Bank business credit in Canada. Our clients are very much forgiven for sometimes feeling that obtaining commercial bank financing in Canada is more akin to working there way through a roller derby tournament - high levels of navigation required at all times.!br>
Key to understanding your ability to access and receive commercial bank financing is understanding the habits of that rare beast - the Canadian commercial banker. We say rare because we're talking about the good ones! Let's dig in.
Although it should not, in our opinion, necessarily be the case the hard reality is that most Canadian business owners and financial managers feel our Canadian banks are the ' go to ' when it comes to debt or operating capital finance. (They often forget, or worse, don't know, that those same solutions are offered in abundance by commercial finance companies, lease companies, and non bank asset based credit line lenders.)
The business owner/ financial manager can be forgiven though, because when bank financing is accessible by your firm the financing is in great abundance, and every type of business financing needed can be on the table.
Bank offerings in Canada today, depending on who you are dealing with, offers -
Revolving credit lines
Letters of Credit
Well, you get the picture. The key aspect that needs to be realized is that banks are at their essence cash flow lenders, so a great deal of emphasis is placed on analysis of your historical, current, and projected cash flow. Each bank might look at this a little differently (but not that differently) and at the back stop of that analysis is your ability to offer secondary corporate and or personal) collateral and guarantees.
We have always been of the opinion that there is a general similarity to commercial bank lending and competition. The difference, again, in our opinion, is the quality of your commercial banker. He or she operates in a very regulated and bureaucratic environment - so finding the commercial banker that is genuinely interested in your business and its growth is key,
Because, unlike in the U.S. , banks are highly regulated they are somewhat predictable in their behavior and offering Therefore the amount of capital they can lend, the rates, and margins on loan to value lending are not that dissimilar.
Many clients find themselves at some point in time being ' out of favor' with the bank. This might also mean they are segregated into a ' special loans' portfolio. At this point it's often time to consider non bank solutions, especially if your assets and growth potential are still there.
In general, start up companies in Canada can not, we repeat, cannot access commercial bank financing. The absence of our aforementioned cash flow coverage, collateral, and predictability of financing performance isn't there. Don't count on your bank to properly finance a start up - but do consider non bank commercial financing sources.
Just knowing a couple of basic ratio qualifiers will help you often to understand your chances of success with bank business credit. Cash flow coverage should be greater than 1:1, and debt to equity rarely can exceed 2 or 3 to 1, respectively.
While commercial bank business credit in Canada is the lowest cost for pretty well every type of finance you need your challenge understands the criteria and probability of success. And finding a great banker is key - its alwasys back to the people component.
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your bank, and non bank commercial financing needs.
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Stan Prokop - founder of 7 Park Avenue Financial – 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 :
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