Business Loans In Canada: Financing Solutions Via Alternative Finance & Traditional Funding

Business loans and finance for a business just may have gotten good again? The pursuit of credit and funding of cash flow solutions for your business often seems like an eternal challenge, even in the best of times, let alone any industry or economic crisis. Let’s dig in.

Since the 2008 financial crisis there’s been a lot of change in finance options from lenders for corporate loans. Canadian business owners and financial managers have excess from everything from peer-to-peer company loans, varied alternative finance solutions, as well of course as the traditional financing offered by Canadian chartered banks.

Those online business loans referenced above are popular and arose out of the merchant cash advance programs in the United States. Loans are based on a percentage of your annual sales, typically in the 15-20% range. The loans are certainly expensive but are viewed as easy to obtain by many small businesses, including retailers who sell on a cash or credit card basis.

Depending on your firm’s circumstances and your ability to truly understand the different choices available to firms searching for SME COMMERCIAL FINANCE options. Those small to medium sized companies ( the definition of ‘ small business ‘ certainly varies as to what is small – often defined as businesses with less than 500 employees! )

How then do we create our road map for external financing techniques and solutions? A simpler way to look at it is to categorize these different financing options under:

Debt / Loans

Asset Based Financing

Alternative Hybrid type solutions

Many top experts maintain that the alternative financing solutions currently available to your firm, in fact are on par with Canadian chartered bank financing when it comes to a full spectrum of funding. The alternative lender is typically a private commercial finance company with a niche in one of the various asset finance areas

If there is one significant trend that’s ‘ sticking ‘it’s Asset Based Finance. The ability of firms to obtain funding via assets such as accounts receivable, inventory and fixed assets with no major emphasis on balance sheet structure and profits and cash flow ( those three elements drive bank financing approval in no small measure ) is the key to success in ABL ( Asset Based Lending ).

Factoring, aka ‘ Receivable Finance ‘ is the other huge driver in trade finance in Canada. In some cases, it’s the only way for firms to be able to sell and finance clients in other geographies/countries.

The rise of ‘ online finance ‘ also can’t be diminished. Whether it’s accessing ‘ crowdfunding’ or sourcing working capital term loans, the technological pace continues at what seems a feverish pace. One only has to read a business daily such as the Globe & Mail or Financial Post to understand the challenge of small business accessing business capital.

Business owners/financial mgrs often find their company at a ‘ turning point ‘ in their history – that time when financing is needed or opportunities and risks can’t be taken. While putting or getting new equity in the business is often impossible, the reality is that the majority of businesses with SME commercial finance needs aren’t, shall we say, ‘ suited’ to this type of funding and capital raising. Business loan interest rates vary with non-traditional financing but offer more flexibility and ease of access to capital.

We’re also the first to remind clients that they should not forget govt solutions in business capital. Two of the best programs are the GovernmentSmall Business Loan Canada (maximum availability = $ 1,000,000.00) as well as the SR&ED program which allows business owners to recapture R&D capital costs. Sred credits can also be financed once they are filed.

Those latter two finance alternatives are often very well suited to business start up loans. We should not forget that asset finance, often called ‘ ABL ‘ by those Bay Street guys, can even be used as a loan to buy a business.

If you’re looking to get the right balance of liquidity and risk coupled with the flexibility to grow your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist you with your funding needs.

Investing Wisdom From Howard Marks of Oaktree Capital

Investing Wisdom from Howard Marks of Oaktree CapitalMy regular listeners probably heard one of my earlier segments where I spoke about Howard Marks, the 67-year old billionaire who co-founded investment management firm Oaktree Capital which now manages about $84 billion in assets and is a publicly-traded company with ticker symbol OAK.Oaktree focuses its investments on high-yield bonds, distressed debt and private equity, and has delivered a whopping 23% average annual return over the past 25 years… so Marks has rightly earned his fame and fortune. To give you an idea of just how much a 23% rate of return is: If you invested $10,000 25 years ago, it would be worth $1,769,000 today.And, like Buffett, Marks too sends out folksy memos to Oaktree clients where he outlines his views on investing, the markets and the economy that are insightful, direct and sharply written. And today, I’m going to share a few insights from Marks’ latest memo – morphing his thoughts so they apply to individual financial planning. I’ve decided to break this up into a two-part series – with the first half of Marks’ memo today, and the rest to follow next week.Key Questions to Ask FirstSo in this latest memo, Marks first addresses philosophical questions on what to consider in setting up your investment portfolio. Once you have a clear idea on what your investment goals are, based on your retirement needs, Marks says you should discuss the following questions with your advisor:- Is it possible to build a retirement portfolio that can beat the market? If yes, then how, and to what extent can we beat the market?- What’s the best way to manage risk?- How do we define success, and what risks are we willing to take to achieve investment success?Then, as you build your portfolio, you’d want to balance it out between index investments (where you should not expect market-beating returns), individual stocks such as dividend payers, and perhaps some alternative investments to a smaller extent. If you’re closer to retirement, you might also want the safety of inflation-protected bonds. And for the safety of bonds, index investments and dividend stocks, you should be willing to accept “average” performance. But for the alternative investment portion of your portfolio, you should expect above-average or superior returns, as Marks calls it.Pick Funds that Dare to be DifferentFor your alternative investments where you’re seeking superior returns, look for funds that are backed by a strong track record, and where fund managers dare to be different. You see, if you pick a mutual fund that’s run by a manager who is essentially following or mimicking what others are doing, you’ll just end up paying high fees without getting any real bang for your buck.So for this alternative portion of your portfolio, look for managers that are courageous enough to be different and open to being wrong… managers who assemble a portfolio that is different from those held by most other funds. As Marks puts it, to be a top performer, the fund manager has to “escape the crowd” by being active in unusual market niches, buying things others haven’t found, don’t like or consider too risky to touch. A good alternative fund manager avoids what the market considers to be a darling, or all the rage, and engages in contrarian cycle timing, and concentrates heavily in a small number of things that he thinks will deliver exceptional performance… everything that personifies great investors such as Howard Marks and Warren Buffett.As Marks puts it “the cautious seldom err or write great poetry” in referring to fund managers that follow the herd.So look for fund managers who dare to be different, have a consistent history of market-beating performance and are transparent with their investors. That said, you also need to recalibrate your expectations with such alternative funds because their investments often could take longer to bear fruit… so only invest a small portion of your funds that you’re not planning on touching till you reach retirement… because if you picked the right alternative investment fund, those superior returns could compound very nicely over time.Now I know that it’s near impossible for most individual investors to really evaluate alternative investment funds, so this is where a good, qualified advisor can offer advice and help kick some of your returns into high gear.And as I mentioned above, Marks’ company – Oaktree Capital – is publicly traded with ticker symbol OAK, so you can buy shares to participate in Oaktree’s success; When you invest shares in OAK, you are not buying into Marks’ portfolio, but rather participating the company’s profit from its portion of the investment it takes for itself and the fees that are generated from his clients. Oaktree shares also offer a pretty compelling 7.7% dividend yield at current levels… but this is not a recommendation so please do your own research should you consider buying Oaktree.Most great investments begin in discomfort.Most people feel good about making investments where the underlying premise is widely accepted, where recent performance has been positive and where the outlook is rosy – but such investments are high in demand and are unlikely to be available at bargain prices.Bargains are usually found among things that are controversial, that people are pessimistic about, and that have been performing badly of late – investments that generate discomfort for most people. And this is where good alternative funds excel. For example, Oaktree Capital focuses on distressed debt – bonds issued by companies that are on the ropes in some way or another, bonds that are priced at pennies-to-the-dollar… bonds that comfort-seeking investors would not even think about. This discomfort is what causes distressed debt to be priced cheaper than it is really worth, and it’s one sector that has helped fuel Oaktree’s outsize returns. This area of investing is practically impossible for the typical investor to get into and one has to have superior skills in order to avoid being burned badly if things don’t work out.Marks also says; Dare to Be WrongMarks also reminds us that with courageous, discomfort-generating investments, you must also be prepared for failure as an inescapable potential consequence of trying to do really well. In other words, be prepared to lose money on this alternative portion of your portfolio… it’s not something anyone wants, but get into alternative investments with the understanding that non-mainstream investments could be harder to liquidate and have greater risk, and while your fingers are crossed for the upside, be aware that you could also lose money. That said, a good alternative investment fund should protect you significantly on the downside too.So look for alternative funds that invest judiciously, have more successes than failures, and make more on their successes than lose on their failures.Alas… No Magic FormulaMarks also cautions us that there is no easy formula to produce superior risk-adjusted returns – because if there were, everyone with a positive IQ would be rich.Or, as good ol’ Charlie Munger, Warren Buffet’s Partner bluntly puts it, “Investing is not supposed to be easy. Anyone who finds it easy is stupid” and does not understand investing’s complex and competitive nature. Hardly the words of someone who wants to be politically correct, but he makes a good point. Why should successful investing be so easy that the uneducated and lazy investor achieves superior rate of return? It just doesn’t happen that way.Superior investment results can only come from a better-than-average ability to figure out when risk-taking will lead to gain and when it will end in loss. And this is not easy task. So it’s good to look for fund managers that ideally have a strong background in economics, financial math, accounting and investment analysis.Okay, I’ll wrap up here for today, and continue with more on Howard Marks’ thoughts on investing next week.

What We Have Here Is A Failure To Communicate

The results of this past election proved once again that the Democrats had a golden opportunity to capitalize on the failings of the Trump Presidency but, fell short of a nation wide mandate. A mandate to seize the gauntlet of the progressive movement that Senator Sanders through down a little over four years ago. The opportunities were there from the very beginning even before this pandemic struck. In their failing to educate the public of the consequences of continued Congressional gridlock, conservatism, and what National Economic Reform’s Ten Articles of Confederation would do led to the results that are playing out today.. More Congressional gridlock, more conservatism and more suffering of millions of Americans are the direct consequences of the Democrats failure to communicate and educate the public. Educate the public that a progressive agenda is necessary to pull the United States out of this Pandemic, and restore this nations health and vitality.

It was the DNC’s intent in this election to only focus on the Trump Administration. They failed to grasp the urgency of the times. They also failed to communicate with the public about the dire conditions millions have been and still are facing even before the Pandemic. The billions of dollars funneled into campaign coffers should have been used to educate the voting public that creating a unified coalition would bring sweeping reforms that are so desperately needed. The reality of what transpired in a year and a half of political campaigning those billions of dollars only created more animosity and division polarizing one extreme over another.

One can remember back in 1992 Ross Perot used his own funds to go on national TV to educate the public on the dire ramifications of not addressing our national debt. That same approach should have been used during this election cycle. By using the medium of television to communicate and educate the public is the most effective way in communicating and educating the public. Had the Biden campaign and the DNC used their resources in this way the results we ae seeing today would have not created the potential for more gridlock in our government. The opportunity was there to educate the public of safety protocols during the siege of this pandemic and how National Economic Reform’s Ten Articles of Confederation provides the necessary progressive reforms that will propel the United States out of the abyss of debt and restore our economy. Restoring our economy so that every American will have the means and the availability of financial and economic security.

The failure of the Democratic party since 2016 has been recruiting a Presidential Candidate who many felt was questionable and more conservative signals that the results of today has not met with the desired results the Democratic party wanted. Then again? By not fully communicating and not educating the public on the merits of a unified progressive platform has left the United States transfixed in our greatest divides since the Civil War. This writers support of Senator Bernie Sanders is well documented. Since 2015 he has laid the groundwork for progressive reforms. He also has the foundations on which these reforms can deliver the goods as they say. But, what did the DNC do, they purposely went out of their way to engineer a candidate who was more in tune with the status-quo of the DNC. They failed to communicate to the public in educating all of us on the ways our lives would be better served with a progressive agenda that was the benchmark of Senators Sanders Presidential campaign and his Our Revolution movement. And this is way there is still really no progress in creating a less toxic environment in Washington and around the country.