Lender Finance ? Get Successful With You Canadian Lender Financing Needs

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Lender financing is about the ability to grow and support your financing capabilities to maximize the profitability and growth potential of your finance company. The opportunity to obtain a customized lender finance solution to your industry enhances your reputation via credit facilities and business capital that deliver true lending potential to your client best, whether that be consumer or business, aka ' b2b' and b2c'. That's when ' experience ' counts!

No lender/finance company wants to decline borrowers that meet their credit criteria for lack of internal funding program capability or competitive interest rates.


At 7 Park Avenue Financial our clients that are lenders know that they require specialized insights into their business. The industry is vast and diverse with firms offered both secured and unsecured loans and other ' niche ' financing products. The 2008 financial crisis brought about significant changes in the way in which specialty financing solutions are funded. Whether it's a collapse in financial markets or the traditional banking system . a pandemic crisis, or technological breakthroughs in delivering consumer or corporate finance solutions the only constant is: Change! As challenging as specialty finance industry issues are seasoned lenders know that opportunities emerge at every turn in times of upheaval.

The Lender Finance Search - Understanding  The Lender Financing Provider

Most industry specialists in finance feel that they have been somewhat abandoned by the major insurance companies and Chartered banks that traditionally filled the void in specialty lending. Whether that can be termed a failure on their part of only a hard reality of the capitalization and constraints of those two lending bodies is subject to vigorous discussion.

Finance firms have certainly seemed stifled when it comes to the potential to grow, and your firm might be anxious to capitalize on access to the internet by business borrowers. That type of access to clients can only help you to spur growth without having to recognize boundaries (like the old days !). As an example, well-respected statistics firms such as Dun and Bradstreet estimate that the specialty finance industry in North America has volumes in excess of 585 Billion dollars.

Growth capital is what it is all about as your core business requires capital alternatives to deliver financing services. Owners, managers and shareholders of your business know that new capital sources should come with expertise that will lead to further financial success and the ability to operate effectively on an ongoing basis. At the end of the day, it is all about the portfolio and your management's ability to deliver value to owners and the client base.

Credit risk, more specifically the management of that risk is at the heart of your firms borrowing capabilities. Your ability to borrow well is dependent on your ability to demonstrate assessment of credit risk as well as documentation, collection, and fee issues dependent on your success


You want a partner or advisor who had an understanding and insights into your business. At 7 Park Avenue Financial, we have 16+ years of business dealing directly with specialty lenders in every aspect of consumer and corporate borrowing. You're looking for someone who understands your ' credit box ' when others don't or don't want to!

It's no secret that every aspect of every specialty lenders business is somewhat unique. Whether that be consumer lending, asset based lending, equipment leasing, law firm lending, factoring /receivable finance, auto loans, MCA ( merchant cash advance ) working capital loans, sr & ed loans, as well as other / niche lending markets every finance business is different. Online lending models have exploded into the Canadian and North American marketplace.


Your team knows that specialty lenders succeed best when they fill the void left by the exit of other or traditional market players. You, therefore, want to capitalize on expansion and growth. Therefore financing with a partner or advisor with industry expertise and the ability to finance creatively is foremost in your mind. That's where the relationship begins at 7 Park Avenue Financial - with a focus on understanding your current portfolio and the credit criteria that drive that growth.

Specialty Lender Financing Makes Your Firm More Competitive

Demand for your financing comes from client confidence in your finance services and of course interest rates, your ' cost of capital '. Someone lending to finance companies will look at your ability to write new business, but, as importantly service and collect on those loans. If your firm is a smaller finance company those rates/cost of capital areas are more important than ever if you are competing with the ' gorillas' in your industry who have the scale and potentially multiple sources of business capital. In some cases your firm may also be challenged to align new funding with redesigned business processes.

Niche players such as your firm always can succeed of course by highly specializing in your chosen field of finance. The specialty finance industry is not unique in that similar to many industries experts tell us that the higher quartile of lenders have the majority of the business


Your firm's ability to demonstrate adherence to any level of regulation in your industry, as well as the ability to divulge credit practices is key to the start of a good relationship with a specialty lender or funding advisor.

These days it's all about ' fintech ' which can mean a lot of different things, but the essence of that is the technology that delivers your firm's funding and growth and reporting. It should be no secret that a well-performing portfolio and your firm's ability to demonstrate that performance is key to attracting new funding.

At 7 Park Avenue Financial our focus is on delivering on a financing solution that will maximize your portfolio growth potential, so our focus of discussion is around areas of the size of your portfolio and the ' credit box ' that goes into those client approval decisions.

In some cases your firm might have some level of industry self-regulated or government compliance which should be demonstrable. These days it's all about ' FINTECH ' and any technology issues your firm has invested in or intends to invest in.

Similarly to any corporate borrower your finance companies must demonstrate the ability to report appropriately on portfolio statistics such as ageing, bad debt reserves, etc.


Lender to lender funding is also about your firm's ability to capitalize on new markets when new niches or geographical opportunities emerge. New economic cycles have a way of identifying unique new opportunities. The growth of alternative financing products has uncovered millions of dollars of lending possibilities for successful firms with existing portfolios.

Benefits Of Flexible Specialty Lending To Your Industry :

Ability to maximize the borrowing power/leverage of your existing portfolio

Secure specialized facilities based on the nature of your business

If your firm can't issue debt or stock or access commercial paper markets you need the best interest combined with flexibility and good repayment terms as low as possible compared to your interest earned

Almost all firms, probably including yours have external pressures around regulation, credit risk, and competition.


Lenders control credit risk by assessing the borrower's creditworthiness before extending credit. If a borrower fails to meet the conditions of a loan, fees can be charged, or the loan will become a loss. Lenders can minimize loan losses by employing or outsourcing a collections team that contacts and attempts to collect from borrowers who fall behind on payments.


At 7 Park Avenue Financial we have delivered on the financing of credit services for unique finance programs delivered by industry leaders in a niche industry. Whether your firm is experiencing hyper-growth or if you have very special requirements the 7 Park Avenue Financial team wants to become a long term financing advisor/partner and contribute to your company's success in your industry.

Seek out and speak to a trusted, credible and experienced Candian business lending advisor who can ensure your lending needs are met.





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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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
7 Park Avenue Financial/Copyright/2020

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How To Access Business Factoring For Cash Flow Success Via Receivable Financing

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Receivable financing solutions in Canada, often called  ' business factoring ',  offer a true ' second chance ' when it comes to the business owner/financial mgr’s ability to turn adversity into opportunity. This business finance solution goes by a few names: invoice factoring, invoice discounting, receivable factoring, etc.  There are different forms of factoring, so we forgive new clients at 7 Park Avenue Financial for sometimes getting overwhelmed with the terms!


The ability of your company to turn cash flow for business challenges into a major win in working capital and cash flow might just come from one of Canada's newer forms of business financing, called ' business factoring '. Spoiler alert -  Accounts Receivable factoring it's not that new!

Getting the order, and then getting paid. The old  ' cliché' of  ' the order is not complete until it's paid for '... as trite as that sounds, seems to hold true even today, especially for new, small and medium size firms.

Many clients we meet with are in the enviable position of getting larger orders and contracts than they might have imagined based on their innovative products and services. But with that success, as we noted, comes the challenges of cash flow financing.

During the past few years with all the economic turmoil it seems Canadian business financing options seem either limited or have disappeared - that's certainly how many clients feel. The impact of accounts receivable growth is a huge challenge, not to mention inventory and Purchase Order / Contract funding needs.

 Many companies find that traditional bank financing is restrictive to a point that Canadian banks can't meet their business credit needs. The concept of ' seeling a/r ' to a third party and generating immediate cash as you grow sales has become popular with thousands of companies in Canada.   This differs from assigning accounts receivable to a bank.

Note that almost all of the commercial factoring in Canada is done by non bank commercial lenders. Canadian banks will often refer customers seeing a/r financing to a specialty lender or an experienced advisor familiar with factoring.

Advantages of Factoring Vs. Other Types Of Financing 

There are of course some significant differences between a/r finance and the concept of a ' commercial loan '.  Primary is the fact that this type of business credit is not a ' loan' per se - your company does not take on debt on your balance sheet.  The amount of factoring financing is simply directly related to the amount of your A/R. Canadian borrowers will be happy to know that there is virtually no upper limit to the amount of factoring finance if your firm is growing and has good receivables, domestically or internationally. 

Borrowers know only too well that bank financing is tied to credit limits, annual reviews, and a variety of covenants, personal guarantee focus, and the potential requirement of outside collateral. Many Canadian firms feel the pressure to increase outside equity, and a good receivable financing facility will allow you to potentially avoid that need.

What Type Of Company Utilizes  Accounts Receivable Financing?

Almost every industry in Canada uses Factor financing.  Industries in the oil and gas sector, staff placement, manufacturing, distribution, wholesaling, trucking, technology and business services all are major clients of the receivable financing industry.

Although some businesses that are financially challenged in some manner, the proverbial ' bad credit ' industry statistics show that the factoring industry is experienced strong growth and popularity.


Business cash flow, a la ' cash is king ' has never been more relevant for the economy. Receivable financing allows firms to not be victimized by clients pay 30, 60 or dare we say it 90 days beyond stated payment terms. It's the SME sector that feels that pain the most, as larger corporations have access to more liquidity.

Business factoring can be called a subset of asset based financing - the monetizing of assets without taking on commercial business loans and term debt. The speed at which factoring facilities can be arranged is also an appeal to Canadian business owners and their financial managers. The concept of no installment payments has broad appeal to factoring clients.

Key Points in Determining the Financing Value Of Your Accounts Receivable 

Numerous factors are taken into account when commercial lenders are setting up your accounts receivable financing facility. It's all about the true value and quality of your a/r. When it comes to your accounts receivable ageing it's no secret newer invoices have greater value - numerous industry statistics validate that point.  Who your client is also is important. An extreme example has been given that a receivable owing to your firm from Google has more value than one owing from a local DVD rental store!

As a commercial borrower in a factoring facility the more info you have on your a/r base will result in a more cost effective facility.

What Do Factoring Companies In Canada Require To Set Up Your Invoice Purchasing Facility     

As a general rule borrowers will be pleased to know that the entire application process in setting up your facility is very simple and straight forward. Key information required includes :

1.     Standard credit application 
2.     Agings for a/r and a/p
3.     Confirmation of legal company name - ie articles of incorporation
4.     Sample invoice 

New clients of 7 Park Avenue Financial always want to understand how the advances and cost work when it comes to receivable funding. As a general rule your sales invoices are funding at 90% of their face value.  Your firm receives the balance of the invoice, ie the remaining 10%, less financing costs when your client pays the invoice. Invoice purchasing is now completed!

It should be noted that there is no requirement to finance all your a/r base, although many of our clients choose that route, allowing the facility to mirror a true bank line of credit.

So we have waxed eloquent on the problem- That's easy. You'd prefer a solution though!   Receivable financing, also known as factoring addresses the issues of your customers paying you in 30.60, or dare we say it, 90 days. You can carry those receivables and continue to make a high investment in current assets, or you can turn your sales into immediate cash.

Let's cover off some other basics around how this innovative method of business financing works.  When you sold the product or service you hopefully had enough gross margins in your cost of sales to make the sale profitable. If you are able to sustain another 1- 2% of gross margin erosion you can use receivable financing to turn sales into same day cash, which is what this financing is about. That is known as the factoring discount, which is a cost, and not an interest rate as some people believe.

So how does this all work? We're glad you asked! Let's reveal and recap in a manner that's understandable.  Your purchase orders or contracts must be ' clean ' from a viewpoint of being able to demonstrate you can recognize revenue on your shipment.  We should interject at this point that the banks will finance your receivables also, but that comes with much stricter criteria and limits on the amount you can finance.

That is why factoring has risen in popularity, it provides unlimited... yes... unlimited same day cash flow for your sales. Your challenge is to work with a trusted, experienced and credible business financing advisor who can steer you to the right partner with the type of facility that works for you.


Although traditional factoring along the lines of the U.S. model requires your customer to be notified we are in fact a fan of the type of facility that allows you to bill and collect your own receivables, for all the obvious reasons.  At 7 Park Avenue Financial we've called that Confidential Receivable Financing.

It's important for clients to understand at its most basic how factoring works. You are advanced, on the same day as you invoice approx 90% of funds for your invoice. The remaining 10% is a holdback which creates a reserve and also covers the financing charges. When your customer pays you or the factor you receive the remaining 10% of your invoice amount, less the financing charge.

In Canada the cost of factoring from accounts receivable factors ranges from 1-2% a month.  The cost of factoring revolves around some key points. They include:

Industry specific issues relating to your company  - some industries are occasionally ' out of favour"

Size of your Receivable base - a very general rule is that many facilities start in the 250k range, there is no upper limit, but any size of facility small or large can ultimately be financed with the expertise of a business financing consultant 

General level of creditworthiness of your client base as it relates to any major concentrations or invoice size, geographical location, etc

DSO! Business people need to be familiar with the concept of DSO -  ' days sales outstanding ' It is a key measure of any successful company. The largest and most successful corporations in the world have this a key measure of financial and profit performance. DSO is measured in days, lower is better and the turnover of your a/r can dramatically affect the cost of factoring.



Note that it is also possible to transfer all of the risk of bad debt to your funder, which is known as non-recourse factoring - these facilities naturally cost a bit more and are sometimes abetted by credit insurance. Factoring companies in Canada and advisors can provide your firm with more info on this additional investment in credit risk.



It turns adversity into opportunity because you grow sales with larger gross and net margins, and if you utilize the financing properly you are actually in a position to reduce much, in some cases all of your financing costs by taking discounts with your own suppliers or buying smarter and in larger quantities. Reversing the cash flow for a business problem - That’s a win win in the language of business.


In summary, it is important to realize how factoring works and why it can be valuable to your business, in good times and in less than good times! Your firm accelerates cash flow and literally unties the capital you have invested in sales to clients.


If you are looking to factor receivables seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business factoring and A/R financing needs.





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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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
7 Park Avenue Financial/Copyright/2020



















 

Working Capital Finance Solutions & Bank Alternatives !

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Benefits Of  Financing Alternatives Vs. Traditional Bank Loans

What Is Working Capital? How To Find Alternatives To Bank Financing

Canadian business owners and financial managers seeking working capital finance by banks or other sources are generally experiencing growth in sales and profits. That's the good news, which is of course offset by the fact that this type of success requires additional working capital and newer ways to finance your business. Putting working capital to work enhances your firms value when return on capital is higher than your cost of financing!


Liquidity has become the name of the game and ' cash is king' even today never seems like a worn cliché.  Past studies by the Conference Board of Canada indicated that the key worries of business owners were working capital cash flow. (Also referenced were ' regulatory issues and competition'). The bottom line is: business owners and their financial managers want options


So you have sales and assets... but can those assets generate working capital finance by banks or other alternatives?

The ability to secure funding at critical times is always challenging for entrepreneurs, even in established companies. That one of the biggest reasons that alternative funding has risen to so much prominence. A wide variety of finance solutions is now available to the Canadian business owner - solutions that involve cash flow financing via the monetizing of current assets such as inventory and receivables, monetizing future sales ( merchant advance/short term working capital loans), equipment financing and sale-leasebacks, and traditional cash flow term loans, also known as ' mezzanine financing '.


Somewhat remarkably many businesses have even turned to online borrowing solutions in Canada. Canadian chartered banks have also participated in the online borrowing industry, although reviews of customer experiences in business journals such as the GLOBE &  MAIL and NATIONAL POST have met with some lacklustre customer experience. Although approvals are relatively fast interest rates and borrowing costs and terms of repayment have left many customers wanting better solutions.

In online borrowing models, including peer-to-peer loans significant emphasis is based on owner personal credit history. Alternative funding options are continually changing in the digital space and borrowers are well advised to speak to a business financing consultant in this area. It is safe to say that business owners can't be expected to call and interview all the different online lenders as it relates to loan info, cost of financing, and loan criteria.

The main appeal of short term working capital loans is the emphasis on fast approval, no requirement for additional collateral, and less emphasis on personal credit scores and net worth.


The bottom line is that businesses who choose to grow and that require external funding want to deal with reputable lenders/financing partners. Unfortunately many Canadian firms can't meet the criteria under traditional bank lending policies , even though financing needs are critical to their business.



For working capital purposes it's all about ' current assets ' which include typically receivables and inventory. As you invest in those two assets to generate sales your working capital needs go up, and your ability to manage and turn over those assets plays a key role in the sourcing of working capital by banks, and non-bank institutions.


You should not be afraid to enter into traditional or alternative working capital solutions if you have properly managed current assets - you are simply monetizing for liquidity, and that's rarely a bad thing.  Business owners know cash goes down when you are expanding sales as you invest in assets and resources.


So are Canadian chartered banks the solutions to your working capital needs. Probably, possibly, maybe is our answer, meaning that if your firm is capable of meeting bank criteria for a revolving line of credit your needs typically can be met. Of more and more concern to our clients is their ability to not be able to generate sufficient financing for the sister of receivables, aka inventory!


That then takes us into an alternative for bank financing, which is the fast growing area of asset based financing, in particular asset based lines of credit. These facilities cost more, but give you total margining of the market value of your receivables, inventory, and , guess what, we'll throw in equipment and real estate if you want to temporarily margin them for working capital. And remember, your balance sheet is not taking on debt when you enter into either a bank or alternative asset based line of credit, you're simply monetizing your financials for cash flow.

The reality is that alternative methods of financing are growing more popular - yes they are more expensive, but if your firm generates sufficient margins and return on equity your ability to tap into virtually unlimited working capital can prove to be a very positive experience.

The reality of working capital finance by banks or alternative methods is always the same - you need to determine your asset turnover, there will always be times when you need a bulge in inventory and A/R to fund your growth.

Solutions for alternative working capital cash flow include:

Non bank asset based lines of credit  - These facilities help to smooth out what the pro's call the 'operating cycle ' of your business , assisting those times where cash inflows don't match outflows based on a/r and inventory turns. As you invest in current asset categories of receivables and inventory you experience a decline in cash reserves. Businesses with seasonality or ' bulges' of sales activity require solid business credit lines. 'ABL' ( Asset Based Lending ) lending is true collateralized lending.




The operating cycle may cause businesses to experience shortfalls for a specific period. There are numerous reasons why this can happen, but one underlying reason is that a business may extend credit to its customers to attract more business. The more credit a business extends, the less cash is available during that time. That’s why a line of credit can help these businesses with their cash flow management.

A/R Financing/ factoring (We recommend Confidential Receivable Financing) - 

Accounts receivable finance is one of the most highly utilized and successful forms of non bank working capital financing. This type of financing allows you to, in effect , sell your invoices to generate cash flow. Many business people don't understand this type of funding is not a loan, in effect its a transfer and cash flowing of your asset - A/R! 

So pricing is not an interest rate per se, but a discount to the total value of your invoice, typically in the 1-1.5% range.  We recommend confidential a/r financing, allowing you to bill and collect your own accounts with no intrusion of any finance firm into your customer relationship.



Sr & ed Tax Credit Bridge Loans

Sale leaseback solutions

Inventory & Purchase Order Financing

Loans for professional practices ( Doctors/Dentists/Lawyer/Accountants, etc )  - These loans may involve financing needs around equipment, marketing,  or in some cases acquiring another practice. Expansion for business real estate is also a common need in this area.




Short Term Working Capital Loans ( aka ' Merchant Advances ) - As we have discussed to a certain degree these online/peer-to-peer solutions became ultra-popular after the 2008 recession and became a strong competitor to invoice discounting finance. Loans are typically based on a percentage of annual sales, typically between 10-20%. Although readily accessible we consult to clients around the pros and cons of this financing, one issue being higher interest rates.

It is important to understand the financial concept of matching when it comes to working capital finance solutions. These sources of capital should be used for day to day operating needs.  Serious mistakes occur when these types of solutions are used for long term need such as investments in equipment, r&d,  marketing, etc.

At 7 Park Avenue Financial we find that many new clients are confused around some of the terminology around the ' working capital loan '. Also noted is that certain loans in this category are secured, others are not.

Is Alternative Financing Right For Your Firm?

Business financing is a challenge, so owners must invest their own time, or work with a trusted advisor to evaluate options. Companies with good sales revenues, profits and clean balance sheets will have more options, but we have demonstrated that commercial lenders providing alternative finance options are plentiful and offer numerous cash flow solutions to your short term needs. If your firm has sales, and or assets you have non bank funding options.


Liquidity, that's what it's all about. Speak to a trusted, experienced and credible Canadian business financing advisor in order to ensure your traditional and alternative business financing options are first, clear, and second, available!





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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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
7 Park Avenue Financial/Copyright/2020

Business Acquisition Financing In Canada

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Buyout And Acquisition Finance Solutions

What Is Acquisition Financing?

It's the capital required to buy another business, as simple as that. The purchase of a business will require external capital, namely business acquisition loans . That is the challenge of financing a takeover. Acquisition opportunities are available and ongoing in every industry.


Acquisition financing in Canada almost always involves validating the price you're going to pay to purchase a small/medium enterprise. One reason is that companies in the SME sector don't always have the same talent available to price real value. Business people should of course rely on their trusted advisors for professional help in that area, but this article will hopefully give them insight and advice into their challenge.

There are a number of reasons why a smaller company might purchase another firm, it could be to simply get 'scale ' as opposed to current organic growth in the company. Bank loans and alternative sources of financing for term debt and lines of credit are the common way to buy a business and finance it successfully.

Government loans and seller financing are other methods to complete a business purchase.

A successful acquisition loan will facilitate the purchase of another business. The type of financing you require will depend on whether the business is a start up, or a more well-established firm.

HOW DOES ACQUISITION FINANCING WORK?

The good news is there are numerous ways in which you can finance the purchase of a business. In the new economy both traditional and alternative financing sources are available. The ability to procure reasonable rates based on the overall credit quality of the transaction is important when putting your financial strategy in place. Flexible terms and reasonable financing costs will help propel the purchase towards higher sales and profits.


In the current environment many transactions do not meet the lending criteria of traditional Canadian chartered bank financing. Alternative lenders may well provide the solution you are looking for - the challenge is to ensure rates and flexibility match your business goals. Banks in Canada look for key metrics such as growing revenues, profits, and a clean balance sheet. Alternative lenders will often focus on hard assets, receivables, etc, versus the traditional cash flow demanded by the bank underwriters.

Government of Canada Small Business Loans should not be overlooked as a potential source of financing. For many acquisition targets in the SME enterprise area, as well as in the booming franchise sector the government guaranteed business loan is a perfect match.


Note though that the program is focused on 3 asset categories, equipment, real estate, and leasehold improvements. Down payments are at a minimum and the program has rates and loan flexibility repayment that rivals that of larger corporations. Entrepreneurs applying for this loan should ensure they have reasonable personal credit and net worth, which are key lending criteria for the program.

SELLER FINANCING / OWNER FINANCING

One method of business acquisition financing that brings substantial creativity to the process is the ' seller finance' strategy. This method of financing has the seller/sellers of the business providing a payment contribution to the total purchase price. Purchasers then make installment payments or in some cases' balloon payments ' on the seller financing portion, typically with favourable rates and flexibility. This finance strategy can sometimes be the missing piece that takes your transaction over the goal line!




The terms involved in financing a business you are buying can themselves be overwhelming to those who don't regularly work with

EBITDA, intangible assets, capitalization and discount rates, lbo financing mbo financing

We would point out that as technically overwhelming as some of those issues might be, there is even a whole additional layer of complexity around longer term issues down the road. These would include:


- Owner and management compensation


- Insurance planning


- Estate planning


- Exit strategy



With reference to our last point on ' exit strategy ' imagine the look on some purchasers' faces when they have not even completed the deal and are encouraged to talk about an ' exit strategy '!



At the heart of the matter around the final price paid for a business is the concept that both parties feel they have reached a fair deal. As we all know the buyers and sellers' perceptions of the same deal might vary greatly. Ultimately all the technical jargon around buying a business comes down to a term such as 'reasonable market value'.


As common sense as this may sound it also has its challenges since is it only a hypothetical value based on all the different financial elements related to the purchase of a business.



The most commonly used valuation of a business is known as the ' value of future earnings '... Accountants and financial advisors often project earnings out as far as ten years and try and then place some value and normalcy around those future profits. Our advice in this area is simply that owners should not focus solely on future earnings potential; there are other factors to be taken into consideration.



Some of those other factors of course include the true value of the current business assets, such as equipment, real estate, fixtures and leaseholds, etc. We can only say that as critical as those assets are they must be supported by the company's ability to generate the cash flow to support those assets and grow the business.


Buyers and sellers frequently disagree on the total purchase price, with all sorts of psychology kicking in around prices being set artificially high for negotiation purposes, the buyers focus on a low- ball offer, etc.


We would also point out the buy/sell challenge is accentuated when it relates to a ' service' firm as opposed to a product firm. Many experts agree that ultimately the valuation of the business was so far out of whack that this clouded any possible attempts to negotiate a fair price for buyer and seller.


The bottom line: buying or selling a small to medium enterprise has its challenges. If owners are aware of the key basics around the technical aspects of the matter they can successfully utilize third party assistance (accountant, lawyer, trusted financial advisor) to consummate a successful transaction.

Buyers and sellers must focus on tangible issues as well as all the intangibles that come into play in order to assist in a proper (and a successful) buy or sell. Methods to finance a purchase depending on the overall size and credit quality of the business.

LOANS TO BUY A BUSINESS IN CANADA / BUYOUT ACQUISITION FUNDING SOLUTIONS

Commonly used financing techniques in acquisitions and mergers include:

Asset Based Loans ( The assets of the target company can often help to finance the purchase )


Non bank asset based lines of credit


Govt Small Business Term Loan


Cash flow loans/ Mezzanine Debt


Traditional bank financing

Accounts Receivable Finance & Inventory Finance - financing working capital through a/r financing provides valuable cash flow for day to day operations and the ability to finance inventories helps accelerate the cash conversion cycle of the business


Sale leaseback strategies


Vendor take backs


Working capital needs also need to be addressed, proving that buyouts and acquisitions require specific solutions to facilitate your transaction.


If you're looking to successfully explore the key aspects of buying and selling a business seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business acquisition success, who can assist you with buying or selling your business.



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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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
7 Park Avenue Financial/Copyright/2020

You Need A Business Plan : Here's Why

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Business plan requirements are a common need for many of our clients at 7 Park Avenue Financial. Whether its a start up business plan, or one for an established firm we prepare and deliver on many business plans to our clients. There are a variety of needs when it comes to business plans, but our focus is typically on obtaining financing for our clients.

 The ' business plan ' is really a financing proposal - that's how we look at it at 7 Park Avenue Financial and our ability to customize your plan is our ' secret sauce '

Many bankers and commercial lenders and financiers have referred their customers to 7 Park Avenue Financial for such a document. They know we will deliver a professional industry-driven final document that's realistic and what the bankers and lenders want/need to see. They realize that a free business plan is worth just that ! Clients want more than just a business summary .

The sad truth is that many business plan templates available online are very marketing, or even ' ego ' driven. Our executive summaries and cash flow and financial projections are focused on obtaining financing for the products and services of our clients.

What Makes A Great Business Plan?

We're often asked ' how to write a business plan ' . It involves a significant amount of business expertise. Whether its a market analysis, a strong executive summary, or financial projections our focus is on creating a plan that attracts debt or cash flow financing and funding. An appropriate level of research is required for a good business plan, allowing your business to differentiate itself from the competition.

Cost of A Business Plan

Plans prepared by our firm are very reasonably priced and are almost always well below the price of other business plan preparers. Our plans are delivered in a timely fashion, but we stress to our clients that some key input and information around the business is required.

Almost every lender, banks included agrees that entrepreneurs and owners need business plans with a clear goal and outline for their business model.  Our plans are geared toward getting a loan, outside financing, or in some cases equity investment.

 The plans will show you bankers, financiers, investors, and potential acquisitors how you make money and how they will be repaid or in some cases earn a return on their investment. While some firms focus on clever ' pitch decks' and Powerpoint presentations they rarely are a replacement for a good business plan .

It's all about ensuring you have a document that includes data on your industry and information and statistics that prove financing viability . 

What Are The Key Components Of A Business Plan?

What's Important When Your Want To Create A Business Plan?

The format of a typical plan includes some key financial statement information such as opening balance sheets, 3 years of cash flow and revenue projections, and information on the owners and the team. Our plans include your website and social media strategy if applicable. Those digital and social media items certainly were not part of traditional elements of plans of the past! 

Remember also that the lender works for someone and it is key that your final document communicates the proper criteria for determining business loan or financing approval. You should be prepared to understand that in some respects the plan will be ' attacked ' by the lender, so your ability to show ' upside potential ' and to generate enthusiasm on your company is key.

It might, (but shouldn't ) come as a surprise that your full plan is not read in totality by lenders. Some experts refer to the ' 5 minute read ', with careful emphasis placed on financial and management experience. That's advice worth knowing. The takeaway? It's not always about the font and the pictures!

Here's Why Banks and other Commercial Lenders Want a Plan and Why Writing a Business Plan Summary  is so Important

That ability to provide clarity and a vision to your business will help attract the financing you need. So the step-by-step process of knowing what resources will best lean in your favour is key. Your final plan should identify yourself and your team as doers, not dreamers!

The sign of a well crafted business plan is one in which you have conveyed that you have a strong understanding of your industry, the costs of entering that industry, and competitive issues that will have your firm stand out, with customers clearly wanting to buy your product or service.

What Are The Key Elements of a Effective Business plan template  - What Business Plan Tools Are Required ?

Here is a list of the key elements of a business plan that we utilize at 7 Park Avenue Financial :

Executive Summary

Financial models - sales, expense, and profit projections ( Upside potential/profitability)

Marketing Strategy

Pricing/Product / Profit Margins

Industry / Management overview

Operations

Competition Analysis

Target market / customer

It is important to remember that business plans are usually used for different circumstances, in some cases they might be focusing on a startup business, while in other cases it might be for a loan or additional financing for equipment or expansion. Note also that a great business plan can simply be used as an internal document highlighting to management and employees the mission statement and financial goals of the company. In that case it should be designated as company confidential, rights reserved, and it can grow with your business .

In summary, we do not mean or infer that a plan is in fact absolutely required required for a lender or financing but a business owner or entrepreneur with no plan is, outside of luck, may be guaranteed to fail.

Seek out and speak to a trusted, credible and experienced business plan consultant who can assist you with your needs.

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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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

7 Park Avenue Financial/Copyright/2020