Canadian businesses need more options when looking for funding; alternative financing can provide the variety your small business needs.
Alternative financing offers many options for your Canadian business, filling in the gaps traditional banking cannot with an abundance of preferred industries such as health services, food, agriculture and fisheries, natural resources and critical minerals, energy, financial services, advanced manufacturing, and green infrastructure.
Traditional Funding vs. Alternative Funding
Traditional funding options are often more familiar, so they are generally considered a more trustworthy source of funds, though alternative financing may provide a unique advantage that traditional options do not.
Traditional financing often has strict eligibility criteria, slow approval processes, rigid terms, and a great deal of documentation. Alternatively, alternative financing has fast access to capital, flexible funding options, and minimal documentation.
Canada’s small and medium-sized enterprises are an underserved community when talking about business financing in Canada. They often have difficulty accessing capital, cash flow issues, high operating costs, and limited government support. Alternative financing offers flexible funding options like revolving lines of credit, working capital, and bridge loans. Each option is tailored to your specific small business needs.
The choice between traditional and alternative financing generally depends on your business's needs and financial health.
Pros of Alternative Financing vs. Traditional Financing
When it comes to securing funding for your business, the choice between alternative financing and traditional financing depends on your specific needs. Alternative financing offers several advantages that make it an appealing option for many businesses. Such as:
1. Faster Approval and Funding
Alternative Financing: Approval processes are streamlined, often requiring minimal paperwork, with funds typically available within days.
Traditional Financing: Banks and credit unions often have lengthy application and approval processes, which can take weeks or months.
2. Easier Qualification Criteria
Alternative Financing: Emphasis is placed on cash flow, revenue, or assets rather than just credit scores. Even businesses with less-than-perfect credit can qualify.
Traditional Financing: Rigid requirements, including high credit scores, strong financial histories, and extensive documentation, make qualification harder for newer or smaller businesses.
3. Greater Flexibility in Terms
Alternative Financing: Options like merchant cash advances, invoice factoring, or revenue-based loans offer adaptable repayment structures tailored to business cash flow.
Traditional Financing: Terms are often fixed and may not align with a business’s fluctuating revenue cycles.
4. Minimal Collateral Requirements
Alternative Financing: Many solutions don’t require collateral, reducing risk for business owners.
Traditional Financing: Often demands significant collateral, such as property or business assets, which can be a barrier for some.
5. Focus on Immediate Needs
Alternative Financing: Ideal for addressing short-term cash flow gaps or urgent business opportunities.
Traditional Financing: More suitable for long-term investments or major capital expenditures, but less effective for quick-turnaround needs.
Alternative Financing: Working Capital and Canadian Small Businesses
Canadian small businesses commonly use working capital to account for seasonal cash flow changes depending on the industry. Canadian industries that are affected by seasonal cash flow are agriculture, fishing, tourism, retail, construction, landscaping, and outdoor recreation.
Typically, these industries use working capital to reinvest in the business and expand the business by:
Purchasing inventory
Paying suppliers
Expanding into new markets
Developing new products
Launching marketing campaigns
Obtain industry-specific certifications
Hire or train employees
Complete energy efficiency projects
And more
Conclusion
Alternative financing is particularly advantageous for businesses seeking speed, flexibility, and tailored solutions, especially when traditional lenders are not an option. It’s an excellent choice for entrepreneurs looking to grow without being constrained by rigid approval processes or terms.
Is your Canadian business looking for alternative financing? Capital Infusion has helped hundreds of Canadian businesses secure alternative financing to fuel their business needs. Apply now, and explore your financing options today!
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