Sources of business financing. What we really mean is do you as a business owner of manager really understand the type of funding your company might need, and moreover what alternative to loans and finance exist.
Capital has always been a challenge for Canadian business, more so in the SME sector. While larger corporations have Chartered banks, advisors, and access to capital pools both public and private the ‘ little guy ‘ in the small and medium enterprise sector struggles to search for capital.
It really is a bit easier than some business owners or financial managers might think – it’s about knowing whether it’s the time to take on more debt, how you balance taking on more capital, and why loans and funding, seemingly expensive, are in actuality much cheaper than equity.
Your ability to generate financing is of course what is going to make or break your growth aspirations. While there is probably no one perfect solution for all your financing needs the reality of the matter is that you can actually often ‘ cobble together ‘ finance sources that make sense when it comes to funding your firm.
As we hinted previously, you of course could consider equity investments into your firm via VC’s or angel investors but the reality is these are demanding sources of capital and selling ownership at a point when you are starting to grow is in fact, quite simply, not optimal !
Let’s then examine some sources of capital that are both traditional and a bit alternative. We say a bit alternative simply because many of those sources are becoming the new traditional. Talk about a paradigm shift.
Lease financing is a great example of traditional financing that works. 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.
No one is a bigger fan of Canadian chartered banks than us. To companies that are well qualified they are a veritable ‘ buffet ‘ of funding and loans for cash flow, fixed asset acquisition, real estate, etc, Just make sure that you’re in a position to qualify for bank financing or you might waste a lot of precious time . And remember also that the bank looks to alternative collateral, strong cash flows and balance sheets, etc.
Although the Canadian banks administer Govt SBL loans they in fact are underwritten by the government. These loans make bank financing seem quite a bit ‘ looser’… and thats a good thing .Because the government guarantees a major portion of your loan the bank financing on an SBL loan is flexible, competitive, and less restrictive from a pesonal covenant point of view .
The small 2% service fee on an SBL loan is, in our opinion well worth the quality of financing and funding you’re receive with this product .
Are there some sources of business financing and funding in Canada you have not even considered. Some are very obvious, some less so. As an example let you customer finance your business! How? Consider an advance payment structure which also clearly identifies the commitment a client is prepared to make 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’ve got more bargaining power than you think.
Monetize. That’s our alternative word for the day. Take a look at your balance sheet and if you have tax credits under the SRED program due your firm you can also finance those. Borrowing against a tax credit is a solid funding strategy.
Keeping in line with our monetization theme we are huge fans of receivable financing, aka factoring. By selling your receivables your balance sheet immediately becomes cash positive, there are no limits to this method of financing if you are in growth mode and the only trick here is getting into the right facility with the right partner.
Many firms who have an actual product as opposed to a service can take advantage of setting up their own vendor finance program. 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.
Supply chain financing or purchase order financing is also a solid alternative funding vehicle for your firm. If you have good vendors and qualified customers the PO financier will pay your suppliers directly, assuming the risk in the whole supply chain scenario
Never forget you have options, both traditional and alternative for funding via loans and monetization strategies in Canada. Speak to a trusted, credible and experienced Canadian business financing advisor today. It’s all about the options!
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years – has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :