Transform Your Business: Smart Alternatives to Traditional Lending
Stan Prokop
Canadian Business Financing | Cash Flow Financing | Asset Based Lending | Equipment Finance | Lender Financing | Purchase Order Financing | Acquisition Financing | SAAS Financing | Acquisition Financing
Fast, Flexible, Future-Proof: Alternative Business Funding Solutions
YOUR COMPANY IS LOOKING FOR BUSINESS FINANCE SOLUTIONS!
The Revolution in Lending: Uncovering the Truth about Alternative Finance Loans
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CONTACT:
7 Park Avenue Financial South Sheridan Executive Centre 2910 South Sheridan Way Oakville, Ontario L6J 7J8
Direct Line = 416 319 5769 Email = sprokop@7parkavenuefinancial.com
Tired of hearing 'NO' from banks? There's a better way to fuel your business growth.
"The biggest risk is not taking any risk. In a world that's changing quickly, the only strategy that is guaranteed to fail is not taking risks." - Mark Zuckerberg
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Business Financing Alternatives 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 Finance Loans: The Modern Approach to Business Financing
Business financing needs in Canada often leave business owners/ financial managers with that ' not happy ' feeling regarding loans or alternative finance solutions.
By the way, in today's competitive environment, some pretty smart people are running and growing their firms—yet even they are searching for ' the fix ' rather than traditional business loans.
INTRODUCTION
Alternative business loans remain a vital part of the Canadian business financing landscape. It has proven to be a solid alternative to traditional bank loans.
As conventional financing continues to be challenging for ' SME ' small and medium-sized companies, the need to access capital continues to rise.
The appeal of alternative lending arises from its ease of access compared to traditional financing norms. Even online portals offering relatively quick access to short-term working capital loans and other types of financing have gained a lot of popularity.
In many cases, even the banks have participated in some of these online portals targeted toward small business owners in some manner, including lender finance solutions. The domination of Canada's chartered banks has seen a dent in its dominance.
BREAKING FREE FROM TRADITIONAL LENDING - SMART FINANCING SOLUTIONS
Traditional financing can frustrate many Canadian SMEs looking for day-to-day funding and growth financing. Your business needs capital to grow and maximize business opportunities. Alternative finance solutions provide innovation financing that helps you bypass traditional lending if needed!
DID YOU KNOW?
WHAT IS ALTERNATIVE LENDING
Alternative lending solutions are in contrast to traditional bank financing in Canada. They are almost always more flexible and practical and often are a preferred choice when a business is seeking funding -
However, business owners must understand the often higher cost of financing that comes with the benefits of alternative finance.
Alternative lenders are direct lenders providing loan options outside of standard bank loans via debt financing and cash flow monetization issues for assets on the balance sheet -
Unlike equity funding, debt financing does not dilute owner equity in exchange for the business capital provided.
Part of the growth in alternative lending stems simply from the continuing awareness of financing options—when it comes to asset-based loans, the ability to finance the balance sheet is at the top of the list in Canadian alternative finance.
It is interesting to note that a large portion of alternative finance solutions are, in fact, American-owned firms that have chosen to enter the Canadian market.
Small businesses, that SME sector we're always talking about at 7 Park Avenue Financial, often has the biggest challenge in raising capital. It's all about alternative small business funding.
REDEFINING BUSINESS CAPITAL - HOW ALTERNATIVE FINANCE LOAN SOLUTIONS HAVE CHANGED THE GAME!
When raising finance and acquiring business loans for your business, today’s environment requires looking far beyond the traditional solutions of the past. This is where alternative lending and financing options have grown in popularity.
More often than not, that has meant ' the bank ' as the sole solution provider of business capital and the 'go-to' for funding options.
The variety of alternative finance solutions offered by alternative lenders has given rise to a whole new way of financing in Canada.Banks, by their nature, emphasize historical and present cash flow, external collateral, personal guarantees, and banking covenants. Not all businesses can meet those requirements!
FINANCING DISRUPTED - HOW ALTERNATIVE FINANCE LOANS OUTPERFORM BANKS
Business owners who cannot raise capital from conventional lenders have found that alternative business financing solutions with significant benefits are readily available. Of course, it is also necessary to ensure that they consider the risks and costs of any business financing.
If you are a small or medium business owner who has struggled with obtaining a loan in Canada in the past, or even if you want to avoid the headache and frustration associated with conventional lenders, there are several sources of alternative lending from which you can choose.
Each has its unique set of benefits and drawbacks, so consider them all carefully.
Some have called it ' debanking'! Industry stats show that a large percentage of applications by firms in the SME COMMERCIAL FINANCE sector are, in fact, declined by banks for a variety of reasons. The bottom line is that these firms simply don't fit what the pros call ' the credit box ' of banks and their fiduciary lending responsibilities.
But by addressing the proper cost of capital versus growth opportunity and the ' risk ' element associated with any form of traditional or nontraditional finance a whole new world of capital providers is out there.
Traditional bank loans for small businesses have traditionally failed to satisfy entrepreneurs hoping to start, grow, or acquire a business.
HOW TO ADDRESS THE SEARCH FOR BUSINESS FINANCE IN THE CANADIAN LENDING INDUSTRY
What, then, is the best way to look at some of those alternatives, and, as importantly, what are they?! It starts by assessing your need, which is usually in one of three categories:
Growing sales
Refinancing
‘Other’
That 'other' can cover various scenarios, one of which might mean a forced exit from your bank relationship - i.e. the dreaded ' special loans' category.
As we have said, understanding how things work, as well as cost and risk, are the key elements of a new financing strategy. That kind of thinking will often determine what's best for your business.
Are you looking for some key tips around alternative financing and new sources of business financing and capital?
We've narrowed it down for you as follows!
SOLUTIONS TO CONSIDER FOR TRADITIONAL AND ALTERNATIVE FINANCING
Keep an open mind to available new solutions.
Consider both traditional and alternative financing solutions.
Understand what you need - i.e. new assets, working capital, investment.
Focus on potentially a combined solution of different methods of business finance.
Ensure you can present your company properly - i.e., current financial statements, a strong exec summary or business plan, etc.
Be prepared to consider ' Plan B '!
Cost of financing and interest rates
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BUSINESS FINANCING SOLUTIONS RECAP
Alternative finance loans are unique non-traditional financing options that cater to the needs of established and startup businesses who may not qualify for traditional bank loans.
These loans can help businesses grow by providing flexible and accessible financing options tailored to specific business needs.
Let's recap business financing solutions most typically available to your firm - they include:
SOLUTIONS OFFERED BY TRADITIONAL AND ALTERNATIVE LENDERS - WHICH IS RIGHT FOR YOUR FIRM?
A/R financing / Invoice financing / Invoice factoring - same day funding for accounts receivable - factoring accounts receivables is probably the most popular alternative loan solution
Solutions such as invoice factoring allow you to go from sales to cash immediately, with virtually no upper limit to financing if you have sales and receivables. And even better, no new debt on the balance sheet!
Business Start Up Loans - The Canada Small Business Government Guaranteed Loan - Federal guaranteed small business loans for startups and companies under 10M in annual revenue.
Short Term Working Capital Loans - ( Merchant Cash Advances )
Many business owners in Canada have experienced rejection from traditional financing sources. The search for operating capital is always ongoing, and management often has to spend an inordinate amount of time searching for operating and long-term capital.
Given that many businesses fail solely based on their inability to raise capital, the need for assistance in Canadian business financing is always there.
Many firms struggle to understand the lingo and the players as they wade through terminology that includes VCs, Angels, merchant advances, and even the confusing world of grants and other Canadian government incentives. It has never been more important to have access to experienced advice.
DEBT VERSUS EQUITY
Business owners want to continue to control their ownership and are often reluctant to raise additional capital when it will dilute owner equity. They are also concerned about rates and fees and how loans and capital will be repaid.
PERSONAL GUARANTEES
Needless to say, the omnipresent issue of the ' personal guarantee ' is also something business owners must wrestle with, given that a majority of business finance solutions, both traditional and alternative business loans, come with the ' PG' request from lenders.
Managing your business's debt/equity relationship comes hand in hand with understanding funding options.
At 7 Park Avenue Financial we are huge admirers of balance sheet lending and monetizing your assets via solutions covering receivables, inventory, and fixed asset funding via solutions such as equipment leasing.
Many firms can easily confuse a/r factoring with short-term working capital loans—they are very different. Short-term loans are very popular but come with fees, higher rates, and certain repayment conditions.
Some short-term working capital loan lenders tout the fact that you can use funds for any reason, but danger lies ahead if you use this type of funding for longer-term needs such as purchases or equipment, etc. Bottom line: Match your financing solution to your needs.
KEY TAKEAWAYS
CONCLUSION
Alternative financing solutions allow a business to access capital not previously accessible - allowing a company to take advantage of innovation and growth opportunities.
As conventional bank solutions become less scarce, alternative finance loans offer a timely and efficient way to secure capital. Business owners who embrace the new financing paradigm in Canada will find obtaining money for business needs much easier to access.
So when it comes to alternative lending and getting a loan in Canada, and if your firm needs finance ' fix,' speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your loan and cash flow needs for capital lending in Canada.
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is alternative finance?
Alternative finance & Alternative business lending refer to financial channels, processes, and instruments that have emerged outside of the traditional finance system via conventional lenders such as regulated banks via a bank loan or loans from credit unions and the markets. Examples of alternative finance and alternative lending options outside traditional banks in the fintech area include secured lines of credit, invoice factoring, a merchant cash advance, crowdfunding, peer-to-peer lending, microfinance, and cryptocurrencies. Alternative business funding and alternative lenders typically compete with traditional financial institutions and are not regulated, similar to traditional business financing sources.
What is alternative funding?
Alternative funding is closely related to alternative finance. It refers to methods of raising capital that fall outside traditional funding mechanisms such as a bank or business-oriented credit union. These might include online crowdfunding campaigns, venture capital, angel investors, private equity, peer-to-peer lending, micro financing, or even grants and funding from non-traditional sources.
What are non-bank financial institutions?
Non-bank financial institutions (NBFIs) provide certain types of financial services and alternative financing methods but do not have a full banking license. These services may include investment (such as hedge funds), risk pooling (insurance companies), contractual savings (pension funds), and lending. They play a significant role in the economy by providing competition and market efficiency, complementing traditional banks, and expanding access to financial services.
Who are non-bank lenders?
Non-bank lenders are a subset of non-bank financial institutions that specifically provide lending services without a banking license. They can be companies, organizations, or investment funds. They often lend to consumers or businesses through online platforms, and their funding sources can be diverse, including private equity, endowment funds, or securitization of their loans.
What sources of financing are available to businesses?
Businesses have a variety of financing sources available to them. Some of these solutions from business financing companies include:
Government business loans are often the best solution for a business loan for startup purposes.
What is a business line of credit, and how does it work?
A business line of credit is a flexible loan that gives businesses access to a fixed amount of money, which they can use when needed and pay back over time. It's like a credit card in that you can borrow up to a certain limit and pay interest only on the portion of money that you borrow. You can draw from and repay the line of credit as needed if you don't exceed the credit limit.
How do you qualify for a business line of credit?
Qualifying for a business line of credit typically involves meeting specific criteria set by the lender. These may include a minimum credit score, a history of profitable business operations, sufficient cash flow to repay the loan, and sometimes collateral. The specific requirements can vary widely depending on the lender.
What is a merchant cash advance loan?
A merchant cash advance (MCA) is a type of business financing where a business sells a portion of its future credit card sales for a lump sum payment upfront. The MCA provider then collects a percentage of the business's daily credit card receipts until the agreed-upon amount has been repaid in full.
What is invoice factoring?
Invoice factoring, also known as accounts receivable factoring, is a financing method where a business sells its unpaid invoices to a factoring company at a discount. The factoring company then takes responsibility for collecting payment on those invoices, providing the original business with immediate cash.
Why is it difficult for small businesses to get loans from banks?
It can be difficult for small businesses to get bank loans for a few reasons. Banks often see smaller businesses as riskier investments, as they may not have the long financial histories, significant collateral, or stable cash flows that banks look for when assessing credit risk. In addition, the costs of processing a small business loan can be the same as for a large loan, but with less profit for the bank, making them less incentivized to provide these loans.
What are the benefits of alternative lending?
The benefits of alternative lending can include:
Who Qualifies for Alternative Finance Loans
Alternative finance loans is that they are more accessible than traditional bank loans. Companies of all sizes and credit histories may qualify for these business loans and lines of credit. Alternative business lenders may have different loan requirements and will look at a business's credit history, revenue, and financial statements to determine qualifications. It's essential to have a solid business plan and financial projections that will often increase the chances of approval.
' 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