Business Financing in Canada finds owners/financial mgrs (particularly in the SME area) either on… or off… ‘the grid’. That’s our term for traditional (on) or alternative (off) loans and finance sources. With all the changes in business and finance in these post recession years the challenges around accessing capital sometimes seem greater than ever. Let’s dig in.

Owners/finance mgrs have had to a lot of learning in ‘Off the grid’ financing and an equal amt of ‘ unlearning’ in ‘ on the grid ‘ traditional solutions, many of which are no longer available or somewhat inaccessible.

Business owners in small and medium business often make the mistake that their personal banking relationships will take them into commercial banking relationships with the same bank – they feel even more strongly about that when they have good personal credit and other personal borrowings from that bank

However Canadian chartered banks run their commercial borrowings from major commercial offices and head office quite distant from the local branch relationship. More to the point commercial borrowing involves data points that are highly focused on business cash flow and other measures of business health including debt to equity, interest coverage, and quality of assets and collateral.

Being unable to access traditional capital has opened the world of ‘ off the grid ‘ finance sources – our coined term for ALTERNATIVE LOANS & FINANCING. While most business owners associate non bank financing with higher costs they need to understand the benefits of these solutions, which tend to be:

Quicker approval turnaround
More flexibility
Access to greater amounts of capital

While it is true that in most cases alternate finance solutions do bring a higher cost of funds in many cases their short term nature is actually cheaper than borrowing long term or taking on debt that will be on the balance sheet for a long time.

The one type of bank financing that is a ‘ hybrid ‘ of our on grid/off grid financial strategy is the Government Guaranteed Business Loan. Here term debt at attractive rates and structures offers a great solution for equipment needs and leasehold improvements. The downside? It’s term debt and is not a cash flow/working capital/business line of credit solution that some business folks mistake it for.

Understanding non bank finance alternatives is key knowing what to borrow and when. This is a great time to measure the amount of financing you need, what it will cost and how it will contribute to your return on investment/return on assets.

And what exactly are those non bank finance alternatives? They include:

A/F Financing (Traditional factoring or our recommended CONFIDENTIAL RECEIVABLE FINANCE)

Inventory Financing

Asset based business lines of credit

SR&ED Tax credit financing

Bridge loans (asset based) & Sale leasebacks

Sales/Royalty Financing

Purchase Order/Contract Financing

If you’re looking to better understand financing sources ‘ on’ or ‘ off’ the grid
seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with business finance needs.