Business Finance In Canada: Financing Cash Flow Allows Your Business To Take Off

 

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Financing & Cash flow are the biggest issues facing business today.

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

 

 

 

Financing  Cash Flow: Unleashing Canadian Business Growth

  

 

 

  

 Introduction: Is Worrying About Business Finance Necessary?  

 

In the landscape of Canadian business finance, anxiety and concern seem commonplace. Is it justified? The answer lies in how you're financing your cash flow needs. By addressing these properly, your business is positioned for takeoff. Let's dig in!

  

The Consequence of Poor Cash Flow Management & The Impact on Business Operations  
 

The effects of insufficient cash resonate deeply with business owners and financial managers struggling with day-to-day working capital needs. The inability to purchase or upgrade assets, meet payroll, or fulfill debt obligations can create a high-pressure environment when the business is in a negative cash flow position.

 

Funding Daily Operations and Growth: A Canadian Business Perspective

A successful business in Canada treads on a dual path - maintaining operational sustainability while growing revenues and profits. If a company isn't generating cash and profits, it's more akin to a hobby,' which is far from how Canadian business owners perceive their ventures.

 

Can Traditional Financial Wisdom Assist? Textbook Definitions vs. Real-World Applications 

While textbooks offer well-defined definitions around cash flow, including net profits and depreciation, these rarely translate into practical solutions for the struggling business owner. Paper profits and cash flow ratios from accountants often fall short in the daily financial battle.

 

Challenges in Accounts Receivable Management & The Cash Crunch Created by Poor Financing

Delayed payment from clients exemplifies cash shortages and reverses positive cash flows the company may have enjoyed. Though paper profits might appear robust, actual cash generated and cash on hand/cash equivalents can be disheartening. Effective accounts receivable financing and payment management have become a critical success factors in Canadian business finance.

 

  

Let 7 Park Avenue Financial Help You With These Alternative and Traditional Financing Solutions  

A/R Financing (Accounts Receivable Financing):

What it is: A/R Financing allows businesses to obtain immediate cash by selling outstanding invoices to a finance company.
How it works: The company receives an upfront percentage of the invoices’ value, while the financier collects directly from customers and charges a fee for the service.

Inventory Loans:

What it is: Loans aimed explicitly at financing inventory purchases.
How it works: These loans provide businesses with the necessary funds to purchase inventory, with the inventory itself often serving as collateral for the loan. Inventory financing needs and accounts receivable investments can strain cash reserves. Both high growth and falling sales may intensify cash flow shortages. Banks in Canada often require detailed information, including historical financials, cash flow forecasts, collateral, and owner's details to justify borrowing via financing activities.

Access to Canadian Bank Credit:

 What it is: Canadian banks offer Various credit facilities, including loans and lines of credit.
 How it works: Businesses can apply for these credit products to finance operations, growth, or other needs, often requiring collateral and adherence to specific lending criteria around debt and interest payments. Unsecured bank business loans are a commonly sought-after option for small businesses seeking cashflow finance. These loans are attractive because they don't necessitate the use of personal or business assets as collateral in many cases, instead of relying on overall credit quality, but businesses need to demonstrate a strong financial track record and a promising outlook for their future cash flow in order to qualify for the loan.

 Non-Bank Asset-Based Line of Credit:

What it is: Credit lines provided by non-bank lenders and secured by company assets.
How it works: Businesses can draw funds as needed, using assets such as inventory or equipment on the balance sheet as collateral, often at higher interest rates than traditional banks.

SR&ED Tax Credit Financing (Scientific Research & Experimental Development):

 What it is: Financing based on anticipated SR&ED tax credits from the Canadian government.
  How it works: Businesses can borrow against expected tax credits for qualifying R&D activities, improving immediate cash flow.

 Equipment / Fixed Asset Financing / Sale Leasebacks

 What it is: Loans or leases used to purchase or lease equipment and business assets.
  How it works: Lease Financing is secured by the equipment, allowing businesses to obtain needed assets without depleting cash reserves and maintaining positive cash flow.

 Cash Flow Loans:

  What it is: Loans are provided based on a company's cash flow rather than collateral.
  How it works: Lenders assess the cash flow statement to determine the creditworthiness of a cash flow loan, providing more flexibility via cash inflows but often at higher interest rates.

 Royalty Finance Solutions:

 What it is: Financing cash flows  in exchange for a percentage of future revenue or profits.
  How it works: Investors provide capital upfront and receive ongoing payments based on revenue or profit, aligning their returns with the company's success.

 Purchase Order Financing:

  What it is: Financing to fulfill specific purchase orders from customers.
  How it works: Lenders pay suppliers directly to fulfill orders, then collect from customers, allowing businesses to generate cash and take on large orders without draining cash and increasing accounts payable.

Short-Term Working Capital Loans/Merchant Advance:

What it is: Short-term loans or cash flow loan advances to cover immediate operational expenses. These are structured as installment loans or short-term debt, unlike invoice financing which is  a monetization of receivables.
 How it works: Funds are provided quickly, often with daily or weekly repayments, to assist with short-term net cash needs. Working capital loans have a downside due to higher interest rates. When collateral is limited, lenders raise interest rates to mitigate risk. These loans frequently hinge on the business owner's personal credit, putting them accountable in case of any issues. When evaluating cash flow finance choices for small businesses, it's crucial to carefully assess the advantages and disadvantages.

Securitization:

What it is: Securitization is turning assets like loans or receivables that the company generates into tradable securities.
 How it works: Assets are pooled and sold to investors, providing immediate liquidity to the originator while spreading risk among investors.

These financial solutions offer diverse options for Canadian businesses to access needed capital and support various operational needs, growth initiatives, and strategic goals.

Conclusion: Finding the Right Business Finance Solutions in Canada & Identifying and Addressing Cash Flow Gaps

Determining the amount and timing of financing by identifying key gaps in future business cash flow is essential. Addressing these gaps with appropriate finance solutions sets the stage for success.

Call 7 Park Avenue Financial,  your Trusted Canadian Business Financing Advisor for business loans that make sense for your business.

Don't let business financing concerns hold you back. It's essential to understand the ability to calculate cash flow needs. We provide tailor-made solutions to help your business take off in Canada.

 

 FAQ 

 

What is financing cash flow, and why is it essential for my business?

 

Financing cash flow refers to the money generated or spent in obtaining or repaying a business's capital. This includes loans, equity, and other financial instruments. It is essential for your business as it helps maintain liquidity, supports growth initiatives, and allows for better financial planning and stability.

 

What are the different sources of financing cash flow available to my business? 

 

Various sources of debt financing and equity financing solutions for financing cash flow include bank loans, venture capital, angel investors, crowdfunding, and self-financing. The right source for your business depends on factors such as the stage of your company, industry, financial health, and specific growth objectives. Consulting with a financial professional can help you tailor the best solution.

 

How can I evaluate the best financing option for my specific business needs? 

 

Evaluating the best financing option involves understanding your business's financial situation, growth goals, and risk tolerance. Analyzing interest rates, repayment terms, and lender requirements will help you choose the right option. Working with financial advisors or utilizing financial planning tools around cash flow statements can provide a more detailed analysis tailored to your circumstances.

 

What are the potential risks and challenges involved in financing cash flow, and how can I mitigate them? 

Financing cash flow/cash flow lending can present risks such as over-leveraging (borrowing too much), committing to unfavourable terms, or choosing the wrong financing source, which causes negative cash flows. These risks can lead to financial instability or limit growth potential. A well-defined business plan, a thorough understanding of financing options, professional consultation, and continuous cash flow and obligations monitoring are essential to mitigate these risks.

 

How can I improve my business's financial health to make it more appealing to lenders or investors?

 

Improving your business's financial health involves building strong cash reserves, maintaining a good credit score, reducing unnecessary expenses, and demonstrating steady revenue growth. Transparency in financial reporting and solid business plans with financial projections indicating how much cash is needed and for what purpose can also increase trust and appeal to lenders or investors. Collaborating with financial professionals to ensure your financial statements accurately represent your business is a valuable step in this process.

 

What is positive cash flow?

 

A company has a positive cash flow when the liquid assets such as cash on hand or accounts receivable generated from operating cash flows exceed cash spent in the company. Financing cash flow business finance solutions can aid in the needs of the business.

 

Click here for the business finance track record of 7 Park Avenue Financial

Canadian Businesses' Secret Weapon: Purchase Order Financing Unveiled

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS!

Fulfill Large Orders with Ease: A Guide to Purchase Order Financing Business Finance

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CONTACT:

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

Direct Line = 416 319 5769

Direct Email = sprokop@7parkavenuefinancial.com

 

Navigating Big Orders? A Comprehensive Guide to P.O. Financing in Canada

 

 

INTRODUCTION  - PURCHASE ORDER FINANCE IN CANADA: A GUIDE FOR CANADIAN BUSINESSES

 

Purchase Order Financing and Inventory Financing are emerging alternative financial solutions in Canada's business landscape.

 

Supplier payment schedules can be challenging for companies lacking substantial equity. Suppose your business gets orders faster than your existing working capital can handle. Talk to 7 Park Avenue Financial about purchase order (PO) financing and how it can be a practical short-term solution to facilitate growth.

 

For businesses dealing with finished or nearly finished goods from suppliers,  PO financing aids in fulfilling supplier demands. It bridges the potentially long gap between a product being prepared for transit and the customer's receipt and payment.

 

 

Paired with traditional sources of financing from Canadian chartered banks or independent finance firms, these solutions from purchase order financing companies offer supplementary flexibility for small business owners and SME's.. Let's dig in.!

 

Challenges in Traditional Business Financing

 

Traditional business financing revolves around working capital and cash flow, focusing on current receivables and inventory assets.

 

Even if your firm is well-capitalized and has an established bank credit line, fulfilling large orders or contracts can be daunting. This challenge intensifies when traditional financing is unavailable, making cash generation for larger orders and contracts seemingly unattainable.

 

What is Purchase Order Financing?  How does purchase order financing work? The Concept of P.O. Financing

 

Purchase order financing, or " PO Financing, "is a relatively new phenomenon in Canada. It provides the capital a small business owner / SME needs to complete large orders and contracts and can complement your existing financing arrangements if implemented correctly.

 

 How P.O. Financing Works

 

This financing covers your material and direct labour costs, often 60-70% of many businesses' total orders or contracts. Your firm can thus leverage working capital to finance production, leaving the profit from your P.O. or contract as a residual amount.

 

 

 Key Considerations for Qualification in P O Finance

 

Qualifying for such financing requires sufficient proof of a valid, creditworthy order or contract. If there's doubt about payment or creditworthiness, it may hinder the successful completion of the purchase order financing. Additionally, this solution is not designed for long-term financing, and funds are generally repaid once the order or contract is fulfilled.

 

 PURCHASE ORDER FINANCING VS. FACTORING

 

Technical Issues in Financing Arrangements

 

When secured financing arrangements are already in place, such as a bank line of credit, understanding the security taken in the Purchase Order and resulting receivables is crucial. Purchase order financing typically works best without a secured lender, but additional collateral or personal guarantees may be needed.

 

The Importance of Gross Margin

 

Healthy gross margins are vital for P.O. Financing. Low-margin, commodity-driven businesses may struggle with this financing model, as the blend of costs and financing charges leaves limited profit. Therefore, robust gross margins make for a more favourable P.O. Financing deal.

 

 The Growing Popularity of Purchase Order Financing

 

The current Canadian business financing climate is challenging, opening doors for alternative financing methods like P.O. Financing. It can fuel growth, improve profitability, and enhance competitive positioning within your industry.

 

 

Case Study: Understanding Purchase Order Financing Fees Through a Practical Example

 

 

Background: Purchase order financing fees are a critical aspect of considering this financial solution. Typically ranging from 2% to 4% per month and priced on a per-30-day period, these fees are charged on the supplier's total costs and may increase the longer a customer takes to pay their invoice.

Scenario: In this case study, we explore an example where a business entered into a purchase order financing agreement. The supplier was paid $200,000, and the financing company charged a fee of 2% per 30 days.

• 30-Day Payment: If the customer paid their invoice within 30 days, the total fees were 2% of $200,000, amounting to $4,000.
• 60-Day Payment: If payment took 60 days, the total fees doubled to 4% of $200,000, totalling $8,000.
•  

While these fees may seem relatively low, converting them into annual percentage rates (APRs) reveals a more substantial cost, often exceeding 20%.

Purchase order financing fees depend on various factors, including business qualifications, customer creditworthiness, and supplier reputation. The chosen example illustrates the essential considerations and potential complexity of purchase order financing, emphasizing the importance of fully understanding the fee structure and overall cost when evaluating this option.

 

 

Key Takeaways:

 

1. Definition: Purchase order financing is a funding option for businesses to cover the costs of materials or goods needed to fulfill purchase orders.

2. Applicability: Purchase order loans are useful for manufacturers, wholesalers, distributors, and import/export companies.

3. Process Overview:

   • The business receives a purchase order without sufficient funds or inventory.

   • Applies for purchase order financing from a financing company.

   • Financing companies may cover up to 100% of the supplier's costs based on the supplier's reputation and the customer's creditworthiness.

   • The financing company pays the supplier directly (via a letter of credit).

   • Business invoices the customer and provides an invoice copy to the financing company.

   • The customer pays the financing company directly.

   • The financing company deducts its fee and sends the remaining funds to the business.

4. Benefits:

   • Allows businesses to fulfill orders without waiting for funds from customers.

   • It helps prevent missed opportunities due to a lack of capital.

   • Enables business growth and expansion.

5. Costs:

   • Purchase order financing can be expensive.

   • Fees range from 1.8% to  3% of the monthly purchase order value.

   • When converted to an APR, a 3.5% monthly fee equates to over 40%.

6. Parties Involved:

   • Your business (applicant)

   • Purchase order financing company

   • Customer (who placed the purchase order)

   • Supplier (from whom goods are being purchased/manufactured)

7. Key Advantage: It involves more parties than a traditional loan and can cover costs even when a business lacks the funds or inventory.

8. Use Case Scenario: When a business receives a purchase order for goods, it lacks stock and needs financing to fulfill the order.

9. Payment Flow:

   • The financing company pays the supplier directly.

   • Business invoices the customer.

   • The customer pays the financing company.

   • The financing company deducts its fee and transfers the remaining funds to the business.

10. Consideration: While it helps meet orders, the high fees should be carefully weighed against potential profits.

 

 

CONCLUSION

 

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian Business Financing Advisor, if you are considering Purchase Order Financing.  Let the 7 Park Avenue Financial team assist in optimizing your cash flow and working capital through this innovative financing approach to a business loan.

 

  

FAQ: FREQUENTLY ASKED QUESTIONS  PEOPLE ALSO ASK /  MORE INFORMATION

 

What is Purchase Order Financing, and how is it different from traditional financing?


 Purchase Order Financing is a short-term financial solution providing capital to fulfill large orders or contracts. Unlike traditional financing, it's tailored to cover material and labour costs, thus aiding businesses in completing significant transactions without requiring extensive capital reserves.



 How does my business qualify for Purchase Order Financing?


Qualification for Purchase Order Financing requires a valid and creditworthy order or contract, healthy gross margins, and, often, a lack of existing secured lenders. Collaboration with a reputable Canadian Business Financing Advisor can guide you through the qualification process.



 Is Purchase Order Financing suitable for long-term financial planning?


No, Purchase Order Financing is a short-term solution to help businesses fulfill specific orders or contracts under a purchase order financing agreement. Purchase order funding is not meant to replace traditional long-term financing strategies like bank loans or lines of credit.


 What kinds of businesses benefit most from Purchase Order Financing?


Businesses that face large orders or contracts and need immediate working capital to cover material and labour costs benefit the most from P.O. Financing. It's particularly suitable for firms with good gross margins as margins offset the financing cost and those operating in industries where significant contract fulfillment is common.


Why should I consider Purchase Order Financing for my Canadian business?


Purchase Order Financing offers flexibility and the ability to fulfill large orders without straining your existing financial resources. PO Financing companies can assist you in accessing cash flow, enabling growth, and improving your company's competitive positioning. It's an innovative alternative to traditional financing that aligns well with the unique challenges and opportunities of the Canadian business landscape.


Can I use Purchase Order Financing for international orders, or is it limited to domestic orders within Canada?


Purchase Order Financing is generally applicable to both domestic and international orders. The key consideration is the creditworthiness and validity of the customer's purchase order or contract. It's advisable to consult with a Canadian Business Financing Advisor to understand the specific requirements and regulations for international transactions.


Are there any industries where Purchase Order Financing is particularly ineffective or not recommended?


Purchase Order Financing may not be suitable for businesses with extremely low margins or in industries where the combination of costs and financing charges leaves minimal profit. Understanding your industry's dynamics and discussing with a financial expert can help determine if this financing model aligns with your business needs.


What are the typical interest rates or fees associated with Purchase Order Financing in Canada?


Interest rates and fees for Purchase Order Financing can vary based on factors such as the po financing company you use,  the risk associated with the order, and the overall financial standing of your business. Working closely with a financing provider or advisor is essential to understand the exact costs tailored to your situation.

Should the financing company approve you for only a portion of the funding to pay suppliers, such as 90% of the supplier's costs, it will be your responsibility to cover the remaining balance of 10% on your own.



How quickly can I access funds through Purchase Order Financing? Is it a fast process?


Accessing funds through Purchase Order Financing can be relatively quick, often depending on the lender's requirements and the complexity of the order.

 

Timelines for the cash advance may vary until the financing company approves the transaction. However, working with an experienced Canadian Business Financing Advisor can often expedite the process and ensure that funds are available when needed. In most cases, a personal guarantee might be required.


Can I combine Purchase Order Financing with other types of financing, like bank loans / small business loans or Factoring / Invoice financing / Invoice factoring?


Yes, Purchase Order Financing can often be combined with other financial solutions, depending on the existing financial arrangements and the specific needs of your business. A comprehensive assessment with a financial expert specializing in Canadian business financing can provide insight into crafting a customized, multifaceted financing strategy.

 

  

 What are the pros and cons of purchase order financing?

 

 

Pros:

1. Availability for Startups: New businesses and startups may be eligible, even without a long history that traditional lenders usually require.
2. Credit Flexibility: Lower business credit may not be a hindrance if the customer has good credit.
3. Rapid Funding: Unlike traditional bank loans, funding can occur within a matter of days.

Cons:

 

1. Limited Applications: It's only applicable for covering supplier expenses, and companies may require a minimum expected profit margin of at least 20%.
2. Partial Coverage Risk: Might not cover the entire cost of an outstanding purchase order, leaving the business to cover the rest.
3. Potential Relationship Strain: Since customers pay the lender, not your business, this can impact your reputation or strain customer relationships. 

 

 

 

What are alternatives to PO Financing?

 

1. Invoice Financing: Borrowing against outstanding accounts receivable, useful for healthy revenues and short-term expenses.
2. Invoice Factoring: Selling outstanding invoices to a factoring company for immediate cash, suitable for businesses needing quick access to funds.
3. Merchant Cash Advance (MCA): An advance against future sales, with a faster approval process than traditional loans.
4. Line of Credit: A flexible option not requiring collateral, allowing use for any purpose, including inventory purchase.
5. Term Loans: Lump sum loans for various purposes, available from local banks and credit unions.
6. Government of Canada Loans / EDC Financing: Offer interest rate caps and government guarantee, potentially a lower-cost alternative to PO financing for small businesses.

 

 

 

 

Click here for the business finance track record of 7 Park Avenue Financial

Business Finance Solutions Include Government Loans & SRED Tax Credits

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS! 

Fueling Growth: Government Loans in Canada for Small Business Finance For R&D

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing businesses today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CONTACT:

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

 

 

  

Empowering Entrepreneurs: Unleashing Potential Via Government Loans & SR&ED Tax Credit Financing   

  

 

The main government loan programs discussed in the article are the Canada Small Business Loan Program and the SR&ED (Scientific Research and Experimental Development) program

 

Business finance solutions in Canada include the Canadian Small Business Government Loan as well as the SR&ED tax credit program. Should you ' tap into ' these two programs (probably about 15,000 other firms do already!) and how is that done? Let's dig in.

 

 

INTRODUCTION

As a Canadian entrepreneur/ business owner have you considered exploring the avenues of government lending and other financing programs? Such lending options have been carefully curated by the Canadian government to assist companies in growing in Canada.

Understanding the vast landscape of government-sponsored loans in Canada can prove daunting.
 

The Canada Small Business Financing Program and the Scientific Research & Experimental Development (SR&ED) program are two of the most popular programs.

 

Although business owners and financial managers in Canada are sometimes reluctant to take on debt (or in fact anything associated with the wheels of government) the reality is that thousands of companies utilize our two aforementioned programs to tap Billions of $ of capital every year.

 

 

THE CANADA SMALL BUSINESS LOAN PROGRAM - THE ' SBL ' - FUELING SME BUSINESS GROWTH IN CANADA 

 

 

The Canada Small Business Financing Program offers financing for small businesses in Canada -Any business under 10 Million dollars is eligible.

The program is intended to bridge the fiscal divide between traditional financial institutions for accessible funding.

To be deemed eligible for the program, businesses need to adhere to specific qualifying criteria. These typically encompass being a profit-oriented venture, operating in Canada, and meeting some key eligibility criteria. Funding is flexible and comes with competitive interest rates.

The eligibility process for the Canada Small Business Financing Program is uncomplicated, generally necessitating basic documentation like financial statements, a business plan, and the ability to demonstrate loan repayment.

Businesses can access government loans via banks and cooperative financial institutions such as credit unions. The program proffers notable benefits, including reduced initial down payment requirements, extended loan repayment durations, and the capability to allocate the funds for diverse objectives such as acquiring assets and technology, commercial real estate, and the funding of leasehold improvements.

The govt SBL program is one of the best initiatives the Canadian government takes in ensuring a certain amount of capital is available to many predominantly younger and growing firms.

 

This includes start-ups, as they and other firms in the small and medium enterprise chunk of the economy generally power Canadian economic success.

 

It's important to realize that only 3 asset categories are financeable under the program:

 

Equipment/fixed assets/technology/application software

 

Leasehold improvements

 

Real Estate

 

In 2022 the government made substantial increases to the program which no include credit lines and working capital.

 

Depending on which asset category or categories you are applying for the loan can be as much as $1,100,000.00.  Want some more good news? Owners are on the hook for only 10% as a personal guarantee component of the loan, the government guarantees the balance.

 

In case you think we at 7 Park Avenue Financial are gushing too much  over such a great program we probably are as other strong selling point of the program include:

 

No prepayment penalty

 

Competitive rates

 

Terms ranging from 2-7+ years

 

Remember, this isn't a government ' grant ' - it's a true term loan that must be justified by a good business plan and hopefully some good mgmt and industry experience. 

 

The government relies on Canadian banks to administer the program and your best bet is to ensure you're working with someone who understands criteria and timelines and the basics of a loan package.  (Those basics are typically a business plan and cash flow that reflects the loan repayment.)

 

 

SR&ED  PROGRAM - FINANCING RESEARCH AND DEVELOPMENT IN CANADA 

The qualification for the SR&ED program investment tax credit hinges on a company's engagement in suitable and eligible r&d activities around scientific and technological uncertainty, like devising new products, procedures, or software, as well as enhancing existing ones.

Expenses eligible for claims under sr ed expenditures might encompass salaries, materials, subcontractor fees, and overhead costs directly associated with R&D undertakings.

The procedure for making a sr ed claim via the  SR&ED program requires comprehensive documentation of the research venture, including technical narratives, project timelines, and financial accounts.  Claims are often prepared by third-party consultants, known as ' sr&ed consultants ".

Businesses can file claims with the Canada Revenue Agency (CRA) for examination and sanction for eligible sr ed r&d. The program provides substantial benefits, such as tax credits, deductions, and even refundable tax credit refunds, allowing businesses to reinvest in additional research and development endeavours.

With its commitment to innovation, Canada has carved a niche for itself as a nexus of creativity and the SR&ED program has played a pivotal role in cultivating r&d in Canada. The program has enabled companies across diverse industries like technology, healthcare, software and manufacturing, to expand and grow around their work in scientific and technological criteria.

For privately owned firms the government makes this tax credit ' refundable'. This credit can then be monetized or cash-flowed as a bridge loan or cash-flow advance. Many early-stage firms use this cash flow loan as a main component of their overall working capital or cash flow strategy. Talk to the 7 Park Avenue Financial team about sr&ed tax credit financing.

 

GOVERNMENT GRANTS AND FUNDING PROGRAMS

 

In addition to loans Canadian federal and provincial governments offer various grants and funding programs to support businesses and individuals financially. Some of the popular funding programs and grants in Canada are:

- Canada Job Grant

- Strategic Innovation Fund

- Canada Summer Jobs

- Scientific Research and Experimental Development Tax Credit

 

KEY TAKEAWAYS

 

Both the Canada Small Business Loan Program and the SR&ED program aim to foster business growth and development in Canada, although each serves a distinct purpose.


    Through comparative analysis and understanding of these initiatives, entrepreneurs and researchers can leverage the advantages provided by each program.

  The Canada Small Business Loan Program is chiefly designed for small businesses seeking financial help. It aids in overcoming fiscal challenges and propelling growth ambitions.

 In contrast, the SR&ED program is centred around supporting research and development endeavours, stimulating businesses to invest in innovative projects and maintain a competitive edge in the global marketplace. SR ED Financing is available to firms who wish to finance their refund in lieu of waiting for the government refund of refundable tax credits.

 Businesses can consider employing both these initiatives in a combined manner to maximize benefits.

  By securing funding through the small business loan program, Canadian companies can bolster their financial stability, thereby enabling investments in research and development initiatives that can reap SR&ED program incentives.
 

  

CONCLUSION  

 

Government-sponsored lending options can serve as a substantial financing solution for SMEs in Canada.

 It's essential to diligently explore your alternatives, collate all required documentation, and engage with a trusted advisor such as 7 Park Avenue Financial.

Canadian government loans, notably the Canada Small Business Financing Program and the Scientific Research & Experimental Development (SR&ED) initiative, have benefited thousands of firms in Canada,

By seizing these opportunities, businesses can accelerate growth and profits.

If you're looking to tap into 2 solid programs that deliver capital and cash to your business call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in navigating either program in a timeline that makes sense for your capital needs.

 

FAQ: FREQUENTLY ASKED QUESTIONS  / PEOPLE ALSO ASK  / MORE INFORMATION

  

 
How does the Canada Small Business Loan Program benefit small businesses?  

 

The Canada Small Business Loan Program provides financial assistance to small businesses, offering competitive interest rates, flexible repayment options, and advantages such as lower down payment requirements and longer amortization periods. It enables small businesses to access capital for various purposes like purchasing equipment, expanding operations, or increasing working capital.

What is the Eligibility Criteria for Government Loans

To be eligible for a government loan in Canada, you must meet certain requirements. The eligibility criteria vary depending on the type of loan you are applying for. However, some of the common eligibility criteria for government loans in Canada are:

    - You must be a Canadian citizen or a permanent resident.

    - You must be at least 18 years old.

    - You must have a good credit score.

    - You must have a solid business plan (for business loans).

    - You must be able to demonstrate the ability to repay the loan

 

What Documents are Required for Applying for a Government Loan

 To apply for a government loan in Canada, you will need to provide the following documents:



    - Personal identification (e.g., driver’s license, passport)

    - Proof of income (e.g., pay stubs, tax returns)

    - Business plan (for business loans)

    - Financial statements (for business loans)

    - Credit report

    - Other supporting documents as required

 

What are the Pros and Cons of Government Loans

 While government loans can be an excellent source of financing, they also have their pros and cons. Here are some of the advantages and disadvantages of government loans:

     Pros

    - Lower interest rates compared to traditional bank loans.

    - Longer repayment terms.

    - Access to funding for businesses that are unable to secure traditional financing.

    - Loan forgiveness options for some loan programs.


    Does not require collateral


    Cons

    - Strict eligibility criteria.

    - Lengthy application process.

    - Limited loan amounts for some loan programs.

   

 
What is the purpose of the SR&ED program? 

  The SR&ED program is designed to foster research and development activities in Canada for Canadian controlled private corporations. It provides significant incentives, such as tax credits, deductions, and cash refunds, to businesses engaged in scientific research and experimental development. The program encourages innovation and supports companies in developing new products, processes, or software, as well as improving existing ones. A sr ed tax credit loan helps companies recoup the cash refund prior to filing claims via a sred cash advance loan.

 
 How can businesses qualify for these loan programs? 

 To qualify for the Canada Small Business Loan Program, businesses must meet specific eligibility criteria, including being a for-profit enterprise, operating within Canada, and demonstrating a solid business plan. On the other hand, eligibility for the SR ED TAX INCENTIVES  program is based on a business's involvement in qualifying research and development activities, and expenses directly related to those activities.

 How do these loan programs contribute to the growth of businesses in Canada?

 
These loan programs contribute to the growth of businesses in Canada by providing them with much-needed financial resources. The Canada Small Business Loan Program helps small businesses overcome financial barriers, enabling them to expand, invest in new opportunities, and create jobs. Sr ed tax credits encourage research and development initiatives, allowing companies to innovate, improve their competitiveness, and contribute to economic growth via these tax incentives. SR ED Financing allows companies engaging in r&d to accelerate the cash flow benefits of the program.



 

Click here for the business finance track record of 7 Park Avenue Financial

Know How To Finance A Business ? Financing Choices Are About Timing And Strategy In Funding Choices

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Properly Forecasting Your Business Finance Needs ?

Is there a right way and a wrong way to finance a business in Canada? We definitely think we can show you there is ... as well as pointing out those risks and benefits. And by the way, it is in fact possible to change horses in midstream to adapt to today’s changing times when it comes to business financing and your company.

 

WHAT TYPE OF FINANCING DO YOU NEED - SHORT TERM OR LONG TERM ?

 

As we have been prone to say lately the concept of ' term' is critical in both assessing and choosing the right business finance. By terms, we simply mean short, intermediate and long term, as all of those have a number of different implications.  And to compound the challenge for the business owner and manager both the type and  ' term ' of the financing can impact the amount of funds that flow in and out of your business.

 

FACTORS TO CONSIDER IN FINANCING

 

So what in fact are some of the things you need to consider when choosing a financing solution?  There are a number of factors, probably all as equally important. They include:

 

Cost/rates,

Amount of risk you are taking

How your overall business capital structure changes with any one particular sort of financing

What cash flow, working capital and profits that that financing will deliver... or take from your company!

 

It's easy sometimes to get confused about the timeframe when you're in the middle of searching for a finance decision. We meet and talk to many clients that are looking to solve an immediate problem and somehow miss considering the growth and future of their firm.  A simple example might be a banking arrangement - i.e. not considering whether you can live through the tough times based on covenants, guarantees and collaterals that you have either offered up or have been demanded of you.

PLAN YOUR CASH FLOW SHORTAGE !

 

One of the most proactive things the business owner/manager can do is to focus on planning to be short of cash and what solutions might be available. Why? Because cash flow shortfalls always happen, for pretty well everyone!

 

The toughest decision many business owners have to face if giving up equity and ownership of some sort in their business because debt levels are too high or the right financing is not available.

 

4 FINANCING SOLUTIONS YOU CAN ACCESS TODAY

 

So what are some of the short and intermediate financing solutions available - They include:

 

Supplier financing

Bank lines of credit

Receivable financing

Equipment leasing

 

DON'T OVERLOOK SUPPLIER FINANCING AND HOW IT AFFECTS CASH FLOW

 

Supplier financing is almost always overlooked when it comes to cash flow financing. Just negotiating better payment terms or taking supplier prompt pay discounts can save firms many thousands of dollars.

 

IS TRADITIONAL BANK FINANCING THE SOLUTION

 

Bank financing in Canada takes many forms - when you can achieve approval. Those forms include lines of credit, term loans and fixed asset financing for long-term assets.  

 

 We caution clients that the crux of the bank relationship should revolve around what you need to provide in the form of collateral, covenants, and reporting.  Many Canadian business owners simply don’t know that alternative financing for their businesses can in fact be arranged outside of Canadian chartered banks. While these solutions might be more expensive they solve problems!

CONCLUSION

What financing solution suits your business? Seek out and speak to a trusted, credible and experienced Canadian business financing advisor today.

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.


Click here for the business finance track record of 7 Park Avenue Financial





Stan Prokop
7 Park Avenue Financial/Copyright/2020

HOW DO YOU FINANCE A BUSINESS ACQUISITION

Business financing sometimes presents an acquisition opportunity. How does acquisition finance work when the opportunity arises, and what loan scenarios might match your needs. We're talking about the ' buy-side '.  Let's dig in.

Naturally, the reasons to either purchase or merge into another company vary when it comes to a business acquisition. Some of the most typical scenarios include growing sales faster (i.e. non organically), entering new geographies for sales revenue opportunities, different client or market segments, etc.  The need then arises for financing to purchase an existing business.

How are mergers and acquisitions ( ' m&a ' financing ) financed?  Some key basics quickly emerge for business owners/ financial mgrs when contemplating a business loan and buying and financing another firm. Knowing these allows you to access and talk to acquisition financing lenders as you are prepared. Those basics?

THE FINANCE BASICS AROUND A SOLID ACQUISITION STRATEGY

Your business loan requirements investigation should  include, but not be  limited to:

Determining proper value

Understanding financial strengths and weaknesses

Knowing the optimal amount of debt/equity that will make the transaction work

Knowing where to seek financing and what type of finance alternatives exist when you're buying a business

The seller in some cases can in fact be an important ally in closing a transaction. If they have the proper personal or financial incentives their ability to help structure a  ' seller financing ' component to the transaction could be key to success. In some cases that might mean adjusting the purchase price higher, but that seller involvement can well mean a better chance of a more successful transition.

While the proverbial ' friends and family ' financing is certainly one alternative that has been used in the past most top experts will also warn against that scenario; as well pledging personal assets is also high on the not desirable list!

Since receivables and growth in A/R are often a significant component of any growth strategy accounts receivable financing solutions such as debt factoring and asset-based credit lines can play a key role in acquisitions financing.

'Small ' is of course a relative term, but don't forget to also consider the Govt Guaranteed SBL Small Business Loan when it comes to acquiring a business. That loan limit now is 1 Million dollars, but critical to note that it covers only two asset categories, equipment and leasehold improvements.

It is very safe to say that your acquisition plans should also include a well-crafted business plan or cash flow analysis of the new or combined operation.

A careful study of your working capital and loan needs will also help identify the proper method to finance a purchase.  Those other solutions to help finance your transaction are a combo of new, alternative, traditional and non-traditional methods of Canadian business financing. They will help you complete a final financing structure. They include:

BUYOUT AND ACQUISITION FINANCE SOLUTIONS

Bank term loans/ operating lines of credit
Asset-based bridge loans
Inventory Loans
 PO Finance
Confidential receivables financing
Sale leasebacks
Commercial mortgage financing/refinance
Royalty Financing
Refundable tax credit finance ( sr&ed loans )
Unsecured cash flow/mezzanine finance loans

The ultimate choice in your acquisition finance strategy should include some level of analysis around your overall expected rate of return. Ultimately success in the acquisition will be demonstrated by your ability to manage, grown and improve the value of the new or combined business.

Conclusion :

Financing acquisitions allows firms to leverage the assets and cash flow of target companies, allowing them to complete acquisitions with a combination of debt solutions, owner equity, cash flow financing, and a potential seller financing component.

If you're looking for the best financial acquisitions solutions and the proper funding to buy a business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business finance loan 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.


Click here for the business finance track record of 7 Park Avenue Financial

Acquisitions Financing In Canada: Your Business Finance Loan Strategy Awaits

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Business Financing At The Speed Of Light? You Decide!

Business finance in Canada, according to most business owners and financial mgrs we talk to, doesn’t seem to happen at the speed of light! So when the type of loan and cash flow needs your firm requires isn't happening as quickly as needed are there alternatives. These alternatives include bridge loans and other specialty lending solutions. Let's dig in and look at some of that finance for businesses and business lending.

In most circumstances specialty lending and bridge financing refers to non-bank borrowing, business loans that banks can't or otherwise won't make. A lot of that comes back to the ' credit box ', somewhat of a slang term for the ' risk appetite ' that any commercial lender is willing to take. There are, of course, numerous reasons why traditional bank financing can't accommodate your business financing needs - reasons such as lack of substantial profits, poor balance sheets, low owner equity, unsatisfactory collateral... and on it goes! Traditional lenders such as Canadian chartered banks, insurance companies, et al are in fact regulated around the types and amounts of loan risk they can take.

Specialty lending from a finance company takes up where those traditional lenders leave off. Often only self-regulated they are prepared to take additional risk commensurate to the interest rates they will charge. Not in all cases, but certainly in the majority specialty lenders focus on collateral value and how you run your operations. Their ability and expertise in both valuing and realizing on their security if need be is the key to specialty lending and the specialty lender profile. In certain cases their business loan might be complimentary to another senior lender you might be working with.

Why Bridge Loans? What is Bridge Financing?

Although the specialty lending solution is always more expensive it provides the ability to do a deal, save a company, etc when that otherwise might not be accomplished via banks. Therefore the business owner/financial mgr. must be in a position to weigh the ' cost of capital ' against ' access to capital '! We recommend to clients they view the commercial lender bridge loan as a path to operational success and growth. Canadian business financing access is always viewed as a potential obstacle to success.

'Short term' is always the key in bridge loans, whether its a restructure scenario, a cash crunch, or supporting new business/orders/contracts for financing capital.

WHAT DO BRIDGE LOANS COST? HOW DOES PRICING WORK IN ALTERNATIVE FINANCE COMMERCIAL LOAN ?

Numerous factors come into play around the cost of bridging financing and alternative finance solutions. Key factors include the quality and value of assets, the ability of the borrower to utilize the funds properly and for the right reason, potential exit strategies by the lender, and of course the overall size of the facility relative to the equity of the borrower company. We can of course make the blanket statement that alternative lending/bridge loans, etc always cost more than traditional finance solutions.

As a borrower in the bridging loan process, you must be able to clearly identify the use of the financing and your ability to repay based on term requested. Many bridge loans have balloon payment scenarios/options. At 7 Park Avenue Financial, we always focus on the need for both a business plan and a cash flow projection that identifies where the business is going. As a commercial borrower you should be able to identify how and when you will exit alternative financing solutions.





The alternative to shorter-term bridge loans and specialized financing solutions might sometimes be equity investments, but that type of solution comes with longer timelines and ownership equity dilution.

Typical Uses for Bridge Financing & Specialty Lending Solutions

A firm can benefit in numerous ways when consideration is given to business financing solutions around the bridge loan and alternative finance.

Many times a company is looking to simply refinance existing credit arrangements. In other cases you or your firm might be looking to acquire a business or to replenish existing working capital and cash flow needs. In other cases key management might be looking to a management buyout or leveraged buyout utilizing the assets of the company.

In more challenging scenarios a company might find themselves in ' Special Loan ' at the bank and trying to satisfy the workout team at a bank. In the most severe circumstances, a firm with assets and a business plan will be looking for a ' debtor in possession' financing or exiting from a receivership. Traditional commercial lenders not always capable to work on those sort of circumstances.

Alternatives To Bridge Financing

A/R Financing facilities

Inventory Loans

Sale/leaseback loans on unsecured assets

Working Capital loans

SR&ED Tax credit loans

Asset based non bank credit lines

Purchase order financing



Commercial mortgages are very common in the bridge loan environment. They allow your firm to refinance the commercial mortgage at more favourable rates at a future point in time. In commercial loan and mortgage financing in Canada non-bank lenders are typically called ' B ' or ' C ' lenders, reflecting where they are in the credit risk profile. Those ' B ' lenders, for example, are typically ' one notch ' down from traditional Canadian chartered banks. These ' B ' and 'C' business lenders are looking to fill out the story when your financing needs don't match that bank ' credit box ' we've talked about.



The majority of term loans, as we've noted are usually on a 1-year term. That timeframe usually ( but not always !) allows the business to achieve the main purpose of the business finance need that arose, such as buying a company, refinancing, etc.


Business owners should expect to be asked for a first lien on any unencumbered enterprise asset. Perhaps even a second lien on working capital and other fungible resources. Also, you may request a personal guarantee as a sign of the owner’s intention to work with the lender in good faith to repay the loan. The guarantee may, in some cases, be limited to the amount of the financing.







Most bridge loans are ' secured' so they must take into account any existing financing your company has in place with any other lenders, which might often include a Canadian chartered bank.



Financing rates for specialized lending solutions will almost always come with higher financing costs. That is usually the case, but not always; larger firms who are more stable can often obtain bridge loans at more normal interest rates from commercial lenders.



Typical bridge loans are more often than not provided by commercial finance companies/niche lenders. These firms serve the SME COMMERCIAL FINANCE / MIDDLE MARKET needs of the Canadian business borrower.



Startup companies rarely fit the profile of companies who qualify for bridge financing, which typically is based on assets such as receivables, inventory, equipment, real estate, etc.

WHAT TO LOOK FOR IN AN EXPERIENCED BUSINESS FINANCE ADVISOR / COMMERCIAL LOAN BROKER EXPERIENCED IN BRIDGE LOAN / SPECIALTY LENDING

Your firm should be looking to access solutions that are tailored and flexible to your particular situation, taking into account your overall capital structure and the amount of time you require to put appropriate financing in place. In most cases financing needs around the bridge loan process might be complex and speed and expertise are the key requirements. Numerous industries have unique requirements around how they run and finance their business.



If you're focused on an interim ' bridge ' solution to capital and cash flow needs seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your specialized lending 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Business Finance In Canada: When Bridge Loans Or Specialty Lending Just Might Work!