Avoiding Canadian Business Credit Nightmares. Banking And Bank Loans For Business In Canada

When it comes to Canadian business credit and banking in Canada (loans, credit lines, etc) it's more than a bit unfortunate that many business owners and financial managers view the process and the challenge as somewhat of a nightmare or at the very least a negative process.

Let's examine how you can turnaround that process with a viewpoint towards success. And let's hope we can get rid of some of that negativity also.

Secret # 1 - Choose a banker, not a bank. We don't think there is one important thing we could share on our subject other than that statement. A good (hopefully great) banker will become a great source of financial and business assistance.

So you've made your pick?! Now what? It’s critical that over time you gain the confidence and respect of that person, whether it’s a he or she. This can be achieved in a number of ways. Banks in Canada are focused on ' cash ' and ' cash flow ', so just supplying your banker with reasonable cash flow projections goes a long way to instilling confidence of the bank in your business.

That ' cash plan ' is simply a solid estimate of incoming and outgoing cash needs, with hopefully the bank bridging the gap.

A huge issue in Canadian banking (it’s not huge for the banks, but it sure is huge for our clients) is the whole area of personal guarantees. While the majority, if not all of bank credit in Canada for privately owned corporations mandates a guarantee we would point out that we see numerous cases of flexibility when in fact none seemed apparent.

That flexibility comes in the form of limiting the personal guarantee, or in some cases securing outside assets in lieu of the guarantee. We have seen cases where the bank waived the entire need for a ' PG ' (personal guarantee)... in general this is the exception, not the norm.

A simple summary of the entire PG situation is that assets and your personal credit history and situation will drive the final decision here. As Canada goes through different economic cycles banks seem to be either pulling in the reins or making an all our effort to make personal and business credit available. So it’s important for you to judge where the banks are in the cycle!

One way in which you can maximize the benefits of a solid bank relationship is to continually explore the ability of your banker to introduce you to other professionals that might assist your business. These might include lawyers, accountants, and Canadian business financing advisors.

Those intro's are worth their weight in gold in many cases, as these exte
al advisors have not doubt proved themselves many times before as they established their own relationship with the bank.

What are bankers in Canada looking for when they look to extend Canadian business credit? It's not rocket science - they look for management depth, a solid busines model, what financing you have in place via debt or equity , as well has how you market and price your services or product.

A final note on bank loans in Canada? Unlike the U.S. which has hundreds, even thousands of different banks and even more independent non bank finance firms Canada's banking system is smaller. Clients who are bankable often focus on ' rates ' - in our opinion the rates will vary no more than some basis points from bank to bank.

Your focus should be on the banker, and the structure, terms, and guarantees surrounding your bank loans or credit lines. That saving of a couple basis points will be non existent in your mind when you get locked into a structure or guarantee or ratio and covenant scenario that you can't get out of.

Can you avoid business credit nightmares in Canadian banking? We sure think so... consider talking to a trusted, credible and experienced Canadian business financing advisor on achieving some of the best business banking in Canada.