Funding a business in Canada at times must seem like sorting through urban legends and myth vs. reality. Financing choices via banks or commercial finance firms seem either plentiful or non existent at times! We’ll review some basics around ‘ de-stressing’ your ‘ credit crunch’ with a view towards high functioning finance solutions that make sense for your firm. Let’s dig in.

The reality in Canadian business financing is that your firm will often experience at times either a contraction in business financing capability. That might be from external reasons – i.e. the 2008 world depression debacle, or simply challenges in your own business re profit/loss etc.

The harder reality is that small firms tend to be much more vulnerable, and many business owners/financial managers look to newer non bank finance solutions for business credit. Those that seek bank credit typically look for either revolving credit lines or term loans of some type.

Many business owners certainly would agree that the ‘ bank relationship’ concept is often more of a myth than reality , as concepts such as mgmt depth, business strategy etc are often misplaced by commercial credit scoring with a focus on ratios . The hard reality of Canadian business banking is that there is no real distinction in services and credit appetite, unlike the U.S. where choice abounds based on a different banking system.

Many businesses are looking towards Asset Based Lending (‘ABL ‘ ). This is a direct replacement for bank credit lines, providing working capital finance based almost solely on your business assets – not the ratios!

There are some interesting and popular subsets of asset based lending such as A/R financing, Inventory finance, etc. The ‘ harder assets’ of your business, i.e. equipment or real estate can be addressed by equipment leasing or sale leaseback strategies which are tremendous popular.

It should never be forgotten that both owner equity and credit from suppliers often round out financing needs for many businesses in the SME (small to medium enterprise) sector.

In our opinion if you’re looking for a true ‘ urban myth ‘spend some time looking for ‘ government grants ‘. While some ‘ grants ‘ (aka ‘ free money’?) exist they rarely can finance a business and often require ‘ matching ‘ of some sort.

The two government financing scenarios that are clearly NOT myth are the Canadian Government Small Business Loan and the SR&ED refundable tax credit program. These two programs fund over 10,000 businesses every year for amounts reaching 10 Billion dollars. No urban myth with these two programs.

For real world financing in Canada it’s highly recommended to ensure you have both a business plan/cash flow forecast and a total focus on cash flow and debt repayment reduction in those documents. Naturally track records and business assets/collateral always help! Start up entrepreneurs take note!

If you’re looking to de- bunk some Canadian business financing urban legends with a view towards time mgmt ( and ‘ de-stressing ‘ !) seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with commercial finance options and solutions that are ‘ high functioning’ for your business.