Canadian business financing options. Here’s a question for business owners and financial managers. Do you really think you have made the right business credit and finance choices for your firm?

When we talk to clients it’s often clear they are not sure they have the right finance mix for both survival and growth of their business.

Contrary to what many businesses think they actually do have a lot more choices than they think. Often times the owner/manager is focus on a final approval for ‘ any ‘ type of financing that seems to fix that days problem.

What the owner/manager doesnt realize is that as your business grows and matures different financing options are both required, and available. That of course covers us all the way from start up to mature!

So what are some of those mistakes that are being made… and more importantly how can you avoid them? Let’s cover off some basics.

The first point is that at certain stages of your business growth it’s all about ‘ collateral ‘ when it comes to business lending. Our point here is that different forms for finance require different forms of collateral, and in fact you quite often arent required to put up as much collateral as you think.

One area is the personal guarantee, which in many forms of business financing is sometime very much required, and in other instances has little emphasis put on it. Quick example – in a start up environment there is going to be significant emphasizing of personal credit and net worth of the owners. However down the road your firm might be eligible for millions of dollars of asset based lending finance, and that type of financing does NOT place a large amount of emphasis on personal guarantees.

So it’s all about ensuring you don’t over pledge on collateral when you don’t need to, while at the same time recognizing that the type of financing you require is going to focus on the collateral aspect. But it might not be all of your collateral – its all about the negotiation process.

Receivable financing, which is a subset of asset, based lending in Canada and if you have solid A/R clients external collateral shouldn’t really be on the table for discussion.

A lot of business owners misunderstand how their personal finance and credit history can affect their ability to get business credit. At the same time larger firms with established collateral does not really overly focus on personal credit of owners. But we do caution the start up firm that banks and other commercial lenders view your personal credit as a signal as to how you might run your business finances. Enough said!

A third area of potential mistakes revolves around the fact that business owners are sometime poor at matching the financing they have access to with what they really need. Here it’s critical to understand how your cash flow and collateral fits into each different type of business financing, and what rates make sense for the type of financing you’re trying to achieve. Quick example – for revenue generating assets solutions such as long term equipment leases make sense. Don’t use cash or credit lines which typically give your working capital.

It’s all about two simple choices – are you looking for debt in the form of long term loans, or are you wanting to monetize assets for cash flow and working capital . Once you understand your options its all about deciding which of these options works for you best:

Receivables finance
Bank operating lines
Equipment leasing
Working capital term loans
Non bank Asset based lending
Securitization
Tax Credit Monetization

Those are just some some of the key areas of business financing options under which your firm can access credit and finance capital

Our bottom line – it’s about access to knowledge and execution of the proper business finance strategy. Speak to a trusted, credible and experienced Canadian business financing advisor on your business finance needs.