When, and how. Do you have a handle on what business financing you need when seeking finance and commercial loans in Canada? Let’s review some of those timing issues, as well as the sources and solutions.

Plan A (which often quickly becomes PLAN B) for many business owners and financial managers in Canada is to highlight a Canadian chartered bank as they main option. And truth be told, commercial banking is quite competitive these days; especially from a perspective of rates, etc. (Approval is a different story!)

It’s a hard core reality that you in fact, due to the above competitiveness, as well as your firms own credit quality could in fact get a better deal , structure , and rate simply by … ‘ changing banks ‘. Is that recommended? Certainly not always, more so when it comes to evaluating the cost of a relationship.

Are there alternatives to Canadian chartered banks when it comes to commercial loans and financing in Canada? There sure are – they include pension funds, insurance companies, and commercial independent finance companies. The latter group consists of specialized small firms, niche firms, and larger Canadian and international finance corporations.

Clients ask us, when they are looking to finance externally what they need to look out for. It’s a question of looking at what type of firm and financing vehicle is in fact best suited for your needs. And the factors that determine that? They include:

Term of amortization of your financing

Why you are financing

Cost

The upside / downside of that type of finance

Short term business financing transactions in Canada tend to be 1- 3 years in length. We’re often approached for very short term needs and these are difficult, but not impossible to accomplish.

Naturally longer term financing tend to be anywhere from years onward. When you consider the period or term of the loan the business owner focuses on the overall financial position of the company. The lender however focuses pretty well solely on risk and collateral.

Businesses in Canada finance for many reasons. They include expansion and growth, new markets, probably the best advice we can give a business owner, and it’s certainly the view of many lenders, that areas such as product development and working capital should be financed internally through profits and operating cash flow.

If you can’t generate enough cash internally probably one of two situations exists – your profit model is (hopefully temporarily) broken or you can’t really afford the financing you think you need. Our point is simply that it’s not always external debt that is the fix to a problem .Physician, heal thyself comes to mind!

In Canada sources of financing include securitization of assets, export finance, sale leaseback of assets, working capital term loans, and monetization of assets via bank credit facilities; asset based lending agreements, and monetization of assets such as receivables or inventory on their own.

If you need assistance in identifying the why and how of business financing and commercial loans in Canada speak to a trusted, credible and experienced Canadian business financing advisor.