Difficulties in obtaining a commercial loan or business financing for your established or start-up firm in Canada? First of all, you’re not alone, and secondly it’s because you’re what’s known as a ‘ story credit .’ That’s the term that commercial lenders use in Canada when financing needs to be structured uniquely to your firm’s current situation /status. Let’s explain!
So when the business owner finds himself or herself in that situation, it clearly is a time when they are looking for some real world advice on financing solutions that still might be available. And they are available; it’s just that you need the help and expertise to find and access them successfully.
In a lot of situations, we see when talking to clients it’s about not getting enough. By that, of course, we mean that you can view your financing as your firm’s need to be fed, it’s your job to ensure that appetite is satisfied.
The concept of story credit financing still pertains sometimes to traditional financing, but more often than not it comes under the umbrella of alternative finance. It’s simply that your firm, for whatever reason, is not ‘ GRADE A ‘ today. So you need to explain properly ‘ the story.’
When you’re a ‘ story credit ‘it’s never as important to ensure you are prepared when you are looking for business financing. This is not the case of looking in the yellow pages and making a call – there a bit of work and preparation required! In fact, it’s been our observation that a lot of clients we meet have failed in the past to raise the financing they need simply because they present their story properly or fail to document correctly their need for financing.
It’s important also to differentiate between equity and debt financing- we’re focusing on our discussion here on debt financing and asset monetization. Top finance experts agree that debt financing is pretty well always more costly than equity financing, but the wrong type of debt financing has disastrous consequences.
Don’t get us wrong, we’re all for more equity, it’s just that the journey in dealing with angel investors, friends, and family, and initial public offerings or capital pools and VC’s can be one of the longest roads you’ll take.
There are some sources of debt financing that in fact can be quite creative that you may wish to explore – these might be Community Futures loans, Royalty Financing, Loans from high net worth private investors, and even the government?
Did we just say the government?! Well in fact for many firms the government small business loan is a great way to access capital in your start-up or early stage. Close to 8000 firms a year, including your competitors, rely on this program which offers great rates, terms, and structures and low personal guarantees.
Other forms of ‘ story credit’ financing when accessing a commercial loan.
Supply chain/PO Finance
Asset-based nonbank lines of credit
Financing SR&ED tax credits
Leasing Companies which consider less than ‘GRADE A ‘credits
Our key point today? It simply that if your firm has a unique challenge, or is in the throes of a turnaround you still are eligible for a commercial loan and asset finance in Canada.