Despite the current economic uncertainties, the basic fact of business life endures: capital is critical!
“For any entrepreneur, including small businesses, access to capital is critical,” says Steve Dizep, president of Pillar Capital Corp., the privately held lending company that provides asset-based loans from $500,000 to $15 million to business owners across Canada.
“Without financing, a small business is unable to grow, let alone manage their working capital requirements. Financing also provides capital for growth and expansion, investing in innovation and assisting in providing a competitive edge within their industry.”
Successful business leaders, entrepreneurs and consultants agree. Credit is a cornerstone for businesses. It influences business’ ability to make purchases and achieve financial goals. Any business with serious intent to grow must actively manage its established lines of credit, understand additional options and have plans for optimizing its credit when scaling up.
“Financing is vital for small business owners to have the necessary funds for day-to-day operations and expansion plans,” explains Lisa Christensen, vice president, financing for Alberta south area with BDC. “Financing can help them invest, buy inventory or equipment, manage cash flow and even acquire competitors. A common mistake is underestimating how much financing they need, which can limit growth opportunities and make it harder to handle financial challenges.”
While 2025’s tariffs, trade war jitters, supply chain worries and other economic uncertainties are legit business speedbumps, in the Edmonton market, business financing trends continue to change.
Traditionally, a business’ credit options were limited to the banks, usually where the business held accounts. Mostly because there was limited competition for funding and limited financing options, bank credit was often the only game in town and, by nature, it became slow and inflexible, due mostly to the regulatory background and resistance to risk that tends to drive traditional finance.
At its most basic level, a line of credit is a simple agreement in which a lender provides funds up to a predetermined limit, and the business pays interest on the rolling amount of money borrowed. Different variations include fixed or variable interest rate agreements, the use of collateral, repayment terms and minimum monthly payments.
The alternative finance sector evolved and continues to earn its niche.
The simplified but key differences – and small business advantages – of alternative financing are catching on, partially because alternative financing allows for more flexible lines of credit, which small businesses can leverage for greater agility and sustainable growth.
Banks conventionally used a business owner’s credit score to gauge the funding limit on a line of credit. Alternative financiers are shying away from that established routine, resulting in easier and better service to their small business clients. For example, an Edmonton small business owner can establish a same-day line of credit with alternative financing by providing simple cash flow and account summary documents, which most business owners have readily available.
“Alternative financing is a growing industry and has experienced significant growth over the last 20 years,” Dizep adds. “According to Stats Canada, the private lending market comprises 40 per cent of all lending in Canada, which is substantial. There is a large market of businesses that are under serviced by traditional lenders and require alternative sources of capital to meet their funding objectives. Private lenders fill this gap.”
He speaks from much experience, being actively involved in the alternative lending industry for more than 20 years. The industry continues to evolve, providing numerous options to all types of businesses.
Private debt can include everything from mortgages, accounts receivable loans, equipment financing and leasing, subordinated or mezzanine financing and bridge capital. However, the formula, the protocols and the processes of alternative financing are different from conventional banks. It’s vital that businesses and lenders must understand the differences.
“Entrepreneurs applying for financing should ensure their financing request aligns with their business needs,” Dizep says. “Every business is unique and each lender, depending on the request, will have its own set of requirements. At a minimum, all lenders, banks or private, will require the basics, including a sound business plan, financial statements and/or projections, collateral available, personal net worth form in support of a guarantee, etc. Lenders, banks and private also require equity or ‘skin in the game,’ showing commitment to the business and mitigating the lender risk.”
Christensen explains that lenders look at several key factors when evaluating small business funding applications. This includes assessing the financial health of the business by reviewing past financial statements and comparing them to industry averages.
“They also evaluate growth plans and financing forecasts, as well as the credibility and experience of the management team, investments in the business and any assets that may be used for collateral. Both personal and business credit scores are important, as they reflect the ability to manage debt.”
The growing alternative financing sector is gaining popularity by offering an alternative in response to some concerns about conventional finance borrowing, primarily a faster and easier process, flexibility and much less paperwork.
With alternative financing, the application time is drastically reduced with fund distribution often being more expeditious than conventional lending. Many alternative financiers emphasize a one-to-two-day turnaround time to secure the funds. Traditional lending is often layered with rigid and set-in-stone terms. Alternative lenders tend to offer more flexible terms, preferable for small businesses with less established credit histories.
Most alternative lenders have relied heavily on the use of online tools and digital platforms to streamline the application and loan process, further reducing the need for physical paperwork. While technology may dissuade those who are not as tech-savvy, the fintech industry is constantly introducing waves of innovation to make digital financing easier and more accessible.
The catch?
Alternative financiers may charge higher interest rates and fees than traditional banks since they are taking on more risk with lending to borrowers with less established credit.
Some things will never change. Capital will continue to be critical. Financing options will continue to evolve and offer businesses more choices.
Analysts and consultants suggest diversifying financing sources to allow entrepreneurs to access different types of services more specifically tailored to their specific needs.
“While financial institutions may likely continue as the primary source of financing, banks typically view themselves as just one option among many. Entrepreneurs should first clarify their needs and the type of project they require financing for in order to ensure the chosen option serves their business effectively,” Christensen points out.
With financing expertise and being gung-ho and focused about the future of alternative financing, Dizep cautions that alternative debt must be fully understood by businesses.
