During the summer of 2015, WeCanFinancial received a volume of financing and business planning requests from companies in food processing sector. Most of the requests came from Vaughan, Woodbridge and Richmond Hill area, showing that this segment is actively moving to northern part of GTA. This article will discuss the financing issues and challenges that we see coming from entrepreneurs in this segment, and some solutions that our firm can offer to business owners in food processing sector.
Food processing business could be a very lucrative enterprise, it is consumables, it’s vibrant, and has huge retail chains that once your product is in – the sky is the limit. Development and expansion of food processing business normally is quite expensive and lengthy process. Financing requirements for such businesses also normally vast and substantial, therefore properly prepared business plan, and proforma is a must. As usual we would like to emphasize how important is the business plan not just for efficient expansion but also for financing purposes, either for small business loan, or full scale corporate finance. Business plan should be based on existing operations, with a thorough analysis what works well currently, what product lines work better than others, and where is the biggest short term opportunity so money will be spent wisely. Medium term and long term business opportunities should also be incorporated in the business plan, to make sure business is developing strategically with 1,2,3 and 5 year goals planned out and modeled.
WeCanFinancial.ca and our associates very often start from modeling current operations in excel , to calculate monthly cash burn, debt load, and real monthly operating capital. We are looking for efficiencies to maximize and capitalize on current operational efficiencies. We also look for deficiencies to make sure we understand why they exist and how to improve on them. If the loan is under $500k we typically looking for a combination of small business loan financing, cash flow financing and sometimes private equity financing. Each financing type had different requirements, therefore understanding proper financing requirements up front is very important. Therefore if financing requirement is $250k – $350k, and budget is mostly for renovations and equipment – then business loan modelling will concentrate on requirements of small business loan program, under EBL – easy business loan guidelines.
If financing requirement is $350k-$500k, and budget includes equipment, renovations and operating capital requirements, the business loan modeling will include small business loan requirements and cash flow financing requirements. This will include properly calculated debt service ratios (DSCR), to make sure current operations and projected operations will be in line with DSCR requirements for both small business loan and cash flow financing. Food processing enterprises normally have vast inventory requirements and equipment requirements, therefore operating cash plays an important role to make sure operations are healthy financially.
Development and growth of food related enterprise is a full time business from planning and execution perspective. Execution of the plan, and running tight budgets is also a full time job, therefore entrepreneurs running such business, normally has no time left for anything else. Without previous experience in planning and financing, getting institutional financing for food processing businesses in Ontario is a super difficult task. Even seasoned financial advisors, working in branches have very little experience when it comes to modeling financing request, so it fits in within all criteria with tightly managed small business loan program, and other financial products. WeCanFinancial.ca is the only firm in Ontario that is well positioned to service food processing clients required expansion, with 100’s of deals placed over last 8 years on the market, and proprietary programs prepared by our firms and executed by major non-street lenders in Ontario.
We will continue the series of articles, describing different products and business segments that WeCanFinancial.ca serves. As usual we wish our clients Happy Financing, and we are hoping to hearing from our existing and new clients aspiring for new funding and business planning in food processing and other segments of economy.