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Canadian Commercial Business Bank Financing - What’s Right ( And Wrong ) With Your Banking Strategy

Guest post by: Stan Prokop

Article Overview: Information on Canadian bank financing . Commercial business banking strategies vary with your needs and current situation and required needs for growth or survival.

Canadian Commercial Business Bank Financing - What’s Right ( And Wrong ) With Your Banking Strategy

Canadian business owners and financial managers assess their commercial business banking and financing needs at different times in their company's life.



As in many other facets of business it's a little difficult to develop a solution and fix a problem if you don't understand the fundamental problem.



The need to grow your business and be profitable usually drives a bank financing need. A growing business consumes, and needs more cash, if only for the fact that you’re building up receivables and inventories.



In Canada business operating lines of credit are offered by our chartered banks. These facilities finance your A/R and inventory via specific margin calculations.



Most Canadian firms that have this type of credit facility submit monthly financials and aged receivables, which in turn create a new borrowing base under which you can draw funds. Companies that are having challenges ( i.e. they are in special loans ) or who are in breach of covenants may in fact be required to submit almost daily cash flow and receivable reports .



Although the basic arithmetic around bank financing and commercial banking is simple in reality there are a lot of other factors that might end up affecting your bank facility.



What are some of these? In the continuum of time certain industries fall in and out of favor. No better example of this is offered up than the auto industry. Other factors that you as a business owner might not like that affect your bank financing are issues such as your profits ( or lack thereof!) , they quality of business and outside collateral, and your banks insistence on personal guarantees.



Bank financing works best under the following condition - your company is expanding, but at a reasonable rate. One of the greatest ironies of Canadian business financing is that a hyper growth business, even if its generating profits, is often viewed as financing challenged by a Chartered bank.



Business banking utilizes a very basic concept that is often misunderstood by the Canadian business owner. That's simply the fact that with a commercial bank line of credit you're drawing on assets of your growing business to pay older items. But wow, when your business ceases to grow, or profit your ability to draw cash flow out of your A/R and inventory business line of credit stops. But you still have operating and fixed term payment obligations and it now becomes difficult to pay suppliers.



Companies that have a solid handle on cash flow needs and their historical working capital inflows and outflows are in the best position to manage their firms and access bank financing.



Time and time again we meet with clients that tell a very similar story - business grew, expansion plans were put in place, fixed and operating costs grew, and .. you guessed it .. sales started flattening or going down. The result - a recipe for financial disaster!



The ability to manage your cash flow, or, alternatively, slow down your business is key. Speak to a trusted, credible and experienced Canadian business financing advisor for commercial bank financing that makes sense from where your firm is now.

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Article Tags: bank financing, business banking, commercial



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BDC - [quote="IWDCanada":jib6tqt9]I think if you try to do business in the Maritimes the Business Development Bank of Canada might be able to provide grants.[/quote:jib6tqt9] On that note, does anybody have any experiences with the Business Development Bank of Canada that they would like to share? I have been considering approaching them for a business loan.
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
Re: BDC - [quote="Jones":255lkmrn][quote="IWDCanada":255lkmrn]I think if you try to do business in the Maritimes the Business Development Bank of Canada might be able to provide grants.[/quote:255lkmrn] On that note, does anybody have any experiences with the Business Development Bank of Canada that they would like to share? I have been considering approaching them for a business loan.[/quote:255lkmrn] I'll be working with the BDC later this month on a few projects. From what i've been told they are really great when it comes to small business. Their loans have a little higher interest but their payment terms are a lot easier to swallow. I can give you a contact if you need.
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