Bank Loan vs Alternative Financing for Canadian SMBs

Hosts Percy Barr, Wayne Pratt and Bernie Franzgrote

Bank loan vs alternative financing for Canadian SMBs. East Trade Winds with Michael Yasny on factoring, vendor debt, CRA taxes, and advisors for owners.

GROWTH CATEGORY: Leadership & Ops

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You land a big order. Then your credit line hits its limit, and you have to say no.

Michael Yasny knows that moment well. He joined East Trade Winds to show what to do instead.

Michael Yasny, founder of Money Consultants and author, has helped business owners find financing for more than 30 years. In this East Trade Winds talk, he explains why bank loans are not always the best fit for a business. A bank line of credit can cost less, but it can also cap your growth. He shows how factoring and other growth capital can fill the gap. He also shares how to keep a key vendor supplying you when you owe them money. He covers how to handle taxes, the CRA, and collection agencies too. His advice is to build a team early: a lawyer, an accountant, and a business advisor. This talk is for new, growing, and struggling business owners who need financing options and a plan.

Watch the full conversation here:

Many Canadian small businesses lose growth because a bank line of credit has a limit. Michael Yasny, founder of Money Consultants, has arranged business financing for more than 30 years. After reading this post, an owner can compare bank loans with factoring, protect key vendor ties, and know which three advisors to hire early.

Who this is for

SMB owners, solopreneurs, and leaders building systems.

Key lessons

1. The cheapest rate is not always the cheapest money. A bank line of credit may cost 3%, but it has a limit. When you hit it, you may turn clients away. In Michael's example, a factoring deal that works out to 45% can still win if it keeps you selling. He asks: does it matter that you spent $50,000 when you made a quarter of a million?

2. You can negotiate with a vendor you owe. After COVID, a client of Michael's owed a vendor $100,000 and still needed supplies. Michael suggested selling to the client cash on delivery, with a 5 to 10 percent surcharge to pay down the old debt. The vendor kept a customer and got paid over time. Suing, he says, could take two or three years.

3. Build your team before trouble starts. Michael names three people: a lawyer with commercial and litigation experience, an accountant, and a business advisor who understands cash flow. They cost less at the start than when you are in trouble. In one case, a friend owed American Express $200,000 personally. With the right help, it settled for $90,000, paid by his business.

Practical steps

•      Write down what one turned-away client would be worth. Compare that number to the cost of the money.

•      Ask your accountant one question: "Do I need to incorporate when I first start?" Michael says a yes is the answer to look for. He says online incorporation in Ontario was about $400 when he last checked.

•      Check your tax filings now. Ask a pro about any CRA balance before it grows. Michael says unpaid taxes get bigger the longer you wait.

•      Before you sign with any lender, ask a lawyer to explain the security. Michael warns that some lenders tie you up so you cannot move to other financing.

About the guest

Michael Yasny is the founder of Money Consultants and the author of So, You Want to Start Your Own Business. Connect: LinkedIn · Amazon author page

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Partners on this episode

•      East Trade Winds: free weekly networking. Bring one challenge and one introduction.

•      Profit10™: a free Profit Snapshot that shows where your business leaks profit.

•      Web Indexer: a quick-install chatbot that gives your visitors answers 24/7.

FAQ

Can factoring be better than a bank line of credit? Michael says yes, if the bank limit makes you turn away clients. He adds that factoring is selling something at a discount, not taking on debt.

How do I keep a vendor selling to me when I owe them money? Michael offered cash on delivery plus a 5 to 10 percent surcharge to pay down the old balance. The vendor gets paid over time and keeps a customer.

What should I know about CRA debt? Michael says unpaid taxes can grow fast, and the CRA can garnish a bank account. His view: an accountant who knows the CRA rules helps you stay ahead. This is his view and general information, not legal or tax advice.