Business capital requirements in Canada often boil down to a few basic truths that a business owner/financial manager/entrepreneur must address when it comes to business financing.
One of those truths? Know the true state of your financial condition and what financing you qualify for and what you don’t qualify for when it comes to qualifying for business loans in Canadian businesses.
Business Loans in Canada
Whether you’re a smaller or new business looking for information on getting a business loan or a larger established business looking for growth financing or acquisition opportunities, we highlight 3 mistakes business loan seekers like your business should avoid making when address, obtain and negotiate your cash flow/working capital and business financing needs.
1. Understand the true condition of your business’s finances: These are almost always successfully addressed when you spend time on your finances and understand how your financial statements reflect your access to business loans and business credit in general.
2. Make sure you have a plan for sales growth and financial needs around trade financing
3. Understand the real hard facts about cash flow which is, of course, the lifeblood of your business
Can you answer honestly or feel positive about those 3 points? If so, go ahead and get $100.00!
A good way to approach your company’s financial plans is to make sure you understand growth financing solutions, as well as how to manage a downturn, ie not growing, losing money, etc.; It’s never fun to finance yourself in an economic or industrial downturn like the 2020 COVID pandemic!
When we talk to new or established business clients, it seems like they are almost always talking about sales, so the ability to understand and focus on the differences in their profits and cash fluctuations is key.
How do cash flow and sales plans and projections affect the type of financing you need? For one thing, sales growth typically starts with eating up your cash, not generating it. A poor financial plan will drag your business down and tackling financing just gets harder and harder.
Three basic concepts always come up when it comes to finding the right capital and financing for your business.
1. The amount of financing you need
2. The type of financing (debt/cash flow/asset monetization) The interest rate on business loans will be dramatically affected if you choose traditional or alternative financing solutions. Private business loans in Canada come from unregulated commercial finance companies, better known as “alternative lenders.” These lenders are often very specialized in a “niche” of business financing and can be Canadian companies or branches of US banks and non-bank lenders.
3. How financing is structured to make it manageable with your day-to-day operations
Which finance company in Canada can meet your loan needs and why capital is important in business
Let’s identify and break down the key financings your business needs to know about and understand if they are applicable and achievable for your business. They include:
Accounts Receivable Financing / Factoring / Confidential Accounts Receivable Financing
Inventory financing / floor planning / retail inventory
Working capital term loans
Unsecured Cash Flow Loans
Merchant Working Capital Loans/Advances: These loans are geared toward short-term cash needs and typically last for one year. Loan amounts are typically 15-20% of your annual sales revenue.
royalty finance
Asset-Based Non-Bank Business Lines of Credit
Tax Credit Financing (SR&ED Bridge Loans)
Equipment Leasing/Leaseback Sale: Equipment financing in Canada is used by nearly 80% of all businesses looking to acquire new and used assets.
Government Guaranteed Small Business Loan Program – Government loans in Canada are sometimes referred to as ‘SBL’ aka Note: BDC financial solutions are available through this non-brick and mortar Canadian corporation . A small business loan through the government-guaranteed loan program comes with real flexibility in term loan length, market rates, no prepayment penalties, and of course, the low personal guarantee that borrowers require. These two ‘government’ loan solutions are usually perfect for financing a new business.
If you’re focused on making no mistakes in your business’ financial needs and want to capitalize on solutions your competitors are likely already using, find and speak to a trusted, credible and experienced Canadian business financial advisor who can help you with your cash flow. and business financing needs.
