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Financing sources in Canada. Truth or Fiction? That's probably one of the feelings or comments some clients we meet have when it comes to Canadian business financing. Let's get in behind some of those sources of finance for the commercial borrower and eliminate some of that turbulence. Primarily we'll focus on what we could term ' intermediate ' sources of capital. These include trade credit from suppliers, banks, equipment lessors, A/R financiers, and inventory finance solution providers. Occasionally the business owner /manger forgets to consider that supplier/vendor financing is one of the best and cheapest forms of capital and cash flow. Quite frankly it is much easier to obtain, is rarely, if ever ' secured' or ' collateralized 'and typically carries no interest penalty Don't forget though that while delaying payment to suppliers is a ' cash flow positive ' you never want to have that strategy deteriorate the relationship you have with a key vendor. Furthermore if your firm has the cash the cost of not taking a payment discount also must be measured. Just a quick example on the whole issues of prompt payment. You can check with your accountant but let's say you bought 10k of product from a supplier and were able to successfully negotiate a 2% NET 60 payment term. If you calculate your discount foregone and the proceeds from the use of the money you might find that's an 18% savings rate -so if you can borrow for less than that you clearly are ahead of the game. Bottom line - dont underestimate the power of supplier financing from a payment and cash flow perspective. Banks are of course the business owner/manger ' go to ' when it comes to financing sources under consideration. However unsecured loans for business, while available, will rarely give you company all the funding you require. Business lines of credit from banks are low cost and flexible - they simply require appropriate bank collateral and the understanding from yourself that there might be some restrictions on your financials re additional borrowing from others, etc. If your company meets cash flow and ratio requirements from banks they are an excellent source of intermediate term capital for loans on equipment, fixed assets, etc. A/R financing is becoming increasingly popular in Canadian business financing. Why? Simply because it can provide significant capital without additional equity and allows you to avoid long term debt. It has a higher cost, and we also spend a lot of time in speaking to clients around the fact that the old stigma of A/R factoring disappears more and more every day. The old alternative is fast becoming the new traditional. Other benefits of A/R finance include immediate cash flow and the ability to handle seasonal bulges in your business. Inventory financing is typically done in combination with a bank line of credit or non bank asset based line of credit. Good inventory financing is available if your firm has quality products; good inventory turns, and is not of a perishable type - i.e. food. Equipment financing is a solid use of intermediate financing. It allows you to avoid large cash outlays, replenish assets and technology, is easier to obtain from a financing approval point of view, and allows you to simply pay for assets over their useful economic life. Our bottom line? You can eliminate the turbulence that comes with business finance challenges by understanding what sources are available for what maturity. Simple as that. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your needs for financing sources in Canada. Stan Prokop - founder of 7 Park Avenue Financial – http://www.7parkavenuefinancial.com Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info re: Canadian business financing & contact details : http://www.7parkavenuefinancial.com/finance-sources-business-financing-canadian.html
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