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Top 5 Alternative Lending Options for Canadians

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Business owners in Canada are painfully aware of the difficult path they need to undergo to secure enough capital to grow their business. If you’re currently undergoing fast-paced growth, then you might be in need of consistent financing to continue your successful business venture.

The most approachable option for many businesses in this type of situation is alternative finance, which will satisfy customer demand for your services while stabilizing or expanding your business and reach.

Startups and small businesses often fail to secure traditional financing like bank loans and government funding simply because of their young age or innovational spirit. If your business is unable to qualify for these financing options or you would like to explore other opportunities, don’t forget that Canada is known for its many alternative lending options. Here are the top non-traditional financing options for Canadian business owners, which may be the type of funding you’re looking for:

1. Receivable Financing

For businesses that secure big orders, but don’t have working capital to fill them.

If your orders are piling up, but their value is at costs you cannot cover, there’s a great way to tackle the issue directly — receivable financing. Since the demand for your services is on the rise, you just need to find a loan provider who understands your needs and clients.

At FundThrough, we know that your company is yet to reach its full potential and you might be in a position where alternative financing is not only your best bet, but the perfect one. This is why FundThrough’s receivable financing will help you grow and reach your goals in no time!

It works in 3 easy steps. First, we want to know about your customers — it’s not about your business’s financial history but the quality and reliability of your customers. Second, we will create a line of credit suitable for you, which will be based on your outstanding invoices. The third step is simple —  you will be able to withdraw money from your line of credit whenever you need, without having to take a specific sum as a minimum or commit to any repayment periods.

What’s great about FundThrough compared to other means of financing is that the credit is designed especially for the needs of your Canadian business. The interest rates are extremely low, especially minding traditional financing options. If you’re feeling unsure about this new form of financing, simply check out portfolio of clients who’ve already used our service and we hope you’ll be swayed. Our mission is to help your business — it’s what we do best.

2. Angel Investors

For new businesses in need of substantial capital for development.

Angel business investors are affluent individuals or companies who are willing to support and invest in a project or business for a variety of reasons. Even though some may request ownership equity, there are those who offer financing against convertible bonds or long-term business engagement. The pros of this type of financing is that you may be able to get a large amount of capital to use over a long period of time, while at the same time associating your company with a respectable investor.

Another possible “angel” figure could be your supplier(s) with whom you have already built a trusting business relationship. Meet them in person and discuss options for business arrangements, funding or partnerships. You could even discuss low interest rates on respite payments.

Finding business angel investors is not an easy task, yet it is a means of alternative finance that Canadian businesses are usually keen to try out, because it’s an ideal option for secure expansion. In order to find an angel investor there are certain steps you should take as a business owner. You need to know exactly who you’re looking for, where you’re most likely to find them, and network until you build the connection you need.

3. Equipment Lease Financing

For businesses that need expensive equipment, but can’t afford it.

Equipment lease financing is especially good for those of you looking to buy new equipment to satisfy a grow in demand or to make the production chain faster and more productive. With this method of financing, you won’t have to invest in expensive equipment, which you may or may not need for its entire long life. It’s a safer bet, since you can use the equipment while you need it for just a small price, and be rid of the burden if you ever switch business directions or want to upgrade to new machinery. The Canadian Finance & Leasing Association is one of many sources, which can open your door to equipment lease financing and help secure the right option for you.

On a similar note, your Canadian business may be able to receive a sale leaseback on equipment you’ve already purchased, or use your current machinery to apply for an asset-based loan. Both options will provide your business with the needed capital to invest in other, more essential sectors of your business structure to secure fast growth.

4. Asset-Based Loans

For businesses in need of working capital, willing to provide valuables as collateral.

Asset-based lending is not only one of the most popular means of alternative financing today, but also a great method to finance seasonal spikes, demand for expansion or to overcome financial difficulty. If you own valuables that you can exchange for working capital, asset-based loans could easily solve your demand for finance. Zillidy is an example of a Canadian company, which offers asset-based loans against personal possessions, such as precious metals, jewelry, watches, and more.

Based on the value of your collateral asset, you’re provided with working capital that you can use to fuel an idea or expand your business. Asset-based lending is also secured through inventory and purchase orders, which is one of the reasons behind this method’s popularity among new business ventures. Last but not least, the requirements and approvals for such loans are faster, easier, and more business-friendly, compared to traditional lending institutions (i.e. banks).

5. Scientific Research and Experimental Development Tax Credits

For businesses involved in research/development.

 

If your company is performing a systematic investigation or research in a specific area of interest, then your business might be able to qualify for The Scientific Research and Experimental Development Tax Credits (in short: SR&ED Tax Credits). Your company will be able to use the SR&ED Tax Credits if the work you’re doing incorporates basic or applied research that advances scientific knowledge. Furthermore, you may also quality if you’re conducting experiments that aim to create or improve devices and materials.

If your business qualifies for this financing option, your expenditures associated with SR&ED work performed in Canada for the tax year can be deducted in computing its income from your business. The benefits of the tax incentive programme are twofold: it’s positive for both your province and your company and assures you can grow your Canadian business thanks to the research and development your company has done.

Summary

These are just some of the options for alternative lending in Canada. The list goes on, and odds are that you can find a financing option that’s perfect for your particular business venture. If you have a great idea and your business is already going well, don’t let financing troubles get in the way — find a way to fund your idea, so that it can survive and prosper, and reap the long-term benefits.

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