Working Capital Financing in Canada is provided in a number of different ways to Canadian business owners and financial managers. Like anyone, you would prefer to deal with an ‘expert ‘in business financing, so we encourage you to seek and speak to a trusted and credible business financing advisor in your area of working capital need.
Working Capital solutions are provided by our banks of course and also by what we will call non-bank independent finance firms. Smaller and medium sized firms are often better served by non- bank firms who have a better understanding in many cases of their business needs as it relates to receivables financing, inventory financing, purchase order financing, equipment leasing, etc.
Clients always bring up the issue of ‘government grants and loans ‘. There are some grant type programs out there but in general they do not serve the needs of the average Canadian business owner as they relate to working capital.
There are two very viable grant and loan programmes in our opinion. They are the government guaranteed Small Business Loan, aka CSBFL, aka SBL loan, as well as the federal SR &ED program. The Small business loan provides equipment and leasehold loans to Canadian business owners, and is not capped at a new high of $ 350,000.00. This in or opinion is a great term loan, and has excellent, we repeat, excellent rates, terms and structures. But the reality is that this is a term loan and is not a working capital loan per se. When clients come to us for ‘working capital loans ‘more often than not they are referring to cash flow needs for inventory, receivables, and equipment.
The other ‘ grant ‘ which in some ways could be construed as a working capital injection is the federal SR & ED program for your work on new products, services, and innovation in your business sector. This is a non – refundable grant that covers approximately 40% of all the cash you have spent in this area. We encourage all business owners in Canada, if it is applicable, to speak to an advisor in this area.
Most Canadian business owners are not aware of what is known as a cash flow loan. A more sophisticated finance term for this loan is a mezzanine or ‘sub debt’ loan. For smaller and medium sized businesses these loans tend to go up to the 250k range and are offered by a specialty lender which is funded by the Government of Canada. Larger cash flow and working capital loans tends to be in the 1 Million + range and are offered by non banks. These loans typically are unsecured, are used for cash flow purposes, and have rates in the low to mid teens due to their unsecured nature.
In summary, working capital means different things to different business owners. Our focus has been on real cash flow and cash flow for your business. Certain government programs might meet your needs in the areas of term loans, leasehold improvements, etc. But true working capital is the financing of current assets such as receivables, inventory, and purchase orders. Speak to a trusted credible financing advisor to determine which type of facility meets your needs.