Thanks for dropping in for some hopefully great business info and on occasion some hopefully not too sarcastic comments on the state of Business Financing in Canada and what we are doing about it !

In 2004 I founded 7 PARK AVENUE FINANCIAL. At that time I had spent all my working life, at that time - Over 30 years in Commercial credit and lending and Canadian business financing. I believe the commercial lending landscape has drastically changed in Canada. I believe a void exists for business owners and finance managers for companies, large and small who want service, creativity, and alternatives.

Every day we strive to consistently deliver business financing that you feel meets the needs of your business. If you believe as we do that financing solutions and alternatives exist for your firm we want to talk to you. Our purpose is simple: we want to deliver the best business finance solutions for your company.

Saturday, July 31, 2010

SR&ED Tax Credit Financing - 5 Things You Need To Know

As a Canadian business owner or financial manager your company should be taking advantage of Canada’s SR&ED (also pronounced sred) program for tax credits. The most obvious benefit of this program is that monies advanced to your firm are in the form of a non repayable grant. We tell clients you can’t get any closer to the concept of ‘free money’ in Canadian business that the SRED program.

Did you also know that you can turn that ‘grant receivable’ into a sred loan as soon as you file your claim – in fact in some cases with the right consultant you can generate funds even before you file!

Let’s explore 5 Key Things you need to know about SRED Finance

1. it’s a specialized finance – more on that later

2. If you have a claim you can finance a claim – it’s as simple as that

3. You can generate approximately 70% of the total value of your sred claim (combined federal and provincial portions) as immediate cash flow under a Sr&Ed financing or a sred factoring scenario

4. The time to complete a sred financing is usually two to three weeks – the sooner you start and plan the better

5. SR&ED Tax credit financing does not add debt to your balance sheet – your financing is collateralized by the sred itself

Let’s clarify all those additional points in more detail so you can be well equipped and informed to consider a sred financing.
A sred loan is clearly something that anyone outside of the sred environment hasn’t even heard of - and for the portion of Canadian business that does take advantage of sred claims we can assure you a good portion of that business population doesn’t even know you can finance of ‘ discount ‘ your claims . It’s more or less like selling a receivable that is due your firm –you are simply receiving the cash now.

In Point # 1 we talked about sred finance being specialized – you should clearly seek out and speak to a sred business financing advisor. That will allow you to understand the basics, determine how much you can receive based on claim value, and work through a basic application to get your transaction financing. A Sred loan should be really just viewed the same as any other business financing – getting back the usual application forms and our clients quickly understand that the essence of the financing doesn’t necessarily revolve around rations, covenants, outside collateral , etc, but in fact focuses on one item –your Sr&Ed claim itself .

Point # 2 revolves around the financing of your actual claim. Any claim is financeable, but we caution client that this type of financing makes more sense when it involves a claim in excess of $ 200,000.00 – That should not deter smaller recipients, small claims can be filed, but in reality they make less economic sense for the lender .

In Point #3 we referenced 70% as a guideline for most of sred financing in Canada. So what about that other 30% - lets clarify that. Your firm is advance 70% of the claim on filing – the other 30% of course still belongs to you. That amount is more or less viewed as a ‘holdback’ which helps carry some of the financing costs, and also covers off any possible downward adjustments that Ottawa might make on our claim adjudication. As SRED participants know your claim is viewed from both a financial and technological point of view.

Point # 4 involves of course the favorite questions of most clients - how soon can we get the funding?! As we stated, with your full co operation on providing copies of your claim, info on who prepared it, as well as basis business financing application criteria, you can receive funds in two to three weeks. Most firms are pleased to know that sred financing in Canada does not involve ‘payments ‘on the loan. In some ways the term Sr&Ed loan is a misnomer because it is really the factoring or monetization of your Sr&Ed receivable .Therefore you simply receive the funds and financing costs are deducted from the back end when Ottawa processes your claim and cheque.

As we have already stated the sred tax credit financing does not impact your financial statements, other than of course allowing you to put to use valuable cash flow and working capital as a result of the financing.
Consider a sr&ed tax credit financing when it makes sense to access additional working capital and cash flow and when you don’t want to wait for your funds over a long period of time!


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Friday, July 30, 2010

Franchise Finance – Info You Must Know re: Franchise Financing and a Franchise Loan In Canada

As a Canadian entrepreneur considers a franchise purchase you want franchise financing info re the Canadian environment. When we meet with clients the questions is always very clear –

What do I need to know about franchise financing and how can I get a fast track to franchise loan approval.

Let’s cover off the basics in order that you are well prepared for the full completion of a successful franchise acquisition. That of course includes selecting the right franchise for you ( we leave that up to you !) but lets ensure you are well equipped to cover off franchise financing success on your own or with the assistance of a trusted, credible and experience franchise financing advisor .
Many fundamentals in franchise finance are key, and you should ensure these are in order prior to contemplating a franchise loan for the purchase of a new or existing franchise. (Many of our clients contemplate existing franchises that are being sold for some reason or another – they feel they can better validate chances of success by assessing the business results, location, etc.)

Speaking generally, you should ensure that you have a reasonable credit history and personal credit score. Whether you like it or not the two main credit bureaus in Canada allocate a score to every consumer and borrower in Canada – we can generally say that your personal bureau score should be in the 650+ range to acquire the best, and proper franchise loan approval.
Many clients we talk to believe the ‘franchising fee ‘being charged by the franchisor can be financed. You need to understand that is what people in the finance business call a ‘ soft cost ‘ and you should generally be prepared to use your own working capital for that issue as apart of your total financing plan . Naturally that amount still counts as a part of your overall equity contribution.

We should focus in on that point for a bit – You do not borrow in Canada ‘successfully ‘using the OPM model. OPM stands of course for other people’s money. Business borrowing, whether you are General Motors or an independent franchisee, has to be based on a combination of debt and owner equity. While in some cases you can achieve successful financing in Canada with a 10% deposit, in general the current economic climate calls for a 25- 40% or so owner equity contribution.

Where do clients get this ‘personal equity contribution’ that is a critical part of your franchise plan. In general it comes from savings, the liquidation of investments, or in many cases a collateral mortgage. The one positive feature of a collateral mortgage equity contribution is simply that rates, terms and structures are low and variable. I.E. low rates due to the current rate environment in Canada, and flexible repayment structures, i.e. no pre payment penalties, etc.

The positive advantage of arranging franchise financing for a resale franchise is that you can validate the profit and cash flow potential of the business. We should add that we are always a little bit concerned when a client assures us he or she can over turn the financial position of a failing franchise. Clearly a case of buyer beware we would say.

However, as we have stated, purchasing an existing franchise gives you great insights into the ownership and running of the business – including insights from the owner, i.e. the current franchisee. One can forgive the franchisors for being bullish and optimistic on their business, as their business is of course selling franchises.

We recommend all clients incorporate a business when applying for a franchise loan, if only for the reason that it is prudent to separate your business life from your personal life re liabilities, assets, etc.

So whats our bottom line – it’s simply that franchise finance in Canada is as complicated as you want it to be. Work and seek out a trusted, credible and experienced franchise financing advisor who will assist you in putting together the right franchise loan structure that meets lender and personal needs. That’s a solid financing plan!


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Thursday, July 29, 2010

2 Reasons Why Working Capital Financing via a Business Line of Credit is the best Asset Financing for your Business

A business line of credit may or may not be achieved via a bank facility .only. One of the fastest growing trends in Canada revolves around a concept known as an ‘asset based line of credit ‘. Ironically when we meet with many clients they are not even familiar with the term, let alone its benefits!

So what are the two reasons this type of business financing is in fact better than a Canadian chartered bank line of credit. They are as follows:

1. The facility will bring you higher levels of liquidity, cash flow and working capital based on your asset base

2. You qualify much more easily for a facility that is in fact even higher in line of credit requirements

In recent years the term asset based lending had somewhat of a negative effect or perception when it was discussed by business owners. But, guess what – time changes, and nothing changes faster than trends in business. The 2008 and 2009 global economic meltdown forced thousands of businesses, small, medium and even large to re assess their financing. In some cases that was simply because their financier disappeared! This happened less so in Canada, but the ripples of global liquidity clearly touched Canada also!

So let’s get back to our premise #1 which is that utilizing an asset based line of credit brings you greater liquidity. Why is this so? It is simply because the asset based facility focuses solely on the assets. Traditional financing, as you may have so painfully discovered, focuses on balance sheet ratio, profitability, external collateral, and personal guarantees. The reality is that if your firm is selling shoes to WALMART then historically your bank or lender had no sense of what those shoes were worth or what to do with them in a worst case scenario.

Enter asset based lending! Working with a credible, trusted and experienced asset based lending advisor will allow you to truly leverage assets to borrow for more liquidity, working capital and profit growth.

So what are those assets you can leverage – they are as follows:

Equipment (that is unencumbered)
Real estate

Look at your current working capital and credit facilities – you may have these through a bank, or even more challenging, you might be self financing. If you could leverage tomorrow 90% of your receivables, 50-70% of your inventory, and borrow on a monthly basis against fixed assets would that work for your firm? We have a feeling that in many cases we just doubled and tripled your borrowing power.

Let’s look at our premise # 2- you qualify for more capital with less stringent qualification requirements. This point somewhat dovetails on our point #1 – that is to say that the total focus of an asset based line of credit revolves mostly around one work - the ‘ Asset ‘ ! The values of your assets in fact determine your total operating facility – it is not pre determined by balance sheet ratios, covenants, etc. Most business owners and financial managers use the facility for the primary purpose of providing day to day working capital and liquidity to their firm. Asset based lending has less stringent overall requirements, but we should mention of course that it generally is more expensive than bank financing.

In summary, an asset based line of credit can be used for:

Acquisition of a Competitor
Asset Purchasing

Speak to an expert in this area and determine if the benefits of a true asset based line or credit or non bank working capital facility work for your firm.


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Wednesday, July 28, 2010

Small Business Loans in Ontario for Working Capital – 3 Solutions!

Small business loans for working capital in Ontario and the rest of Canada for that matter are similar to shoes - they come in various sizes and styles! Let’s explore what you as a business owner are looking for when you discuss working capital needs.
Part of the problem we tell clients is simply the terminology. Working capital means different things to different business owners. What it means to you, clients ask.

If we want to keep things simply working capital can be achieved successfully, and in a fairly timely fashion in the following three manners:

1. A cash working capital term loan that injects permanent working capital into your firm and is paid back over a specific period at a fixed rate

2. Monetizing your current asset accounts – i.e. advance high levels of margin against your receivables and inventory

3. Receivable Discounting – otherwise known as factoring your receivables for immediate working capital and cash flow

Those are the three main ways in which we advise clients on achieving working capital fulfillment for their business. We would point out that there are a couple of spin offs of variations of the above strategies – one is so simple that you probably know it intuitively but haven’t focused on it. So what is that strategy?

We will call it our internal strategy – You can increase your working capital tomorrow at no cost – we repeat, no cost by doing the following:

- Collecting your receivables more quickly
- Turning your Inventory over faster
- Slowing down your accounts payable

All of those require management skills and a greater level of customer intrusion – which is to say you do so at the risk of potentially offending suppliers and valued customers. But it is the perfect way to achieve working capital nirvana... trust us on that.

The current business environment makes it very challenging for you as a business owner to achieve any level of working capital via a loan or monetization of your current assets.

Canadian chartered banks are among the most respected in the world, but business owners know that it is extremely difficult to achieve working capital via traditional bank financing. As a business owner you need two things – reliable financing, and financing to grow your business. If you have bank financing and are unable to replace it the situations becomes of course even more challenging, because you become ‘self financing ‘at a good point.

Key Business Point – If your firm has positive working capital (subtract current liabilities from your current assets) you need external financing. For a starter you are essentially stopping or at a minimum hindering your growth when you are self financing or have financing challenges with traditional institutions.

One of the best pieces of advise we feel we give business owners is to not focus on one solution only as the ‘ holy grail ‘ to their working capital challenges . The reality, in our experience is that the solution to cash flow challenges will come from a variety of different sources, certainly two at a minimum that will allow you to achieve working capital and cash flow piece of mind.
We have discussed simply better internal controls around working capital accounts to self achieve better cash flow. There is a finance expression we recall – we believe its along the lines of ‘ assets in the barn ‘ – what that simply means is that your firm might have unencumbered assets ( the best examples are equipment , machinery, real estate ) that can effectively be monetized into a bridge loan or working capital loan .

Most alternative financing structures come with high rates than traditional banking. We address this issue with clients by saying that in some cases these solutions will actually save your firm from extinction, but on a more positive note, they can, despite their costs, help you grow sales and profits, thereby offsetting much of the perceived higher costs.

Factoring is a good example of that, as we have shown many clients that this can be an effective way to borrow capital at almost no cost if they use the tool effectively and enter into the right type of facility. That is just one example.

Don’t be afraid to consider new or alternative working capital sources, it might be the best business financing decision you ever made.


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Tuesday, July 27, 2010

Leasing Construction Equipment New and Used

Leasing construction equipment new and used is a huge part of Canada’s equipment financing industry. The fact that used equipment can be financed at satisfactory rates terms and structures is sometimes news to Canadian business owners and financial managers.

The reality is that this type of financing is a somewhat specialized area of finance and we urge clients to seek a trusted, credible and experienced lease and financing consultant or advisor in this area of Canadian business financing.
Used equipment, particularly in the construction industry, (but in reality a variety of other industries) is financed to the tune of hundreds of millions of dollars annually.

The equipment plays itself out in a variety of different ways – Companies grow, the acquire other firms, some firms go unfortunately, out of business , yet at the same time the values of equipment hold up significantly due to the quality and nature of the products .

Naturally we have just gone through one of the most difficult times in the global economy ever, and , as such , for some of the aforementioned reasons there is a variety of equipment for sale and for re financing .
We would point out to clients that it is very prudent to liken the acquisition of used construction and heavy equipment to renewing your mortgage. By knowing you are pre approved at certain rates and structures gives you significant purchase leverage when negotiating a final price. Even though some industries and sectors, geographic and otherwise are in a slump there is still a deal to be made on a variety of heavy equipment.

When you are acquiring used equipment, construction or otherwise, you should be looking for the same type of leases that you would entertain for other business equipment financing. You have, as always, two options – lease to own, known as a capital lease, or a ‘lease to use’, more commonly known as an operating lease. Given the high dollar values of some of the larger equipment it clearly might make sense to entertain an operating lease if that type of lease can be negotiated satisfactorily. That comes of course with off balance sheet flexibility, and, as importantly, the ability to purchase, upgrade or renew at the end of the lease; and that’s your decision at the time, not the lessors!

Just look at the benefits of such financing. If you can derive both productivity and profits from a piece of used equipment, and get financing in place that is satisfactory in overall pricing, terms and structure you have saved many thousands of dollars in purchase price .

All of the traditional flexibility that is associated with lease financing accrues towards used equipment financing also – they include better cash flow management, the ability to control obsolescence, and the ability to put ‘good debt ‘on your balance sheet – i.e. assets that will be used for production and profits. You should also remember that you can negotiate to include soft costs in your used construction equipment financing – they might include warranty, maintenance, delivery and installation.
Years ago the American firm CIT did a study on why contractors and firms leased equipment – the results were very interesting:

- Many firms leased because they saw a limited need for the asset – i.e. not a permanent need

- Unexpected need for equipment often came up as a driver in lease financing

- Interestingly enough cost was never really the major driver in the lease or purchase decision – as you thought it might be of course

- Continually upgrading leases was also cited, given the need to stay current and competitive

So whats our bottom line – simply that you should consider the used equipment construction market for asset acquisition when it makes sense – and by working with an expert lease partner you should be able to maximize the benefits of your acquisition from both a financing and productivity viewpoint . That’s solid Canadian business financing sense!


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Computer Equipment Leasing in Canada – 3 Things You Need to Know

Business Equipment Financing, including computer leasing, telecom equipment etc is the method by which some of the most sophisticated and largest companies in the world use to acquire technology.

If you are an informed business owner or financial manager you can use some of those sophisticated options for your acquisition needs.

Let’s cover off three critical things you need to know to give you the edge on computer and technology financing. These are:

1. The type of lease you choose can dramatically affect the financial and technological aspects of your acquisition

2. Software and soft cost can be included and financed!

3. Your end of term options choices need critical evaluation – now

Today’s rapid changes in computers, telecom equipment and other technologies require of course that you stay ‘leading edge ‘. Naturally there is a cost to acquiring the newest and the best. In our first point we ironically are encouraging you to immediately start thinking about the ultimate use and benefit and value of the equipment. To do this you need to have the basics on two types of leases. What are those two types? They are ‘Capital’ and ‘Operating ‘.

How can we more clearly define how you should think of those two types of leases? It is simple – As a Canadian business owner or financial manager you want to ask yourself two questions - Do I want to use this asset and return it when it’s reached its useful life, or do I want to own it at the end of the term of my lease. The industry puts many technological, financial, and marketing spins on these two choices, and this is where business people get confused, so simply focus on two words, use or ownership.

If you wish to own the assets – i.e. computers, telecom equipment, high tech business equipment for your production, printing presses, etc, then you should focus on a capital lease. At the end of the term of that lease you will own the asset. The reality though is that technology changes rapidly – our most obvious example is computers. As such you want to seriously consider returning the equipment at the end of the lease. That will more often than not lower your cost, and in some cases have huge financial benefits around your balance sheet and operating expenses and taxes.

Our second point, i.e. our critical tip # 2 is that you should full understand that most soft costs, example – software – can be included in your purchase. Software can be financing, which many business owners and financial managers either didn’t know or didn’t consider. In today’s environment hardware assets tend to be more of a commodity and it’s the soft costs and software that are the true drivers of technology. The costs of software and other related items to our business equipment acquisition can be staggering, so consider bundling the soft costs into your total solution.

Lets move on to our final point – which is putting some solid care and decision making into what will happen to your asset at the end of the term of your lease . When we say term we simply mean that is the amount that you desire or agree on to financed the equipment acquisition. Typical terms are 3-5 years – however terms for 2-7 years can sometimes be negotiated depending on the dollar value of the asset, the type of technology you are financing, and your firms overall credit quality .

If you choose the more ‘ sophisticated ‘ approach to technology financing – i.e. our operating lease option, then you have automatically given yourself 3 choices for end of term decisions . And it is you, not the lessor that makes those choices, thereby empowering you to drive the true value of the acquisition. Those choices are return the equipment, upgrade the equipment, or purchase it for fair market value if you still fee it has a useful economic life.

Speak to a trusted, credible, and experienced lease financing advisor to determine which options most suits yourself, and you will also get assistance in walking your firm confidently through the sometimes turbulent technology financing maze.


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Monday, July 26, 2010

Factoring Receivables – Factoring Companies That Don’t Charge Interest in Canada

More and more Canadian business owners and financial managers are considering factoring as a viable alternative financing solution. Everyone seems to tell you that ‘factoring is expensive ‘. If that’s the case why would you want to choose this financing solution? Even moreso, is it even remotely possible to achieve interest free factoring or factoring at zero cost? Let’s show you why that premise is defensible and we will let you decide.

If you are a small or medium sized business you know the true value of financial serenity when you have positive working capital and cash flow. Actually, cash flow is great, if you have positive working capital that simply means that you have a major investment in accounts receivable and inventory, and that isn’t necessarily great, especially if your balance sheet accounts such as receivables aren’t turning over every 30 days.

Does anyone ever pay in 30 days anymore? We don’t think so, that’s for sure.

When your firm is able to more efficiently used cash flow generated from accounts receivable you have easier ability to grow your business. In fact as a business owner you quickly realize that the single largest asset on your books is often accounts receivable. In the current economic environment it takes easily one, often two, and sometimes 3 months to collect the average receivable. When you delay payments to suppliers you are increasing your cash flow from operations, when you grant credit to your customers you are decreasing that same cash flow – it’s a daily battle that plays out every day.

Factoring, or receivable financing allows you to collect and immediately invest those funds back into your business.
A quick example offered by a firm called the Receivables Exchange (U.S. based) is as follows –

Let’s say your firm earns 20% on the money it invests in itself, therefore in 44 days your firm can earn a 2.2% return.
Now let’s get to the root of our premise. Factoring companies don’t charge ‘interest ‘per se, because you are not borrowing funds. You are simply monetizing your receivables at a discount for immediate cash today. Let’s use a typical factoring discount rate of 2%, which is certainly not uncommon. That’s a 30 day rate. There is better pricing, and there is higher pricing.
But look at what we are saying – if you can immediately, on the same day you generate an invoice get cash , re invest in your business , and earn a profit, ( we will use our example of 2.2% return in 44 days ) haven’t you in effect achieved zero interest charges on your working capital financing .

Let’s make a more clear and dramatic point – Use our example again of a 2% discount fee for 30 days. What if your receivables for the month were $ 300,000 and you were factoring them at our 2% discount rate. If you have immediate cash for that $ 300,000.00 do you think you could pay major suppliers immediately and subtract 2% for their stated net 30 day payment terms. Also, do you think you could meet with your major and valued suppliers, advice them you were in a position to pay cash on the basis of getting better pricing, and would they accept!

We hear the saying ‘cash in king ‘everyday in business – after the 2008 economic meltdown Cash ruled supreme. By offering to pay your suppliers more promptly and buy in greater quantities we have had many clients tell us they have achieved as much as a 5% saving in some cases.

Let’s recap the premise of our information. It’s simpler that it may sound:

**Factoring offers you immediate working capital, and purchases your invoices at a discount – it is incorrect to view these funds as a loan, or an interest rate per annum.

** If you got the typical fee of 2% as a discount charged on factoring by your factoring company and had unlimited cash flow and working capital could you purchase more effectively and pay suppliers more promptly, taking a discount all along the way . Yes we believe you could.

You will never get a letter from a factor firm that states you are being charge no finance charges – but we have effectively shown that the cost of that financing, balanced against carrying your customers and being able to take supplier discounts and purchase more effectively can add thousands of dollars to your bottom line . And at the same time you have removed the business person oft greatest worry – lack of working capital.


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Business Inventory and Purchase Order Financing Canada

Many Canadian business owners and financial managers are not fully aware of the availability and benefits of business inventory and purchase order financing .. These types of financing are very ‘niche ‘and are specialized areas of business financing in Canada.

The reality of these two financings is that they can be arranged individually, but quite often are sought by business owners as a combination as they are inherently linked by their very nature. That is say that your firm receives a purchase order (p.o.) or contract, and as a result required working capital and additional cash flow to buy the inventory required to fulfill those customer needs.

Business owners want to ‘unlock ‘the cash and working capital that they have in inventory. If your firm qualifies for traditional bank financing you will be margined against the inventory, in much the same manner as a bank would margin receivables. The challenge in the current financial environment is that banks, which have traditionally not enjoyed financing inventory, are even somewhat more reluctant to embrace this type of financing these days.

So are there solutions. Yes there are. In Canada you need to seek out and explore the services of a trusted and credible business financing advisor who can guide you through the inventory and po... financing maze.The basic solution to the business inventory finance challenge is a collateralized loan against inventory. What has to be addressed though is the relationship of that loan or working capital advanceto the security you might currently have in place against your business vis a vis receivables , etc . That requires somewhat of a skill in order to satisfy all secured parties and give you the working capital you need in a manner that makes sense.

The exercise of obtaining this type of financing is worth if when you have a significant investment in inventory and your inventory asset can be collateralized and liquidated in some manner .We say this , because, as most business owners know inventory come sin three forms,raw materials, work in process, and finished goods. So care must be given in the analysis of what type of inventory you maintain and what are those three different levels within your working capital cycle.

Ultimately you should explore business inventory and purchase order financing ( In p.o. financing your suppliers are paid directly by the purchase order finance firm) if you are always short of cash flow and working capital, or have seasonality in your business cycle – i.e. huge amounts of product required for the Xmas season would be a good example.

Your firm is a candidate for business inventory financing if you can demonstrate the ultimate salability of the inventory, as it of course becomes the main collateral. If you are unable to demonstrate the marketability of your inventory as collateral you will have a major challenge in obtaining this type of financing.

If your firm identifies inventory as a major working capital component and you have solid gross margins (inventory financing can be more expensive than traditional financing) you should explore the benefits of such business financing.


- Film Financing via Tax Credits - Two Critical Necessities for Independent Film Financing

IndependentFilm financing via tax credits is a significant component of an independent production in film , well as televison anddigital animation, those latter two gaining significant traction .

There are two critical necessities for the financing of your film:

1. Your ability to ensure you pre qualify for tax credits

2. Your access to capital as an additional resource for cash flow via the tax credit

Provincial and Federal tax credit programs in Canada have never become been more generous and accessible.We have met with a number of industry players, both individuals and corporations who have U.S. vested interests and have expressed a sincere desire to access financing for their productions and ensuring they qualify under appropriate certifications.

It goes without saying that major studios in the U.S. and Canada generally have the wherewithal to finance their own productions via their own resources, which are often quite significant. But if you are an independent production, or a smaller player in the scheme of things then you should view the tax credit financing as a key part of your overall financing strategy.It certainly is cheaper and often less time consuming considering the amount of time we have heard you might be spending on raising ‘ equity ‘ for your productions .

We recently ran into a situation where a major U.S... Movie which was produced in Canada and qualified in the various areas re Canadian content was financed critically under the monetization of the tax credit. It was interesting that the actual tax credit was being pitched to private high net worth individuals who were being promised a 15% return based on the validity of the actual credit and the funds that were due under that claim.

Using film and tv as our prime examplescapital for projects tends to be raised by owner equity, international distribution, and tax credits that can very easily be in the 30-40% range for the entire production‘ below the line’ budget .

Its perhaps a larger example in terms of dollar value, but what we are of course saying is that if you have a$10,000,000.00 budget and have a proper legal entity, ownership, and accounting in place you can easily qualify for a3 to 4 Million dollar non repayable tax credit .

More importantly many clients don’trealize their claim is financeable, so they‘ wait’ for the cheque which is dependant on the review and auditing of their filing, as well as the timelines that might come from waiting many months after the initial filing .

Is there an alternative. There certainly is. If you are working with a credible, experienced, and trusted advisor in this area you can generate funds for your tax credit as soon as it’s filed! Does it get any better than that – Actually it does. In the right circumstances, if you have a credible, experienced management team, solid industry representation re an accountant or lawyer, you can actually apply to get the funds prior to even filing the final claim. That is true cash flow and working capital generation.

The overall growth in DVD, home downloads, and cross marketing with other players allows Canadian productions to benefit significantly, even if the content is on a much smaller scale than large studio productions.

From a pure financial risk and reward point of view, the fact that a large part of your production is in effect guaranteed via the production tax credit , and that fact that you can monetize that claim any time you want ( if you qualify ) significantly enhances the overall financialreturn on investment .

As an example, we’re working with one Canadian production that will use the concept of accrual tax credit financing to in effect start production on the project. We can’t over emphasize the importance of proper and realistic budgets, your ability to show some industry experience in this area, as well as aligning yourself with credible parties.

Structuring your project properly via legal and accounting mechanisms, maximizing your leverage regarding tax credits that are available, and monetizing those tax credits into real money for the current or next production ensure a very viable chance of financial success for film, television and digital animation projects in Canada.




SR&ED Tax Credit Financing - 2 Things You Must Know

Many of our clients can be easily forgiven for being confused and mis-informed on CanadasSR&ED program, aka‘ SRED ‘, as most people callit . They can be even more forgiven for not know the basics about SRED finance .

We try and simplify that discussion into two very basic things you need to know :

-If you have a sred claim its financeable for cash and working capital now

-To finance a claim you need to have filed a claim, but not always!!

Your ability to monetize or cash flow a claim is in fact a superior way of generating additional working capital and cash flow now based on the value of your filing . We will add one technical point here, in that claims are generally financed at70% LTV . LTV means ‘ loan to value ‘ , so we are simply saying that for everyone hundred thousand dollars of sred claim filing you can generateseventy thousand dollars via a short term sred loan .We can expand on that point a bit to ensure you arewell informed . After filing a claim it is clear you are in a‘waiting mode ‘ for your claim to be analyzed, potentially audited , and then of course waiting for the proverbial government cheque – we are of course all familiar with the expression ‘ it’s in the mail ‘ – With Ottawa backing your non repayable cheque you of course have the assurance funds will come, but you just don’t know when !

We recommend that if you have filed a claim that you investigate the ability to finance that claim now . If the cheque under the program is a non payable grant( other than paying tax on the income that’s as close to free money as we can get in Canada from the government !)Why wouldn’t you consider a financing option to accelerate cash flow and start using those funds now?

Uses of funds under SR&ED financing are totally within your control. We see clients utilize sred financing to further invest in even more R&D, i.e. next years claim! or you can choose to reduce payables, invest in additional equipment or business assets, etc .

In a small handful of cases we meet with firms who have a tax liability to Ottawa or the province re source deductions, GST/PST back remittances, etc. If you work with a trusted, credible, and experienced sred financing Sr&Ed consultant you can structure your financing to ensure that you’re past due remittances are taken care of during the sred financing process. No firm wants to be in the governments bad books re past due government super priority issues.

The actual SR&ED financing process should be treated by yourself as any other business financing – we try and actually make the case its easier in some cases, because the actual asset behind the sred loan is the sred claim itself, so even if you think your firm might not qualify for financing for other forms of traditional borrowing your probably qualify for the sred – why?? Because you have a sred claim as an asset that’s verifiable!

Ensure you are aware of this great program within Canada that generates billions of dollars in working capital and cash for Canadian corporations .Yes you can wait for funds, which may take a couple months or the better part of a year – if you cant wait consider financing your Sr&Ed claim via a short term sred loan which is collateralized against your filing. We strongly recommend you have a professional filing prepared, by your accountant or sred consultant (there are many) – this will significantly positively impact your ability to finance your claim.

It’s a great cash flow and working capital strategy, and no debt is on your balance sheet, as it is offset by your sred asset that is in fact a monetizable account receivable.

Friday, July 23, 2010

Buying a Franchise - 3 Things You Must Know About Franchise Finance and Franchise Loans

Clients are always asking what extra steps or information they need to know to complete a successful acquisition a new or existing franchise. Buying a franchise, it goes to says, is clearly one of the largest decisions any entrepreneur might take. Of coruse there are a couple of different versions of the opportunity, as follows

- Purchase of a new franchise

- Purchase of an excising franchise that is for resale by current owner

- Purchase of an additional unit in your chain when you own one already

Are there any special tips and critical pieces of information you need to know that will get you a leg up on a ‘ leg up ‘ in the area of franchise finance . Let’s share and discuss three critical points.

1. Franchise Finance is a very specialized type of financing – financing options are available but not unlimited – you need to know what they are

2. There is a chance for franchise financing failure if you do not have the proper fundamentals in place and are exploring numerous options at the same time – ‘flailing around is not good!

3. You might significantly benefit by using the services of a franchise consultant in the area of business financing

Lets review our point # 1 - Business financing in general has always been a challenge. Specialized financing in any area of business is a unique challenge because of limited options and a limited number of players. Players = lenders! If you accept business financing is difficult then you can imagine the severity of the challenge in the 20010 global economic crunches that we still seem to be in.

So is it all negativity and bad news. Not necessarily of course if you are informed and prepared. Let’s unveil the mystery of franchise financing. How exactly are the majority of franchises financed in Canada?

The options are exactly as follows:

- A special Government programme called the BIL program under which the majority of franchises in Canada are financed
- Owner equity – your own deposit into the deal
- Equipment and asset financing
- Working capital cash term loan – typically a 5 year payback
- Vendor financing ( if available – more often than not it is not )
- Revolving line of credit for ongoing operating needs and growth!

With respect to the last point we would emphasize that while it is of course important to structure a proper financing around your franchise purchase many business owners forget to consider how they will finance the business on an ongoing basis , and more importantly, how growth options will be financed .

It is critical for you to understand that it is very rare that any one option will get you the full financing you need. The reality is that it will be a select combo (and that’s the expertise you require) to fully finance your business with any number of the above options.
We point out in our key point # 2 that you must be prepared. This is where many clients tell us they have failed in the past – they have not prepared a proper business plan and executive summary. We encourage you to prepare a proper business plan, understand what your opening balance sheet will look like, and most importantly, understand the cash flow needs of your business. For example, if you take the time to sit down and do all the numbers ( this is actually easier than you think ) you could find that in month one and 2 and 3 that you might be experiencing negative cash flow . If sales ramp up slowly and you have negative cash flow then clearly you will have problems which could accelerate and dampen the overall success of your business.

Finally, consider using the services of an experience, credible and trusted franchise consultant that can guide you through the financing maze. Having that party properly prepare a business plan, opening cash flow, executive summary, and proper financial projections is worth a small fee you might be charged . Business financing in Canada dried up in 2008 and 2009 – franchise financing is still alive and well though. Many lenders view franchise financing even more positively than other types of businesses and industries – the reality being that there is a greater chance of success for a brand that is proven and known, and has a reliable business model of proven success.

Know your franchise options, be prepared in executing on those options, and consider italicizing a franchise consultant to complete your franchise loan and overall funding. That’s a solid plan!


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Thursday, July 22, 2010

Asset Based Line of Credit – 3 Critical Things You Need to Know About This Working Capital Financing Solution

When working capital starts to become a critical day to day challenge Canadian business owners and financial managers must consider all business financing options.

One of the most growing in popularity options, and often mis understood is an asset based line of credit. This type of financing comes under the broad category of asset based lending and the simple definition of such a facility is the ability of your firm to maintain an operating line of credit, outside of a bank relationship. How is that possible? Let’s examine 3 critical factors that you need to know and understand to effectively use such a financing solution.

1. What assets are financed under this facility and how does this differ from a bank facility

2. How does the facility Work on a day to day basis

3. What are the fees involved and how much can we get from a total working capital perspective

Let’s start with our first critical factor – exactly what is this type of facility? An asset based line of credit in its true sense, and in the context we are discussing is a working capital revolving credit. The assets that are secured under this facility are accounts receivable, inventory, and in many cases equipment and actually sometimes real estate.
We poised the question – how does this facility work when we compare it to a charted bank line of credit. In actuality it is quite similar, with the main difference being that 99% of the time you can extract additional borrowing power out of the assets we mentioned. That is simply because a bank focuses on overall financial health and considers a number of external metrics to the actual line of credit – these include balance sheet and income statement rations, personal guarantees, outside collateral, and the overall nature of your industry and business model.

Asset based lines of credit in fact tend to eliminate many of those considerations, and focus only on one key point - the assets! Because that is the case receivables and inventory are margined up, via traditional borrowing based certificates, to a much higher level than might otherwise be maintained with traditional financing. When you factor in working capital that is secured by equipment, you can quickly see that your borrowing capacity has increased significantly.
Let’s examine a very typical solution that we see with our client base everyday. A firm has a bank facility, or is self financing in some cases, and essentially their only working capital relies heavily on accounts receivable. If your firm gets more borrowing power from you A/R, has the ability to throw inventory into the mix, and can secured additional funds via some unencumbered equipment which is used working capital collateral you can quickly see how a 150,000 line of credit could become a 400,000 line of credit in very short form.

Let’s move on to point # 2- how does this facility work based on any current financing arrangements you have? Similar to a bank revolving line of credit your borrowing capacity in an asset based line of credit is simply the drawing down, on a weekly, monthly, or in fact anytime basis, of your total borrowing capacity based on your reporting of current A/R, inventory and equipment levels. A quick example – lets assume for simplistic purposes you haven’t drawn anything down – you send in your borrowing based certificate showing receivables of 500k and inventory of 300k. (Previously it was determine you could draw 90% of A/R and 60% of inventory) That would allow you to receive immediate funds of 630,000$.

Some factors that might make this facility a little less are the overall age of your receivables, or if you only have a couple of concentrated accounts. Key to mention here is that under this type of facility you are reporting more often on the assets and their turnover, so that should be considered and of final point, fees and borrowing limits.

Asset based lines of credit typically cost more than the bank- In Canada these facilities are priced from 7-9% per annum to 1-2% a month . What determines this huge spread in pricing? It is the overall asset quality and size of the transaction , as well as the ability of many asset based lenders to do transaction that would normally not be anywhere near to be considered by a bank, and as such, the risk is higher, so pricing is higher . It is as simple as that. In terms of what amounts you can borrow, you can assume 90% of A/R, a 40-60%+ range on inventory, and a similar amount for equipment. (Equipment would often be subject to a market value appraisal) . Very standard legal costs, due diligence fees, and origination fees usually are part of the term sheet you will receive .

Does your firm need more working capital? Are you self financing now. Are you unable to access traditional financing, or, more commonly, does traditional financing seem unable to meet your growth or unique situation needs? If so, speak to a trusted, credible, and experienced financial advisor in asset based lending.


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Wednesday, July 21, 2010

Small Business Loans for Working Capital Financing In Canada

If your firm is looking for what is commonly known as a ‘ Small Business Loan ‘ it is critical to focus on two major issues –

1. Are you looking for additional financing

2. Are you looking for new Financing, aka ‘ re financing ‘

The current overall economic environment makes it challenging for business owners and financial managers to often access the right amount of capital they need.

When we talk to client’s discussion tends to revolve around what type of financing they require, and as a business owner you should understand the options and benefits that come from various types of working capital financing.

A good way to address the issue is to simply focus on why you feel you need the additional capital. Reasons might be as follows – refinancing existing debt, leasing new equipment, or, if we use the true meaning of working capital, to further monetize current assets such as A/R and inventory. You need all the help you can get in assessing those needs and the benefits that arise from them – as a result we recommend you work with a credible, trusted, and experienced advisor in business finance.
For ongoing working capital needs you are either in Category one or two-

Category 1 – You have a bank relationship but can’t access the true amount of financing you need

Categories 2- You can’t and haven’t accessed traditional financing, are self financing, and require additional capital to maintain and grow your business.

If we get straight to the heart of the matter for options for working capital financing are as follows:

- a working capital term loan

- additional bank operating facility

- a true asset based lending / working capital facility – ( this is a non bank facility)

- Receivable discounting, also know as factoring your receivables

- Inventory financing via a supplemental inventory loan ( this traditionally works best when it is combined with a receivable facility

- Sale leaseback options to release working capital in assets

We encourage customers to think around the terms traditional financing and non traditional financing. If you are thinking of exploring traditional financing with a new or existing bank then you should anticipate, in our experience, at least a 1-2 month timeframe. This might not be suitable for your timing purposes if you have increased payables to address, or new orders and contracts which require a build up in A/R and inventory.

If timing and increased working capital are your priority you should consider an interim solution to the always long term problem of business financing – that solution might be a working capital facility from a private finance firm, one that provides you full margining of your receivables and inventory .Typical entry advances for a/r and inventory are 90% and 40% respectively, and if you work with the right partner that specializes in inventory financing then you can even enhance those ratios . All that simply means is more working capital! One point of confusion that we like to clarify with clients is that the government small business loan program finances only equipment, leaseholds, and real estate, i.e. hard assets – as such this program should not be confused with a true working capital solution .

So what is our bottom line for small business loans (unsecured) and working capital financing .It is simply that you must realistically recognized the commercial lending landscape has changed:

Traditional financing is harder to access

Collateral requirements and guarantees are at a higher bar for approval

There are alternative methods to securing working capital financing – these might come at a higher cost, but should in most cases provide you with the cash flow you need to effectively run and grow your business.


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Tuesday, July 20, 2010

Equipment Financing Canada – One Big Mistake Not to Make

Equipment Financing – Canada has embraced this type of business financing for decades. Most Canadian business owners and financial managers know they can obtain financing for equipment, but they are often unaware of some of the hidden benefits, and, yes, pitfalls, of equipment financing. Let’s explore a couple of those key issues that you need to know about.

Myth ! - Only ‘new’ equipment can be financed.

Nothing can be more farther from the truth. Lease financing is readily available for all types of equipment in Canada, including used and refurbished equipment. This equipment typically is bought at auctions, as well as via the internet, or in many cases from dealerships that have taken a trade in or have a machine that has come in off- lease.

The main benefit of used equipment financing typically is the price. Lets look at an example – lets say you are buying some production equipment and the price for new equipment is 300,000.00$ - Typically this type of equipment if lease financed over 4-5 years. If you were to acquire the asset as used, and lets say you got it for $ 225,000.00 (certainly not unrealistic), then you are saving that 75,000.00 – that’s obvious to anyone of course. But remember that 75,000.00$, if purchased new, is a part of a 4-5 year financing so the ability to cut 75k in long term financing out of your cash flow is a very large benefit .

We would point out that in some cases, because the equipment is used, it might need to have an appraisal or a valuation attached to the financing – this would typically be obtained from a qualified third party appraiser. Typically, as in all financing costs, the borrower, or in our case, the lessee, (that’s you) pays for the appraisal. So the common sense question simply becomes – if your equipment was warrantyed, guaranteed, and you felt it had long term value, would you in fact invest 1k in an appraisal to save 75k++ in financing costs . We think our clients would!

Does the type of equipment alter the pricing and structure of your equipment lease – in some cases it might, but typically not drastically. The lessor might in some cases ask for a down payment, or a larger down payment, and also might, on occasion, lower the term of the lease ( for example – 3 years , not 4 years , etc ) but overall lease financing for used equipment is still a great value . In many cases even computers are often re financed after they are returned to the vendor or reseller.

Clients often ask if there are certain types of used equipment that can’t be financed. The reality is that pretty well everything can be considered for financing. Normal credit underwriting is done, focused mostly on your ability to repay the lease from cash flows generated from your company and the asset. All types of equipment should be considered, especially when you and your team have confidence in your ability to acquire, price, install and maintain the asset.


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

Monday, July 19, 2010

Factoring and Accounts Receivable Financing – A Real Working Capital solution for Cash Flow challenges

Factoring is predominantly becoming the main solution when a firm considers a new or alternative accounts receivable financing strategy. As customer payments slow down ( many firms seem to be waiting 60 to sometimes 120 days for the customer payments ) the challenge of running your business from a cash flow perspective increases . The irony is of course that many customers still post 30 day terms on their invoices and purchase order acknowledgements from their client base.

We should not fail to mention of course that there is one very obvious ‘non – financial ‘solution for your company, and it does not even involve additional financing effort. It is simply to enforce collections more strongly and reduce what is known as your ‘day’s sales outstanding ‘to a more manageable level. Any major dent you can put in your ‘D S O ‘will improve working capital and cash flow. There is of course the other non financial alternative, which is the other side of the equation, and that’s to slow payables, which also improves cash flow – but you don’t want to do that at the expense of your suppliers which you value.
So we have discussed why you want to factor receivables and to some extent what your non – financial solutions are.

But let’s just make sure we understand what we are talking about. When you are working under a bank facility your receivables are collateralized or pledged as a security for an overdraft. That’s the best simple way we have of explaining to clients what factoring is not. What is is , though, is the sale of your invoices , on a daily, weekly, or monthly basis ( the flexibility is your choice ) , thereby increasing your advance rates on those receivables to the 80-90% range depending on the type of facility you have structured .

More cash flow and more immediate cash flow is the most obvious solution to factoring and accounts receivable financing. There are two sides of the coin though, and on the other side of this type of financing strategy is the fact that you might find yourself reporting on your receivables more often that you would have with a bank type revolver line of credit. You also might be less reluctant to negotiate longer payment terms for your customers, as in fact it will as your firm that directly carries this financial cost.

We spoke of the price you have to pay in factoring receivables. When we site down with clients we advise them there is a real price, i.e. the financing or invoice discounting cost, but, more apparently, the major change in the way day to day business changes from a paper flow and customer interaction basis. If you negotiate the wrong type of facility you might find yourself in the same situation that many of our clients have found when they come to us with financing woes, which is simply that they feel that in spite of the significant cash improvement they in fact feel that their factor firm partner is running their business.
Factoring facilities in Canada are available with firms who have very high professional standards, are well funded to meet all your financing needs, and in fact tailor their financing service to your business, once they understand the uniqueness of your challenges.

Many business owners who know little about factoring seem to know one thing, that it can be viewed as intrusive by their customers. You can eliminate that ‘intrusiveness ‘by ensuring you have the right type of facility, one that is priced right, has straightforward terms, and works on a day to day basis for you and your customers. The best factor funding facility in fact, we feel, is the one that allows you to bill and collect your own receivables, while at the same time reaping all the benefits of accounts receivable discount, as factoring funding is also known.

So what’s our bottom line in our cash flow information interchange – it simply:

- Determine if you can achieve self financing status via the more prompt collection of receivables

- If financing is in fact needed consider factoring financing as a working capital strategy

And , most important, work with a credible , trusted and experience advisor who will model a working capital and cash flow solution that reaps benefits and cash on terms you can live with on a day to day basis .


Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .
For info on Canadian business financing & contact details :

How Factoring and Accounts Receivable Funding Can Fix your Working Captital problems

When your payments from key customers are significantly slowing down many firms in Canada turn to accounts receivable financing, otherwise known as ‘factoring’ for a solution to their working capital challenges. As unbelievable as it seems in many cases it is not unusual to have clients tell us that receivables are getting paid in 90 days these days, sometimes longer in fact. Gone seem the days when the 30 day term on your invoice seems acknowledged and honored.

When those payments do slow down that tends to cripple your cash flow. Naturally the solution to the problem, or the obvious one to most business owners is to make an all our effort to improve collections but focusing on increased accounts receivable turnover.

As an aside we think it’s very important that Canadian business owners and financial mangers know their accounts receivable collection period – you don’t have to be an analyst to do that - the simple formula is as follows –

A/R Times 365 Divided by Sales

To illustrate, if your firms year end balance sheet has receivables of 400k and your annual sales are three million dollars your collection period is 48 days. (We wish our collection period was 48 days we can hear you saying!)
Naturally you can alter the above formula on a quarterly or monthly basis by adjusting the A/R and sales level for your required period.

You can address the additional cost in carrying receivables by attempting to raise your prices with your customer to cover those increased A/R cost. However, that gets you profit, and not liquidity. That is where factoring and receivable financing comes in.
Factoring is quickly becoming the first alternative solution for firms who wish to get 85-90% of their cash immediately after they invoice. This solution is available through a pure factoring solution, or, if your firm is a bit larger ( 250k + in receivables) as part of a working capital facility or asset based lending facility.

The challenge, we tell clients, is ensuring you have the type of facility and factoring partner that meets your overall goals in day to day business financing. It certainly also helps when you have a solid business with good clients, but the hard reality is that factoring is available to almost every size and type of business is Canada – what will differentiate your facility is simply the overall pricing, terms, and structure of your facility .

Is your firm a candidate for a factoring or accounts receivable financing facility. It probably is if your customer payments are slowing down, sales are growing, and you are unable to obtain traditional bank lines of credit from Chartered banks. Factoring is hugely popular in the U.S. - Over 140 Billion dollars (yes that’s billion!) was done in 2009. The Canadian landscape is much smaller and fragmented, but bottom line, its growing.

We can’t over emphasize to clients that your factoring facility grows with your business, and your factoring credit facility can be adjusted upward very easily in terms of your growth.

Is there any downside at all to a factoring and working capital facility? When we sit down with clients and work them through the process we focus on 3 main areas –

1. Choosing the right factoring and receivable financing partner

2. Ensuring you understand your true costs ( and how to offset them )

3. Picking the right facility from a day to day ease of doing business perspective

Speak to a trusted, credible and experienced advisor in this area to ensure that you are comfortable that such a business financing is the solution to your cash flow and working capital problems.



Sunday, July 18, 2010

Independent Film Financing via a Film Tax Credit Finance Strategy

One of the best lines we have ever read on our subject of film financing for Canadian productions is as follows, and we attribute it to on of Hollywood’s more astute observers and reporters on this subject - the line is as follows:

‘Have you ever wondered why the U.S. looks like Canada in the Movies? ’!!

We love that line and the answer to that question mostly revolves around 3 words - Tax Credit Financing.

Whether or not you subscribe to the idea that independent (‘ indie ‘ ) film financing,(and of course we are talking about independent televison project financing also ) is dead our basic point is simply that tax credit filing, and the financing of those tax credits has never been more popular than in the current environment in Canada - 2010 .

Tax credits can finance a very significant portion of your production, in particular whats known as ’ below the line ’ budgets. By employing a specific quota of Canadian actors and resources and filming locations, and utilizing the point system in place, you can recover a large amount of costs, and, if you choose you can finance your tax credit claim prior to receiving a final cheque from the government.

The key tax credit involved is of course the ’ Film Production Services Tax Credit ‘, which covers a large portion of labour cost. As great and in some cases greater per cent age amounts can be recovered on digital animation projects related to your production, or as separate entities themselves.Some of the basic rules are that key personnel such as actors and directors must be from Canada.Several thousand products have been done in Canada - no one can of course say that tax credits were the sole reason for these productions, but we can venture to say they were in many cases a primary decision driver.

As industry professionals and participants are aware of some of the key elements of financing your project - those include proper budgeting and accounting via reputable staff and parties.

Revenue and cash flow, pre and post production comes from foreign pre sales, your own equity, bridge loans, gap financing, and of course tax credit financing.

How are tax credits financing in film, TV, and digital animation. Your project of course must be certified and eligible for the credit being financed - that is only common sense. It also makes sense to have a separate legal entity in place for each project - the lawyers call this a ’ SPE ’ - Which stands for Special Purpose Entity.

It is critical to work with an experienced, credible, and trusted tax credit financing advisor, lets call he, she, or it the ’ Film Financing Company ‘. Film financing sources are a great way to finance your projects. Your credit can be cash flowed, or ’ monetized ’ when it is filed, and, if you have some credibility and good accounting and up to date filings for your project you might be surprise to know you can receive funds, via a loan, prior to the actual filing.

Utilized available and popular tax credits as a solid source of your overall project financing strategy for your independent film, television show or series, or a digital animation project.