Canadian Business Financing - 7 Park Avenue Financial: September 2014

Monday, September 29, 2014

Asset Based Financing : Are Business Credit Line Needs Causing You To Miss Out

Is Asset Based Financing The Better Way For Business Credit Line Needs

Information on the ABL business credit line . Asset based financing provides a solid alternative to ongoing working capital facility needs

Business credit line needs can often very well leave the Canadian business owner and financial manager feeling ' left out '. Asset based financing via an ' ABL ' line of credit can easily be called the ' better way ‘Let’s dig in.

Asset based lending, in our case in the form of a working capital facility is the ultimate in ' secured lending '. A laser like focus on your fixed assets and current asset accounts (receivables / inventory) transforms the true value of those accounts into ongoing cash flow.

It's that value in your business assets that allows companies in pretty well any industry in Canada to benefit from what we term a ' non bank line of credit '.

Almost any industry can benefit from Asset based financing, and in fact many industries seem almost perfectly positioned to use this type of borrowing. That includes mfg companies, wholesaling firms, retailers who have inventory financing needs, and even tech companies.

The essential difference in a Canadian chartered bank line of credit and an asset based financing facility is one is asset based (ABL) and one is more cash flow focused (the bank!). Bank facilities typically have ‘caps’, aka limits on the facility. The asset based credit line is more, shall we say ' elastic' in nature and really grows or contracts relative to your sales and working capital accounts.

Many companies, for a variety of reasons simply can't meet the stringent requirements of bank credit lines - which comes with very low rates, but requirements that are often onerous for firms that are in various stages of their life - that might be a turnaround scenario, or coming off a difficult year, or surviving, but paying the price of a one time incident such as the loss of a contract or key personnel.

It's those above mentioned typical scenarios that don’t allow firms to meet cash flow and balance sheet ratios required by bank lending. In some cases a lot of companies are subject to seasonality and cash flow ' bulge' requirements. It's the ability to also incorporate other assets into your credit line that assist in financing those ' bulges' in cash flow needs - seasonal or otherwise.

Because asset based financing for credit lines is almost always more expensive it's often a bridge to other forms of financing, think of it as a solid business band aid. If you're focused on getting business credit that meets your cash flow and financing needs seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your asset based financing needs.

Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop

Stan Prokop

Tuesday, September 23, 2014

Why The Equipment Lease Bravely Steps Up : Leasing Company Solutions Help Acquire Assets

Getting It Wrong Is Not An Option When It Comes To Asset Lease Finance

OVERVIEW – Information on what key concepts business owners and financial managers must address when constructing the right equipment lease with their chosen leasing company solution provider

Equipment lease solutions aid in acquiring assets. Simple as that. It's a solution that's used by a majority of businesses in Canada and the U.S. alike. But can you ' get it wrong ' when it comes to a leasing company choice. In some cases any mistake in financing an asset properly costs your firm time and money. Let's dig in.

Whether you're a public company, a government entity, or even a start up it's still important to give serious attention to how you're leasing and asset, who you are dealing with, and the rights and obligations you have in leasing equipt. in Canada.

Leasing is all about cash flow conservation, so some solid cash flow planning around projected monthly payments relative to the useful life of the asset.

Naturally no form of Canadian business financing is ' all inclusive ' and works all the time - so yes, alternative options do exist. They include loans or rentals, although rentals are in effect a form of the ' operating lease ' solution.

Picking the right term is critical as it relates to our cash flow mention, as well as being able to accurately determine the life of the asset. While longer term/amortizations are available typical lease terms are 2-5 years in Canada. Certain heavy equipment/aircraft/production equipment etc lends itself to much longer terms potentially.

It seems our clients always only want to talk about ' rate' ' interest rate' considerations on any transaction. That's all well and fine but the actual terms of the lease as well as type and structure are considered much more important by experienced lessors. At the end of the day your overall business credit quality (or lack thereof) will take care of the interest rate question, if only for the reason that the industry itself is very competitive these days!

It's that competitiveness that will allow you potentially negotiate critical customer concerns such as down payments that might be required, the dreaded ' personal guarantee', or end of term options such as upgrading, returning, extending the lease .

Many of our clients we initially talk to don't fully understand that ' capital lease' (i.e. lease to own) solutions are known as ' hell or high water ' contract, requiring you to make all the payments under the lease - i.e. no early terminations, etc.

Who in fact offers lease finance solutions in Canada. You'd be surprised at the number of players; they include some of our Canadian chartered banks, independent commercial lease firms, captive organizations within certain large manufacturers, and niche players. In some cases your lessor might be 100% Canadian, in other time it might well be a subsidiary or division of a U.S. organization. (Not that there's anything wrong with that!)

So is there any one way to guarantee you are aware of and selected the right lease structure and lessor? One possible solution is to seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can ensure ' getting it wrong ' is not the option.

Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :

7 PARK AVENUE FINANCIAL = CANADIAN EQUIPMENT LEASE FINANCING EXPERTISE

Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?
CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop

Monday, September 22, 2014

Gov’t Guaranteed Loans In Canada : Winds Of Change In The Government Small Business Loan

The Great , The Good, And The Bad & Ugly On Changes In Government Small Business Loans

OVERVIEW – Information on recent (relatively !) changes in the government small business loan in Canada . Gov’t guaranteed loans provide solid business financing for thousands of businesses from start up to SME

The government small business loan has been, and continues to be a benchmark in start up and small business financing in Canada. Govt guaranteed business loans have had some changes, so it's time to ' plug in ' to these changes and how they impact the financing benefits of this program. Let's dig in.

Have you heard about those ' winds of change '

in ' SBL’ small business loans in Canada? The ' great ' news is that the fundamentals and purpose of the program clearly do not seem to have changed. That's probably recognition by INDUSTRY CANADA (they sponsor and manage the program) that the SME COMMERCIAL FINANCE sector in Canada generates a huge portion of employment, revenues, and... oh yes ....taxes!

So for over 50 years the program has delivered solid financing for businesses in all industries. Fundamentals of the program include the opportunity to start, grow, and expand your company. In many cases these loans are a direct substitute that our clients would normally not be able to successfully receive under ' traditional ' bank financing criteria. Those criteria are all too well known to the entrepreneur who arrives ' plate in hand ' looking for business financing or expansion capital.

Those winds of change that have entered the program do not affect the basic fundamentals - financing is available for start ups or established businesses with less than 5 Million dollars in projected or actual revenues respectively .

Assets that can be financed include equipment that is either new or used, or leasehold improvements to leased / rented premises. It's important for the business entrepreneur, financial manager to understand that those equipment categories are extremely broad. It includes rolling stock, such as trucks or other vehicles, computer, telecom, and application software, and even the ability to finance a franchise.

What can't you finance under a government guaranteed SBL loan? That's the painful news we often have to deliver to clients to have exhausted other financing options - that includes goodwill, credit lines, fees to purchase a franchise, or R & D costs in developing a product. ( Note - use the SR&ED program to finance and cash flow your research and development - these credits can be financed also ).

So what about those ' changes ' to the program? Although banks are chartered to fund and administer the program the bad news is that different banks tend to, by law, interpret the program differently.

Recent legislative changes to the program include the ability for fees to be charged by the bank, as well as personal guarantees to be required on a case by case basis. (Traditionally only 25% guarantees were required). We suppose those are the ' ugly ‘(as deemed by the borrower) portions of changes under the program.

If there's a bottom line it's certainly that most top experts agree that the Canada Small Business Loan program is still a clear winner for start up, franchise, and growth financing in the SME sector. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in obtaining govt backed loans that meet your requirements.

Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop

An ABL Revolver Credit Facility : Reasons To Consider This Business Credit Line

Which Of These Business Credit Lines Would Your Company Choose

OVERVIEW – Information on the business credit line knows as the ‘ abl revolver credit facility . Asset based lending is a solid alternative for these reasons provided

Business credit line solutions in Canada actually, believe it or not, come with choices. One choice is the ' ABL ' revolver credit facility; it’s the cornerstone of ' Asset Based Lending ' in Canada. What then are the reasons that Canadian business owners / financial managers choose this finance solution? Let's dig in.

The crux of the matter in ' ABL ' credit is really understanding the differences between other financing options and how it's used in a variety of circumstances. While the majority of companies seeking this method of credit line asset financing do in fact qualify it’s important to understand how the facility is structured.

One of the main good news pieces in ABL revolving credit lines is that they are ' covenant light ' ; business isn't always good news though and some aspects of this type of borrowing includes typically higher borrowing costs as well as the need to provide more ongoing reporting information around ' assets ' .

A good way to define the difference between asset based credit lines and traditional Canadian chartered bank solutions is simply understanding one is very ' asset based' , while the other is very ' cash flow ' based, the latter being of course the bank offering . It's that ongoing focus on borrowing on all your assets under one facility that distinguishes the asset based revolver. Rightly or wrongly the banks our banks don't really look at it that way.

In almost all cases asset backed lenders have a lot more ' asset ' expertise, which one top expert calls ' predictable ' financing. Where banks look at historical, present and future cash flows the asset backed credit lender it’s your A/R, inventory and fixed assets that form the substance of your credit line.

Probably the best example we can provide to clients around why an ABL credit line revolver makes sense is the fact that growing sales places huge pressures on working capital investment, The result? Just when you need credit line financing the most is when bank ratios and operating cash flow ratios limit your company borrowing!

Talk about a double whammy of bad news.

So who uses Asset backed financing solutions? Some of the largest companies in the world actually, its just not generally advertised. For the larger facilities for companies that have good credit ABL solutions pricing is often even better than bank financing, but that certainly doesn't apply to SME Commercial finance borrowers.

So which credit line solution makes sense for your firm, a traditional bank facility or an asset backed ABL revolving credit line? Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in making the right choice.

Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :

7 PARK AVENUE FINANCIAL = CANADIAN ASSET BASED ABL CREDIT LINE EXPERTISE

Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?
CONTACT:

7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop

Thursday, September 18, 2014

SRED ( SR&ED ) Loans : Don’t Be Out Of The Loop On SR ED Refundable Tax Credit Financing

A Beautiful Marriage
Of Cash Flow & Tax Credits : The SR&ED Loan Works

OVERVIEW – Information on SRED loans in Canada . SR ED refundable tax credit financing cash flows r&d expenses , accelerating working capital your firm has spent on research and development for future growth and profits and market domination

SR ED refundable tax credit financing could well be called the perfect marriage of cash flow and the maximization of government tax credits for research in Canada. These ' SRED LOANS ' help to power the economy in a number of ways - which is of course why the Canadian government provides billions of refunds each year to qualified claims. Let's dig in.

We're the first to admit and agree that even the name of the program is a bit too fancy and might well turn off many applicants. (SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT ... aka ' SRED'!) That conjures up men and women in white coats, labs, etc. Yet the reality is that thousands of firms in almost every industry in Canada regularly successfully file claims for those billions of dollars we've mentioned.

Cash flowing your claim simply maximizes , and accelerates recovery of funds for eligible applicants, typically private companies and partnerships .Many business owners and financial managers who either are not fully aware of the program, or a just misunderstand it somehow feel they need to show profitability , or other forms of credit worthiness to both file and finance their claim .

The fairly technical work in preparing a claim is usually handled by a SR&ED consultant. These folks prepare the majority of claims and having a credible / experienced consultant is one key factor that enhances the finance ability of your claim. Its qualified consultants that both maximize a claim, add credibility to their approval from Canada Revenue, and, as we noted help the financing approval.

The total cost of preparing and financing a SR&ED tax credit filing are two separate matters. Preparation consultants typically work on a contingency fee, although fee for service preparation is absolutely available also. We've observed business owners appear to prefer consultants on contingency because these folks absorb all the time and financial risk involved in filing a claim.

SRED Loans are usually ' bridge loans ' - your company receives 70% of the total claim as a cash flow loan - no monthly payments are made in the interim period while you are waiting for claim approval. That other 30% of your funds? You receive it as soon as the claim is approved and funded by the govt, less financing costs.

One top expert analogizes your SRED claim to a well executed high school class experiment

that’s well documented and supported.

Our final point today? Simply that if you're not familiar with either the program itself, or the financing of your claim seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in that beautiful marriage of cash flow and govt refundable credits.

Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

Buying a Company In Canada : Business Purchase Finance Problems Are Solved Like This

Can Buying A Company In Canada Be Easily Done ? Acquisition Financing 101

OVERVIEW – Information on buying a company in Canada. These business purchase finance solutions , tips and tricks will make your acquisition successful

Buying a company in Canada may be an easier process than you might think... if you're aware of certain financing and valuation pitfalls that many purchasors either don't know about, or worse, choose to ignore. Let's dig in.

In many cases it safe to say that that amount borrowed to fund the purchase will often dictate different levels of complexity. Many businesses in Canada that are under the 5 Million dollar range in annual revenue can actually be accomplished with the government ' SBL ' loan.

Here though the loan cap is $ 350,000.00 so that again dictates that in some cases additional financing strategies on top of that loan might be required. In our experience many franchises are well suited to purchase under that 350k cap. And by the way the general terms and conditions of that loan are very competitive and attractive.

If you are borrowing from a bank, a commercial finance company, or even with some level of seller participation ( aka ' the vendor take back ' ) there are some solid ' top up ' financing solutions available . They include equipment financing, cash flow loans - secured and unsecured, working capital term loan debt, asset based credit lines, and even monetization’s of SR&ED research credits if in fact they exist on your transaction.

While many prospective business purchasers focus on taking on debt or monetizing assets of the business in question they often overlook the fact that a significant amount of cash flow

can be generated by better management of company assets. You would be surprised at how improving A/R turnover, turning inventory faster and managing payables better will improve cash flow.

When buying a business study ratios of DSO, Inventory turns, and a/p days outstanding. They will give you a strong sense of where there is room for improvement. Over all this new found cash flow will limit some of the ongoing working capital you need.

Valuing the fixed assets will also maximize financing potential, and this is typically done via the services of a third party appraiser selected by yourself, or more commonly the lender.

No issue in Canadian business financing could generate more discussion with your lender than the dreaded ' Personal Guarantee '.

While every situation will differ it's safe to say these are negotiable to a certain extent if the overall optics of your purchase are positive.

Purchaser and seller may well wish to consider a vendor take back of some sorts. While sellers can often demand a higher purchase price in this area buyers have the comfort of knowing they have secured some additional ' financing ' with someone who is very incented for you to succeed!

The absolute fundamentals of buying a company and arranging business purchase finance include having a solid business plan, good cash flow projections ( conservative is better!) and ensuring that in some manner you as a buyer have some personal equity in the transaction . It's the proverbial ' skin in the game'.

When it comes to that cash flow carefully consider realistic revenue expectations and your ability to collect client receivables in a timely manner. Building in the need for future asset purchases is critical also.

Both buyers and sellers can benefit from the use of an outside advisor when it comes to actual valuation of the business. Tax issues around asset vs. share financing, earn outs, goodwill, etc can be complex.

Would a co-pilot help?

Consider seeking out and speaking to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
who can assist you in making more complex financing issues easy to understand.. and accessible.

Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop

Wednesday, September 17, 2014

Financing For Buying A Business In Canada : Unlocking The Not So Secret Book Of Rules

Looking For That ‘ How To’ In Business Acquisition Loan Finance ?

OVERVIEW – Information on available financing for buying a business in Canada . What issues affect finance success

Financing for a business purchase in Canada has some entrepreneurs, business owners and other professionals wondering if there is perhaps a secret book of rules

to success in this aspect of Canadian business financing. We're claiming to have a copy of that publication, so let's dig in!

One key issue in all the work that goes into purchasing an existing business (or even a franchise) in the Canadian marketplace is the necessity to start the financing strategy of your purchase well in advance of any final formal undertaking or offer you might make.

While the current business credit markets are certainly much better than they were post 2008 - 2009 recession one key issue is the amount of personal equity or down payment required by any bank or other commercial lender. (Yes there are non bank options for financing your business!)

Typical sources of financing for buying a business in Canada include:

Canadian chartered banks

The government crown corporation bank

The Canadian govt (via the govt guaranteed Small business loan)

Commercial finance companies

Asset based lenders (this might include an equipment leasing /refinancing component)

At the higher end of the food chain are private equity groups and VC's

which arent really our focus in today’s discussion - primarily because they are equity players, not debt/loans/asset monetization

It is though important for business owners/entrepreneurs to understand the key difference in a debt versus equity final solution - that being simply that any equity financing you could come up with dilutes your ownership and often control in the business

When people source home and personal financing they encounter the recommendation by many to get ' pre - qualified '. This suggestion carries over well into buying a business, as its key, just as it is in your personal financial situation, to demonstrate asset, cash flow, and information on the company/business. Knowing the amount you need to borrow to run, operate and grow the business is also key. This type of business opportunity always requires a contingency plan, as Murphy’s Law is well known in business! (What can go wrong ... will)!

Assessing on going working capital needs is critical also. We have met and worked with many clients who made that proverbial follow up call (we’ve hit a cash flow crunch -help!)

While there might be a all inclusive ' how to ' in buying an existing business or franchise in Canada it might be well considered to seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you unlock some of those secret rules to business purchase success.

Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Stan Prokop