Many of our clients and entrepreneurs overall, normally have very different understanding when it comes to small business loans, and operating lines. Normally small and medium size business owners hear about intricate solutions other entrepreneurs got through their contacts or network of friends and looking for similar solutions based on the experience and information outside of sophisticated finance circles. This article will concentrate on explanation of small business loan scenarios and operating line scenarios, and will discuss pros and cons for small and medium business.

WeCanFinancial.ca started as a consulting firm for small business loans, and then added other types of financing such as operating lines, inventory financing, invoice factoring, commercial mortgages and private equity loans. Small business loans is a type of product where there are firm set borrowing limits and rules on how the product could be used. In the process of business development, the need of capital is always present, business owners would all benefit knowing that up to $500k could be obtained using this interesting financial product. Business plan writers and accountants could also shite in front of their business clients, if they are proficient in small business loan financing.

The major advantage of small business loan financing is the ability to obtain this loan with partial personal guarantee – fractional personal recourse. Most small business loan programs that we offer and advise on, have government guarantee attached to them, meaning that if the business will fail in the future, business owner will have only a partial repayment liability, such as 25% of the total principal amount. Another great advantage of obtaining small/medium business loan solution is attractive lending rate that these loans are priced. Since most loans are structured and offered in order to fuel small business growth, and support Canadian economy, the small business loan program is priced at 6%-8% annual rate, which is way cheaper than private equity loans.

WeCanFinancial.ca also offers and advises on operating lines, normally to mid-large sized businesses. Over last 2 years more and more entrepreneurs came to us and requested this type of financing. Companies that are rapidly growing, and need money for business development, new employee hiring, marketing financing and more would benefit a lot if operating line is available to them.

Most operating lines are placed on corporate books against accounts receivable as collateral. Corporation with large account receivable and good balance of account receivable versus payable, with positive yearly cash flow have great chances qualifying for operating line financing. WeCanFinancial.ca has long established relationship with many commercial lenders that specialize in operating line financing. The main advantage of operating line is that it is on demand financing, entrepreneur uses it when it is needed, and does not pay interest when the line is not used. This is different with small business loans, which are considered term loans, normally 5 year term or less. Because operating lines are not amortized and have pay as you go structure, monthly carrying costs for operating lines in absolute cash amount is much less than heavily amortized small business loan. Normally when our associates prepare business plan and use of proceeds model for our clients, for small businesses without substantial receivables, we are structuring small business loan product, since operating line will not be available for this client.

But when we are preparing a business plan and financing package for bigger firms, with good and strong receivables, we structure financing through both, small business loan program, and operating line financing as well. This way we catch both rabbits, by allowing a good portion of financing to be available when it is needed. But also placing heavy assets and capital expenses into term debt or small business loan debt, in order to amortized and pay for the assets used in the business in the shortest time possible.

There are many other tricks that WeCanFinancial.ca implements to structure financing for our small business loan and commercial clients on daily basis, we will share many more of them in the future.

Happy Financing Everyone!

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