How To Finance A Company…that’s the challenge for owners of new and existing businesses in Canada when it comes to equity, debt, and cash flow financing.
Let’s examine some basic aspects surrounding that issue with a focus on how Canadian business owners and financial managers can both identify and then source capital. Our focus will be primarily outside of the equity arena as private and public entity is… well… a whole different kettle of fish.
Timing is of course… everything .. and it sure helps when you’re financing a firm in an economy that is a bit healthier. Financing, both from a debt or cash flow point of view is of course the lifeblood of any firm. Great companies, both small and large go out of business due of course to inability to get the proper mix of financing in place.
As most business people know its not only a challenge to generate the interest of a financial partner – then it becomes the challenge of an approval securing those funds! And as your firm grows you will need additional cash flow financing – you don’t want to be in a position of growing so much that you business fails – that has happened to many in Canada.
In Canada banks and other commercial financing firms provide the debt and cash flow financing capital you need Let’s explore and recap some of those debt and cash flow financing options available
When most business owners think in terms of external financing they consider Canadian chartered banks as the key option. That is no doubt certainly the most publicly available finance – and when you have the corporate and personal assets and collateral the rates, terms and structure of the bank agreement is without a doubt appealing.
But in many cases the Canadian banking system can’t support the thousands of firms who have additional or specialized needs. In the case of securing bank credit you need positive profits, assets and collateral, a track record and probably forms of what the banks call ‘ secondary repayment – Our clients know it as the ever concerning Personal Guarantee!
So, when you are looking s to how to finance a company what are some of those other options? They include asset based lenders; in the true sense of an ‘ ABL ‘ solution these firms provide non-bank lines of credit secured by your A/R, inventory, and fixed assets on the balance sheet. And a lot of the emphasis that banks place on approval do not come into play with an ABL lender.
Equipment financing, aka leasing your key assets is also a very effective method of financing your firm. It also relieves the larger cash outlays your busines needs when it acquires assets.
Start up and small businesses have access to the Government SBL loan program, which has great rates, terms and structures when it comes to acquire assets and even financing leaseholds and real estate. And the majority of the loan is guaranteed to the bank by the Federal government.
Cash flow financing, or the ‘ monetizing of assets ‘ can be accomplished by utilizing receivable financing, inventory finance, and even selling your tax credits such as those under the SR&ED program . Why wait a half year to get your cheque from your non repayable tax credit?!
One of the best methods of cash flow financing comes your a partner you know only too well – yourself and your firm. By managing your assets such as inventory and A/R you can generate internal cash flow through your business operations.
Speak to a trusted, credible and experienced Canadian business financing advisor on those equity and debt options when it comes to how to finance a company in Canada.