12 Types of Business Financing in Canada - Which Do You Need? Commercial Loans & Cash Flow Finance
Stan Prokop
Canadian Business Financing | Cash Flow Financing | Asset Based Lending | Equipment Finance | Lender Financing | Purchase Order Financing | Acquisition Financing | SAAS Financing | Acquisition Financing
Canadian Business Financing Alternatives in Commercial Lending
You Are Looking for a Commercial Business Loan!
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Financing & Cash flow are the biggest issues facing business today
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Email - sprokop@7parkavenuefinancial.com
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COMMERCIAL BUSINESS LOANS IN CANADA
Are you serious? We can hear clients asking that already.
Can 12 different SME Business financing alternatives for business capital be available to business owners and financial managers in Canada? And are they commercial loan and finance alternatives that make sense?
BREAK FREE FROM BUSINESS GROWTH BARRIERS
As a business owner, you know the feeling of being trapped between ' opportunity' and the need for business capital. Many strains in your business can hinder growth in sales and profits. Let the 7 Park Avenue Financial team demonstrate financing solutions that relate to your business cycle.
DID YOU KNOW?
EXPLORING BUSINESS LOAN ALTERNATIVES FROM TRADITIONAL AND ALTERNATIVE LENDERS
We’re not serious; there are more than 12 different alternatives to business lending, including options from alternative lenders.
Some are rare or esoteric, we could say, and might not be applicable daily to your company relative to its finance and growth needs but are still useful when needed.
WHAT IS A COMMERCIAL LOAN?
A commercial loan is a debt-based financing arrangement between a business and a financial institution.
It is designed to provide businesses with the necessary funds to meet their financial needs, such as purchasing equipment, expanding operations, or managing cash flow.
A Commercial loan can be used for various purposes, including working capital, business expansion, and commercial real estate financing. These loans are essential for businesses looking to invest in growth opportunities without depleting their cash reserves.
By leveraging a commercial loan, businesses can maintain liquidity while pursuing strategic initiatives.
HOW COMMERCIAL LOANS WORK
Financial institutions such as banks and credit unions typically offer commercial term loans. These loans are designed to provide businesses with a lump sum of money that can be repaid over a set period.
The loan is usually secured by collateral, such as property or equipment, which helps mitigate the lender’s risk.
The financial institution determines the interest rate on a commercial loan based on the business’s creditworthiness, industry risk, and other factors.
These loans can finance various business needs, including start-up costs, expansion, and refinancing existing debt. By understanding how a commercial loan works, businesses can make informed decisions about their financing options and choose the best solution for their needs.
DOES YOUR COMPANY NEED A SHORT-TERM FIX OR A LONG-TERM STRATEGY
The ability to develop an overall long-term strategy and plan is vital for commercial financing via business loans for small and medium-sized businesses in Canada.
You want to optimize business assets for borrowing and determine which type of financing works best for your firm. That type of financing will come from two sources:
Clients and suppliers
External finance sources.
WHAT AMOUNT OF DEBT CAN YOUR BUSINESS CARRY?
When addressing where your business financing will come from in Canada, you need to determine your optimal level of debt - many business owners don’t always realize that certain forms of financing actually don’t bring debt onto your balance sheet.
The debt service coverage ratio is crucial in determining the optimal level of debt as it measures a company's ability to service its debt with its current cash flow. They monetize assets.
APPLYING FOR A COMMERCIAL LOAN
Applying for a commercial loan requires careful planning and preparation. Businesses should start by reviewing their financial statements and credit history to ensure they are in good standing.
It’s crucial to determine the amount of money needed and the specific purpose for the funds. Once this information is gathered, the application process can begin by submitting a loan request to a financial institution.
The financial institution will review the application and may request additional information, such as business plans and financial projections, to assess the loan's viability.
A well-prepared application increases the chances of approval and helps secure favorable terms.
WORKING WITH A FINANCIAL INSTITUTION
Working with a financial institution can be a beneficial experience for businesses looking to secure a commercial loan.
Financial institutions have experienced professionals who can provide guidance and support throughout the loan process. They offer a range of financing solutions, including commercial loans, lines of credit, and other financial products tailored to meet various business needs.
By building a relationship with a financial institution, businesses can gain access to valuable resources and expert advice on managing cash flow, interest rates, and other financial matters. This partnership can be instrumental in helping businesses navigate their financial challenges and achieve sustainable growth.
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12 SOURCES OF COMMERCIAL LOANS IN CANADA
So, on to what you have been waiting for! Let's highlight briefly the commercial, corporate loans and cash flow facilities that make up our 12 sources of external business financing. (Your profits, suppliers, and customers are your other sources of cash flow, by the way.)
Inventory Financing
Equipment financing / fixed rate asset financing
Credit card receivable financing/ Merchant Cash Advances / Short term working capital loans
Microloans
Business Banking Loans / operating lines/business line of credit / commercial real estate mortgages
Government small business loans / commercial mortgages via BDC / term loan solutions
Mezzanine and subordinated debt finance
That’s a handful, for sure. What it really comes down to is determining which type of financing is available based on your firm’s overall credit quality as it relates to approval and interest rates.
Often, that is tied to what stage of life your company is in—we’ve referred to that in the past as which stage of the life cycle your firm is in. That could be a start-up, high growth, maturity, or, yes, ‘distress.’
Unfortunately, the larger your company is, it often plays into the fact that you might have more flexibility and ‘wiggle room’ in Canadian business financing alternatives.
3 UNCOMMON TAKES ON BUSINESS LOANS
KEY TAKEAWAYS
CONCLUSION - DON'T LET FINANCING HOLD YOU BACK
Bank loans for businesses are a challenge. Is there a formula or roadmap that is perfect for every firm? Unfortunately, not. Each firm and industry is different.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can ensure you know the various flexible solutions most applicable to your company's business needs today!
FAQ: FREQUENTLY ASKED QUESTIONS
What factors determine commercial loan interest rates?
How do lenders evaluate commercial loan applications?
What's the difference between secured and unsecured commercial loans?
What is a commercial loan?
A commercial loan is a type of debt-based funding that allows for purchasing or improving business property. A bank or non-bank lender / commercial finance company will provide funds to cover operating costs, major capital expenditures and more if needed -This form of financing from commercial lenders can come at an interest rate that varies considerably. Hence, it's important businesses explore options before committing to larger loans.
How do commercial loans improve business cash flow management?
What advantages do commercial loans offer over other financing options?
What types of growth can commercial loans support?
How quickly can commercial loans impact business operations?
What long-term benefits come from establishing commercial lending relationships?
Can startups qualify for commercial loans?
What happens if I miss a commercial loan payment?
How do seasonal business cycles affect commercial lending?
' Canadian Business Financing With The Intelligent Use Of Experience '
STAN PROKOP 7 Park Avenue Financial/Copyright/2024
Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil