A Business Credit Line Smackdown? Here’s A Calculator Strategy

Turfing Your Crystal Ball Or Ouija Board To Determine Your Corporate Line Of Credit Needs?


OVERVIEW – Information on the business line of credit in Canada . Is there a calculator strategy to determine which type of revolving credit facility works for your firm?



Is there a ' BUSINESS LINE OF CREDIT CALCULATOR ' that owners/managers can use to determine their financing needs? There are several key components of that ' calculator’, and they also may help you in determining which credit facility makes sense for your company.

You just might find your firm is in the middle of one of those ' Smackdowns' between the two types of competing lines of credit in Canada for business .Let’s dig in.

Financing needs are determined by several factors - the most basic of which are the seasonal or ' bulge' gaps that typify your business or industry. Credit lines in business fill ' the gap ' between the time in between the mfr. or providing your goods and or services (or both) up until the time your clients pay. It's never a perfect world in revenue and cash flow realization - so enter business credit lines.

Are there consequences when you don't assess your financing needs to address the gap we have just mentioned? Surely there are, the most serious being business failure - but that’s the extreme. Other areas of concern are damaged vendor or client relationships, as well as perceptions by your lenders that your company will be unable to meet obligations.

If you have the right revolving credit facility in place you have a strong chance of 'managing' your sales. Start up or early stage firms have a bigger challenge, because they often cannot qualify for bank financing right out of the gate until they can establish themselves and meet some banking criteria. In those cases banks will often look predominantly at the personal assets or guarantee of the owner, which isn’t the most desirable scenario for entrepreneurs and owners!

Your sales forecast is a key component of our ' business credit line calculator'. Many firms, especially if they are a bit larger have both an internal sales forecast for their own measurements as well as external revenue projections for lenders / outside owners, etc. The sales forecast is a key component of our ' credit line calculator '. Sales will generate receivables, which are the key component of corporate credit lines. Your forecast should show when those projected sales will be collected, which will drive the final need for a credit facility.

There are two types of business credit revolvers in Canada: They are your Smack Down contenders -

1. The Canadian chartered bank/credit union facility

2. The non bank Asset Based Credit Line

Knowing how each of these types of lenders assess borrowing is in fact the final elements of our business financing needs calculator.

Banks/credit unions will typically lend 75% of your outstanding A/R that is less than 90 days old. Your sales forecasts can now be amended to show your borrowing based, i.e. your credit line cap.

Remember also that banks require profits, total collateral on your business, and debt and cash flow ratio requirements that match their criteria for credit line approval.

The non bank asset based lender will advance 90% of A/R, and will also typically margin inventory and equipment in that formula. It’s a winning combination for firms that can’t meet bank or business credit union requirements.

The new normal in business finance (post 2008 world wide economic tumble) requires that the business owner / financial manager pay a lot more attention to lending sources and alternatives they might previously not have considered.

Abandon that crystal ball or Ouija board

and your gut feelings around financing needs. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor to help asses your needs, and available choices in business credit.










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 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :


http://www.7parkavenuefinancial.com/business-line-of-credit-calculator.html



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CONTACT:

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653


Email = sprokop@7parkavenuefinancial.com

Stan Prokop