Franchise Financing Canada – The Process and Approvals

Franchise Financing – Prospective franchisees in Canada want to know what is involved in obtaining the proper financing for their business. Many new franchisees are not aware of how franchises are financed and whats involved, so let’s share some critical information in this exciting and growing industry in Canada. Statistics show that franchises in Canada are in fact a huge part of the Canadian economy, and business and consumer franchises are involved in virtually every industry in Canada.

As a prospective franchisee you are either looking to purchase a turn key new opportunity from a franchisor or master franchisor, or you may perhaps be entertaining the purchase of an existing franchise that is already established . It goes without saying that you should carefully examine in that instance why the current franchisee is selling. More often than not it is because the current franchisee wishes to move on to another business or career, but you should examine why he is leaving for all the obvious reasons.

There are some innovative ways to finance your franchise in Canada. So how are franchises actually financed? The majority of them are done via a government programme called the BIL (also known as CSBFL) programme. This program is subsidized in rate and structure by the federal government and in our opinion is, bar none, the best small business financing program in Canada. It can of course be used for existing and new franchises. The program offers rates and structures that even larger corporations can’t achieve – i.e. Longer terms and amortizations, very competitive rates, and limited personal guarantees.

When clients approach us with transactions that are more difficult to structure an often used strategy we employ is the VTB. That stands for vendor take back, and allows the current owner in effect to reduce the total financing cost for the customer considerably. The owner takes a promissory note arrangement from you and these notes are structured for maximum flexibility to both parties. Lets to a quick example to show you the power of the strategy.

Lets say you are purchasing a franchise for 400,00.00 .00. The monthly payments on a 5 year loan for that amount of funding would be approx 7600.00. If the seller was willing to accept a 75,000 note from yourself to repay this portion later your new finance amount is 325,000.00 and your monthly payment are now only 6200.00. It goes without saying it’s easier to make a 6.2k / mo payment than a 7.6k/mo payment! In circumstances such as this good negotiating and the good intentions of all parties are required, that’s what makes a deal work, when both parties adopt a win win attitude.

Typical franchise loans tend to be in the 100-350k range in our experience. Much larger loans often involve the most well known names in their industry, and in many cases might have some real estate attached to the transaction.

We have found with great success that the ‘cobbling together’ of a franchise financing is, in the current economic environment, the most successful strategy. That usually involves our previously mentioned BIL franchise loan, perhaps some equipment leasing, and in some cases an unsecured working capital cash flow loan. A total package usually comes with a business Visa and an initial operating line of credit to suit the overall needs of the business.

To properly execute your franchise financing strategy you require a business plan and some carefull planning around what you need to purchase the business, and, as importantly how you will finance future cash flow, inventory, and growth needs.

In summary, franchise financing in Canada is unique and a specialized type of financing. We strongly suggest you seek and utilize a business financing expert in this area in order to help you determine your overall needs and how you will execute on a successful franchise financing. Its step one to being a new successful entrepreneur!

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Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/franchise_financing_canada_process_and_approvals.html

Equipment Financing Approvals – Toronto and Area

Equipment Financing Approvals – You are a Canadian business owner or financial manager who requires lease financing for asset acquisitions. Although a majority of leasing firms are located in the Toronto area lease financing is of course available across Canada. We encourage clients to seek out and develop a business relationship with a trusted and credible lease financing advisor.

So what is important in getting a lease approval? Unfortunately most clients tend to focus on only one thing – the interest rate. The actual accounting reality around lease financing is that the interest rate is not even a rate per se as you are utilizing the equipment but not necessarily owning it. Anyway that point alone is a discussion for another day.

Naturally the financing rate attached to the lease is important, but face reality – your rate is always going to be commensurate with your overall credit quality – if your firm has excellent financials, is profitable, has good cash flow, is growing and is in a good industry sector we can assure you that you will always have a competitive rate within a ¼ point or so.

The lease credit decision actually plays a large part of the entire lease financing approval cycle. Factors that determine your overall final approval are as follows:

- Overall credit quality of your firm – ( key factors include your balance sheet, are you profitable, years in business, and amount of financing requested
- Type of asset you are financing
- Dollar size of transaction
- Special structuring requests

Traditional lease financing focuses on your ability to demonstrate you can make the payments – no surprise there of course. But how does your lease firm make that decision. Fortunately or unfortunately it’s a very mechanical decision – it’s a case of taking your cash flow from your financials - i.e. net income and depreciation combined together, and determining if that cash flow supports on an annual basis the next 12 months of payments .So there, we have just shown you how you can influence and present your cash flow repayment ability.

In many cases, certainly in the current more challenging business environment your financials might not be in a position to meet these cash flow calculations. That is where extra skill on your behalf (but more probably and properly achieved with a leasing advisor) is required to present what I have called ‘the weight of evidence ‘that you can make those payments and are worthy of an approval. Additional factors might include some potential restructuring of the lease term – i.e. a shorter term, or accelerate payments . Although many firms stress leasing as 100% financing the reality is that for the transaction to work for yourself and the lessor you should be expected to offer up a 10- 15% (sometimes more) down payment.

Typical other factors to be taken into consideration are your payment experience reports at a Commercial Credit bureau or Dun and Bradstreet, and miscellaneous factors such as years in business, cyclicality of your industry etc. In some cases offering up some additional equipment that isn’t financed as collateral will get you to the goal line.

In summary, lease financing approvals in Canada is a bit of both an art and a science .A proper presentation of your ‘weight of evidence ‘around your ability to pay should ensure you receive a satisfactory rate, term, and structure. And remember, it’s not always about the rate – pick a solid lease partner and work towards a long term relationship which will pay off ten fold over time relative to your lease financing needs.

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Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/equipment_financing_approvals_toronto.html

Working Capital Financing Canada – For Sales and Growth

Working Capital Financing in Canada is provided in a number of different ways to Canadian business owners and financial managers. Like anyone, you would prefer to deal with an ‘expert ‘in business financing, so we encourage you to seek and speak to a trusted and credible business financing advisor in your area of working capital need.

Working Capital solutions are provided by our banks of course and also by what we will call non-bank independent finance firms. Smaller and medium sized firms are often better served by non- bank firms who have a better understanding in many cases of their business needs as it relates to receivables financing, inventory financing, purchase order financing, equipment leasing, etc .

Clients always bring up the issue of ‘government grants and loans ‘. There are some grant type programs out there but in general they do not serve the needs of the average Canadian business owner as they relate to working capital.

There are two very viable grant and loan programmes in our opinion. They are the government guaranteed Small Business Loan , aka CSBFL , aka SBL loan, as well as the federal SR &ED program. The Small business loan provides equipment and leasehold loans to Canadian business owners, and is not capped at a new high of $ 350,000.00 . This in or opinion is a great term loan, and has excellent, we repeat, excellent rates, terms and structures. But the reality is that this is a term loan and is not a working capital loan per se. When clients come to us for ‘working capital loans ‘more often than not they are referring to cash flow needs for inventory, receivables, and equipment.

The other ‘ grant ‘ which in some ways could be construed as a working capital injection is the federal SR & ED program for your work on new products, services, and innovation in your business sector . This is a non – refundable grant that covers approximately 40% of all the cash you have spent in this area. We encourage all business owners in Canada, if it is applicable, to speak to an advisor in this area.

Most Canadian business owners are not aware of what is known as a cash flow loan. A more sophisticated finance term for this loan is a mezzanine or ‘sub debt’ loan. For smaller and medium sized businesses these loans tend to go up to the 250k range and are offered by a specialty lender which is funded by the Government of Canada. Larger cash flow and working capital loans tends to be in the 1 Million + range and are offered by non banks. These loans typically are unsecured, are used for working capital purposes, and have rates in the low to mid teens due to their unsecured nature.

In summary, working capital means different things to different business owners. Our focus has been on real cash flow and working capital for your business. Certain government programs might meet your needs in the areas of term loans, leasehold improvements, etc. But true working capital is the financing of current assets such as receivables, inventory, and purchase orders. Speak to a trusted credible financing advisor to determine which type of facility meets your needs.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/Working_Capital_Financing_Canada_Sales_Growth.html

Factoring – Financing Canadian Receivables

Factoringfinancing in Canada is a proven, and growing in popularity method of generating cash flow and working capital for your Canadian firm. It often works best in conditions when your firm is experiencing higher than historical growth, or in many cases you are a start up or early revenue company who requires additional cash flow that you might not be able to attain from Canadian chartered banks.

In speaking to many clients factoring is clearly mis – understood. Last week we got a call from a customer who inquired whether we purchase bad, uncollectible accounts receivable. We indicated to that customer that what she in fact wanted was a commercial collection agency! Factoring in fact is the opposite of that, it’s the purchase of your accounts receivable ( and we mean the collectible accounts ! ) for immediate cash flow .

Factoring in Canada is somewhat of a fragmented industry, so we encourage you to seek and speak to respected and credible business financing and factoring advisor. The type of firm you end up dealing with in factoring will often affect how successful you viewed this type of financing strategy. There are a number of different types of factoring in Canada. Technically speaking we can refer to the types of factoring in the following manner –

Full notification invoice factoring (This is the U.S. and British model)

Non notification factoring

Spot factoring

Factoring in the context of a true working capital or asset based line of credit facility

We are always concerned that customers, armed only with a little bit of information or their first contact with a firm who only offers one type of factoring, will get themselves into the wrong type of facility, thereby tainting any future positive thoughts they might have on this type of financing. The bottom line again – you can speak to an unbiased expert on how this financing can help your firm, or you can choose a hit and miss approach and enter into the wrong type of financing facility. We will take option # 1 any day!

Let’s talk a bit about factoring in general as opposed to focusing on which type of factoring best suits your firm.This type of financing is essentially the purchase of one or all of your receivables, on a one of, of on going basis, to facilitate immediate cash flow.

Remember also that you are not incurring any debt when you are factoring – in fact your balance sheet improves because you are turning over receivables / working capital in a more efficient manner.

Because there is a cost associated with factoring you should generally be comfortable that you have the proper gross margins for the factoring of your accounts receivable.Very low margin businesses, even though they have good turnover are not always best suited for this type of financing.

In summary, factoring is growing in popularity. At the same time the myriad of types of firms that offer this financing, as well as the way in which they offer factoring can ultimately affect whether your firm is a successful user of this financing strategy. Investigate the benefits of this type of financing, ensure you understand who is offering it to you and which ‘factoring model ‘they use, allowing you to better determine if financing in this manner suits your cash flow and working capital needs . That ‘s proper business decision making!

Film Tax Credit Financing in Canada

Film tax credit financing in Canada is a unique and specialized type of financing. While many of the larger film, tv, and digital media firms in Canada are aware of and are utilizing this type of financing, many smaller and independent firms are either unaware that the financing exists, or alternatively know there are substantial tax credits, but were not aware that they can be monetized into immediate cash flow for either project completion, or even moving on to your next project.

All of this activity stems from federal and provincial legislation that was recently amended to increase tax credits to Canadian firms in the three aforementioned sectors:

Film

Television

Digital Media – i.e. Animation, etc

All these program obviously boost Canadian content and help foster Canadas reputation in the industry, and the government, both at the federal and provincial level seems keenly comfortable that these tax credits and incentives, which are non repayable in most cases (yes we said non repayable) generate additional tax and revenue for Canada many times in excess of the tax credit values.

While federal legislation is of course standardized across the country each province has different organizations under different ministries to handle the provincial portion of the grants.

In Ontario as an example you can claim tax credits for 6 different credits – but did you know that if properly claimed you can generate immediate cash flow and financing of these film credits. (The six credits are: Production services/book publishing/sounds recording/interactive media/film and tv/computer animation).

How can these credits be financed ask our clients? Simply speaking if you have valid tax credit claims and the proper certificates in place you can monetize these into immediate cash flow. From a terminology perspective we can almost say that you are monetizing, factoring, or discounting your claim now based on cash flow you will receive from the federal and provincial authorities. In effect they are accounts receivable now on your special purpose entities (i.e. your current project/production) balance sheet.

Clients also ask what qualities or additional information must be in place in order to generate immediate financing of your tax credit. The answer is that you must have your affairs in order, namely the ability to confirm your eligibility, ensuring you have the right certifies either in place or set to be in place, and of course maintain proper records showing your disbursements, etc.

In certain cases , where proper documentation is available and has the ability to be maintained ‘accrual financing ‘ is also available – by that we mean cash flow is made available during your production prior to final certification . This is a true temporary cash flow and working capital benefit for many independent type productions.

A recent paper by the prestigious firm KPMG referred to these tax credits as ‘hidden money ‘. We would point out that the financing of these credits is in fact the true hidden money that could be the final spoke in your productions wheel!

In summary, if your project is eligible for tax credits take advantage of them. If you wish to monetize those credits immediately into additional working capital and cash flow then speak to a trusted, credible and experienced firm in this area. It’s a great cash flow and working capital strategy in one of Canada’s most exciting industries.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/FILM_TAX_CREDIT_FINANCING_3.html

How to Finance a Canadian SRED (SR&ED) claim for Cash Flow

Canadian business owners and financial managers who file SR ED ( aka SR&ED , aka SHRED ) claims in Canada are keenly aware that it is one of the true ‘ government grants ‘ that many people are referring to when they are researching the broad topic of government grants and loans .

Funds approved in your SR ED claim are non repayable, and we cannot think of a better program in Canada that both assists Canadian firms in ongoing research and development, as well as allowing Canadian to maintain momentum in new products, processes, and technologies .

Our is certainly not to questions why the government provides such non repayable grants, they simply do, and as a Canadian business owner you want to be able to maximize your claim.

SR ED credits are applied for every year when you file your tax return. Our focus is on ensuring the reader understands that this tax credit filing is the trigger that allows you to, if you choose, to also finance your claim. These claims are not traditionally financed by Canadian banks, as the banks we feel probably aren’t fully comfortable with the collateral. Most Canadian business owners also know that there is some risk involved in having your claim cut back a bit after it is reviewed by the appropriate department in Ottawa that hands SR ED claims.

If you wish to finance a Sr Ed claim it is important that you follow a much defined process. Let’s review that process and provide you with some additional tips and information on how the claim is financed and what benefits might come out of the cash flowing of your claim.

There exists in Canada a small boutique market in SR ED financing. Given the unique and specialized nature of this financing we strongly recommend that you work with a trusted, experienced and credible advisor in this area of Canadian financing. That will allow you to maximize the size of the financing we believe, but probably more importantly speed up the process.

When clients ask us how long it takes to finance a claim we generally advise on 2 to 3 weeks, assuming the full co operation of your firm in the usual back up to such a transaction with of course includes:

Application to Finance Sred
Related back up to the application – i.e. financial statements, etc
Copy of the SR ED (SR&ED) claim itself
Copies of prior year claims that were approved, if applicable

It’s basically as simple as that.

‘What amount of funds can we receive for our claim?’ That also is probably questions number two from clients – and the answer is that claims are generally financed at 70% loan to value, which means simply that for every $ 100,000.00 of claim you should expect to receive 70,000.00$.

SR ED financing is structured to your firm’s benefit – that is that they are loans that have no payment during the term of the loan. The term of the loan is of course as simply as long as Ottawa takes to process your claim. Various factors are involved in the timing – we can generally say it takes anywhere from two to twelve months to process your final refund cheque from Ottawa. At that time the other 30% of the claim is returned back to you by the SR ED financier, less the financing cost, or the ‘total time to carry the loan’

So in summary, you can of course wait from 3-12 months for your refund cheque for your sred claim, but why not consider putting that working capital and cash flow to work now. In reality all you are doing is collecting a receivable (the s red claim) faster than waiting for a long period of time. Put that money to work into more R&D to stay competitive in your industry, reduce your payables, or invest in additional marketing or machinery. Take advantage of SR ED financing to inject immediate cash flow into your company. Talk to a SR ED finance advisor today!

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/How_To_Finance_Canadian_SRED_SR_ED_Claim.html

Canadian Franchise Financing – Made in Canada Solutions!

Canadian franchise financing requires solutions that are not necessarily part of mainstream business financing . As in all types of business financing we urge clients to consider working with an expert who is credible and experienced in the Canadian franchise financing environment .

There are a solid handful of franchise financing alternatives in Canada . Franchising is growing increasingly popular, and the industry as a whole is a key part of Canada’s relatively strong economy after the difficult challenges of 2008-2009.

Franchise financing in Canada consists of the same two elements that exist in any business financing – debt, and equity . Our work with clients has found that it is more beneficial in financing a franchise for your equity portion of your deal to carry some of the major soft costs . In general, and this is news to many new franchisees, soft costs such as franchise fees, pre paid rents, etc cannot be financing .

As we have stated , your financing is completed via two areas – your equity that you put into the business, and what you borrow . You naturally would have a much stronger chance of success if you put up all the funds yourself, as your franchise would not be carrying any debt – but the reality is of course that is not generally possible .

In discussing franchise financing with clients we point out that financing has to consist of two different mind sets – the financing you need to get the business purchased and going, and then, equally as important , the ongoing working capital needs . Many franchises are ‘ cash businesses ‘ ( example – restaurants ) that require little or no investment in receivalble and inventory . Alternatively your franchise might have a non cash business focus on you need carefull planning on the level of financing you need for a/r and inventory, etc .

Franchises in Canada are financed in 5 ways in Canada . It is extremely important you are aware of those five sources – Naturally the 6th source , unmentioned, is yourself, as you are of course required to make some level of personal investment also .

The Golden 5 ! Franchising in Canada is financed by one major international finance firm , as well as the Canadian banks, who have special departments set up for this type of financing . It is incredibly important to ensure you are dealing with the right group at these two institutions , otherwise you will waste significant time and erase some of the credibility around your financing request .

Our firm supplements the above two sources of financing with leasing for various assets, and in some cases unsecured working capital loans . The final component is the franchisor itself, or the franchisee from whom you are buying an existing franchise . While many franchisees who are selling to your will consider offing vendor takeback financing in general this is tenuous – additionally franchisors themselves are in the business of selling you a franchise , not lending you funds !

In summary, franchise financing in Canada is a focused and specialized niche lending . It is accomplished through a combo of traditional and somewhat non traditional sources . Determine what financing you need to acquire the business, as well as ongoing working capital needs . The words ‘ franchise financing expert ‘ should become a top priority , as an expert will help you cobble together your total financing solution that meets your personal needs .

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/Canadian_Franchise_Financing_Solutions_in_Canada.html

Asset Based Lines Of Credit – Canadian Solutions

Asset based lines of credit are solid solutions for Canadian business financing. They are often an alternative to a Chartered bank line of Credit – (in some cases the banks themselves even offer this unique financing as a subset of their services)

Asset based lending should not be confused with ‘loans ‘or ‘term debt ‘. Instead it is a working capital or line of credit facility that is tied to your firm’s inventory, receivables, and in some cases equipment and real estate can be added.

Although asset based lending, or ‘ ABL ‘ facilities as they are called are often viewed as an alternative to Canadian chartered bank lending, the hidden reality is that some of the largest corporations in Canada are now utilizing this type of financing . So if some of Canada’s largest corporations have abandoned traditional bank financing should your firm at lease consider and learn more about this type of facility. We certainly think you should investigate both the benefits and the mechanics of this type of financing facility.

Rates on ABL facilities in Canada vary, and you can pretty well guess the parameters of why they vary – which is simply:

- deal size of the facility
- your firms overall credit quality, and some component of assessing what industry you are in and
- How your industry functions Vis Vis profitability, seasonality, and other industry dynamics.
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- We can say in general that rates on ABL facilities in Canada go from 7-9% per annum to 1 ½% per month depending on most of the factors we listed above.

Overall credit quality challenges should not deter you from looking into a Canadian asset based lending solution – for the simple reason that this type of financing focuses on assets, not overall balance sheet and income statement quality. Simply put, your company might be currently losing money or experiencing a unique challenge, but you might find you still qualify for a very significant facility.

On a day to day business the most significant feature of an asset based line of credit is the ability for you to bridge cash flow that you have tied up in inventory and receivables. Your asset based line of credit will fluctuate based on the key elements of the ABL security, namely the receivables and inventory. The good news is that as your receivables and inventory grow you can draw down on more funds – unlike a bank facility which might have certain caps on how much exposure the bank will take with your firm on an operating line basis.

The one aspect that you should consider in such a financing solution is additional reporting, but if you can properly account and report on receivables, inventory, etc you should not be concerned. Many clients tell us that some of the additional ‘reporting’ that comes with an asset based credit line actually has helped them understand their business better!

In summary, asset based lending solutions are working capital and operating facilities that are non bank based. They can provide you with greater liquidity and access to capital that might normally not be achieved through traditional banking. Talk to an expert in the area, determine if this financing meets your needs, and ensure, with the help of an expert, that you access the type of facility that provides you with working capital in a manner that suits your company’s cash cycle
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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/Asset_based_Line_of_Credit_Canadian_Solutions.html

Working Capital Financing – Canadian Challenges and Solutions

Working Capital Financing - Your Canadian business is challenged to find the best working capital solution for your firm. Canadian business owners and financial managers have unique needs – factors that affect their needs are the types of customers they have, their industry characteristics, etc.

Let’s break tradition and insert the summary of our information we’ll share right here! Quite simply it’s that you have a choice of working or seeking advice from an expert or a non-expert in business financing. We’ll take an expert any day!

There clearly in the mind of Canadian business owners exists a gap in financing solutions. Working capital is needed by your firm for both long term and short term needs.

One of the best programs, bar none in Canada is a government sponsored guaranteed loan that goes by the name of CSBF loan, or BIL loan, and most people commonly call it the SBL Loan, which stands of course for small business . There is only one problem with it, as we tell our clients. It’s simply the program covers only equipment and leaseholds and real estate – and that aren’t working capital!

Working capital needs are commonly day to day needs - other terms for it are operating lines of credit and net working capital. The two most common assets in this category are receivables and inventory. So short term working capital needs need to be addressed within those two asset categories.

The best form of working capital financing is of course free financing – what is that you ask? Its supplier financing, because the credit suppliers grant you has no financing charges applied to it, and by delaying payment of your payables you are in effect generating cash flow and working capital. But that must of course be balance off by the need to maintain positive supplier relations in the context of a long term business relationship.

The biggest challenge in the working capital environment is fast or dramatic growth within your firm. Sales are great, fast growing sales are even better, but at the end of the day they require your additional investment in receivables and inventory.

How can your firm finance receivables and inventory. It can be done in a number of ways – those methods include –

- Bank operating lines
- Inventory financing
- Floor plan financing
- Asset based lending
- A permanent cash flow loan that injects working capital but is paid back on a long term basis

Most small and medium sized business we talk to have a major challenge in obtaining the proper overdraft or line of credit facilities from their banks. Quite often they also have a hefty inventory component in their working capital needs and are unable to get proper margining on inventory. In those cases we strongly recommend to clients that they focus on alternative financing – this comes at a higher cost but often times can be the source of financing that takes your company to the next level of sales and profit growth.

In summary, working capital challenges are complicated. You need to determine what your cash flow needs is, how they will be met, and if they aren’t being met by your current financing strategy consider alternative methods of working capital financing. And, as we stated, you can talk to a non-expert in this area, but we don’t recommend that!

Lease Financing Canada – Canadian Asset Financing Solutions

Lease financing in Canada is the acquiring of use of assets such as machinery, vehicles, and computers. Most Canadian business owners and financial managers have recognized for years that this type of financing is a great way to avoid large investments of capital in equipment. You use and profit from the equipment, but the lease finance firm owns the asset for the interim period of the lease.

Canadian business has almost unlimited choice in what can be leased. We advise clients that their only challenge in equipment financing is simply to ensure they have structured the right lease with the right finance partner that offers superior rates, terms, and structures.

Most of the advantages to leasing in Canada are already know to Canadian business owners:

- fixed lower monthly payments
- certain tax advantages
- preservation of working capital
- staying competitive by utilizing and acquiring more up to date technologies for your plant or office needs
- lease payments are expensed and if structured properly do not significantly impact your balance sheet

Naturally there is no ‘ perfect ‘ solution in business financing for all firms for all the time – In certain circumstances you might end up paying a bit more for the asset over time, also, most lease payments, as we noted are fixed, and if you used a loan strategy you might have access to variable rates .

Although most Canadian business owners utilize a lease to own strategy in general you should always be focusing on matching the term of the lease with the useful life of the asset.

We can’t over emphasize that each customer has unique needs and may benefit more from certain of the key benefits of leasing depending on their overall business model and financial structure.

Rates in leasing are important, but at the same time the ‘rate ‘on the lease should not drive your over all decision to finance with any one particular firm. Flexibility, favorable buyout terms, easy to understand documentation, and prompt credit approval are all key factors in equipment financing.
Overall credit quality of your firm is also a key factor in Equipment financing in Canada. We can categorically state that lease financing is utilized by start ups to the largest corporations in Canada. Therefore approvals for equipment financing are focused on the general over all credit quality of your company, and in the case of small business, the credit attributes of yourself as a business owner.

In Canada the players in lease financing are: Banks, Equipment Dealers, Independent finance companies, captive finance companies, and lease financing specialist with a wide access to the market.
In summary, lease financing is a solid strategy for equipment acquisition in Canada. Canadian business owners should weigh the lease versus buy decision carefully and determine which lease benefits are most important to them. Work with a specialist in the area based on your asset type, your firm’s credit quality, and any unique issues you might have in your firm or industry. Utilize lease financing to grow and profit in today’s competitive environment.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/Lease_Financing_Canada_Canadian_Asset_Financing.html

Floor Plan Financing Canada

Floor plan financing in Canada is clearly a niche financing industry. The landscape for floor plan financing has changed dramatically over the years, with this type of financing become a very specialized field.

When clients ask us for floor planning information several key points are always up for discussion. We will focus our article information on non-automotive floor plan financing.

Canadian wholesalers and retailers in non automotive markets often find it critical to keep sufficient inventory on hand for product sales, demonstrations, and order fulfillment. This type of focus on inventory is important to Canadian business owners and financial managers.

Your business has the need for inventory and floor plan financing that gives you’re the amount of credit limit you require to grow and prosper.

Interest rates charged on floor plan financing are important – equally as important is your ability to maintain enough gross margins to absorb floor planning charges and still generate a profit.

Floor plan financing in Canada is available for any wholesaler or retailer who is aligned with reputable manufacturers. Historically floor plan financing was for select industries but now it has broadened to a variety of consumer and commercial products. In the 1980’s and 1990’s floor planning of computers for OEM’s and Value added Resellers was an important component of the computer industry.

Floor plan financing is all about inventory. You need inventory as your products are sold to your customer based.

In many cases it also makes serious sense to ensure you have a financing program in place with the customer base also that is a logical extension of the floor plan financing that you yourself carry.

Floor plan financing is somewhat of a ‘ risk’ based financing, in that your floor plan lender always carries the risk that your firm might sell product ‘ out of trust ‘ – which is the finance terminology for the collateralization of your inventory by your floor plan financing firm . A significant amount of emphasis in any floor planning arrangement is the focus that is put on your firms overall all credit worthiness and ability to conduct business in an honest and ethical manner. Clearly your business model also necessitates that your have strong inventory and control systems in place which allow you to report regularly on the inventory that is financed.

In Canada the Person Property Security Act and the concept of ‘security interest ‘is the lending documentation by which your inventory is financed and collateralized.

While physical inspections and regular and ad hoc audits are a key element of floor plan financing clearly the use of technology and the internet has significantly enhanced your ability to interact with your floor plan lender . At the root of all floors planning is the ability for the manufacturer, yourself, and the floor plan financier to communicate effectively. The overall all credit worthiness of your company drives the final decision on what amount of maximum floor planning credit line can be provided.
We often speak to our clients regarding floor planning facilities on the need for your business to understand your inventory turns – in a perfect world you want to have a strong inventory turnover which will drive a lower cost of carrying floor plan financing .In many cases the receivables you generate out of a sale of inventory can help to bolster your overall floor plan financing arrangement.

The ‘ worst case scenario ‘ in any floor planning arrangement is your firms inability to pay the floor plan financing at which point measure are taken to repossess product . No one wants that of course. That’s the most negative aspect of floor plan financing – the positive aspect is that it provides tremendous financing power for sales growth.

Floor plan financing is a key element of business finance for any wholesaler or retailer of manufactured products by well known household and industrial names. Speak to a credible, trusted and experienced financing in this area to determine how floor plan financing in Canada works and how it may improve your revenues and profits.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/floor_plan_financing_canada.html

Banks, and Me ...

Canadian banks got zapped in a Financial Post article on April 14 called ’ SMALL FIRMS SCORE BANKS POORLY : STUDY ’ .

While CIBC and RBC got a solid scathing quite frankly every Canadian chartered bank got its share of criticism with respect to their commitment to small business .

This article could not be any closer to what this BLOG and my business ( www.7parkavenuefinanical.com ) is all about . We originate business financing for Canadian corporations of all size, from start ups to major corporations .

My own thoughts on this are very clearly - its the banker, not the bank. Doesn’t anyone get this ? We work with some great people at all these banks , in fact a large part of my own time is spent searching these people out and cultivating business relationships with them . In any large organization you have under’performers and over performers . We have contacts at these institutions who wake up every day and look for small businesses to finance . Many of their peers , in my opinion, dont do that .

When Canadian business owners and financial managers are looking for business financing do you think they go to the balance sheet and financial statement of the banks and determine which bank might have the most capital, cash on hand, etc . That doesn’t happen .

What they should do is try and find a banker who is sympathetic to their needs and who will outline financing options, and then champion that customers cause within their own organization based on their job parameters and the particular offerings of the bank .

It’s the banker , not the bank - can I be anymore clear?!

Stan

Sr&Ed Financing – Cash and Working Capital Now for your claim!

SR&ED financing (also known as SR ED / SRED Financing) is a very positive working capital strategy to monetize now your SR&ED tax credit filing.

Canadian business owners who have filed SR&ED claims in the past are already aware of the great aspects of this program, under which the Canadian federal and provincial governments provide a non repayable grant to your privately owned Canadian company for your expenditures relating to improved products and processes. The fact that you can recover a very significant portion of your salaries, materials, equipment and portions of overhead is in our opinion the best program in Canada as it relates to government actually really helping Canadian business.

Many clients approach us and ask about ‘government grants and loans ‘. While there are of course many such programs out there the SR&ED program is real money under a much defined process. And it is non repayable – that’s a good thing.

Let’s assume you are aware of the program, have filed claims, or are filing your first claim. The claim is of course filed at the same time you are filing you year end tax return. The claim can be prepared by yourself, but in our experience 99% of claims are best prepared by specialized consultants of your accountant.

So you have prepared a claim and you have filed it. Of course you can wait for your government refund cheque, but that process involves of course also going through the review of your claim by Canada Revenue and in some cases having a technical audit of your claim. The government website indicates that depending on when you are filing, whether it is a first time claim, and if you are filing for multiple years that you can wait anywhere from 4 – 12 months based on some of the above noted factors. CRA in Canada has a specialized team that works in this area and clients tell us that the overall review of your claim is a fairly standardized process – naturally the overall quality and back up your provide to your claim helps finalize proper adjudication and approval .

Can you get cash and working capital now for your claim? Yes you can. Simply work with a trusted, credible and experienced business advisor in this area and immediate financing can be provided for your claim.

Clients ask what the basic process is over view to get your filed claim financed. It is a very basic process not unlike any standard business financing application. The basic steps are as follows “

-Complete an application – i.e. business details, your current company financials etc
-Provide details of your SR&ED claim

A term sheet can be provided in a matter of days, and claims are financed at generally 70% of the total value of what you have filed, i.e. the combo of the federal and provincial portions. Financing can take place, in our experience in a matter of 2- 4 weeks. You can of course use your SR&ED loan funds for any general corporate purpose, and no payments are made during the loan period. The loan period ends when you claim is processed by Ottawa and you of course receive the other 30% of the claim at that time, less any financing fees.

Consider maximizing the Canadian SR&ED claim by turning your filing into immediate cash flow. That is a solid working capital strategy that assists your firm in growth and competitiveness.
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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/Sr_Ed_Financing_Cash_and_Working_Capital_Now.htm

Film Tax Credit Financing – Canadian Expertise and Cash Flow Solutions

Film tax credit financing in Canada is enjoying a mini boom and resurgence due to a number of positive factors. The economy is strengthening and government and industry bodies are both recognizing and capitalizing on the overall benefits to the film, television and animations sectors, which are the prime movers in the industry.(Music and book publishing traditionally rank behind these sectors.

Although the film and entertainment business in general might seem so much more esoteric than, for example, Canada’s manufacturing industry, it should not seem surprising that the business faces the same challenges as any other Canadian firm – namely financing via cash flow and working capital and fundamental product success.

What Canadian participants in the industry need to know is that your ability to finance projects viatax credit financing , accrual financing, and other financing strategies can significantly enhances your chances of overall financing success.As most industry participants know you don’t necessarily have to have a production hit to ensure you can still capitalize on financing and recovery of costs.(Having the market accepts your movie, show, or product is still very nice though!)

There are a number of late breaking industry changes in the market place that are extremely attractive and are therefore able to assist you in the financing of your projects. As we have noted, it certainly has help when federal and provincial governments have stepped up to the bar and committed millions of dollars of tax credit ability.

Your ability to capitalize on the financing of those credits could be a major factor in the successful completion of your projects.To re- enforce our point on government commitment the there is even intellectual property financing assistance in screen based industries.

The core of successful financing is knowing what is available and then implementing and utilizing innovative strategies around financing.

In any business you have a choice of working with experts, or trying to get financing things done on your own. By utilizing the services of a credible, experience financing advisor in this area you have the ability to broaden your financing possibilities.

When clients as us for tax credit financing assistance they are pleasantly please to hear that that they have the ability to monetize their tax credits into immediate cash flow and working capital. As a producer or other principal you simply might not be aware of the myriad of financing options available, even if it’s just the availability of various tax credits.

Many industry players might think their productions go to some sort of tribunal or jury for adjudication – in fact that is not the case. Your main focus in film and related tax credit financing should be as follows:

-Determining which credits you should use Vis Vis cash flow maximization – as an example for certain of the refund credits you have to choose between one and the other

-Getting certification in place

-Financing your certificates( Innumerous instances accrual financing is possible ; so cash flow is then almost instantaneous provided you meet basic criteria

Surrounding yourself with a credible team always helps in any industry.Knowledge of Small nuances in the programs can actually save, and get you thousands of dollars – a good example is the OFTTC credit and your willingness to shoot a production outside the GTA – In effect you are in a position to recover 45% of your funds at that time, with just that one issue being considered and implemented.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/Film_Tax_Credit_Financing_Canadian_Expertise.html

Franchise Finance Canada – Financing your Canadian Business Purchase

Franchise Finance in Canada calls for both you as the owner, as well a lender, to, on a combined basis, complete the financing you need for a franchise acquisition. In Canada you could of course be acquiring a new turn key franchise from a U.S. or Canadian franchisor, or in many cases also considering the purchase of an existing franchise.
Several key questions are always table by our clients – inevitably they are:

-How much do I have to put into the business as my own investment?
-Where do the other funds come from?
And, oh yes, how long does the process take!

We always encourage clients to start thinking of financing very early in the process. A great place to start is often, guess who? Your franchisor! That is simply because if they have a multi unit system already in place they usually have a strong indication of how these franchises were financed. Information you obtain from the franchisor or other existing franchisees is invaluable , as the franchise financing journey is a puzzle to many .We also are quick to add that you should never expect financing assistance from a franchisor in the form of loans, etc – The franchisor grows their business from selling you franchises, not loaning you money .
In the U.S. the majority of franchises are financed via the SBA, which stands for Small Business Administration . This is a government sponsored / funded loan, and Canada has a similar program that is commonly known by several different names – they are SBL, CSBFL, and BIL. All of these are acronyms for the same program.

You should most certainly incorporate your business to both gain access to business credit as well as limit personal liability. Personal liability under the Canadian version of the program is limited to only 25% - that’s a great deal for the business owner, as it of course limits your risk.
Most franchises in Canada are financed via this program. Sounds good so far right. We simply point out to clients that achieving success in this financing program is simply a case of:

- ensuring you understand the basics of the program – i.e. what it does not do
- complying with the information required by the program

When planning your franchise financing focus on what amount you can contribute personally to the business, and also understanding the components of financing you need. What are those components? They are:
- Soft costs ( example – franchisee fees, pre paid rent, etc )
- Equipment
- Leaseholds ( if required )
- Working capital

We can’t over emphasize the need to work with an experienced and credible business financing advisor who preferably has a track record of franchise financing success. A thorough business plan, the right advice, and understanding you’re financing needs – all are critical elements to franchise financing success!

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/franchise_financing_canada_business_purchase.html

Asset Based Lines of Credit – Canadian Financing Solutions

Asset based lines of credit are an alternative to Canadian chartered bank financing in Canada. It is certainly well documented that Canadian business, small, medium, and even large has experienced general credit tightening by our chartered banks here in Canada. Business owners and financial managers are forced to consider alternative financing solutions which are certainly not numerous in natures here in Canada.

Asset based lines of credit are absolutely one solution to the financing you might be searching for. Surprisingly many of our clients have not even heard of this type of financing, much less understand it.

Many customers are actually forced to consider an asset based lending solution because of the concern of owners, lenders, and suppliers that their business does not have the ability to finance the firm properly. When suppliers and other lenders act aggressively on the belief that your firm can’t meet its obligations problems ensue!

One key point we continually make with clients, and we would recommend this to everyone is that you should be aware of your financing alternative before you are forced to be aware of them. Simply speaking, it behooves you to learn about asset based lines of credit. Although the ‘ABL ‘ ( short form ) financing facility has been around for years some people still associate it with distressed lending – it is not just that . It also is not borrowing or taking on additional debt, which is certainly a relief to owners.

So what is it then? It is just the financing of all your current (and sometimes fixed) assets as total collateral for borrowing. In fairness most of that financing is done on receivables and inventory

Because you are in effect borrowing more than you ever could have in a traditional financing arrangement there is some additional reporting requirements when you borrow under an asset based line of credit. But frankly when we talk to customers they indicate this additional reporting often helps them to understand their business better.

It is interesting to note that many firms utilize this type of financing for a long period, and view it as an excellent source of financing, while some business owners and financial mangers view it as a bridge to solve temporary working capital and financial statement challenges. Generally firms considering asset based lines of credit cant meet some of the ratios required for traditional banking and debt service, yet at the same time they have new contracts, need new assets, or more headcount , etc – with asset based financing being a solid solution to provide this additional capital .

In summary, asset based lines of credit are a business financing option. They are utilized in Canada by hundreds, even thousands of medium sized and larger firms. They are a form of non traditional lending that in reality is become mainstream. Asset based lines of credit provide the maximum working capital against your operating assets such as receivables, inventory and equipment...

Speak to a business financing advisor who has credibility, experience in this aspect of Canadian business financing. You can then determine that if it’s the right solution for your Canadian business.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/asset_based_lines_of_credit_canadian_financing.html

Equipment Financing Specialist – Canadian Leasing Solutions

Equipment Financing in Canada is a specialized type of financing. Lease financing on its own goes back hundreds of years and is a widely accepted financing tool.Major companies in Canada utilize lease financing, why shouldn’t your firm.

Lease financing covers all sorts of equipment – that includes production equipment, transportation equipment, machine tools, computers, etc. In general most Canadian banks do not offer lease financing, although two of the Chartered banks have dedicated lease operations but require a very high quality credit quality.

You should consider leasing because it’s a simple to arrange financing agreement between yourself, your vender of the equipment, and the lessor. Leasing should not be considered complicated, however Canadian leasing practices and the parties that participate are much different than in the U.S. . . . It benefits Canadian business owners and financial managers to ensure they understand why leasing is so popular.

Two basic types of leases are available for the Canadian business owner – they are capital and operating leases.Operating leases are often promoted by manufacturers or vendors and they often include maintenance and insurance.You should consult with an Equipment financing specialist to ensure an operating lease is right for your firm.The essence of an operating lease is that your intent is to use the equipment, but not to own it. When you enter into an operating lease ensure that you have no intention of owning the equipment at the end of term. In this case your payments will be much lower than if your intention is ownership, and you will have the benefit of some balance sheet improvement, as this lease is not shown as debt on your balance sheet. The alternative lease is a capital, or financial lease, which denotes ownership.

We can’t over emphasize the need to work with a trusted, experienced and credible advisor in this specialized area of financing in Canada. Seek out a professional that will assist you in acquiring the equipment you need and answer any questions you have about the proper rate, term and structure that your firm deserves based on overall credit and asset quality. Equipment can be new or used, and a good lease financing specialize will be pleased to assist you in maximizing the benefits of lease financing, which include:

-Better use of working capital

-Often cheaper than a term loan

-Wont restrict your current banking arrangements

-Payment flexibility

-Fixed rate financing in today’s low interest rate environment.

Specialists in any industry are a benefit. Consult a lease financing specialist for your asset acquisition needs.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:

http://www.7parkavenuefinancial.com/Equipment_financing_specialists_canada.html

Lease Equipment Financing – Canadian Solutions

Canadian Lease Financing Solutions are available for Canadian business owners who are acquiring assets and business equipment.

When a Canadian business owner or financial manager considers a financing transaction he or she wants to understand the advantages and disadvantages of such a financing. When we meet with clients we clearly explain that no one financing solution is a perfect solution when evaluated against other alternatives.That certainly applies to leasing.

Are there actually disadvantages to a lease financing strategy? Here are a couple of things for you to consider. Naturally a lease is a fixed payment arrangement, so you do have a constant obligation to meet the agreed upon payments over the term of the lease. If you have chose a ‘ lease to own strategy then clearly you own the equipment at the end of the lease – in some cases certain equipment holds value and actually appreciates, but 99% of business assets, other than real estate, decline in value . Also, your accountant may tell you that some of the tax advantages of a lease are less attractive. A lease versus buy strategy may point out that it is actually financially advantageous to purchase or take out a loan.

Well there, we have given you four or 5 reasons why Leasing ‘might ‘not be the best financing strategy. Now though, let’s talk about ten or more reasons why Canadian lease equipment financing solutions in fact might be very attractive and appealing to your asset acquisitions!

The most obvious benefit of leasing as perceived by Canadian business owners continues to be that it allows your firm to conserve working capital. We talked bout how a lease versus by analysis by your accountant or financial team might show that leasing is not the best acquisition strategy – however in many cases, depending on criteria assumptions, it in fact may well prove to be a more profitable financing and cash flow strategy.

If your firm has bank loan or arrangements with any other lenders you are often, if not always subject to other covenants and restrictions they have imposed re collateral, personal guarantees, and ratio covenants. In a lease financing strategy the collateral is generally just the equipment, it’s a very stand along type of financing!And naturally those bank lines and arrangements that we just spoke of are not disturbed; you can still use them for day to day working capital and cash flow.

When clients ask how long it takes to get an approval and financing completed we generally indicate that can be done in a week or so with their full co operation. Generally that type of time line cannot be met with other types of financing. And payments and cash flows can always be structured to meet your financing needs. In effect you have arranged an alternate source of financing for your firm, and all financial gurus will advise you to ensure you have multiple, not just one, source of business financing.

In May cases you are acquiring business equipment and assets because of budget issues and leasing certainly helps to eliminate what our firm calls the ‘obstacle to innovation. Certain assets your lease will ensure you have in effect created a hedge against obsolescence.

Well, in summary, we have given you four or five reasons not to choose equipment financing in Canada as a financing strategy – hopefully you will weigh those against the ten or so great reasons to financing via leasing. Speak to a trusted credible an experienced advisor in this area if you wish more information.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/Equipment_financing_specialists_canada.html

Working Capital Financing – Canadian Solutions

Working Capital Financing – small and medium sized firms in Canada do not necessarily have the options that some major corporations have in putting short term and long term working capital in place for their business. Larger companies have somewhat easier access to credit, operating lines, and ability to tap into public or private equity.

But what options does the small and medium sized business have in Canada for generating working capital and cash flow?

Every business owner knows the challenge of not being able to accept large orders or contracts because of a lack of funding. And if they are in fact able to take on that business it of course means they wont get paid right away – they will have to wait 30, 60 or 90 days for their receivables to be collected .

Working capital itself assists your firm to meet its daily requirements and allows you to grow the business. It also allows your firm to extend credit on favorable terms to your customers.

Solution? There are a number of solutions to consider. If all firms were the same size and had the same problems we might have some easier decisions. The fact is though that when we meet with clients to outline working capital solutions each company is in a different industry, they have different business model, and their funding needs vary by size and nature.

Let’s recap some of the solutions available.

In many cases you may wish to consider an angel investor for your business – another way of looking at this is a strategic partner, perhaps a supplier or customer who sees significant benefit in working together with yourself.

Canadian chartered banks offer a number of programs, but you should ensure you feel you can meet bank requirements. Some of those requirements are that you have been established and the owners of the business have a good reputation and reasonably solid credit history. You should be able to produce financial statements and demonstrate that your receivables and inventory are turning. It’s great to produce a forecast or a business plan, which also assists you as a good planning tool.

Fortunately or unfortunately we have observed that many small businesses in Canada are financing by a certain amount of credit card debt. We can only say on this point that if you are able to meet the credit card payments and get a reasonably low rate credit card it is in fact a source of working capital, not the best one, but it works.

Another great working capital solution is to take out a home equity line of credit and loan it to your business. The business pays you back, and the loan interest is deductible – it’s a solid strategy in many cases.

The government of Canada offers a Small Business Loan program that is one of the best programs in Canada for Canadian business. The one technical point on this program is that it covers only equipment and leaseholds and real estate, so you should ensure these programs meets your exact needs. One other government entity on the federal side offers working capital term loans; these are cash term loans and are generally unsecured, with only the promise to pay of your company and yourself as owner. Rates are excellent for what you are getting.

One of the most power forms of working capital financing comes in two flavors – factoring, or an asset based non bank lending facility for receivables and inventory. These two facilities are probably the best working capital solution in Canada, as they give you full liquidity against your current assets, receivables and inventory. And as importantly, they don’t put debt on your balance sheet, just cash. That is a good thing!

Speak to a trusted. credible and experienced business financing advisor to determine your working capital needs and which solution works best for your Canadian firm.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/working_capital_financing_canadian_solutions.html

Equipment Finance – Sale and Leaseback Solutions Canada

Equipment Finance is one of the most popular and widely used financing strategies used by Canadian business owners and financial managers. It is a unique financing opportunity because it is kind of the opposite of a normal lease financing strategy. Why is that? Normally your firm has the need for equipment, and has cash flow and working capital to make the payment.

In a sale and leaseback financing the opposite is true. You have equipment, it’s paid for, and the capital is of course tied up in the fixed asset account of your balance sheet. How can you unlock that capital and put it to work to generate sales and profits? The answer is the sale leaseback strategy.

You should consider a sale leaseback strategy when you have a need to improve your liquidity. What is the sale leaseback – very simply speaking it’s the re financing of equipment you own under a lease strategy, so it is not a loan per se. There is one key accounting issue that we should point out though, and it’s simply that if you refinance that equipment and the financing is more than you are carrying the asset for on your balance sheet (you have depreciated the asset over time) then the excess you receive over book value might be taxed as a profit. Bottom line, talk to you accountant on that point.

Implementing a sale leaseback strategy for your Canadian firm is easy – along with the normal business lease application you will need to generate a bill of sale to the lease company that transfers title back to them and title will once again revert back to your firm when the lease is repaid.

Depending on the size of your transaction, or the number of assets involved it might be advisable to get an appraisal , in fact one might ever be a requirement, as opposed to a ‘ nice to have ‘. We point out to clients that often work in your favor as it gives you a sense of what the true value is of the equipment and it might increase the amount you receive under the sale and leaseback strategy.

Another benefit of a sale leaseback strategy is that it potentially will make your balance sheet look better. In many cases your current ratio improves because you use the funds to reduce payables. You are more liquid and can use funds for such things as buying more inventories and taking discounts for prompt payment

In summary, a sale leaseback strategy is a great way to improve working capital and your balance sheet. Speak to a trusted and credible leasing advisor and determine if you can take advantage of those benefits.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/equipment_finance_sale_leaseback_solutions_canada.html

Equipment Financing – Toronto Area

Canadian business wants and needs equipment financing. As the Canadian economy continues to improve your business has the need for new or replacement equipment.
You naturally want to do that in an efficient and economical manner. In general, all types of equipment can be financing – Some of the main categories of equipment that can be financed are:

Computers (‘Information technology” ‘IT ‘ )
Plant and production equipment
Software – (Yes, software!)
Rolling stock – i.e. trucks, trailers, etc
Specialized Equipment

Etc!

The challenge for the Canadian business owner is to understand the Canadian leasing landscape and determine which lease partner suits their needs.

Many of our customers focus on ‘rate ‘, or in effect the price. It goes without saying that your firms want a competitive rate, and clients are surprised when we say they get to pick their own rate! What do we mean by that? We simply mean that your company’s overall credit quality will always determine the rate and structure and term of the lease. However, in order to achieve that best rate or ‘ pricing ‘ you need to ensure your company is presented in the best light possible .

In order to achieve both a prompt approval and a solid structure we strongly recommend that you work with a trusted, experienced and credible lease advisor in your area. The ability to properly understand your needs, and to present them in the best light possible is critical.

What is involved in a solid lease equipment financing submission? In Canada many, in fact the great majority of leases under 50,000.00 can actually be approved without financial statement disclosure. You should clearly expect to be providing financial statements on transactions over 50k.

How is lease approval decisions made? No one factor determines an equipment lease financing approval. It’s quite frankly what our firm likes to call the ‘weight of evidence ‘. That simply means that several key factors such as your financials statement health, the current state of your industry, the asset quality, and your ability to demonstrate re payment are the key factors in any lease financing approval. Depending on the size and nature of the asset any one of those indicators might carry a bit more weight. From a technical point of view the ability to show cash flow repayment is very important.

Clients looking for lease financing often are surprised about a few things – examples are as follows –

-You don’t have to be an established business – lease financing can be for a start up or emerging company also
- Your equipment doesn’t necessarily have to be new, it can be used if you can demonstrate its value and that it has been maintained and still has a useful economic life
- You might already own an asset – let’s say it is not financed, you can lease it back to the lease firm and generate cash flow and working capital from that transaction!
- Banks in general in Canada do not provide lease financing – two of the Canadian banks have lease financing operations but credit quality must be quite good to achieve bank type lease financing
- Being declined does not necessarily mean that you can’t get the equipment financing – we simply re structure the transaction to meet the approval criteria – that might mean a down payment of a shorter term, etc

There! You just learned 5 interesting and valuable facts about lease financing!

If you are looking for Canadian lease financing speak to an experienced professional in the industry and ensure you take advantages of this great type of financing.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see:
http://www.7parkavenuefinancial.com/equipment_financing_toronto_area.html

Invoice Cash - Working Capital Now for your Receivables

Invoice cash - How can Canadian companies address the problem of growth and lack of working capital. The majority of any firm’s liquid assets are tied up in accounts receivable. Over the years customer that paid in 30 days now take 60 or 90 days to pay your firm. This then places tremendous pressure on working capital. Thats the problem - is there a solution.

As a Canadian business owner you in fact feel that pressure every day - one business owner I know who has had his business for over 30 years says you aren’t an entrepreneur until you have ’ sweated a payroll ’ - which of course meets rising to the challenge of meeting that key payroll requirement for your employees .

How can a Canadian business owner of financial manager determine when working capital is tightening? They are some very basic calcs you can perform. There are a number of great indicators you can monitor - here is one - it’s the ’ Collection Period ‘. Simply take your accounts receivable and divide you your average daily credit sales the longer your Collection period number is the greater attention you need to pay to working capital. Receivables are a huge component of working capital. So what if you had a solution to obtain all the working capital you needed based on current and projected sales growth?

That solution is invoice cash, or the immediate factoring or discounting of your accounts receivable. If you have no bank line with a Canadian chartered bank, by sacrificing a couple of percentage points in your gross margin, you can immediately monetize your accounts receivable.

The ’ challenge ’ - if we can call it that, in the Canadian marketplace is simply setting up the right invoice cash facility. We advise our clients on focusing on a ’ non notification ’ facility. Factoring , or invoice cash, or accounts receivable discounting, came to Canada via the U.S. and Europe , where the process has been in practice hundreds of years . Canadian business owners are less willing to turn over their accounts receivable function to a third party finance firm.

We therefore focus on non- notification solutions for clients - a financing facility where you can bill and collect your own receivables, and still get daily, weekly, or monthly advances ( It’s your choice ) on your accounts receivable .

An ever better option is to marry an invoice cash facility with an inventory financing facility - you’ll be able to finance your inventory also. That means only one more thing - additional cash flow and working capital.

Speak to an experienced, trusted business financing advisor on your options for Invoice Cash, also known as factoring, in Canada. Putting together the right type of facility will allow you to generate needed working capital and cash flow to run ( and grow!) your business .

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies,specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/invoice_cash_immediate_cash_for_AR_2.html

Invoice Cash – Immediate Cash for accounts receivable

Invoice cash – What is the problem and what is the solution? The problem or challenge is a classic one for Canadian business owners and financial managers. It is that sales are growing fast, but, guess what? The receivables associated with those fast growing sales and converting into cash. In fact they are tying up your working capital for 30, 60, and sometimes 90 days. How can you tell if this is happening? Well we are sure it’s fairly intuitive to most customers, but you can actually do a very basic calculation on this to verify. We also tell our clients there is one easy way to fix the problem,

We advise our clients to track something as simple as the ‘ Turnover of Working Capital ‘ – Take your sales for the time period, example, month, or year , and divide by you working capital which is calculated by current assets minus current liabilities . If your ratio is trending higher you will find that you are having more working capital challenges.

Our clients often ask for solutions though, not a financial ratio as we have presented above! Invoice cash, also known as factoring or receivable discounting is one solution to the above working capital challenge. This solution also assumes you have been unable to get any, or enough, bank financing to fund your business.

How does this solution work – it’s a simple process of generating your invoice as you sell your product, and then on a daily, weekly, or monthly basis (it’s your choice) sending these invoices to the factoring or invoice discounting firm. They will on a same day basis send you approx 90% of those funds immediately. You have just generated IMMEDIATE cash flow for your business. The other 10% of the invoice is paid to yourself when your customer pays, minus a ‘ discounting fee ‘ , which is a carrying or financing charge for the factoring firm .

Canadian business owners need to ensure they have the right facility. We encourage clients to get the type of facility where they continue to bill and collect their own receivables during the factoring process. Also, the Canadian business landscape relative to invoice cash/ factoring firms is much different than in the United States.

As a Canadian business owner or financial manager contemplating a factoring facility you should consider the following key points:

-What fees are you paying – ensure your fee is clearly understood and has no miscellaneous costs

- Ensure you can bill and collect your own receivables – many factor firms will want to take over to some degree your invoicing and collection function

- Ensure you are dealing with a firm that understands the Canadian landscape – many firm are simply branches of U.S. organizations

- You should ensure that your capital requirements can be met and that the firm can fund companies in your facility size range. More cash flow means more growth, more profits, and more competitive success for your Canadian company. That is a good thing!

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies,specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/Invoice_Cash_Immediate_Cash_for_Ar.html

Inventory and Purchase Order Financing in Canada

Inventory and Purchase Order Financing in Canada are two of the key elements of Asset based lending and financing. What do Canadian business owners and financial managers need to know about this type of financing?

Inventory financing is unique – we say that simply because unless you are working with a specialized lender most financiers, bankers, etc do not understand inventory – naturally if you don’t understand something it is difficult to lend against, which limits financing of course !

You need to work with a lender who will take the time, and already has the expertise to assess the critical element of your inventory, which is very simply what is it worth on an ongoing basis. As a business owner looking for additional working capital and cash flow you want to maximize the amount of financing you can extract from inventory. Your inventory and receivables are huge components of your on going working capital needs.

What are some of those key elements in inventory financing? They are as follows – first of all you want to always ensure that you don’t enter into an inventory finance facility that requires your to store product at a third party warehouse . That becomes cumbersome and adds some additional cost to your facility.

When we discuss client inventory financing needs we also try to ensure they are bundled into an asset based facility that includes accounts receivable – this certainly is not necessarily required, but simply makes the entire ‘ cash conversion cycle ‘ run more smoothly . As you know your cash conversion cycle is simply the ongoing process by which cash becomes inventory which becomes receivables which becomes cash again!

When you establish a solid inventory financing facility you simply are maximizing working capital on an ongoing basis by having pre negotiated a maximum loan to value of your inventory – What do we mean by this and how does it work? Well simply explained its putting in place a facility, which, as an example, allows you to draw down on a certain per cent age of your inventory on hand. You simply provide a list of your inventory, as an example, on a monthly basis, and draw funds against that summary listing. A quick simple example – lets say you are selling shoes to Big Box retailers, and you have 400, 00.000 of shoes on hand every month to satisfy customer needs. If your inventory financing facility is margined at a pre agreed upon 60%, (as an example) you can draw on working capital $4000.000/00X .60 = $240.000.00.
In many circumstances we run into your firm either had no or limited inventory financing, so you have just created 240k or additional working capital for your firm.

Let’s discuss Purchase order financing also! It’s a case of drawing working capital out of orders from customers who are deemed sound. You use the funds to satisfy those orders, gain additional revenue, and increase your overall competitive presence.
P.O. Financing is a gap or bridge financing allowing you to take on larger orders/contracts... With your suppliers paid you can convert inventory into receivables and start the process all over again.
. Your suppliers are paid in advance by the p.o. financier, which frees up your working capital. Key requirements of a good P.O. Financing facility are good reputable customers, PO financing facilities of 100k and up, and your ability to demonstrate you can offer the P.O. as collateral. In some cases insured receivables might make sense also
Not everyone knows about or understands these two types of financings; speak to an expert who has credibility and experience to maximize your use of this type of financing.

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Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com
Originating financing for Canadian companies,specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/inventory_and_purchase_order_financing_in_canada.html