INVESTMENT / FINANCIAL

I frequently hear the frustration of businesses owners because their local bank or credit union won’t provide them with the financing they require.
Often the source of the frustration stems from people expecting these conventional lenders to be something they are not.
Firstly, it’s important to understand that banks and credit unions are regulated lenders and are often not permitted by statute to do what a small business owner needs. Legal restrictions often limit what conventional lenders can take as collateral or how much they can lend against particular collateral.
As the U.S. mortgage market melts down, Canadians can take comfort in the fact that government regulation has spared us from the worst excesses of the market.
Secondly, banks like other successful businesses, have determined what’s in their best interest. They might have policies that establish minimum levels of historical profitability for a loan to meet their criteria. Or perhaps there are restrictions on the type of business they can lend to.
There is nothing wrong with this. After all you, as a business owner, make decisions every day that you view are in the best interest of your enterprise.
Being turned down for a loan from a credit union or bank doesn’t mean that your business is not viable or a loan to you is a poor investment. It certainly may mean that. But it may also mean that you are looking to the wrong financing source for your business. There are other pools of capital out there.
Non-conventional lenders such as Community Futures, Business Development Bank of Canada and Ecotrust Canada Capital are not bound by the same regulatory requirements or lending policies as chartered banks and credit unions.
We are niche lenders that have been designed differently—often with clear mandates that are a better fit for your business financing needs. This doesn’t mean we don’t have limits to what we will do; all lenders have loan criteria.
It simply means that non-conventional lenders like Ecotrust Canada Capital are often able to do what your local banker is not. We can also supplement a conventional loan, ensuring that you have appropriate financing.
Sound financial management on your part should include finding the best match between available lenders and your business financing needs. That might mean that you can’t always bank on the banks.
- Bill Girard is an Investment Manager with EcoTrust Canada Capital.