Debt funding is an important tool that companies can use to finance growth, acquire assets, and manage their cash flow. However, securing debt funding can be challenging at any phase of a business life-cycle. Companies must be prepared to demonstrate their creditworthiness and ability to service the loan. In this article, we will outline how companies can prepare themselves to access debt funding successfully.
Collateral
Collateral is one of the most important factors that lenders consider when evaluating a loan application. Collateral is an asset that the lender can seize if the borrower fails to repay the loan. Companies must be prepared to provide collateral to secure the loan. Collateral can include assets such as real estate, equipment, inventory, and accounts receivable. The value of the collateral should be equal to or greater than the amount of the loan.
General Security Guarantees
General security guarantees also referred to a General Security Agreement (GSA) are another way that companies can secure debt funding. A general security guarantee is a pledge of all of the company's assets as security for the loan. General security guarantees provide lenders with additional protection in the event of default. Companies must be willing to provide general security guarantees to secure the loan.
Credit Enhancements
Credit enhancements are measures that companies can take to improve their creditworthiness and reduce the risk for lenders. Credit enhancements can include things like letters of credit, performance bonds, and guarantees from third-party companies. These measures provide lenders with additional assurance that the loan will be repaid.
EBITDA Performance
Companies must be able to demonstrate their ability to service the loan based on their (EBITDA) performance. EBITDA is a financial metric that stands for earnings before interest, taxes, depreciation, and amortization. EBITDA measures a company's ability to generate cash flow and pay its obligations. Lenders will evaluate a company's EBITDA performance when deciding whether to approve a loan application.
In conclusion, securing debt funding is essential for companies that want to finance growth, acquire assets, and manage their cash flow. However, companies must be prepared to demonstrate their creditworthiness and ability to service the loan. This includes providing collateral, general security guarantees, credit enhancements, and demonstrating their EBITDA performance. By taking these steps, companies can increase their chances of securing debt funding and achieving their financial goals.
_________________________
Let's Talk
Securing financing in Canada can be a daunting process for companies of all sizes. Let us help you secure the financing you need to achieve your business objectives.
Empower Your Business Growth with Customized Debt Financing Solutions. Submit your contact information to schedule a no-obligation consultation with our team
Custom Solution: We work closely with our clients to understand their unique financial needs and develop customized solutions that help them achieve their business objectives.
Canadian: Funding available for companies in ON, BC, AB, SK, MB.
📧 CONTACT US _________________________
We specialize in assisting mid-market private companies in accessing capital for their growth, working capital, debt refinance, and expansion needs. Our experienced team of professionals can help you navigate the complexities of long-term debt financing and tailor solutions to your unique requirements. Contact us today to learn more about our services and how we can support your company's capital strategies.
If you are embarking on Capital Financing activities in your company, reach out to us for a free consultation. We can help you to achieve a financing solution tailored to your company's pursuit. Contact us today.