Financing Canadian Small Businesses (Part 3 – Financing options for established businesses)
| Oct. 20, 2011Comments 0
For an established business your financing options increase as financial institutions see you as a safer investment. Although you are generating revenue and profit, you might want to raise additional funds that may be more than your current sales revenue can provide. Some of the sources can be:
Funding from existing profit or earnings – This is the safest route any business can take as they fund their growth through existing profits. However, your business is limited by the amount of cash flow coming in and you will have problems if you don’t have a financial plan in place. However, by combining this form of financing with loans, you will be able to minimize your company’s risk exposure to debt over the long term.
Cash Advances – Cash advances are a great alternative financing source for those who require funding without the use of collateral and can be paid painlessly through daily sales from your merchant processor. This is where companies such as Advanceit come into play. The first thing you need to know about a merchant cash advance is that it is tailored to suit the needs of your business. Unlike a bank loan or a government grant or loan, a merchant cash advance in Canada, allows businesses to sell their future debit and credit sales for upfront cash ranging from a few thousand up to $125,000.
The benefit that we provide is our flexibility in repayments. As an example; let’s say your agreement with Advanceit has you transferring 5% of credit card/debit card sales, if you process less than expected for the month – unlike an interest rate based loan, no additional interest or fee is charged at all! If you have a busy month and process well above what you expect, your advance is paid off at a faster rate without incurring any penalties.
To learn more about how Merchant Cash Advances can benefit your business – watch our video here .
Venture Capital - Venture capital (VC) firms usually focus on highly niche industries where there is a potential for rapid growth in their investments. Normally, they achieve their returns from their investment in a short period of time – mostly through the sale of their portfolio companies or through making the company public. They largely invest in startups, however, there are venture capital firms who provide what is considered bridge financing for mid-to-large businesses.
VCs provide capital for businesses in exchange for equity or ownership in your company. They do not ask for collateral however, due to risky nature of their business, the ownership equity can go as high as 25-50% for the money involved.
Do your research
Don’t hesitate to do your research in choosing the right financing source for your company. Some funding sources might be suitable for your company and remember that they should be considered as suppliers. And in this case, the product being supplied is cash.
Also keep in mind market conditions. If capital markets are volatile, traditional financial institutions tend to stay with safe investments and avoid risk. They may ask for collateral to secure your loan and delve deeply into your financials. If your business has a long sales cycle, some financial institutions will charge a higher interest to mitigate their risk exposure.
If you have any questions – do not hesitate to contact our Funding Specialists!