Le 16 février 2015, 03:53 dans Humeurs • 0
Bank financing in Canada is often viewed as a ' hurdle ' for business owners/financial managers, particularly in the SME COMMERCIAL FINANCE needs area. These can be often overcome with some basic knowledge of success strategies to achieve what is arguably the lowest cost/most flexible financing available to the Canadian business owner. We're diving into some truths and myths around bank lending .Let's dig in.
We're not 100% sure of the per cent age amount of bank finance applications that are declined in the Canadian marketplace , but we do know that in talking to clients it's difficult for them to overcome getting inside the box . The box? That's the credit box of ratios, covenants and collateral that your firm must fit in. When you are not approved you're forced to get financing ' outside the box '! - more on that later.
Let's cover off some basic bank solutions to your capital needs, and then let's discuss several key areas you can in effect ' pre-qualify' yourself on, thereby improving chances of success.
The good news in Canadian chartered bank financing is that, when successful, you can achieve all your short, intermediate and long term financing needs for your business.
Those needs? They include ::
- Unsecured business loans: These loans are substantiated by your immediate cash flow. Terms are shorter in nature and are often for interim financing or seasonality finance needs of your business
Business line of credit: This of course is to cover off your ongoing working capital needs. It's quick daily access to your ongoing working capital and cash flow needs. In essence it funds your working capital accounts on your balance sheet - typically A/R and inventory.
Term loans/ Leasing - These solutions allow you to finance fixed assets and take on debt that makes sense for your firm. While not all Canadian banks offer ' leasing' solutions for assets in some cases they partner with major well known players. A term loan can also often achieve the same results and equipment lease finance.
Let's cover off some basics around the process. First of all it's critical to have a strong handle on what can be called your ' use of funds'. Knowing how much to ask for allows you to take a look at your finance statements and ensure you can meet 'debt service' ratios that are required for approval. Key point - banks love ratios! Get used to it! Typically a cash flow ratio of 1.25:1 is required. By knowing your cash flow ratio you can literally determine yourself the amount of busines credit you will qualify for - all other things being equal.
In the SME COMMERCIAL space in Canada owners must have reasonable personal credit. Know your credit score and be prepared to address issues that might arise out of that discussion.
Canadian chartered banks focus a lot of collateral, both inside the business as well as the owners outside net worth/assets. Different types of assets have different value - a good analogy would be real estate versus perishable inventory. Big difference in collateral!
Bank financing can also be achieved via the Govt Guaranteed Business Loan, which is administered by the banks but is actually a govt program, it's a great way to achieve inside the box financing that you might otherwise not qualify for.
If it's necessary to go ' outside the box ' don't forget that numerous non bank solutions exist for business capital needs. They include: http://www.airjordanhot.com/ Inventory Finance