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OVERVIEW – Information on cash flow solutions for Canadian business. What are key differences between term loans and working capital options

Term Loans . Cash Flow Solutions for working capital . Business owners and financials managers focus on working capital whilst sometimes not determining whether the business financing solution is a longer term focus.

We first need to point out the differences between a business term loan and a receivable financing / working capital type financing solution.

Business loans of a term loan nature tend to be fixed payments. They will bring what we will call permanent working capital into your business. The nature of these loans is that they tend to be ‘fixed’ in term, payments, and rates. Your business can acquire a working capital business loan in a couple of different ways. The transaction can be facilitated purely on a ‘cash flow ‘basis. If the lender feels your firm has the cash flow to support the loan a loan will be created around that belief. Your historical and current financial statements (as well as your projections) should validate that your cash flow can meet the payment requirements of the loan.

The cash flow term loan can also be achieved in two other ways; it can be structured around what is known as a mezzanine or subordinated debt basis, or via a sale and leaseback of your assets or real estate. Some business owners feel it feasible to consider a 2nd commercial mortgage on their property, as an alternative to not having to sell the real estate to bring cash back into the firm.

We’ve covered the term loans portion of a cash injection into your firm. Another popular alternative is a ‘factoring ( aka ‘ A/R FINANCE’ ) solution’. This solution is becoming increasing popular in Canada. We point out that the factoring solution should generally be viewed as an interim solution – our experience is that a firm factors their receivables for a year or so prior to regaining a traditional financing status with the bank for a true margined operating line of credit.

To any Canadian business owner that currently factors their assets it is abundantly clear that the costs and processes are significantly more burdensome than a Canadian chartered bank facility – however, they do work, and they work for your firm now!, when you need it.

Canadian business considers Receivable Financing solutions when they have capital and debt ratio issues in their business. In many occasions the customer has a bank relationship and you need to simply augment that relationship with a factoring scenario for additional capital. The essence of this issue is that you are in fact ‘maxed out ‘at the bank, notwithstanding your good relationship with them.

Business owners quickly find out that banks have limits! Many people don’t understand that a properly constructed factor/AR facility can compliment, and not necessarily replace a bank facility. You should seek the advice of a trusted, credible, and experienced financial advisor or intermediary in this regard. Our preferred solution for our clients is in fact a CONFIDENTIAL A/R FINANCING that allows you to bill and collect your own receivables, financing them only when you need to .

A/R Financing is a much better solution for new and start up businesses, and if your firm is not in a ‘death spiral ‘,but simply experiencing temporary financial losses or one time set backs then factoring is a solid solution.
In summary, business loans for working capital are either fixed / term scenarios or working capital facilities based on current assets such as receivables and inventory. The

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your options on the correct type of financing for your needs.

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 = Sale Leaseback Financing


7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 302 4171
Email = greg@7parkavenuefinancial.com

7 Park Avenue Financial
Canadian Business Financing