Business financing in Canada, executed improperly, has the possibility to go really wrong! So when it comes to finance sources and loan needs it’s critical to have a solid ‘ lay of the land’ to ensure your company is going in the right direction for survival and growth. Let’s dig in.
In Canada there is somewhat of a line down the middle when it comes to the types of capital available – it really comes down to ‘ traditional, or ‘ alternative. Those seeking alternative solutions demand more flexibility to the alternative of Canadian banks, and credit unions. Those banks of course have low rates, unlimited capital for your business, but tougher qualifying criteria – all for the right reasons of course.
The irony of the business landscape is that those firms needing financing the most are in fact the majority of the economy these days!
While business owners / financial mgrs associate government with our category of ‘ traditional’ finance they often overlook two solid sources of funding in this area – Govt guaranteed business loans , and Canada’s ‘ SR&ED program . Recent limit changes in the Gov’t SBL program make the program very desirable for start ups and earlier stage companies. Additionally SR&ED credits allow firms to recoup in the area of 40% of their R&D activity, and these credits are financeable!
When we talk about things ‘ going wrong ‘ it’s important to note that any early stage companies work the Angel investor/VC angle. The reality is that only the smallest % of firms really qualify for this type of financing, and the majority of those are in the tech/pharma area.
Some stats indicate that over 40% of all firms applying for the financing they need from ‘ traditional’ sources are in fact declined. So then, given the need for capital for that ‘ running/growing’ of the business what then are some alternative options.
The key alternatives include:
A/R non bank financing
Purchase Order/Contract Finance
Cash flow loans – Secured/unsecured
Working Capital Term Loans – 2nd position loans that provide cash for long term working needs
ABL’s – These are non bank business lines of credit that bundle a/r, inventory and equipt into one daily accessible revolving credit facility
To make the right financing decision it’s important to distinguish between debt financing and cash flow finance. When assets are being acquired owners/mgrs need to consider equipment financing or term loans. Funds for this category should typically not come from operating cash flow.
If you’re focused on doing things right and proactively closing on your finance needs seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you address our key question ‘ What Could Possibly Go Wrong’!