What’s New … And Working When It Come To Business Funding? Creative Financing 101!

Business funding in Canada. We have remarked on more than one occasion that the landscape has dramatically changed over the last number o years.
Frankly (perhaps it’s because we’re getting older?!) we can barely remember the days when options seemed almost unlimited and everyone was saying ‘ there’s too much capital and too little deals ‘. Yes, the government and banks seem to have a party line about trying to help, and while interest rates are at rock bottom lows the amount of funding out there, either traditional, or in the area of ‘ creative financing’ seems somewhat limited to the Canadian business owner or financial manager.

We think the banks and the government would say that the amount of funding solutions out there is still the same, the reality is that they are simply harder to get approved for, at least for the amount of capital you need.

So where does the business owner/manager start? Let’s explore some of the more creative ways to fund your business, whether you are a start up or established company.

Start up businesses of course seem to have the biggest challenge. They are typically funding via a ‘ bootstrapping’ method revolving savings, home collateral, and friends and family loans. They all work, but they are just not that desirable!

Naturally not being aware of the other more traditional or creative ways to fund your business hampers any chance you have for success, let alone growth. At the end of the day you need the right amount of debt and the right amount of equity to make things work.

Many business start without a plan, and in business that is of course the ‘ business plan ‘. We always tell clients that even if they don’t need a plan for financing purposes (you usually do though!) you should have your own ‘ flight plan ‘ in place for your business, and that document does just that!

Naturally when we talk to clients about additional financing they are often focused on ‘ the bank ‘. The challenge here quite often is that while our Canadian banks are pretty good at funding businesses for growth, they aren’t that great when it comes to financing early stage companies. That always comes back to the banks vested interest in preserving capital. So when you can’t properly demonstrate a track record, the right amount of sales and profitability, or external collateral, what in fact are some alternatives for business funding?

One method is the Government Small Business Loan, which we’ve always thought isn’t really that small – i.e. 350k is the borrowing limit. It’s available all across Canada and criteria is much more ‘ looser ‘ than traditional bank financing.

Other creative financing alternatives in Canada include:

Equity Credit Lines – You lend your business the funds on a secured basis

Business Credit Cards

Loans from Angel investors

Reverse takeovers of a public shell

Royalty and Revenue Sharing

Vendor financing

Business Incubators

If we had to pick the most traditional method of ‘ alternative financing ‘ today we would have to say its factoring or receivable financing .It’s used by thousands of businesses to stabilize and generate ‘ lumps’ in your cash flow , it covers short term emergencies, and lowers receivables and increases cash.

Our bottom line, there are numerous traditional and alternative financing sources the business owner may not even be aware of. Seek out and speak to a trusted, experienced and credible Canadian business financing advisor who can assist you in business funding you need.