is exceedingly difficult to get such financing if you’re a start up. Canadian banks are just not set up to take start up risk in corporate credit without strong collateral or equity involvement of the business owner/owners.
What are then some of those key characteristics in business credit? It should be little or no surprise that the banks focus hasn’t changed in a 100 years, and it’s the timeless adage of:
Businesses with good commercial credit ratings, track records, and clean financials are always in a position to apply.
What about that alternative though that we mentioned to bank credit facilities. It’s called the ABL, the ‘ asset based loan / line of credit’. It’s non bank in nature, more generous in borrowing power, easier to get 99% of the time and available in all sizes, typically from 250k to the many millions.
There is no doubt any growing company needs the cash or working capital supplied by a business line of credit. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your borrowing needs and alternatives that make sense.
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