Very often lately our firm receives request for small business loans or commercial debt that is way above institutional limits, or client’s debt service capabilities. This trend shows that more and more small/medium sized businesses are striving to spend more money in business development and product development. This trend also shows that there is a significant owner confidence, coming from various sectors of business and entrepreneurs running them. In order to simplify and allow our current and future clients more choices when it comes to funding business financing deals above $500k, we decided to show some options on how to combine small business loans and corporate loans with leasing options to achieve higher capital infusions through debt and leasing.
As usual before structuring the expansion financing, or new product expansion plan, our team at WeCanFinancial.ca advises our clients to talk to our knowledgeable associates in close details. Properly prepared business plan and financial plan on early stages of expansion, could save a lot of time and money. Therefore entrepreneurs could spend more time on business development and client interactions rather than in house paper shuffling and housekeeping.
One of the best examples in combination of small business loan funding and leasing options was implemented in trucking business. WeCanFinancial.ca team have helped various tracking companies achieve their short term and long term financing needs. Our firm financed expansion of small trucking businesses from 1 to 2 trucks, from 2 to 4 trucks in total. We also funded acquisitions of 20-30 trucks on several occasions. Trucking business is cash intensive business with high cost of entry. Average truck/trailer combination costs about $250k-$300k in our experience. If there are any custom requirements, such as freezer, or reinforced trailer, costs go higher. In general small business loans in Ontario are catered to companies with cash requests of up to $250k, and in some cases up to $500k. With such a high entry cost, these programs are not well suited to finance trucking business, especially on the scale of more than 2 trucks per loan. In order to be able to serve our clients well, WeCanFinancial.ca implemented combined funding model, where small business loan or corporate loan funded operating cash needs, or office expansion needs, all new truck requirements were covered by custom lease program. Combined program yielded additional $250k in operating cash, and $500k-$2Million in leased equipment. In several cases lease costs were well within financing costs, allowing very comparable financial results, without incurring extra debt obligations from the client.
Another good example of funding small business loans together with lease program was executed by our team in IT sector. Many IT companies are growing too fast to cover all of their financing needs from their internal cash flow. Very often WeCanFinancial.ca arranges operating lines and small business loans of up to $350k to cover business development needs and funding required by business plan and growth initiatives of our clients IT entrepreneurs. In some cases financing could not be placed from institutional sources due to lack of additional debt service, and private equity sources might be premature at this time. Servers, work stations, copiers and other equipment are quite costly as well. Leasing this equipment very often is a viable alternative. If lease program established, most of the debt obtained through business loan or operating line could be used for immediate cash needs of the business, which could be much more beneficial.
Very similar situation is in health care industry. Doctors, recent grads area always looking for financing for their new office, clinic etc. Medical equipment is super expansive. In order to cater to Doctors we normally put a limit of $1 Million of cash flow and equipment funding prior to looking for lease options. If funding goes over $1Million WeCanFinancial.ca team works tirelessly on placing economical leases into the mix.
We will continue series of articles talking about different funding options for small and medium enterprises in Ontario, in a meantime we wish Happy Funding to everyone!