Navigating the SME Commercial Finance Landscape
Stan Prokop
Canadian Business Financing | Cash Flow Financing | Asset Based Lending | Equipment Finance | Lender Financing | Purchase Order Financing | Acquisition Financing | SAAS Financing | Acquisition Financing
Between A Rock & A Hard Place With??Canadian Business Financing?
YOUR COMPANY IS LOOKING FOR BUSINESS FINANCE!
FINANCING SOLUTIONS FOR BUSINESS OWNERS TO GROW YOUR? SALES OF PRODUCTS AND SERVICES
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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CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - [email protected]
7 Park Avenue Financial South Sheridan Executive Centre 2910 South Sheridan Way Oakville, Ontario L6J 7J8
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?Unlock your business potential: Discover how SME commercial finance can transform your financial struggles into opportunities for success.
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7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer SME COMMERCIAL FINANCING? OPTIONS? 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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SME Commercial Finance: Canadian Business Financing
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Canadian business financing comes with a game plan requirement. If there’s any good news, there’s no discrimination regarding being a start-up, small business, or large corporation.
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However, economic uncertainty impacts SMEs' ability to secure financing and grow, as many small and medium-sized enterprises are reluctant to borrow due to prevailing economic uncertainties.
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Overview of SME Finance in Canada
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SME finance in Canada is a cornerstone of the nation’s economic vitality. Small and medium-sized enterprises (SMEs) are the backbone of the Canadian economy, employing millions and significantly contributing to the GDP.
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However, these businesses often encounter hurdles when seeking finance, hindering their growth and potential.
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Despite their critical role, medium-sized enterprises frequently face a finance gap, struggling to secure the necessary funding to expand and innovate.
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This gap is particularly pronounced in rural and remote areas, where access to financial institutions is limited. Traditional bank loans, equity financing, and debt financing are available but not always accessible to all SMEs.
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The Canadian government has rolled out initiatives like the Canada Small Business Financing Program (CSBFP) to mitigate these challenges.
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This program collaborates with financial institutions to provide much-needed funding, thereby helping to bridge the SME finance gap and support business growth.
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Canada aims to foster a more inclusive and robust economic landscape by addressing these financial barriers.
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THE RIGHT STEPS TOWARD YOUR FINANCING STRATEGY
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Consider it as tough a solution as the ‘Dilithium‘ storyline on Star Trek (rare Dilithium crystals were rare and needed to be adequately replicated, and the search was lengthy).
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The right steps and strategy in finding the right solution is your version of that saga. Evaluating external finance options is crucial to ensure they align with your business's operational needs and financial goals.
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Let’s dig in.
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SME COMMERCIAL FINANCE GAP VERSUS LARGER CORPORATE BORROWERS
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Larger corporate borrowers do not have the emphasis on personal guarantees and outside collateral that are required of the start-up entrepreneur and SME.
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It's, therefore, necessary for the latter to ensure their personal credit situations are in order.
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The good news is that while many non-traditional financings require proper disclosure in this area, less emphasis is placed on this aspect of business credit application, offset by either asset strength or the proven ability to generate cash flow.
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DOES CANADIAN BUSINESS BANK MEET YOUR CURRENT FUNDING NEEDS? UNSECURED BUSINESS LOAN REQUIREMENTS
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Canadian banks focus on term loans and revolving lines of credit.
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Low-cost and plentiful, they come with the requirements one would associate with bank funding—profits, cash flow, clean financials, and secondary sources of collateral.
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‘Unsecured debt‘ is available but requires high net worth and verifiable cash flow. If you can’t meet those requirements, it’s a fabulous area to waste your time in!
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SME banking is crucial in providing access to finance for small and medium-sized enterprises, addressing regional disparities and supporting their growth and development.
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Debt finance, typically offered by banks or commercial finance companies, involves borrowing money with a commitment to repay it with interest, adding liability to the business's balance sheet. This differs from equity finance, where funds are raised by selling shares of the company.
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THE CHALLENGE OF GROWING TOO QUICKLY
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Managing Cash Flow for SMEs
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Effective cash flow management is the lifeblood of any SME.
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Cash flow, the movement of money in and out of a business, is crucial for meeting financial obligations and sustaining operations. Without proper cash flow management, even profitable companies can face financial distress.
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SMEs can adopt several strategies to manage their cash flow effectively:
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By implementing these strategies, SMEs can stabilize their cash flow, ensuring they have the necessary funds to achieve their business objectives and navigate economic uncertainties.
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THE CHALLENGE OR GROWING TO QUICKLY
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While critical for start-ups, government loans, etc., they can be easily replaced with a solid cash flow and revenue forecast—one that accurately reflects the timings and inflow and outflow of cash from daily operations.
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The ultimate irony in one aspect of Canadian business finance is that growing too fast is a turn-off to many conservative lenders, as cash needs can’t be accurately identified.
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Equity finance can be an alternative for businesses looking to grow without additional debt. This involves surrendering a share of the company in exchange for investment, which can be a viable option for SMEs despite some owners' concerns about losing control over their businesses.
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ASSET-BASED LENDING SOLUTIONS HANDLE HIGH GROWTH AND CASH FLOW NEEDS
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However, growing fast and large is, in fact, desirable when it comes to finance solutions like asset-based lending, which focuses on financing all the receivable and inventory requirements generated by hyper-growth.
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LET 7 PARK AVENUE FINANCIAL SHOW YOU ALTERNATIVE FINANCING SOLUTIONS FOR FINANCING YOUR BUSINESS
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Being turned down by a bank or traditional commercial lender still offers many other commercial financing alternatives in the SME sector. Those solutions include:
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Tax Credit Monetization Financing - Companies participating in research and development can access Canada's SR&ED program via Canada Revenue Agency guidelines of this popular Canadian government? program
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Government? Guaranteed Business Loans, The ' SBL Loan? ' aka the Canada Small Business Financing Program, is a solid business loan solution for new business startups and franchises from the federal government? - The government of Canada charters the Canadian banks and credit unions as the financial institution that provides the loans on behalf of Industry Canada.
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The SBL loan funds business equipment, leasehold improvements, and even real estate/land or buildings. Participating financial institutions do not provide these loans as cash loans/working capital and lines of credit - that is often a point misunderstood. A 2 % registration fee is due on business funding, but this amount can also be bundled into the loan if you choose. The loan amount typically is 350k. The loan can be 1 Million dollars if used to finance a real estate component.
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A new or existing business can be funded under these SBL loans, and most financed franchises utilize the 'CSBFL' - another acronym for the federal business loan program!
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Note that religious organizations and non-profits are not allowed to borrow under the program. A separate similar loan for farming businesses is available.
领英推荐
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Your annual revenues to qualify for the program must not exceed 10 million or less? - and any for-profit company or proprietorship can apply for financing -
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Business plans are not always required for many types of business lending. But if a business plan is required - 7 Park Avenue Financial business plans meet and exceed commercial lender requirements.
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Sales royalty financing
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Asset-based business credit lines - revolving facilities that allow you to borrow against receivables, inventory and equipment
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Regional Differences in SME Finance
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In Canada, regional disparities in SME finance present a significant challenge. Businesses in urban areas generally enjoy better access to financial resources due to a higher concentration of financial institutions and a more developed financial infrastructure.
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Conversely, SMEs in rural and remote areas often struggle to secure funding, hampered by limited access to banks and other financial services.
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The Canadian government has established Regional Development Agencies (RDAs) to address regional differences.
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These agencies provide targeted funding and support to businesses in less accessible areas, helping to bridge the SME finance gap and promote equitable economic growth.
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Private sector companies such as 7 Park Avenue Financial play a pivotal role in levelling the playing field. By offering tailored financing solutions to businesses in rural and remote regions, these organizations ensure that all SMEs can access the funding they need to thrive regardless of location.
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In conclusion, while regional disparities in SME finance remain a challenge, concerted efforts by both the government and private sector are making strides towards a more inclusive financial landscape for all Canadian businesses.
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THE COST OF BUSINESS FINANCING - COST OF CAPITAL VERSUS ACCESS TO CAPITAL IN EQUITY FINANCING AND BUSINESS LOAN RATES
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Small business loan interest rates will vary greatly based on the type of financing you require, the loan or funding amount, and overall credit quality via a traditional bank loan or alternative lending solution.
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We talk to new clients at 7 Park Avenue Financial who focus a lot on the interest rate and often forget that it becomes a question of access to capital versus the cost of capital when searching for business capital.
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Also, debt and cash flow solutions are cheaper than giving up ownership equity in small businesses before a mature and larger business.
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FUNDING RESEARCH
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To further stimulate economic development in Canada, the government's Scientific Research and Experimental Development program, aka SR&ED, allows you to fund substantial research and development through SRED Credits.
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7 Park Avenue Financial SR&ED financing solutions can monetize your refundable tax credit and act as a bridge loan until you receive your government rebate under the program.
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?KEY TAKEAWAYS
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CONCLUSION
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How do you qualify for a small business loan, then?
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Small business loans / commercial loans or any form of Canadian small business finance source needed must allow enough time to source and achieve the financing you need for your business growth -
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7 Park Avenue Financial,? a trusted, credible and experienced Canadian business financing advisor to deliver on your Dilithium dilemma!
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FAQ
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How can SME commercial finance help my business expand?
SME commercial finance provides the capital to fund growth initiatives, such as opening new locations, hiring additional staff, or investing in equipment. This financial support enables businesses to seize opportunities and scale operations effectively.
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What advantages does SME commercial finance offer over traditional bank loans?
SME commercial finance often provides more flexible terms, faster approval processes, and tailored solutions for specific business needs. These alternative funding options can benefit businesses not qualifying for conventional bank loans.
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Can SME commercial finance improve my company's cash flow?
Yes, various SME commercial finance products, such as invoice factoring or line of credit, can help the? business owner stabilize cash flow by providing immediate access to working capital. This allows businesses to cover operational expenses and trade credit obligations and take advantage of growth opportunities without delay.
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How does SME commercial finance support innovation in small businesses?
By providing access to capital, SME commercial finance enables businesses to invest in research and development, adopt new technologies, and bring innovative products or services to market. This financial support is crucial for staying competitive and driving industry advancements.
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What impact can SME commercial finance have on my business's long-term success?
SME commercial finance can catalyze sustainable growth by providing the resources needed to expand operations, diversify revenue streams, and weather economic challenges. It allows businesses to build a stronger financial foundation for long-term success and resilience.
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What are the typical eligibility requirements for SME commercial finance?
Eligibility requirements vary by lender but often include factors such as time in business, annual revenue, credit score, and financial statements. Some alternative lenders may have more flexible criteria compared to traditional banks.
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How does the application process for SME commercial finance work?
The application process typically involves submitting financial documents, business plans, and other relevant information. Many lenders now offer online applications for faster processing. Depending on the lender and financing type, the time from application to funding can range from a few days to several weeks.
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What are the potential risks associated with SME commercial finance?
Risks may include high interest rates, personal guarantees, potential loss of collateral, and the impact on credit scores. It's crucial to carefully review terms and conditions and assess the long-term implications of taking on debt.
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How can I improve my chances of securing SME commercial finance?
To increase your chances of approval, focus on better financial literacy, and improving your credit score, maintaining accurate financial records, developing a solid business plan, and building relationships with potential lenders. Consider seeking advice from financial advisors or mentors to strengthen your application.
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What role does fintech play in SME commercial finance?
Fintech companies are revolutionizing SME commercial finance by offering innovative lending solutions, streamlined application processes, and data-driven risk assessment. These advancements often result in faster approvals, more competitive rates, and increased accessibility for small businesses. Venture capital firms are big financiers of fintech firms.
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What are the main types of SME commercial finance available to Canadian businesses?
SME commercial finance encompasses various funding options, including term loans, lines of credit, invoice factoring, equipment financing, and merchant cash advances. Each type serves different purposes and suits various business needs, from short-term working capital to long-term investments in growth.
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How does SME commercial finance differ from personal financing options?
SME commercial finance is specifically designed for business purposes and often involves larger loan amounts, different repayment terms, and distinct eligibility criteria compared to personal financing. It may also offer tax advantages and help build business credit separate from personal credit histories.
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What factors should I consider when choosing an SME commercial finance option?
Key considerations include the purpose of the funding, repayment terms, interest rates, fees, collateral requirements, and the impact on cash flow. It's important to assess your business's current financial situation and future projections to determine the most suitable financing option that aligns with your goals and repayment capacity.
' 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