Canadian Business Financing. Learn From These Commercial Credit Mistakes!


It’s not always Happy Talk! When it comes to Canadian business financing and commercial credit in Canada we can learn a lot about the mistakes we and others have made in the past, right. We’re full of sayings today, but our other favorite is that there is a lot of tuition to be paid in the school of business experience. In many cases when it comes to business finance a mistake can be corrected – the worst case is of course business failure, bankruptcy,etc Those experiences make business owners and managers shall we say … ‘ resilient ‘. Securing financing improperly is one of the worst mistakes your business can make. And that doesnt necessarily mean rate, it means structure and purpose of the financing. And when you don’t know how and when to raise capital or monetize assets that just compounds the problem. From your lenders perspective it’s all about risk and the amount they are willing to take with your business. So you become a winner when you obtain the financing you want and your bank or commercial finance firm feels they have not taken excessive risk. That’s a great point to remember. To make their loans and financing ‘ less risky ‘banks and other finance firms make ask for personal assets as collateral. While in many cases that can’t be avoided the business owner should take great caution to over collateralize their lender. That mistake becomes very costly in the even of a business failure. Matching the right term to your financing is critical. Remember that a bank or finance company, Lease Company, etc always feels less certain about a longer term. Why? Simply of course because the long term future is uncertain for any business. Many businesses are forced to give up some for of equity in their early years. That might be from an investor, a lender, a partner/strategic partner etc. When you do that you’re of course giving up significant returns at a future point in time. We probably couldn’t count the number of times we have felt that clients have simply aligned themselves with the wrong firms, people and financing. In a perfect world you want to deal with people who are knowledgeable about your company and industry. We hear a lot about ‘ bootstrapping ‘ these days. Essentially it’s utilizing personal and ‘ friends and family ‘ savings as opposed to seeking outside funding. That’s good and bad we think. You do have less or no external debt, but again you’ve pledge personal assets that ultimately will affect your personal credit history. The best bootstrapping arrangement is one in which you feel very confident about future cash flows. What is the key take away today ?Simply that Canadian business financing, either via debt or cash flow and commercial credit asset monetization must be taken on in the context of short term, long term, and daily operations financing . There are serious implications to taking ‘ other people’s money ‘. You can pay a lot of expensive tuition when you don’t understand your needs and potential sources of commercial credit in Canada. Seek out and speak to a trusted, credible Canadian business financing advisor who can assist you with your commercial credit needs, with the benefits of experience.