Golden Rules For Financing A Business In Canada . Working Capital and Debt Solutions .. That Make Sense !

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Information on financing a business in Canada

Financing a business in Canada. A challenge? Let's just say that's an understatement when it comes to working capital, debt, and ongoing management and recognition of finance problems and opportunities.

Are there some ' Golden Rules' we could follow. We think so.

One of the golden rules of business finance is to ensure that you properly match short term debt and long term debt appropriately. Each of these two has its own benefits and potential disadvantages. Is one better than the other? Not really, it’s just that it’s a case of making adjustments and staying ' in tune ' with what needs are appropriate or required at the right time.

It certainly hasn’t escaped us that not only is it difficult when it comes to financing a business in Canada to manage internally, you of course have to stay in tune with what’s happening in the economy, your industry, and dare we say, politics! Talk about a full time job.

A lot of your financing will probably come from external financial solutions. They might include bank debt, working capital term loans, receivable finance, inventory finance, equipment leasing, and monetization of tax credits. However, you also generate cash internally, and you need to know how to measure that.

When you assess working capital or debt needs you need to be in a position to focus on cost, risk, and what that financing does to your balance sheet? All of those must be taken into consideration.

Also consider your current capital and debt structure and how your balance sheet will look after financing is completed. As an example, something to think about is that working capital and cash flow can be generated through monetization of assets - this doesnt really bring debt to the balance sheet, so you've achieved your goal without increasing debt.

On occasion it’s important to discuss any taxation impact on your financials with your accountant, as there are both positive and negative aspects to debt and tax.

If your firm is mature and operating efficiently you’re in a position to access all sorts of traditional financing. The other side of that is alternative finance, which works just as well but might be more costly on occasion - not always, but sometimes.

It's hard enough to access financing but choosing the right partner is a struggle in itself sometimes, ensuring that the funding source will be with you in tight markets and good times. Apparently those two fluctuate over time. The 2008 worldwide debacle caused many finance firms to disappear or implode, causing havoc among thousands of businesses in Canada, whether you were a start up or large corporation!

One solid GOLDEN RULE of business finance is to be proactive when it comes to access debt solutions and working capital. You might even have to make the tough decision around diluting equity when there it too much debt on your balance sheet. That’s a costly one.

A great GOLDEN RULE is to have a solid sense or understanding of how outside forces can affect your company's financial viability. If market conditions are continually volatile you clearly need to focus on longer term stable financial solutions.

Constantly stay on top of your cash flow planning , and if you want to understand what solutions are available for financing a business in Canada speak to a trusted, credible and experienced Canadian business financing advisor .


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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

The Key To Working Capital Financing - Asset Based Lenders

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Wondering how your competition seems to have all the working capital financing they need and you don't - the key to that answer might just be asset based lenders and the asset based lines of credit they offer to Canadian businesses such as yours.

Let's examine how this relatively new and unique method of business financing can totally alter your business financing success.

The acronym for this type of financing is A B L; simply speaking its daily cash flow provide against your current, and sometimes now so current assets. What do we mean by that? Simply that this facility allows you to margin your receivables, inventory, and in most cases, should you choose, fixed assets and real estate. You are probably saying to yourself that you could arrange financing on your own re those fixed assets and real estate - but we are talking about using those assets as collateral for your daily revolving line of credit. So you aren't borrowing, you are not bringing debt on to your balance sheet, you are just leveraging your ' assets ' (that's the 'A' in ABL!) for daily cash flow and working capital.

And why are we claiming that this type of working capital financing just might be your key to business success. Simply because you have probably found it has been challenging to get the full amount of business credit you need. In some cases you might have discovered its been a challenge to get business lines of credit of any manner.

So if your competitors are using this type of financing today, who exactly is eligible for it, and is your firm a candidate. The answer is simply that if your firm has a combination of 250k in working capital assets you are immediately eligible for asset based lines of credit. We would add that firms with smaller asset sizes can still monetize those receivables via invoice financing or discounting, but that's not our key focus for today's information exchange.

So now you now the offering are out there. But why should you consider it. Simply because your firm might be in one of a number of special situations - that includes issues such as your need for increased daily operating cash, you wish to merge with or finance an acquisition, you have been unable to obtain inventory financing elsewhere, you are growing to quickly for traditional Canadian chartered banking financing, etc! We are pretty sure you get the picture now!

The benefits to this type of business financing must by now be pretty obvious. It's all about access to working capital financing and cash flow that you couldn't access before. Assets that couldn't be financed are now financeable, and inventory financing, previously limited or unavailable now looms on your growth horizon.

Who are these asset based lenders, and what is the cost of this financing? We'll leave that one for another day, but if you want to investigate asset based lines of credit for your firm ( remember, your competitor probably already has ) then speak to a trusted, credible, and experienced Canadian business financing advisor who will assist you with identifying benefits and the best solution for your current strained needs in business finance.




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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop



Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/5895090

ABL Asset Based Finance - Recognize These Early Warning Signs For Your Need for The New Paradigm In Revolving Lines Of Credit

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Information on Asset Based Lending In Canada - The Alternative Business Line Of Credit Solution

ABL asset based finance can be the solution for business revolving lines of credit when your current finance strategy isn't working. And what are those early warning signs? They include situations where your financing currently just isn’t working due to financial challenges you have experienced in the past. They also include acquisition scenarios, turnarounds, and the proverbial double edged sword, high growth.

The simple reality is that although the ABL credit lines have essentially the same goal they in fact get to that goal line in a very different manner. Both the chartered bank facility as well as the ABL line provide you with a bridge for financing from the time you receive customer payments while all the while generating expenses.

Receivables are often the primary component of an ABL strategy. The ABL facility is not capped, so as your sales grow so can the facility, it’s as simple as that. All of this might seem similar to a bank solution, so whets the real difference. One is in fact margining, in that asset based lines of credit, with respect to the a/r component, are usually margined at 90% - typically the bank is at 75%. Although the reporting is generally stricter with ABL the reality is that the tradeoff is significant, you can borrow more and are not focused on staying within any pre set credit limit.

Many clients we talk to don't understand the daily mechanics of how the asset based lender operates given they are not a bank. (The ABL is generally not a bank, but it actually can be sometimes). The typical way this is handled is via a separate blocked account where all the deposits you receive are handled separately from your operating account. Simply speaking you get money from the ABL via your operating account, and your receipts go into the other account. Naturally both accounts are fluctuating all the time.

While some of these terms and the actual ABL facility itself might seem ' new ' the reality is that this type of financing has been happening for decades in the U.S. and is enjoying more popularity everyday. In effect it has become ' mainstream'.

While we have focused on receivables as one component of the ABL strategy the other parts are inventory, equipment, and even real estate. All of these are neatly combined into one revolving facility, enhancing your overall borrowing power. The fact that they are margined at much higher rates than a chartered bank facility simply becomes a ' win ' for your firm.

While banks focus on profits and cash flow, which sometimes are difficult to achieve! the ABL asset based finance revolving lines of credit focus on Assets! Therefore typical bank requirements such as debt to equity, tangible net worth, cash flow coverage, etc simply don’t apply in ABL finance.

ABL can cost more (it can also cost less by the way), and as we noted it require more reporting to your ABL partner. However, if it can provide solutions to growth, turnaround, acquisition, and survival we think it certainly merits your investigation. Often times the higher price of the facility can easily be offset by proper usage of funds to generate profits and savings.

Speak to a trusted, credible and experienced Canadian business financing advisor if you with to look at the new paradigm in business lines of credit.






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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

Is Your Company Properly Exploiting Equipment Lease Financing In Canada ?

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We previously wrote on some of the challenges that Canadian business owners and financial managers face in getting successful lease equipment financing in place for their assets and capital expenditures. The current difficult economic environment makes it more challenging than every for Canadian business owners to get the proper rate, terms, and structure that they deserve.
Success lease equipment financing requires a working knowledge of what the lessor is looking for in a transaction.


Owners can safely assume that the lender is doing significant work on financial statement analysis to satisfy them they are making a proper financing decision with you firm. Included in this analysis is strong emphasis on cash flow history and projections, operating efficiencies of your firm as measure by industry accepted ratios, and balance sheet analysis with respect to the amount of debt your firm is carrying, etc.


In our previous article we suggested that business owners should be aware of some key 'structuring options 'that lenders use when they are contemplating an approval that they are not 100% comfortable with. These options, previously discussed were:


- Utilizing higher rates to compensate for risk
- Use of Security Deposits
- Use of advance payments
- Structuring higher payments in the earlier years of the lease
- Shortening the lease term to offset long term risk


Business owners should be aware of some additional enhancements that can further a financing approval when your firm might not fully qualify for your desired amount of financing and overall structure.
Let's looks at some of those additional enhancements that compliment the 5 areas we have noted above.


Business owners who are not familiar with some of these financial nuances should employ the use of a trusted leasing advisor with credible experience, thereby significantly increasing their chances of getting a lease financing approved.
Business owners might not always be comfortable with providing a Personal Guarantee on the transaction; however personal guarantees are a clear fact of life in the Canadian business financing environment. The logic of the lender, in this case your equipment lessor, is that you are more motivated to make those payments if you are personally obligated in the matter also.

Naturally companies incorporate to avoid personal liability but business owners are often called upon by lenders, lessor, etc to provide a guarantee. It goes without saying that the lender will also want to validate the quality of your personal guarantee.
In many cases you as a borrower, or the lender might request, additional collateral on the transaction.

This would be collateral that is currently unencumbered, but in effect shores up the lessors overall position, allowing your transaction to be approved. In many cases you will be required to provide some form of documentation (usually an appraisal) of the additional asst.


In some circumstances an effective additional collateral might be credit life insurance on the transaction - in a smaller of mediums sized Canadian firm the lender / lessor may rely on that insurance in the event something happens to the owner, that something being ' death ' of course!


Not all Canadian business owners know that in some cases the manufacturer that you may be purchasing and financing the equipment through is in some cases agreeable to providing a limited or partial guarantee on your transaction. They are making a sale, generate profits from the sale to your firm, and may be able to remarket the asset if the lessor requests assistance in this area.


Finally, in some cases your lessor may request a letter of credit or Certificate of Cash deposit as additional collateral. In the authors experience this is rare, as your firm traditionally would note want to encumber cash in such a manner.
So what's our bottom line? It is simply that lease financing can be a challenge, but if you work with a lessor to offer up and co operate on some manner of structuring, as outlined above, then your chances of successfully getting a lease financing approval increase immensely!








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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

How To Finance A Company In Canada : Mistakes You Don’t Want To Make In Cash Flow Financing

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Information on how to finance a company in Canada

How To Finance A Company...that's the challenge for owners of new and existing businesses in Canada when it comes to equity, debt, and cash flow financing.

Let's examine some basic aspects surrounding that issue with a focus on how Canadian business owners and financial managers can both identify and then source capital. Our focus will be primarily outside of the equity arena as private and public entity is... well... a whole different kettle of fish.

Timing is of course... everything .. and it sure helps when you're financing a firm in an economy that is a bit healthier. Financing, both from a debt or cash flow point of view is of course the lifeblood of any firm. Great companies, both small and large go out of business due of course to inability to get the proper mix of financing in place.

As most business people know it’s not only a challenge to generate the interest of a financial partner - then it becomes the challenge of an approval securing those funds! And as your firm grows you will need additional cash flow financing - you don't want to be in a position of growing so much that you business fails - that has happened to many in Canada.

In Canada banks and other commercial financing firms provide the debt and cash flow financing capital you need Let's explore and recap some of those debt and cash flow financing options available

When most business owners think in terms of external financing they consider Canadian chartered banks as the key option. That is no doubt certainly the most publicly available finance - and when you have the corporate and personal assets and collateral the rates, terms and structure of the bank agreement is without a doubt appealing.

But in many cases the Canadian banking system can't support the thousands of firms who have additional or specialized needs. In the case of securing bank credit you need positive profits, assets and collateral, a track record and probably forms of what the banks call ' secondary repayment - Our clients know it as the ever concerning Personal Guarantee!

So, when you are looking s to how to finance a company what are some of those other options? They include asset based lenders; in the true sense of an ' ABL ' solution these firms provide non-bank lines of credit secured by your A/R, inventory, and fixed assets on the balance sheet. And a lot of the emphasis that banks place on approval do not come into play with an ABL lender.

Equipment financing, aka leasing your key assets is also a very effective method of financing your firm. It also relieves the larger cash outlays your busines needs when it acquires assets.

Start up and small businesses have access to the Government SBL loan program, which has great rates, terms and structures when it comes to acquire assets and even financing leaseholds and real estate. And the majority of the loan is guaranteed to the bank by the Federal government.

Cash flow financing, or the ' monetizing of assets ' can be accomplished by utilizing receivable financing, inventory finance, and even selling your tax credits such as those under the SR&ED program . Why wait a half year to get your cheque from your non repayable tax credit?!

One of the best methods of cash flow financing comes your a partner you know only too well - yourself and your firm. By managing your assets such as inventory and A/R you can generate internal cash flow through your business operations.

Speak to a trusted, credible and experienced Canadian business financing advisor on those equity and debt options when it comes to how to finance a company in Canada.





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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

Take Charge Of Your Business Asset Finance Today Via A Revolving ABL Credit Facility

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INFORMATION ON BUSINESS ASSET FINANCE IN CANADA

We meet a lot of business owners that say they don't necessarily feel ' in charge ' when it comes to business asset finance and their ability to secure a proper revolving line of credit.

ABL credit, i.e. the asset based line of credit via a non bank facility is one way the Canadian business owner can take charge and regain control o their business financing needs .

Asset based lenders exist in a wide variety of forms in Canada... today we're focusing on the true asset based lender that provides, outside the bank environment, business lines of credit .

Where it gets a little confusing for Canadian business is that some day to day terms are intermingled to make this form of finance confusing to some. Trust us, its not confusing!

Hopefully even we can be forgiven for contributing to some of that confusion sometimes, as we have positioned ABL Credit as a non bank solution. But in reality even some of the banks participate in this type of finance via separate boutique divisions within the chartered banks. It's at that time its important to know who to deal with and why.

True asset based lines of credit revolve around one thing, the ultimate liquidation of collateral. Simply speaking the security and liquidity in the business asset finance LOC focuses on the underlying collateral that you're borrowing against. As we have noted in the past that collateral consists of receivables, inventory and equipment for the most part. (Real estate can also be added in sometimes.)

So what’s different about ABL credit when it comes to a comparison to a Canadian chartered bank? The simple explanation is that in a bank line of credit your ratios and covenants have to be performing, as set out and agreed to by the bank and yourself, with a revolving ABL facility you need to ensure those assets are operating, ie turning over, and hopefully growing.

That's probably our most significant point today, that being that your assets secured under the ABL facility must have a solid liquidation and market value. In revolving business asset finance you typically borrow 90% of A/R, and 30-70%, as negotiated for inventory and equipment.

The appeal of Asset based lines of credit is that it pertains, in Canada, to all sizes of firms. While larger facilities tend to be in the millions of dollars a financing program of this manner can be set up for a minimum of 250k if in fact your firm is smaller. But we repeat... essentially there is no upper limit.

Want to regain control and take charge of your business financing. Speak to a trusted, credible and experienced Canadian business financing advisor on how revolving business asset finance can help your firm.







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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

Receivables Funding In Canada . The Good , The Bad And The Ugly ! Sales Of Receivables Factoring Works If …..

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Information on Receivable Financing in Canada

It's probably just us, but when it comes to business financing in Canada no other method of financing your business is as controversial or misunderstood as sales of receivables financing, aka factoring funding.

Let's examine some key points that will clarify the ' Good, Bad and Ugly ' of receivable financing in Canada.

Let's start off with the ' good ' as we think you will soon might find that the ' bad' and the ' ugly ' are simply misunderstandings , but we'll let you decide.

So whey do Canadian business owners and financial managers embrace this newer form of financing in Canada. Simply because it supercharges your cash flow - by selling your A/R you in effect maintain cash flow for operations, and eliminate the need for additional debt or taking on or putting in new equity. We constantly remind clients that the dilution of your equity is in fact the costliest method of financing, everyone pretty well agrees on that.

Another point in our ' Good ' column is that if structured properly your sale of receivables financing sets you up for unlimited capital and cash flow - simply speaking your working capital grows lock step with your sales. Not too many other methods of business financing can make that statement.

The Ugly. The following point is simply the most recognized complaint when we talk to clients. It involves the mechanisms under which A/R financing works. 99% of the structures used by factor companies involve the factor firm validating the credit worthiness of your clients, and getting involved in the billing and collecting of your receivables. Why. Their answer would be that you have sold them the receivable and it’s theirs to collect.

So that’s bad, right? Most Canadian business owners and financial managers that we speak to would say they would prefer to bill and collect their own receivables, and maintain those client relationships that are so important. Enter ' the good '! Here's the good news, most Canadian businesses contemplating sale of receivables funding / factoring are eligible for what we term ' Confidential receivables financing ‘. Utilizing that mechanism your firm bills and collects its own receivables, maintaining total control on the billing and collection function. You in term remit those funds to your finance firm, simply because you have been advanced those funds already.

The Bad. Here is where misunderstanding reigns supreme in A/R financing. It's the ' price ' or ' cost ' of this method of business financing. When you finance a receivables portfolio a factor firm buys your A/R at an ongoing discounted price. That price, on balance, in Canada is 2-3%. Business owners in Canada confuse that purchase discount fee as an interest rate, and that’s a large part of the problem. In reality its how you manage that 1.5-2 % that ultimately reflects your total cost of financing. You can manage that cost by adjusting part of the cost into your cost of sales - we remind you that you’re already absorbing a large cost by carrying receivables and inventory already.

And by the way, with that new found sale of receivables funding cash flow you can now take supplier discounts if they are offered, which by the way, are generally in the 2% range. Want more good, rather than bad or ugly?! You can now enhance your purchasing power with suppliers, and if you choose (not always recommended by us) you can offer extended terms to your clients that your competitors might not be able to.

The bottom line today. Thousands of Canadian businesses embrace sale of receivables funding / factoring everyday.

Consider speaking to a trusted credible and experienced Canadian business financing advisor to wade through the good of this method of business finance, and you might just find that bad and ugly are either misunderstood or don't exist . That’s a working capital solution!







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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop