It’s no secret that when it comes to business financing you can use up a lot of ‘ shoe leather ‘ in your search for the proper funding for your company. Let’s examine some key basics that might bring you some clarity, and solutions when it comes to external, and yes internal funding.
Whether you are an entrepreneur looking for start up financing or an established business looking for growth finance it always comes down to the search for capital, right ? We’re making the key assumption here that you’ve got business savvy and knowledge – now you just need the capital!
From a start up business point of view that might be funds for working capital as your revenue ramps, or alternatively it might just well be funds for inventory equipment and general operating expenses. While in early stage companies that might come from friends and family and bootstrapping type techniques sooner or later you’ll need real world assistance from real world banks and commercial finance firms.
Trade credit from suppliers is a key element of business finance and funding that many business owners and financial managers overlook. Just the ability to negotiate 60 day terms on any of the products or supplies you need delays cash outflows. In a perfect world if you can make and sell and collect you product within those 60 days you have in effect become self financing. Oh and by the way… Congratulations!
Where do you stand with Canadian chartered banks? That’ a tough one , because both start ups and fast growth firms are typically very challenged to obtain bank financing in Canada. Our banks, rightfully so, want to be ‘ comfortable ‘ and start up ventures and astronomic growth scenarios don’t necessarily lend themselves to comfort!
The bank questions are actually more simple than you might think – will be get paid back, who exactly are we dealing with there, if we don’t get paid back what happens next. When you think of it you would ask those same questions of anyone you were lending your own money to.
The bank then takes those questions and then drills down to the next level – so you should focus on being able to supply a solid story around:
Understanding your Business and Industry
Having a financial projection and story that ‘ makes sense’
It’s very important for the business owner/manger to address the issue of what the finance folks call ‘ matching assets and financing ‘. Simply speaking its keeping a balance on what you are financing and how. The key principle here is that you finance short term assets with short term financing as an example. A real world example might be a receivable financing program to fund your investment in receivables.
The other side of the coin and here is where things go wrong… is when you use long term financing to fund short term assets. Example: taking out a mortgage on your house or company’s building to fund inventory.
So if we had to make a key point today its that you should view Canadian business financing in terms of the life cycle of your business. Are you just starting, growing, or mature? There’s a difference then in which of the following finance vehicles might make the best sense to your firm:
Asset Based Lines of Credit
Govt Business SBL loans
Tax Credit Monetization
Supply Chain financing
They all work… at certain times, and in certain situaitons… for your growth and survival. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you save some of that ‘ shoe leather’ in your search!
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 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.
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