Differences Between Banks and Alternative Business Capital Lenders

Why??Businesses Need Business Capital Lenders

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YOUR COMPANY IS LOOKING FOR ?BUSINESS CAPITAL AND OPERATING FINANCING? SOLUTIONS!

You've arrived at the right address ! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the? biggest issues facing business today

ARE YOU UNAWARE OR?? DISSATISFIED WITH YOUR CURRENT? BUSINESS ?FINANCING OPTIONS?

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7 Park Avenue Financial South Sheridan Executive Centre 2910 South Sheridan Way Oakville, Ontario L6J 7J8

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Business Capital Lenders: Unlocking the Financing You Need

The Challenge of Business Capital

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Business capital, well, actually the lack of it, can put companies into a highly undesirable tailspin.

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How does the business owner/financial manager ‘unlock’ the operating financing they need to run the business? Let’s dig in. Responsible lending ensures businesses do not take on excessive debt while seeking capital.

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The Capital Crunch: Solving Your Business Funding Challenges

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Canadian businesses struggle to secure adequate funding through traditional channels. Rising interest rates, stringent qualification requirements, and lengthy approval processes create barriers to growth and opportunity.

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Let the 7 Park Avenue Financial team show you how Business capital lenders bridge this gap by offering flexible, accessible financing solutions tailored to your company's specific needs and timeline.

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2 Uncommon Takes on Business Capital Lenders:

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1. They often serve as unofficial business consultants, providing valuable market insights beyond just lending
2. Some lenders specialize in specific Canadian industries, offering more profound expertise than generalist banks

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The Growing Need for Business Funding

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Once companies are past that challenging ‘start-up’ phase, the need for even more capital emerges. That funding needs to come from long-term capital and operating cash.

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That operating cash provides ‘fuel’ to your business, allowing it to grow.

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Small business financing is a critical resource for small firms seeking capital through specific loan programs.

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Understanding Business Loans

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Business loans are a vital resource for small business owners looking to fuel their business growth, expand operations, or navigate financial hurdles.

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These loans come in various forms, each tailored to meet different needs and circumstances. Common types of business loans include term loans, lines of credit, merchant cash advances, and asset-based loans.

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Each option has unique advantages and potential drawbacks, making it crucial for small business owners to thoroughly understand their choices before committing.

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When considering a business loan, it’s essential to scrutinize the loan’s terms, such as the interest rate, repayment schedule, and any associated fees.

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Your credit score plays a significant role in determining the interest rate and the likelihood of loan approval. Additionally, it’s vital to assess how the loan will impact your business’s cash flow and ensure that it aligns with your financial goals. By doing so, you can make an informed decision that supports your business’s long-term success.

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Leveraging R&D Financing for Business Growth

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Thousands of Canadian firms invest in R&D to improve their products/services.

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If that’s your firm and you aren’t taking advantage of Canada’s SR&ED program for your refund in research and development… well… shame on you! We’ll add that those R&D credits are also financeable, and an SR&ED bridge loan helps accelerate business cash flow recovery.

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Additionally, working capital loans are a key financing solution for small businesses, offering a quick approval process and flexible terms tailored to specific business needs.

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Managing Operating Expenses with Cash Flow Forecasting

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We're focusing mainly on 'operating expenses' and how the business finances those needs.

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Here's where a fundamental cash flow forecast is essential. Most business owners/managers will agree that forecasting 'cash flow coming in' is a bit more challenging than forecasting expenses, many of which are fixed.

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Timing Cash Inflows and Financing Your Sales

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As we have hinted, cash inflow is more about timing, so knowing how to finance your assets and sales is the secret to unlocking business capital.

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Sources of Business Capital

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Where do those funds come from? The most essential sources of funding include:

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1. Owner Equity and Personal Assets

Businesses that can't demonstrate long-term financial potential to outside investors/partners must self-fund their businesses.

2. Business Credit Cards

A convenient but often high-interest option for short-term financing.

3. Term Loans and Revolving Credit Facilities

Traditional financing options that provide structured repayment terms.

Journey Capital offers a range of tailored loan options with quick approval times and competitive interest rates.

4. Trade Credit from Suppliers

Leveraging supplier credit terms can ease cash flow burdens.

5. Accounts Receivable Financing

The appeal of A/R financing via a bank or a commercial lender is significant. Financing comes from your sales, not your overall 'business credit' profile.

6. Government Business Loans

The federal ‘SBL’ loan program has recently been expanded and will appeal to many startups and early-stage firms.

Additionally, exploring various trim business loan options can provide the necessary funding for startup, expansion, and equipment financing, helping to stabilize and grow small businesses in Ontario.

7. Tax Credit Financing

Monetizing government incentives to improve cash flow.

8. Equipment Financing

Securing assets through specialized funding options.

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Overcoming Credit Challenges

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Credit challenges are a common hurdle for many small business owners, often making it difficult to secure traditional business loans.

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However, alternative small business loans are designed for businesses with less-than-perfect credit. While these options may have higher interest rates and fees, they can provide the necessary funding to drive business growth.

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To navigate credit challenges, consider the following options:

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• Alternative Lenders: These lenders offer business loans with more flexible credit requirements, often focusing on your business’s revenue and cash flow rather than just your credit score.
• Merchant Cash Advances: This option provides funding based on your future credit card sales, making it a viable choice for businesses with poor credit. It doesn’t require a high credit score, but it’s essential to understand the cost and repayment terms.
• Business Credit Cards: Even with poor credit, business credit cards can offer access to credit. However, be mindful of these cards' higher interest rates and fees.

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By exploring these alternatives, small business owners can find the funding to support their business growth despite credit challenges.

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Responsible Business Funding

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Responsible business funding is crucial for maintaining a healthy financial situation and ensuring long-term success.

It’s important to borrow only what is necessary and to choose a loan with a repayment schedule that aligns with your business’s cash flow.

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To practice responsible business funding, small business owners should:

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• Evaluate Their Financial Situation: Before applying for a loan, assess your revenue, expenses, and cash flow to understand your financial standing.
• Choose the Right Loan: Select a loan that matches your business’s financial goals and cash flow needs. Consider the loan’s terms, interest rates, and fees.
• Make Timely Payments: Making timely payments is essential for maintaining a good credit score and avoiding late fees. This practice also helps build a positive relationship with lenders.

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By following these steps, small business owners can secure the funding they need while maintaining financial stability.

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How to Apply for Business Loans

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Applying for a business loan can be straightforward if you are well-prepared and have the necessary documentation. Here are the steps to follow:

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1. Evaluate Your Financial Situation: Assess your business’s revenue, expenses, and cash flow to determine your needed funding.
2. Choose a Lender: Research and compare different lenders to find the one that offers the best loan terms and conditions for your business.
3. Gather Documentation: Collect essential documents such as business registration documents, financial statements, and tax returns. Having these ready will streamline the application process.
4. Submit Your Application: Complete and submit the loan application and supporting documentation to the funders with responsible lending practices.
5. Review and Sign the Loan Agreement: Once your loan is approved, carefully review the loan agreement to ensure you understand all the terms and conditions before signing and accepting the funding.

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These steps allow small business owners to confidently navigate the loan application process and secure the necessary funding to support their business growth.

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Choosing the Best Financing Options for Your Business

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Which of those finance solutions will work best for your firm? You must match several finance solutions to run and grow your business effectively.

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CASE STUDY

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A Vancouver-based precision parts manufacturer with 15 years in business faced a pivotal moment in 2024. Their largest client, an automotive components supplier, offered an exclusive contract worth $2.5M annually - nearly double their current revenue.

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However, they needed $500,000 in immediate capital to purchase specialized equipment and hire skilled operators to fulfill the contract.

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The Challenge:

• Traditional bank financing / financial support would take 6-8 weeks to approve an unsecured business term loan.
• The contract required production to begin within 30 days
• Existing business line of credit was? tied to current operations
• Equipment costs require a 60% upfront payment to suppliers
• Five additional skilled machinists needed immediate hiring
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The Solution: Through industry research, the company connected with a specialized business capital lender focusing on manufacturing sector financing.

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Key aspects of the funding solution included:

• $500,000 in growth capital secured within 72 hours
• Revenue-based repayment structure aligned with contract payments
• No personal guarantees are required
• Equipment served as the primary collateral
• Flexible payment terms during the 60-day setup period
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Implementation: The capital was deployed strategically:

• $300,000 for new CNC machinery and testing equipment
• $100,000 for hiring and training new staff
• $75,000 for raw materials inventory
• $25,000 for production space modifications
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Results After 6 Months: Financial Impacts:

• Revenue increased by 40% (from $1.8M to $2.52M)
• Profit margins maintained at 22%
• Cash flow improved by 35% due to optimized payment terms
• Created 8 new full-time positions
• Secured two additional contracts worth $800,000 combined

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Key Takeaways

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• Business loans can provide the necessary funding to support business growth and expansion.
• Alternative small business loans are available for businesses with poor credit.
• Responsible business funding is essential for maintaining a healthy financial situation.
• Evaluating your financial situation, choosing the right loan, and making timely payments are crucial for responsible business funding.
• Applying for a business loan requires preparation and documentation, including business registration documents, financial statements, and tax returns.

• Credit qualification requirements drive approval decisions across all lending types.
• Collateral determination significantly impacts available loan amounts
• Revenue-based lending programs offer unique qualification alternatives
• Industry-specific expertise shapes lending terms and conditions
• Cash flow analysis forms the foundation of lending decisions

Conclusion

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So, our recap? Careful time should be spent estimating and understanding your operating finance needs, either from your business assets or sales.

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Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with external finance needs and business loan solutions that will allow you to 'scale' your business.

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FAQ

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Where can I find reputable business financing lenders in Canada?

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Reputable business funding? lenders can be found through:

• Professional business associations
• Certified financial advisors
• Government-backed lending programs
• Online lending marketplaces that have great customer service for the application process
• Industry-specific financing networks

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How long does the approval process typically take?

Business capital lending approvals typically occur within the following:

• 24-48 hours for initial assessment
• 3-5 business days for documentation review
• 1-2 weeks for full funding disbursement

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What documentation will I need?

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Essential documentation includes:

• Business financial statements
• Tax returns
• Bank statements
• Business plan
• Revenue projections
• Collateral information

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How do flexible repayment terms benefit my business?

• Matches payment schedule to cash flow cycles
• Reduces financial stress during slow periods
• Allows for seasonal adjustment
• Improves overall cash management
• Maintains working capital reserves

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What advantages do specialized lenders offer over traditional banks?

• Faster approval processes
• Industry-specific expertise
• More flexible qualification criteria
• Tailored funding solutions
• Ongoing business support

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How can alternative lending protect my business credit?

• Separates personal and business credit
• Builds business credit history
• Provides multiple funding options
• Creates financial relationships
• Establishes credit diversity

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What's the difference between secured and unsecured business capital?

• Secured loans require collateral
• Unsecured loans focus on business performance
• Interest rates vary significantly
• Approval criteria differ
• Risk levels impact terms

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How do seasonal businesses benefit from specialized lending?

• Custom payment schedules
• Revenue-based options
• Flexible draw periods
• Winter/summer adjustments
• Peak season preparation

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What determines business capital lending rates?

• Credit history impact
• Industry risk factors
• Business age considerations
• Revenue requirements
• Collateral influence

' Canadian Business Financing With The Intelligent Use Of Experience '

?STAN PROKOP 7 Park Avenue Financial/Copyright/2024

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Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil