Feeling The Squeeze On Canadian Business Financing For Business Loans?

Canadian Business Financing Decoded: Insider Tips for Optimal Funding

YOUR COMPANY IS LOOKING FOR? SMALL BUSINESS FINANCING!

Small Business Loans & Finance Options for SME Canada

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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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Canadian business financing serves as the lifeblood of entrepreneurial ventures, propelling innovation and economic growth across the country.

?Unlock your business potential: Discover the secret to seamless Canadian financing that fuels growth and success.

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7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Canadian Business Financing and working capital solutions ?– Save time, and focus on profits and business opportunities

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7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”

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CANADIAN BUSINESS FINANCING SOLUTIONS

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Sources of business financing . The Canada Small Business Financing Program (CSBFP ) facilitates loan approvals by sharing risk with financial institutions, making it easier for small businesses to acquire funding.

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What we really mean is, do you, as a small business owner or manager, really understand the funding your company might need, and what alternatives to loans and finance exist in your search for a business loan in Canada?

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Capital has always been challenging for Canadian businesses, especially in the SME sector . While larger corporations have Chartered banks, advisors, and access to public and private capital pools, the ‘ little guy ‘ in the small and medium enterprise sector struggles to search for capital.

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DEBT IS LESS EXPENSIVE THAN EQUITY - BALANCING THE LOAN DECISION

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It really is a bit easier than some business owners or financial managers might think—it’s about knowing whether it’s time to take on more debt, how to balance taking on more capital, and why loans and funding, although seemingly expensive, are actually much cheaper than equity.

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MANY CANADIAN BUSINESS FINANCING SOLUTIONS CAN BE COMBINED TO MEET YOUR FINANCIAL NEEDS

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Of course, your ability to generate financing will determine your growth aspirations.

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While there is probably no one perfect solution for all your financing needs, the reality is that you can often ' cobble together ' finance sources that make sense when it comes to funding your firm.

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As we hinted previously, you could, of course, consider equity investments in your firm via VCs or angel investors, but these are demanding sources of capital, and selling ownership at a point when you are starting to grow is, quite simply, not optimal!

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SOURCE OF CAPITAL FOR YOUR BUSINESS CAN BE EITHER TRADITIONAL FINANCIAL INSTITUTIONS OR ALTERNATIVE .. OR BOTH!

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Let’s then examine some sources of capital that are both traditional and a bit alternative.

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We say a bit alternative simply because many of those sources are becoming the new traditional for a commercial non-bank financing company or asset-based lender.

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It is crucial to consult with a financial institution for tailored advice and support during the loan application process, as the specifics of interest rates and the approval process can vary significantly depending on the lender. Talk about a paradigm shift.

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ASSET ACQUISITION SOURCES

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Lease financing is an excellent example of traditional financing that works. Securing loans against business assets can facilitate funding through programs like the Canada Small Business Financing Program.

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You can use the cash to fund working capital for receivables and inventory growth. In Canada, lease finance is available for firms of all credit quality and asset finance requirements. While it quite often might be a bit more expensive than bank financing is simply less painful to acquire and is a solid way to finance the balance sheet.

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WILL YOUR FIRM QUALIFY FOR SMALL BUSINESS? BANK FINANCING?

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No one is a bigger fan of Canadian chartered banks than we are. To well-qualified companies, they are a veritable ‘ buffet ‘ of funding and loans for cash flow, fixed asset acquisition, real estate, etc.

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Just make sure that you’re in a position to qualify for bank financing , or you might waste a lot of precious time. Remember also that the bank looks to alternative collateral, strong cash flows balance sheets, etc.

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DON'T FORGET THE GOVERNMENT SMALL BUSINESS LOAN

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Although Canadian banks administer Government SBL loans , they are underwritten by the government. These loans make bank financing seem quite ‘looser,’… and that’s good.

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The Canada Small Business Financing Program (CSBFP) is a government-backed initiative designed to facilitate loan access for small businesses by mitigating lenders' risk and allowing borrowers to provide an unsecured personal guarantee.

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Because the government guarantees a significant portion of your loan, bank financing on an SBL loan is flexible, competitive, and less restrictive from a personal covenant point of view. Existing leasehold improvements on leased property, as well as new or used equipment, can even be funded under the program.

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Interest rates under the program are exceptional, given the challenges of obtaining business finance for new, small, or early-stage firms.

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The small 2% registration fee on an SBL loan is, in our opinion, well worth the quality of financing and funding you receive with this product.

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Industry Canada , the program's ‘sponsor, ' has provided statistics showing that almost 10 billion dollars of financing has been provided via over 60,000 loans to Canadian businesses applying under the program. This government program, which is not a grant, is one of the best solutions for small businesses in Canada. Borrowers may also consider Canada's bdc Crown Corporation as a funding solutions.

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YOUR CUSTOMERS CAN ALSO FINANCE YOUR BUSINESS!

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Are there some sources of business financing and funding in Canada you have not even considered? Some are very obvious, some less so.

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Term loans and lines of credit can be utilized to cover working capital costs, emphasizing their importance for managing regular business expenses. As an example, let your customer finance your business!

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How? Consider an advance payment structure that identifies the commitment a client is prepared to take with you.

In the same vein as above, ask suppliers for extended terms. If you’re a valued client who has paid promptly in the past, you have more bargaining power than you think.

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MONETIZATION OF TAX CREDITS

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Monetize. That’s our alternative word for the day. Look at your balance sheet; if you have tax credits under the SRED program due to your firm, you can also finance those.

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Borrowing against a tax credit is a solid funding strategy.

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ACCOUNTS RECEIVABLE / AR FINANCING FOR WORKING CAPITAL COSTS

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Keeping in line with our monetization theme, we are huge fans of receivable financing , aka factoring.

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By selling your receivables, your balance sheet immediately becomes cash-positive. This method of accounts receivable financing is unlimited if you are in growth mode. The only trick is getting into the right facility with the factoring company when it comes to looking at an invoice factoring program.

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The maximum chargeable interest rate for lines of credit is based on the lender's prime lending rate.

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Finishing your receivables via a finance/factor is simply setting up a facility that allows you to constantly ' sell' your receivables " to a third party.

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This allows you to receive cash automatically as you generate sales. Typically, you are advanced 90% of the invoices immediately, and the balance is returned to you, less a fee of approximately 1.5-2%, known as a factoring fee. This fee is often confused with an interest rate, which it is not.

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CONSIDER A VENDOR FINANCE / CUSTOMER FINANCING PROGRAM

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Many firms that have an actual product rather than a service can take advantage of setting up their own vendor finance program .

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With a solid partner, the cost is pretty well zero and provides you with increased selling power, plus the obvious fact that you have provided a true total solution to your product - you make it, sell it, and finance it! Setting up a program is a lot easier than you think.

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THE PURCHASE ORDER FINANCING OPTION

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Supply chain financing or purchase order financing is also a solid alternative funding vehicle for your firm.

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Eligible purchases include leasehold improvements, equipment, real property, intangible assets, and working capital. If you have good vendors and qualified customers, the PO financier will pay your suppliers directly, assuming the risk is in the whole supply chain scenario.

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Using alternative financing solutions, such as PO finance, is a great way to take on larger transactions for your products or services.

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KEY TAKEAWAYS

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• Financial institutions offer various lending options tailored to business needs and stages of growth.
• Government programs provide grants, subsidies, and low-interest loans to support specific industries or initiatives.
• Alternative financing methods, such as invoice factoring and merchant cash advances, offer quick access to working capital.
• Venture capital and angel investors are crucial in funding high-growth potential startups and scale-ups.
• Credit assessment, collateral requirements, and repayment terms significantly impact loan approval and conditions.

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CONCLUSION

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Small business owners should focus on ensuring they can access financial solutions that meet their business capital needs.

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That often involves a combination of short-term financing, term loans, business credit lines, and asset finance strategies that will help the company grow sales and profits with a loan amount/solution that works.

When applying for business loans, it is typically necessary to provide a personal guarantee.

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Lenders may require secured or unsecured personal guarantees and, in some cases, joint guarantees from multiple borrowers. Depending on the loan type and circumstances, options may also be available without personal guarantees.

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Never forget you have options, both traditional and alternative, for funding via loans and monetization strategies in Canada.

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Call 7 Park Avenue Financial , a trusted, credible and experienced Canadian business financing advisor today. It’s all about the options!

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FAQ

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How does Canadian business financing contribute to company growth?

Canadian business financing provides the necessary capital to invest in new equipment, expand operations, hire talent, and develop innovative products or services, ultimately driving company growth and market competitiveness.

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What types of financing options are available for Canadian businesses?

Canadian businesses can access financing options, including traditional bank loans, government grants and loans, venture capital, angel investments, crowdfunding, and alternative lending solutions such as invoice factoring and merchant cash advances.

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Can Canadian business financing help improve cash flow?

Yes, certain financing options, such as lines of credit and invoice factoring, can significantly improve cash flow by providing quick access to working capital and helping businesses manage seasonal fluctuations and unexpected expenses.

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Are there specific financing programs for startups in Canada?

Indeed, Canada offers several financing programs tailored for startups, including the Business Development Bank of Canada’s startup financing, Futurpreneur Canada’s loan program, and various government grants and tax incentives designed to support new businesses.

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How can obtaining business financing impact a company’s long-term success?

Appropriate financing can provide the resources necessary for strategic investments, market expansion, and innovation, positioning a company for long-term success and sustainable growth in competitive markets.

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What are the typical requirements for securing business financing in Canada?

Lenders typically require a solid business plan, financial statements, credit history, collateral (for secured loans), and sometimes personal guarantees. The specific requirements vary depending on the type of financing and the lender.

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How long does the process of obtaining business financing usually take?

The timeline for securing business financing can vary widely, from a few days for alternative lending options to several months for more complex financing arrangements like venture capital or large bank loans.

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Are there tax implications associated with different types of business financing?

Different financing methods can have varying tax implications. For example, interest on business loans is generally tax-deductible, while equity financing doesn’t provide tax benefits. It’s advisable to consult with a tax professional to understand the specific implications for your business.

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What role do credit scores play in Canadian business financing?

Credit scores are crucial in determining eligibility and terms for many financing options. Both personal and business credit scores may be considered, especially for small businesses and startups where the owner’s personal credit can significantly impact lending decisions.

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How has the COVID-19 pandemic affected business financing options in Canada?

The pandemic has led to new government support programs, changes in lending criteria, and an increased focus on digital lending solutions. Some sectors may face increased scrutiny, while others may find new opportunities for financing.

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What are the key differences between debt and equity financing for Canadian businesses?

Debt financing involves borrowing money that must be repaid with interest, while equity financing involves selling a portion of ownership in exchange for capital. Debt financing allows you to retain full ownership but requires regular payments, whereas equity financing doesn’t require repayment but dilutes ownership and control.

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How do interest rates and terms vary among different Canadian business financing options?

Interest rates and terms can vary significantly based on the type of financing, risk assessment, and current market conditions. Government-backed loans often offer lower interest rates and longer repayment terms than traditional bank loans. Alternative lenders may provide quicker access to funds but at higher interest rates.

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What role does a business plan play in securing financing from Canadian lenders?

A well-crafted business plan is crucial for securing financing. It demonstrates your company’s potential for success and ability to repay the loan. The plan should include detailed financial projections, market analysis, and a clear strategy for using the funds to grow your business and generate revenue.

' 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