Start with the money itself

Before any product makes sense, two ideas have to be separate in your head: how much your business earns, and when the cash actually arrives. Almost every business that needs financing is profitable on paper and short of cash in the bank. These are the words for that gap, and for what a lender will ask you to put behind it.

Cash Flow

The movement of money in and out of a business over a period of time — not how much it earns, but when the money is actually there.

Cash flow is the single most common reason a healthy business needs financing. A company can be profitable every month and still be unable to make payroll, because customers pay in 45 days while wages, rent and suppliers are due immediately. Positive cash flow means more money came in than went out during the period. Financing exists to cover the gap between the two, not to fix a business that loses money.

Working Capital

The capital used to run day-to-day operations — payroll, inventory, rent, suppliers.

Formally, working capital is current assets minus current liabilities. Practically, it is the money a business needs on hand to operate between the moment it spends and the moment it gets paid. Working-capital financing covers that gap; it is not meant to fund a purchase you will still own in five years, which is what term or equipment financing is for.

Revenue vs. Profit

Revenue is everything the business collects. Profit is what remains after every cost. Lenders care about both, for different reasons.

Most short-term financing is sized against revenue, because revenue is what repayment is drawn from and it is visible in a bank statement. Profit determines whether the business can actually carry the payment. This is why a business with $200,000 a month in deposits and razor-thin margins can be offered less than its revenue suggests: the deposits prove capacity to remit, the margins decide whether it should.

Secured vs. Unsecured Financing

Secured financing is backed by a specific asset the lender can claim. Unsecured financing is backed only by the business's promise and performance.

Secured facilities — equipment finance, factoring, asset-based lending — are generally cheaper and easier to approve, because the lender's downside is covered by something real. Unsecured facilities price the extra risk into the rate. Note that "unsecured" rarely means "nothing at stake": most unsecured business financing in Canada still carries a personal guarantee and often a general security agreement over business assets.

Collateral

An asset pledged to a lender that can be seized and sold if the financing is not repaid.

Collateral can be specific — a named truck, a piece of machinery, a block of invoices — or general, covering substantially all business assets. In Canada, a lender's claim on business collateral is made public by registering it under provincial personal property security legislation, which is how a second lender discovers that a first one is already there.

Personal Guarantee

A commitment by an owner, personally, to repay business financing if the business cannot.

A personal guarantee pierces the separation between you and your corporation for that specific debt. It is close to standard in Canadian small-business financing, including on facilities described as unsecured. What varies is scope: whether it is limited to a dollar amount, whether it is joint and several across multiple owners, and whether it survives the sale of the business. Those are negotiable points, and they are worth reading before signing.

Time in Business

How long the business has been operating and generating revenue — usually measured from incorporation or first revenue, whichever a lender specifies.

Time in business is one of the first filters applied to a file, because default risk falls sharply after the first couple of years. Most revenue-based products in Canada want at least six months of operating history; term lenders and banks generally want two years or more. A business below the threshold is not unfundable — it is usually a case for equipment financing, a government-backed program, or waiting one more quarter.

Business Credit vs. Personal Credit

Two separate credit histories. Small-business financing in Canada usually looks at both, and early on it leans on the personal one.

A corporation builds its own credit file with the commercial bureaus over time, but a young company has little history for a lender to read, so the owner's personal credit stands in as the behavioural signal. This is also why a personal guarantee is common. Building genuine business credit — trade lines in the company's name, paid on time — is what eventually decouples the two.

Debt Financing vs. Equity Financing

Debt is money you repay. Equity is money you exchange for a share of the company. Debt costs interest; equity costs ownership.

Debt is the right tool when the use of funds produces predictable cash to repay it — inventory, equipment, a receivable gap. Equity is the right tool when the outcome is uncertain and there is no repayment capacity yet. The two are not competitors so much as answers to different questions, and most growing companies eventually use both. Voxen structures debt; it does not take equity.

Cost of Capital

The total price a business pays to use someone else's money, expressed in dollars rather than percentages.

Cost of capital is the number that lets you compare a bank term loan against an advance quoted at a factor rate, because it ignores how each was priced and asks the same question of both: how many dollars leave the business, in total, for how many dollars received. It is also what a business should weigh against the return on whatever the money is used for — capital that costs 18% to fund equipment yielding 40% is cheap.

Broker vs. Lender

A lender funds with its own capital. A broker structures a file and places it with the lenders it fits.

A lender has one credit box and one answer. A broker sees many, which matters most when a file is not a clean fit for any single one — a business between two products, or one that has been declined once for a reason that is fixable. Voxen Capital is a broker: it does not lend its own money, it structures the file and takes it to the lenders whose criteria it actually meets.

The financing itself

There is no single "business loan". There are roughly a dozen instruments, and they exist because businesses run short of cash for different reasons. An invoice that will be paid in sixty days is a different problem from a truck you need to buy, which is a different problem from a competitor you want to acquire. Match the instrument to the reason, not to the interest rate.

Merchant Cash Advance (MCA)

Capital advanced against future business revenue, repaid as a fixed percentage of daily or weekly deposits.

An MCA is not a loan in the traditional sense. A funder advances capital and the business repays it as a percentage of its revenue. Pricing is expressed as a factor rate (e.g. 1.18) rather than APR. Best fit: businesses with consistent deposit volume that need capital within 24–72 hours.

Business Line of Credit

Revolving capital facility that a business can draw from, repay, and redraw as needed.

A line of credit is the most flexible working-capital instrument. The business pays interest only on what is drawn. Ideal for fluctuating cash needs, payroll smoothing, and unexpected expenses.

Invoice Factoring

Selling outstanding B2B invoices to a factor at a discount to receive immediate cash.

Factoring converts accounts receivable into same-day cash. The factor typically advances 80–90% of the invoice value, collects from the end customer, and remits the balance minus a fee. Best fit: B2B businesses with slow-paying clients (staffing, trucking, manufacturing).

Equipment Financing

Capital used to acquire or refinance commercial equipment, secured by the equipment itself.

Equipment financing is asset-backed, which usually means easier approval and longer terms than unsecured financing. Voxen finances trucks, machinery, kitchen equipment, construction equipment, manufacturing equipment, and tech infrastructure.

Bridge Loan

Short-term capital used to bridge the gap between two financing events.

Bridge loans are used when a business needs capital now but expects a definite future event (sale, refinance, lender closing) that will repay it. Typical term: 3–18 months.

Acquisition Financing

Capital structure used to fund the purchase of a business or buy out a partner.

Acquisition financing often combines senior debt, mezzanine debt, seller financing, and equity. Voxen structures multi-lender stacks for SMB acquisitions up to ~$50M.

Term Loan

A loan with a fixed amount, fixed term, and predictable repayment schedule.

Term loans are the most traditional debt instrument. Used for growth, expansion, refinancing, or major one-time investments. Voxen places term loans from $25K to $2M.

Revenue-Based Financing

Capital repaid as an agreed share of ongoing revenue, so the payment moves with the business.

Revenue-based financing is the broader family that a merchant cash advance belongs to. Because remittance is a percentage rather than a fixed instalment, a slow month costs less and a strong month repays faster — which suits seasonal businesses, and makes the effective annualised cost impossible to know in advance. It trades certainty of payment size for certainty of payment timing.

Purchase Order Financing

Funding that pays your supplier so you can fulfil a confirmed customer order you could not otherwise afford to produce.

PO financing solves the problem of winning an order too large to deliver. The funder pays the supplier directly, goods ship, the customer is invoiced, and the funder is repaid from that payment — often rolling straight into factoring. It requires a creditworthy end customer and a confirmed, non-cancellable order; it is not general working capital.

Asset-Based Lending (ABL)

A revolving facility sized against the value of a business's receivables and inventory, and re-measured as those balances move.

ABL sits between a line of credit and factoring. The lender advances against a borrowing base — typically a percentage of eligible receivables plus a smaller percentage of inventory — and recalculates availability as the business reports. It suits companies with substantial current assets and lumpy cash needs, and it comes with more reporting obligation than a simple line.

Sale-Leaseback

Selling equipment you already own to a funder and immediately leasing it back, converting an owned asset into cash without losing its use.

A sale-leaseback unlocks capital trapped in machinery, trucks or production equipment that is paid off and still working. The business keeps operating the asset and now carries a lease payment instead of ownership. It is one of the few ways to raise meaningful capital against something a business already has, and it is often cheaper than unsecured alternatives.

Mezzanine Debt

Debt that ranks behind senior lenders and is repaid only after they are, priced higher to compensate for that position.

Mezzanine capital fills the gap between what a senior lender will advance and what a transaction actually costs — most often in acquisitions. Because it sits lower in the capital stack, it carries a higher rate and sometimes an equity component. It is a structuring tool, not a working-capital product.

Trade Credit

Payment terms extended by a supplier — the most common and least recognised form of business financing.

When a supplier invoices net-30 instead of demanding payment on delivery, it is financing thirty days of your operations at no stated cost. Negotiating longer terms with suppliers, or taking early-payment discounts when cash allows, moves the same needle as a credit facility and appears nowhere on a credit report. It is worth exhausting before borrowing.

Canada Small Business Financing Program (CSBFP)

A federal program under which the government shares the lender's loss on qualifying small-business loans, letting banks approve files they would otherwise decline.

The CSBFP does not lend money — it makes a conventional lender more willing to. Loans are issued by participating financial institutions and the government guarantees a portion of any loss. Eligible uses are restricted, largely to equipment, leasehold improvements and property, and the program sets its own caps and fees, which change over time. Worth asking your bank about directly before assuming a decline is final.

What it actually costs

This is where most business owners get hurt, and it is almost never because a rate was hidden. It is because two offers were quoted in two different languages — one as a percentage per year, the other as a multiplier — and compared as though they were the same number. They are not. Learn to convert everything to one figure: total dollars repaid, minus dollars received.

Factor Rate

A multiplier applied to the advanced amount that determines total repayment (e.g. 1.20 on $100K = $120K repaid).

Factor rates are used for revenue-based products. They are not annualised, so a 1.20 factor repaid over 6 months is materially more expensive than the same factor over 12 months. Always convert to total cost of capital before comparing to an interest rate.

APR (Annual Percentage Rate)

The annualised cost of borrowing, expressed as a percentage of the outstanding balance.

APR is the standard cost measure for traditional loans and lines of credit. Voxen does not publish a universal APR because pricing depends on the product, the lender, the term, and the risk profile of the specific file.

Effective Annual Rate

What a facility costs per year once the repayment schedule is taken into account — the number that makes a factor rate comparable to an interest rate.

A factor rate has no time dimension: 1.20 costs the same whether repaid over six months or twelve. Annualising it exposes the difference — the same 1.20 is roughly twice as expensive per year when the term is halved, because you had use of the money for half as long. Any honest comparison between a short-term advance and a term loan has to pass through this calculation.

Total Cost of Capital

Every dollar repaid, minus every dollar received. One number, comparable across any two offers regardless of how they were quoted.

This is the figure to ask every funder for, in dollars, before signing anything. It absorbs the rate, the fees, the origination charge and the term into a single amount, and it is immune to the trick of quoting one offer as a percentage and another as a multiplier. If a funder will not state it plainly, that is itself information.

Origination Fee

A one-time charge for putting the facility in place, usually a percentage of the amount funded and often deducted from the advance.

Origination fees typically run 1–5% depending on product and lender. The detail that matters is whether the fee is deducted at funding or added to the balance: a 3% fee on $100,000 that is netted at source means $97,000 arrives while $100,000 plus cost is repaid, which raises the real cost above the quoted rate. Ask which it is.

Advance Rate

The percentage of an asset's value a lender will advance against.

In factoring, the advance rate is typically 80–90% of the invoice face value, with the balance released on collection minus fees. In equipment and asset-based lending, advance rates vary by asset class, resale liquidity, and age.

Prime Rate

The benchmark lending rate Canadian banks set for their most creditworthy clients, used as the base for variable-rate facilities.

Variable business facilities are usually quoted as prime plus a spread — prime + 3%, for example. When the Bank of Canada moves its policy rate, prime generally follows, and every variable facility priced off it reprices too. If your financing is variable, your payment is exposed to that; a fixed rate is a decision to pay for predictability.

Amortization

The schedule over which a balance is repaid to zero, and the split between interest and principal within each payment.

Two loans at the same rate can feel completely different depending on amortization. A longer schedule lowers the monthly payment and raises total interest paid; a shorter one does the reverse. Early payments on an amortizing loan are mostly interest, which is why paying one out in year one costs more than the elapsed time suggests.

Prepayment Penalty

A charge for repaying a facility ahead of schedule, protecting the lender's expected return.

Terms vary widely and matter more than most borrowers expect. Some facilities allow early payout at a discount to remaining cost; others require the full agreed repayment regardless of timing, which means paying out a factor-rate advance early saves nothing at all. This is one of the first questions to ask, not one to discover later.

Holdback (Reserve)

A portion of funds a lender retains rather than advancing, released once a condition is met.

In factoring, the holdback is the balance of the invoice — typically 10–20% — released when the end customer pays, minus the fee. Elsewhere a reserve may be held against performance or dilution. It is not a cost in itself, but it changes how much cash actually reaches the business on day one, which is what matters operationally.

How a lender decides

Underwriting is less mysterious than it looks. A lender is answering one question — will this business still be able to make the payment in six months — and it answers it mostly from your bank statements, not your opinion of your business. Knowing what they read, and in what order, is the difference between a file that gets approved and one that gets a request for more documents.

DSCR (Debt-Service Coverage Ratio)

Net operating income divided by total debt service — a measure of a business's ability to carry its debt.

A DSCR above 1.25 is generally considered healthy. Below 1.0 means the business is not generating enough income to service existing debt. Lenders use DSCR to determine maximum sustainable financing.

Debt Service

The total of all payments a business must make on its existing debt over a period — the denominator in most capacity calculations.

Debt service is what a lender adds up before deciding whether it can add more. It includes every facility already in place, not only the ones a business volunteers, because payments are visible in the bank statements regardless. Understating existing obligations is the fastest way to have a file declined after approval.

Bankability

How likely a business is to qualify for traditional bank financing.

Bankability is a function of time in business, profitability, financial statement quality, debt levels, and collateral. Businesses that are not yet bankable use alternative financing to bridge the gap, then restructure into bank debt once the metrics support it.

Average Daily Balance

The typical amount held in the business bank account across a month — a direct read on whether a daily or weekly payment is survivable.

Underwriters weigh average daily balance more heavily than most applicants expect. A business depositing $150,000 a month but ending most days near zero is carrying no buffer, and a fixed remittance will push it negative. A healthy balance relative to the proposed payment does more for an approval than a strong revenue figure alone.

NSF (Non-Sufficient Funds)

A returned payment caused by an account without enough money to cover it. Lenders count them.

NSFs in the statement period are read as evidence of how tight the account actually runs. A small number with an obvious explanation is survivable; a recurring pattern will cap the offer or decline the file outright, because the lender is being asked to add another automatic debit to an account that already fails them. Clearing a clean month before applying is often the highest-return preparation available.

Negative Days

The count of days in a period the business bank account was overdrawn.

Negative days sit alongside NSFs as the fastest measure of liquidity stress, and most revenue-based lenders apply an explicit cap — commonly around three to five per month. The metric is unforgiving because it is factual: it comes straight from the statements and there is nothing to argue about. It is also entirely fixable with one disciplined month.

Deposit Frequency

How many separate deposits arrive per month, and how evenly they are spread.

A business with 60 deposits a month has diversified, predictable revenue. One with two large deposits has concentration risk: if a single customer pays late, the remittance fails. Lenders often set a minimum deposit count precisely because frequency, not just total, predicts whether a daily or weekly repayment will clear.

Current Ratio

Current assets divided by current liabilities — whether a business could cover its near-term obligations from its near-term assets.

A current ratio above 1.0 means the business could, on paper, meet what is due within the year. Below 1.0 signals a liquidity squeeze that financing may relieve or may aggravate, depending on what the money is used for. Term lenders and banks read it; revenue-based funders rely more on bank statements.

Stacking

Taking multiple advances or loans from different funders simultaneously.

Stacking is one of the fastest paths to business failure. Each additional position takes a further percentage of daily revenue, compounding until operations are starved. Voxen's position is that stacking is treated as a restructuring problem, not a funding opportunity.

Soft Credit Pull

A credit check that does not affect the business owner's credit score.

Voxen's application uses a soft pull for pre-qualification. A hard inquiry only occurs when a specific lender formally underwrites a file, and only with consent.

Covenant

A condition written into a financing agreement that the business must keep meeting for the whole term.

Covenants can require maintaining a ratio (a minimum DSCR, for example), reporting on a schedule, or refraining from taking on further debt without consent. Breaching one is a technical default even when every payment has been made on time, which can trigger repricing or demand for repayment. Read them as ongoing obligations, not closing formalities.

Subordination

A formal agreement by one lender to rank behind another in priority of repayment and claim on collateral.

Subordination is what makes a second facility possible when a first lender already holds a general claim on business assets. The senior lender has to agree, in writing, to let the new one sit behind it. Getting that agreement is often the real obstacle to adding financing — not the new lender's appetite.

Blanket Lien

A security interest covering substantially all of a business's assets rather than one named item.

A blanket lien — usually documented as a general security agreement — gives a lender a claim over receivables, inventory, equipment and more, all at once. It is common and not by itself alarming, but it constrains what can be financed afterwards: a later lender wanting specific collateral must negotiate around it. Knowing whether one is registered against your business is basic housekeeping.

PPSA Registration

The public filing that records a lender's security interest in business assets under Canadian provincial personal property security legislation.

Every province outside Quebec operates a Personal Property Security Act registry; Quebec records equivalent rights in the RDPRM. A registration is how lenders discover existing claims before advancing, and how priority between them is settled. Stale registrations from paid-off facilities are common and can quietly block a new approval — they are worth checking and discharging.

The paperwork

The document list is shorter than people fear. Six months of business bank statements answers most of it. The rest exists either because the law requires it, or because a specific product needs proof of a specific thing — an invoice to factor, an equipment quote to finance. Nothing here should be a surprise, and anything asked for beyond it deserves a reason.

Business Bank Statements

The core document in almost every alternative-financing file — usually the last six months, complete and unedited.

Bank statements are read rather than skimmed: deposits, average daily balance, negative days, NSFs, existing debt payments and revenue consistency all come from them. Send the full official statement, every page, including the pages that look empty. Screenshots, exports and partial months are the most common reason a file stalls before it is even assessed.

Compilation Engagement (Notice to Reader)

The lightest form of accountant-prepared financial statement — organised from information you supply, with no verification.

Canadian practice replaced the old "Notice to Reader" with the Compilation Engagement report, though both terms are still heard. It carries no assurance: the accountant has arranged your numbers, not tested them. That is fine for most alternative lenders and short of what a bank will want, which is a Review Engagement or an audit. Knowing which one you have tells you which lenders are realistically open to you.

T2 Corporate Return

The corporate income tax return every incorporated Canadian business files annually.

The T2 and its financial schedules are what a term lender or bank uses to confirm revenue and profitability independently of what the business claims. A recent filing matters: a corporation two years behind is difficult to underwrite at any price, and CRA arrears discovered mid-file are a common cause of a late decline.

Accounts Receivable Aging

A report listing unpaid customer invoices grouped by how long they have been outstanding.

The AR aging is central to factoring and asset-based lending, because it shows both what can be advanced against and how reliably customers actually pay. Concentration matters as much as total: a receivable book where one customer is 60% of the balance carries the risk of that one customer, not of the business's sales.

Term Sheet

A written summary of proposed terms — amount, cost, duration, security — issued before final documents are drawn.

A term sheet is where a business should do its comparing, while changing something is still cheap. It is normally not a binding commitment to fund, and it is usually conditional on verification. Read the security and personal guarantee sections as carefully as the pricing, and get the total cost of capital in dollars before responding.

Commitment Letter

The lender's formal, binding offer to fund, issued after underwriting and subject to stated conditions.

Where a term sheet proposes, a commitment letter commits — provided every listed condition is satisfied. Those conditions are the part to read: outstanding documents, lien discharges, subordination agreements, insurance. A commitment is not money in the account until they are cleared, and a stalled condition is the most common reason a funding date slips.

Stipulations (Stips)

The specific items an underwriter requires before releasing funds — the conditions attached to an approval.

Stips are ordinary, not a sign of trouble: a missing statement page, proof of ownership, a void cheque, an explanation for one unusual deposit. What determines the funding date is how fast they come back. Returning all of them at once, complete, is the single largest thing an applicant controls about their own timeline.

KYC and AML

Know Your Client and anti-money-laundering checks — legally mandatory identity and ownership verification.

Canadian financial institutions are required to verify who they are dealing with and who ultimately owns the business, and to keep that evidence. In practice this means government photo identification for signing owners, confirmation of beneficial ownership above a threshold, and corporate registration documents. It is not discretionary and it is not negotiable, so having it ready removes a guaranteed delay.

Void Cheque and PAD Agreement

The banking details and written authorisation that let a funder deposit to, and debit from, the business account.

A void cheque (or a bank-issued account confirmation) proves the account belongs to the business. The pre-authorised debit agreement is the separate authorisation permitting withdrawals, and it specifies amount, frequency and how it can be changed or cancelled. Read the cancellation terms — that is the clause that matters if repayment ever needs renegotiating.

After the money lands

Funding is the middle of the relationship, not the end of it. How repayment is taken, what happens when a slow month arrives, and how and when a facility is renewed or replaced all matter more to the total cost than the headline rate did. This is the part nobody reads until they need it.

Capital Stack

The full structure of financing behind a business, ordered by priority of repayment.

A capital stack may include senior secured debt, subordinated debt, mezzanine, seller notes, and equity. Structuring the stack correctly determines both cost of capital and resilience. Voxen's role is to design the stack, not to sell a single product into it.

Pre-Authorized Debit (PAD)

The Canadian mechanism by which a funder automatically withdraws repayment from a business account on an agreed schedule.

PAD is the Canadian equivalent of ACH debit and is how nearly all alternative financing is repaid — daily, weekly or monthly. Because withdrawals are automatic, the practical risk is timing rather than amount: a debit that lands the day before a large receivable arrives creates an NSF that a day's difference would have avoided. Repayment day is worth negotiating.

Remittance

Each individual repayment taken against a facility, especially the recurring daily or weekly draws on revenue-based products.

On a fixed remittance the amount never changes, which is simple but unforgiving in a slow week. On a percentage remittance it moves with deposits, which protects cash flow and makes the payoff date uncertain. Which one you have determines how a bad month actually feels, and it is set at signing.

Reconciliation

A contractual right to have remittances adjusted when actual revenue differs materially from what was projected.

Reconciliation exists so a fixed daily payment does not sink a business through a genuinely slow season. Where the right exists it usually has to be requested, with statements, within a defined window — it is rarely applied automatically. Whether a facility offers it, and how it is triggered, is worth confirming before signing rather than during the month you need it.

Renewal

Replacing an existing facility with a new one, often before the current balance is fully repaid.

Renewals are routine and can be genuinely useful — a business that has performed usually qualifies for better terms than it originally got. The mechanics deserve attention: the outstanding balance is typically paid out of the new advance, so the additional cash received is smaller than the headline amount, and the remaining cost of the old facility may be carried forward rather than forgiven.

Payoff Letter (Buyout)

A funder's written statement of the exact amount required to settle a facility in full on a given date.

A payoff letter is what makes refinancing or consolidating possible, because a new lender needs a fixed number and a date to clear the old position and its registration. On factor-rate products the payoff often reflects the full agreed repayment rather than a discount for early settlement — which is exactly why it must be requested in writing before a decision, not assumed.

Default

A breach of the financing agreement — most often missed payments, but also a broken covenant or undisclosed additional debt.

Default consequences escalate quickly: accelerated repayment of the full balance, enforcement against collateral, and a call on any personal guarantee. The important practical point is that the period before default is where the options are. Funders can restructure a facility that is struggling; they have far less latitude once it has formally defaulted, so an early conversation is worth more than a late one.

Restructuring

Replacing expensive or poorly structured financing with cleaner capital.

Restructuring typically consolidates multiple high-cost positions into a single lower-cost facility with a sustainable payment. Voxen's restructuring work focuses on businesses carrying stacked advances.

Voxen Performance

Voxen's designation for high-revenue files that receive dedicated structuring attention.

Files with meaningful monthly revenue or large requested amounts are routed to senior structuring rather than standard intake, because the right answer at that size is usually a multi-lender structure rather than a single product.

Related

• Merchant Cash Advance
• Line of Credit
• Invoice Factoring
• Equipment Financing
• Bridge Loans
• Acquisition Financing
• Term Loans
• Equipment Financing

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