Navigate Cash Flow Challenges with Powerful Alternative Funding Options

Say Goodbye to Funding Roadblocks with Flexible Alternative Financing

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How Alternative Financing is Taking Over in Canada

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Financing & Cash flow are the  biggest issues facing businesses today

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7 Park Avenue Financial South Sheridan Executive Centre 2910 South Sheridan Way Suite 301 Oakville, Ontario L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

The Rise of Alternative Financing: A Game-Changer for Canadian Business

"Unlock your business potential: Discover how alternative funding can be your secret weapon in a competitive market."

Struggling to secure funding for your Canadian business? Are traditional lenders turning you away? Don't let financial constraints hold you back. Alternative business funding offers innovative solutions tailored to your unique needs, unlocking growth potential and helping you confidently navigate challenging times.

7 Park Avenue Financial  originates business financing solutions for Canadian Businesses – We offer Alternative  Business Funding  and working capital solutions  – Save time and focus on profits and business opportunities

7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”

Alternative Business Funding: Financing in Canada

Alternative financing sources in Canada sometimes conjure images of the unknown to Canadian business owners/financial managers.

Is there anything to be afraid of when considering this method of business loan finance? Hardly. Let’s dig in.

At 7 Park Avenue Financial, we have long maintained that the financial industry landscape in Canada for business borrowers has changed drastically compared to traditional bank loans, for example.

Current trends in alternative lending provide numerous solutions and flexible business funding options for your business. Naturally, any form of business financing has advantages and potential disadvantages regarding the amount of funding needed.

DID YOU KNOW?

1. The global alternative finance market was valued at $6.62 billion in 2021 and is projected to reach $28.47 billion by 2030.
2. In Canada, 25% of small businesses reported using alternative financing methods in 2020.
3. The approval rate for alternative lenders is around 56%, compared to 27% for big banks.
4. 63% of business owners who use alternative funding report being satisfied with their experience.

Redefining Business  Capital: The Power of Access To  Alternative Financing

The ongoing struggle for businesses in small and mid-market sizes to secure financing for their firms leaves many more options to explore these days.

It’s the rise of alternate forms of funding as benchmarked to traditional Canadian chartered bank financing.

One kind of hybrid example is always worth exploring in small business loans  - it’s alternative finance offered by the banks.

We’re referring to the government-guaranteed business loan program for financial assistance, which provides term loans to borrowers who can help startups or established businesses but otherwise cannot access a small business loan based on traditional bank criteria.

SBL loans are worth examining, but entrepreneurs with poor credit histories will not be approved.

Traditional funders typically seek personal credit scores of 700 or higher, while alternative funders may have more lenient requirements. Funding startups and franchise financing are two popular uses of the program.

The borrower should be prepared to present a proper business plan for the loan application process.

Alternative Sources of Business  Finance in Canada: Exploring Innovative  Business Loan  & Funding Options

Alternative lenders for small businesses and medium-sized firms are essentially commercial finance firms that are not funded like our banks, i.e. deposits.

These lenders can help cover various business expenses, including immediate cash flow challenges and larger expenditures. Therefore, they are ‘unregulated’ and operate under their own risk and lending models around alternative funding options versus traditional loans.

These firms often specialize in financing certain types of loans or working capital solutions.

Revolutionizing Finance in Canada:  Alternative Funding Solutions

Here is a list of various forms of alternate finance:

A/R Receivable Financing / Invoice financing for unpaid invoices

Inventory Finance

SR&ED Tax Credit Financing

Working Capital Loans

Equipment financing - Sale-leaseback

Non-bank Asset-based business lines of credit

Sales/Royalty financing

Merchant Cash Advances / short-term working capital loans

Purchase Order Financing

Business credit cards

The above solutions offer tremendous flexibility for the business owner in terms of how funding can be derived. These options provide flexible business funding solutions for small businesses, especially in the current lending environment.

Naturally, that flexibility will almost always come with higher finance costs. Because lending standards are less restrictive than those of banks, your firm can access the finance it needs.

The best way to look at these financing forms is to consider that they are heavily ‘ asset ‘ based and much lighter on things such as covenants and other restrictions. Traditional lending has almost always focused on pure cash flow generation.

SPECIAL LOANS / RESTRUCTURING / TURNAROUND FOR SMALL BUSINESS OWNERS

For firms financing with traditional banks who find themselves in some form of distress or business turnaround challenge, the alternative finance vehicle is an excellent way to refinance your business when a workout with the bank in ' special loans '  cannot be established.

One key factor in assessing when you’re e considering business loan finance of an alternate nature is to ensure you understand any reporting requirements. 

Essentially, reporting becomes the ' communication vehicle ' between yourself and the lender. In many cases, it can also work positively to help identify additional or other types of financing you might need.

Being 'self-aware ‘in your financial condition is essential, and a disciplined reporting system helps that cause.

Three uncommon takes on alternative business funding:

1. Alternative funding as a strategic tool for rapid market expansion
2. Leveraging alternative financing to outmaneuver competitors during economic downturns
3. Using alternative funding to cultivate a diverse investor network beyond traditional financial institutions

KEY TAKEAWAYS

• Understand the main types: invoice factoring, merchant cash advances, and revenue-based financing
• Evaluate eligibility criteria: focus on business performance rather than personal credit scores
• Compare costs: assess interest rates, fees, and repayment terms across different options
• Consider the speed of funding: alternative lenders often provide faster access to capital
• Analyze flexibility: explore options with customizable repayment structures aligned with cash flow

CONCLUSION - BEYOND BANKS - BEST ALTERNATIVE FINANCING SOURCES IN CANADA FOR ATTAINING BUSINESS FUNDING

Ensure you are 'self-aware' of your business's overall financial health if you're looking to explore alternative financing sources.

Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can help eliminate the curiosity gap in choices.

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

WHAT ARE ALTERNATIVE METHODS OF FINANCING IN BUSINESS

Alternative financing methods include non-traditional borrowing from non-bank commercial financing companies and asset-based lenders. Alternative financing methods can help cover various business expenses, including payroll and utilities.

Typically, alternative finance solutions provide greater access to business credit because eligibility criteria are less restrictive than traditional financial institutions such as banks. Alternative financing tends to be less stringent without many financial covenants imposed by business lenders such as banks.

Some businesses pursue equity financing to raise money via equity crowdfunding, friends and family, angel investors, venture capital solutions, and their own money in a venture. Alternative financing solutions are approved in a relatively short period when compared to more traditional lending institutions.

WHAT ALTERNATIVES ARE THERE INSTEAD OF BANK FINANCING

Alternatives to bank financing for businesses looking for equity financing include crowdfunding, angel investors, venture capitalists, and private equity sources.

Some business owners pursue government grants as well as peer-to-peer lending.

For debt financing and cash flow/working capital solutions for small business owners, financing is available via asset-based lenders,  invoice factoring companies,  and solutions around purchase order financing,  merchant cash advance, tax credit financing, and lease finance and sale-leasebacks as potential alternative financing options.

WHAT ARE NON-CONVENTIONAL SOURCES OF FINANCE

Non-conventional sources / alternative funding sources are business borrowing solutions from non-bank financial institutions such as commercial financing companies and asset-based lenders who lend money to businesses. They offer financial solutions similar to a traditional bank loan and numerous other types of financing, although in many cases, interest rates will be higher.

What are the main advantages of alternative business funding?

• Faster approval and funding process
• More flexible eligibility requirements
• Customizable repayment terms
• Access to larger amounts of capital
• Opportunity to build business credit

How can alternative financing help my business overcome cash flow challenges?

• Provides quick access to working capital
• Offers flexible repayment options based on revenue
• Helps bridge gaps between accounts receivable and payable
• Enables better inventory management and bulk purchasing
• Supports seasonal business fluctuations

What types of businesses benefit most from alternative funding?

• Startups and early-stage companies
• Businesses with limited credit history
• Seasonal or cyclical industries
• Companies experiencing rapid growth
• Businesses with inconsistent cash flow

How does alternative business funding differ from traditional bank loans?

• Often requires less documentation
• Focuses more on business performance than personal credit
• Provides faster access to funds
• Offers more flexible terms and structures
• May have higher approval rates for newer businesses

What should I consider when choosing an alternative funding option?

• Total cost of financing, including fees and interest
• Repayment terms and schedule
• Impact on cash flow and daily operations
• Potential for repeat funding or increased credit limits
• Lender's reputation and customer support

What exactly is alternative business funding?

• Financing options outside traditional bank loans
• Includes methods like invoice factoring, merchant cash advances, and peer-to-peer lending
• Often provided by non-bank lenders or fintech companies
• Designed to offer more flexibility and accessibility

Are alternative funding options safe for my business?

• Many alternative lenders are reputable and regulated
• Research lenders thoroughly before committing
• Read and understand all terms and conditions
• Consider seeking advice from a financial professional
• Look for transparent fee structures and clear repayment terms

Can I use alternative funding alongside traditional bank loans?

• Yes, many businesses use a combination of funding sources
• Alternative funding can complement existing bank relationships
• May help diversify financial risk and increase overall capital access
• Important to manage multiple obligations carefully
• Consider the impact on your business's debt-to-income ratio

How quickly can I receive funds through alternative financing?

• Many alternative lenders offer same-day or next-day approval
• Funds can often be accessed within 24-72 hours of approval
• Some options, like invoice factoring, provide ongoing cash flow
• Faster funding compared to traditional bank loans
• Speed may vary depending on the specific funding option chosen

What documentation is typically required for alternative funding?

• Basic business information and financial statements
• Bank statements (usually 3-6 months)
• Tax returns (personal and business)
• Proof of time in business
• Details of accounts receivable or future sales (for specific funding types)

What role does technology play in alternative business funding?

• Enables faster, more efficient application and approval processes
• Facilitates data-driven decision-making for lenders
• Supports innovative funding models like peer-to-peer lending
• Enhances security and transparency in transactions

How can I evaluate the true cost of alternative funding options?

• Calculate the Annual Percentage Rate (APR) for accurate comparisons
• Consider any additional fees beyond interest rates
• Evaluate the impact on cash flow and profitability
• Assess potential opportunity costs of not securing funding
• Compare total repayment amounts across different options

' 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