Is This The Golden Age Of Business Capital In Canada? Financing And Funding Your Company Credit Needs Unlock The Secrets To Business Capital In Canada

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YOUR COMPANY IS LOOKING FOR  BUSINESS CAPITAL!

YOUR GUIDE TO CANADIAN BUSINESS FUNDING

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?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

 

 

NAVIGATING THE BUSINESS CAPITAL LANDSCAPE IN CANADA

 

Business capital in Canada. Is this in fact the  ' GOLDEN AGE ' for Canadian companies seeking financial capital and business credit and funding?

 

 

WHAT IS  BUSINESS CAPITAL  

 

While most  business owners and entrepreneurs think of  ' money ' as being capital, and  cash that is in the business for generating a profit and return on investment, in general terms capital is actually the value  and financial assets of the business which might mean everything from hard assets to patents and intellectual property in the business

 

While your business can generate a return on capital from the ongoing operations of the business a company also has the choice of raising more equity as well as taking on debt to fund the business.

 

So capital can come from a number of sources:  owner investment, equity via angel investors, VC's, and private equity firms as well as traditional or alternative financing firms such as banks and alternative finance lenders - the new kid on the block in the Canadian business landscape.

 

Working capital and debt capital are often the most sought-after Canadian business financing solutions

 

We're not 100% sure ourselves; we read that rates are low and capital is abundant - while at the same time clients tell us it's never been as tough to satisfy lender criteria or access innovative capital solutions for their business needs -  especially for the small business owner as well as medium-sized corporations looking for information for funding needs.

 

The reality is that many business owners who aren't in the Financial Post top 1000 in Canada spend a lot of their time ' finding ' financing. The goal seems kind of easy - find enough financing for your business at a cost that makes sense and gives you the amount of risk that the Canadian business owner and financial manager are prepared to live with. At 7 Park Avenue Finanical we want to provide the help that business owners and their financial managers are looking for in their search for funds.

 

That ' risk ' of course comes with the fact that too much debt, and might we add the wrong kind of debt can cripple a firm.

 

5 WAYS TO FINANCE YOUR BUSINESS 

 STRATEGIES FOR SECURING BUSINESS CAPITAL

 

At the end of the day, we can maintain there are essentially 5 ways to finance your firm when it comes to business loans and your capital structure  - two of them, raising equity and issuing a bond or debenture are NOT the subject today.

 

What we're talking about is innovative ways of supplier financing, lease and asset financing for capital assets , and business lines of credit from banks or independent commercial finance companies.

 

 

DON'T FORGET SUPPLIER FINANCING! 

 

Many businesses don’t fully realize of focus on the fact that supplier credit is in fact a key driver of your firm’s cash flow. Just negotiating long terms with your key vendors allows you to generate positive cash flow - That’s a fine line though as you ultimately need the support of suppliers. The last thing you want is for them to turn the ' credit tap ' off.

 

EQUIPMENT LEASING FOR ACQUIRING NEW AND USED ASSETS

 

Yes, you can buy the fixed assets you need for your firm - but over 80% of companies in Canada in fact lease their assets. Whether its trucks, cars, computers, telecom equipment and heavy machinery the business owner has the option of leasing assets for anywhere from, typically, 2-5 years. That allows you to use up the ' useful life' of your equipment and match it to cash outflow vis a vis the payments.

 

Accounting has specific rules around the type of leasing arrangements that you enter into, primarily revolving around whether you are entering into a capital lease ' to own', or an operating lease ' to use '.

 

 

 

THE BUSINESS LINE OF CREDIT IS A KEY FUNDING TOOL FOR DAY-TO-DAY OPERATIONS  

 

Bank and commercial credit business capital in Canada supply businesses with revolving lines of business credit and funding. A credit line allows  your firm to draw down and pay back up, based on pre-set limits, the amount of funding you need for your business. The security of course is the assets of the business, allowing you to constantly replenish working capital

 

 MONITOR YOUR DEBT-TO-EQUITY RELATIONSHIP  

As a business owner, you have to choose the right amount of debt and equity. The finance guys call that your ' capital structure’. Is there a perfect mix or ratio for that?  The answer is... not really; it depends on the risk, flexibility, and amount of control you have in any particular financing.

 

 SOURCES OF BUSINESS FINANCING 

 

So, is it the Golden Age of business borrowing?  Our opinion is... not really. But you do have options and there are probably many innovative ways to finance your firm and achieve access to capital that you have not contemplated ; from government programs to commercial financing.

 

These include:

A/R Financing

Inventory Loans

Access to Canadian bank credit

Non bank asset based lines of credit

SR&ED Tax credit financing

Equipment / fixed asset financing

Cash flow loans

Royalty finance solutions

Government Of Canada Small Business Loan Program  - Guaranteed federal business loan -  Arguably the best financing program for a startup and franchise acquisition

 

THE STARTUP FINANCING CHALLENGE - STARTUP TO SCALE UP!

 

Financing a new business start-up in Canada is always a challenge - In connection with their own savings and investment into a business many entrepreneurs recruit friends and family type investments - as well as explore crowdfunding options.

 

The majority of start-ups in Canada, if not 99% or more do not qualify  or meet the criteria for business capital from  venture capital or angel investors

 

Many startups can benefit from local ' business incubators ' that are more often than not in the high-tech sector. These organizations don't provide financing per se, but they will often provide mentorship,  job creation, and sharing of facilities and hosting.

 

While ' grants ' are often sought after funds from the federal and provincial government in Canada this can be a time-consuming process, and often assistance from grant writers is required to source funds in areas such as r&d, productivity, etc. Talk to the 7 Park Avenue Financial team about grant financing strategies when grants require matching funding.

 

Business loans are available for the majority of small and medium-sized established businesses in Canada the startup has a large challenge in accessing financing. Good credit ratings and solid personal net worth will often attract some bank financing, but the best program by far, from a business loan perspective for startups is the Canada SBL loan - Recent changes to the program in 2022 increased the loan cap to over 1.1 Million dollars, and several different types of the financing were added to the program. The loan guarantee is provided by the federal government to the bank or credit union. A business plan should be provided with your financing request. SBL loans are one of the best financing solutions for small businesses in Canada, and the government loans out billions of dollars every year to thousands of firms.

 

 CONCLUSION - TAKING YOUR BUSINESS TO THE NEXT LEVEL 

 

Talk to the 7 Park Avenue Financial team - we know that the majority of businesses can access venture capital and Angel investments - Government funding and grants can consume management time - Let us show you how debt and cash flow financing solutions are available to your business today can work to take your business to new heights.

 

Speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor for small business owners, who can assist you with your business capital and funding needs in Canada.

 

  

 

  

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

 

 

 

What is the most effective form of business for raising capital?

 

Although a sole proprietorship or partnership can raise capital and borrow money the best form of business organization is the corporate legal entity. Equity capital can come from venture capital firms but venture capitalists or private investors will want a sizeable portion of the ownership of the business - as the goal and exit strategy of the VC is an initial public offering. Financial institutions prefer to deal with corporate entities as opposed to individuals when business lending is required. Economic growth is often easier to achieve by a company versus a private individual.

 

 

What is business capital in finance?

Capital in business financing is value creation and is often primarily identified only as cash and business assets. The financial statements of a business complete a full picture of balance sheet assets and profits.

 

What are some types of capital in business?

Different types of capital in business include debt financing, allowing companies to borrow from different sources such as banks, alternative lenders, and the government at interest rates commensurate with overall credit quality and type of financing.

Business owners have the choice of selling equity in the business via private financing or public equity offerings versus additional personal investment.

Working capital finance funds current assets such as accounts receivable and inventories and profit-generating assets can be financed on a long-term basis.

  

Business Acquisition Loan Success Factors

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Afraid to Ask Questions About Business Acquisition Financing ?

Business acquisition financing in Canada. When you are looking for a funder for a merger or acquisition of another company  or if you're acquiring a business,  remember something we heard the other day -  ' Genius is often just pointing out the obvious truth that no one else sees.'

 

So when we recently talked about some critical aspects, you should not overlook this type of financing challenge we remembered ... ' Wait  ... there's more!”

 

It's critical when buying a  business to ensure you understand that both yourself and the other firm have somewhat separate agendas. No question on that one!  Simply speaking, it’s important to step outside those agendas, look inside, and ensure you have the right evidence on assets, cash flow, and valuation.

 

  

WHY DO ACQUISITIONS SOMETIMES NOT HAPPEN?  

 

Experts in the field say that trends now show that while there seem to be many businesses available for purchasing and financing, many deals fade into oblivion on a target company. A lot of reasons might exist for that fact when it comes to how to finance an acquisition - Some of them might be:

 

Poor objectives of buyer and seller

Inadequate financing knowledge of a proper financing structure

 

As an acquirer, it’s important not to underestimate your capacity to value and finance a deal, as tough as it might seem to admit that.

 

IT'S ALL ABOUT ASSETS, CASH FLOWS, DEBT!

 

Many purchasers and sellers have a huge challenge in assessing existing and future debt issues in your deal. Aside from organic growth, the synergy of a merger or acquisition of an existing business has tremendous appeal in the company's growth of products and services.

Financing is often about the amount of debt that is in fact existing or planned and does not necessarily make or break a deal. Most experts seem to say that it’s all about two things in mergers and acquisitions  - hard assets and cash flows. And by the way, that’s future cash flows that you can reasonably predict!

 

PRIVATE TRANSACTIONS HAVE NO PUBLIC LIQUIDITY, AS DO PUBLICLY LISTED COMPANIES

 

Remember that unless you're purchasing a public entity, which certainly doesn't happen a lot in the SME sector, the liquidity issue around all those assets and intangibles doesn't really exist.  So your challenge is, yes, to understand the value of assets and cash flows, but don’t forget those items such as intangibles!  Perceptions of clients and lenders for smaller firms are equally as important.

 

THE CASH FLOW MULTIPLE IS A COMMON VALUATION PRACTICE

 

There are, of course, some real basic methods to value your acquisition or merger and assess the financing needs. Businesses in the SME sector will typically be valued at a multiple of current cash flows. The time period in which you will be able to retire and pay back debt is also important.

 

Oh, by the way, don’t forget those skeletons in the closet! They might include existing financing and credit problems with banks and other lenders, bad publicity, upcoming industry issues, potential loss of major accounts, and overvalued assets.

 

5 METHODS OF SUCCESSFULLY COMPLETING ACQUISITION  FINANCE / TAKEOVER / OR BUYOUT

 

You do have the financing tools available to make the ' right ' acquisition. They include-

 

Government business loan - The ‘SBL.’ =  SBL loans will cover acquisitions up to a loan amount of 350,000. Interest rates are very competitive, and repayment is typically over a 2-5 year period, so well-planned SME/SMB transactions should safely cover loan expenses and financing costs.

The federal government guarantee on the program provides a guarantee and safety measures for Canadian banks who in turn can now lend money on acquisitions that might otherwise not meet bank criteria - For qualification under the Canada Small Business Financing Program, talk to 7 Park Avenue Financial.

 

Down payments/ owner equity range from 10-40% for acquisitions when using this program. However, the borrower must meet the SBL  requirements on the size of the business ( revenues must be under 10 Million dollars ), which includes limits on net worth, income and credit score, and overall loan size regarding the 350k cap.

Many borrowers avoid the program due to the 'paperwork' and application process, including the need for a business plan. 7 Park Avenue Financial prepares business plans for our clients that meet and exceed bank and other commercial lender requirements.

 

Asset Based Lending - ' ABL' lending focuses on the balance sheet and the  concept of a leveraged buyout - funding for accounts receivable, inventories and fixed assets and real estate

 

Bridge Loans

 

Cash Flow loans / Mezzanine financing -

Mezzanine loans are cash flow loans that are often termed  ' the middle  ' of debt and equity financing - Cash flow is the collateral for the loan, and typically no other collateral is required for a mezzanine loan - This financing typically ranks behind a senior lender. It can be a key component of a final business purchase financing.

 

Bank term loans/lines of credit - Most banks, even those dealing with SMEs, have specific provisions put aside for financing an acquisition, including the government loan program. With interest rates remaining historically low, it is still a good time to avail of a bank option when the price for your transaction is substantial.

 

Canadian banks will often provide the best terms: aware that your business prospects are looking positive, they’ll be keen to keep your business in-house in a current relationship. It goes without saying that this is an angle that you should leverage when looking for a bank loan for a business acquisition if your transaction meets bank credit quality.

Banks look for strong management and a personal commitment to the business.

 

A term loan structure is typically the standard bank acquisition financing financial structure- complemented by a lien of credit to augment the purchase. Ongoing and future equipment needs can be achieved via leasing or business equipment loans from the bank or third-party lessor/lender.

 

Seller Financing -  Owner financing is another method to fund an acquisition deal. Also known as  "seller finance," it can add greatly to the creativity around a deal structure. Offering equity to the owner/owners of a target firm to finance a business acquisition can be one way of smoothing the process.

This would involve giving them some equity in the newly merged firm. If that is undesirable for various reasons, creative strategies around a seller note/vendor take-back of debt need to be taken on in your transaction - minimizing the funds that need to be borrowed.

The combination of reduced costs and potential flexibility on deal terms helps minimize funding from a bank or third-party commercial lender.

Many buyers often forget to assess the ongoing operational costs of the business, which may include needs, for example, for new staff, technology, the infrastructure around operations, etc. Purchasers who forget to take into account these points are at risk for the future success of the transaction.

 

 

 

CONCLUSION - BUSINESS ACQUISITIONS IN CANADA

 

While many entrepreneurs explore private equity or venture capital, these 2 types of solutions are only applicable to the smallest percentage of transactions for an acquisition loan and typically not in the SME sector of the economy. The acquisition process and interest rates will also vary dramatically based on the size and complexity of your transaction.

 

Favourable low rates in the current Canadian economy make rates for acquisitions easier to achieve and assist in letting a company reach new economies of scale, allow for an increase in the size of the company's operations and sales revenues.

 

Hopefully, we have pointed out some of those ' obvious ' truths that will make your small business acquisition and financing more successful. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist you with your business acquisition financing and funding needs.

 

Let's get started on acquisition loans and solutions and resources to make your acquisition deal work.

 

  

FAQ: FREQUENTLY ASKED QUESTIONS  

 

What Is Acquisition Financing? 

Acquisition financing allows users to meet their current acquisition aspirations by providing immediate resources that can be applied to the transaction. Acquisition financing is the capital that is obtained to buy another business. A business acquisition loan helps entrepreneurs acquire an existing business, franchise,  or buy out a partner or owner.

 

 

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/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Acquisition Financing Funding Merger | 7 Park Avenue Financial

Your Business Growth Financing And Funding Strategies Search Just Might Be Over

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Looking For The Phoenix Effect When It Comes To Growing Your Business?

Proven Information On Business Growth Strategies Financing Funding In Canada

Business growth financing strategies financing and business funding in Canada, no secret here, present cash flow and capital funding challenges. The Canadian small business owner and financial manager dreams of his or her firm being able to achieve the Phoenix effect.  That’s the Egyptian fable that has the Phoenix Bird rising from the ashes and signifying resurrection and hope.

 

SALES AND CASH FLOW -  THEY ARE DIFFERENT!!

 

Let’s dig in.  We're never surprised these days, in talking to our clients, that many owners/managers sometimes don't associate growth with a cash flow drain. Their logic is:  ' Sales are great, we've just got those new contracts and PO's, and we’re introducing a new product ‘...etc...Etc.  In their minds, and rightfully so, those expanded revenues will generate more profits. It's a perfect world, right?

 

Not so fast!  The owner/manager has forgotten in those growth scenarios we noted that cash goes out quicker than it goes in. It's a fundamental cornerstone of business finance- Growth eats cash!

 

WHEN SALES GROW YOUR CURRENT ASSETS BUILD UP!

 

The reason is of course is that you must invest more in inventories, receivables,  equipment, as well as ' beefing up ' other areas of fixed costs - i.e. people, etc.

 

RECOGNIZING A FINANCIAL CRISIS

So even if the business owner/manager recognizes the problem what then is the solution to avoiding a financial crisis of some sort? Frankly, we see things go awry quickly because when you firm is in cash crisis mode that is not viewed by commercial lenders and banks as a lending opportunity to your firm!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!   You don't want to be caught in your lenders board room explaining that you didn’t see it coming.

 

BUSINESS LINES OF CREDIT CAN PROVIDE THE SOLUTION

The most common solution for these sort of growth stories is the business line of credit. That type of financing can be achieved via a Chartered bank credit facility, or a newer solution these days, the Asset Based Line Of Credit, offered by non-bank commercial lenders. These facilities of course monetize your 'current assets ' and allow you to borrow on a revolving basis.

 

WHY IS ASSET TURNOVER KEY TO GOOD CASH FLOW

A word to the wise, don’t let accessing either of these two facilities lull you into a false sense of security. Your focus should still be on strong asset turnover to the best of your ability, so inventory turns and collecting A/R in high growth situations should be a top priority.

HOW TO PLAN FOR CASH FLOW NEEDS

Many business owners still don’t realize that they can plan effectively for cash flow needs. A simple spreadsheet tracking your sales, collections will identify the amount of your cash needs. That allows you to be proactive in planning for business growth financing. By the way, that sort of simple analysis will always be viewed positively by your cash flow lender.

 

WHAT STAGE OF GROWTH IS YOUR FIRM IN?

 

Naturally, there are different stages of ' GROWTH' when it comes to business funding solutions that can be all the way from start-up to explosive growth scenarios. All stages of business growth come with different financing solutions - some short term, others long term.

 

Small businesses aren't exactly the candidate for those Bay street venture capital folks. We've referred to bank credit lines, as well as non-bank ABL lines of credit. Other cash flow growth solutions include:

 

A/R Financing

Inventory Loans

Access to Canadian bank credit

Non-bank asset-based lines of credit

SR&ED Tax credit financing

Equipment / fixed asset financing

Cash flow loans

Royalty finance solutions

 

Purchase Order Financing

 

Short Term Working Capital Loans/ Merchant Advance

 

Securitization

 

 

CONCLUSION

 

Which type of financing will make your growth successful? Let your firm experience the PHOENIX EFFECT... seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with growth funding.

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 Credit Lines In Canada - Eliminate The Crash Landing Aspects Of Funding Your Company

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What You Need To Know About A Business Line Of Credit

Business credit lines in Canada.  We sometimes think it’s a lot like ' sensible shoes '.  You suddenly realize how important they are! So when it comes to working capital funding in Canada the business owner quickly realizes the importance and value.

 

WHAT TYPE OF CREDIT DOES YOUR COMPANY NEED

 

But is the Business ' LOC’ something that only the Ouija board can discern as to what's the best business credit for your firm? Some firms even use a business credit card as their line of credit/short term financing solution - that's one of the ways to bank your firm, but not the best of course, it just takes some drilling down into what is available and what's best.

 

 

WHAT IS THE MAIN USE OF BUSINESS CREDIT LINES

 

If there is one solid use for business credit lines it’s simply their ability to finance your business as you move along in growth. If you're not self-financing and don't have a huge equity position (coupled with slow-paying clients) the corporate credit line gives you cash flow.

 

ASSED BASED LENDING SOLUTIONS CAN ALSO FINANCE ACQUISITIONS!

 

Don't forget also, as we've been known to preach that solid a/r and inventory balances can even be used to partially finance acquisitions - all the better if the firm you're acquiring has those same type of current assets.

 

2 KEY CHOICES IN A BUSINESS CREDIT LINE - WHICH ONE WORKS BEST FOR YOUR FIRM

 

In Canada, you have 2 Choices for access to business revolving credit. One is the ' go-to ' - our Canadian chartered banks. Interest costs with banks are of course low, and these days they actually couldn't be much lower.  Bank requirements for business credit lines might be viewed as 'strict' by many borrowers.

 

Quite frankly we have never felt they were necessary strict - it's just that we must assume if the bank is lending unlimited amounts at low rates that they can be easily forgiven for asking for companies with good financials, profits, positive cash flows, external collateral, and good personal credit history/credit score of owners, including of course the proverbial ' PG ' - the dreaded personal guarantee.While the business owner may wish to separate their credit profile from the business the banks do not see it that way - they want to know if you manage your personal finances similar to the way you run or will run your company!

 

ASSET BASED CREDIT LINES ARE THE NON BANK SOLUTION FOR WORKING CAPITAL

 

When your firm can't access bank credit for revolving facilities your other choice is in fact a lot more accessible. It's the ' ABL ' - The asset-based business line of credit.  Although 98% of the time asset-based credit facilities are more expensive they are easier to access from an approval perspective.  Facility sizes run on the small size to the 250k range - and large facilities run to the tens of millions of dollars, usually funded by independent commercial finance companies. There is no reason for your firm to be using business credit cards to fund your business on a day to day basis!

 

WHAT IS THE COST OF ASSET BASED CREDIT

 

When it comes to interest rates in asset-based lending is more costly, but your firm has access to more business cash - and of course, you only pay interest on what you are using in the facility. Subject to credit approval both a variable or fixed rate is available in most credit facilities both in traditional banking and alternative finance.

 

DO BANKS OFFER ASSET  BASED CREDIT FACILITIES

 

An interesting thing about ABL credit is that it's offered by the Canadian banks as a part of their business loan offering. but they don't run many TV commercials on that one. We won’t get into why we think that’s the case, but give us a call anytime and we'll tell you why we think that way!

 

ALL ASSET CAN BE FINANCED UNDER AN ABL FACILITY

 

Surely most business owners know they can't really access business credit line facilities if they don’t sell on commercial credit terms.  From the occasional call, we get we're never quite sure they do in fact realize that. However, an interesting point is that ABL lending has subsets of inventory and equipment financing, so you in theory could have an ABL line that simply margins inventory and equipment. A good example might be a retail chain.

 

Our banks are very trusting when it comes to letting you run your business on a credit line. They in some cases only do an annual review of your financials, in certain cases, you might be reporting monthly on some basic business metrics. By the way, you maintain the use of the same business bank account in ABL lending.

 

ENSURING  YOU HAVE PROPER FINANCIALS AND UP TO DATE BUSINESS INFORMATION AND AGINGS

 

Asset-based lenders offering credit lines are more giving but less trusting with small businesses . By that, we mean that they trust, and they verify! So be prepared to do a bit more reporting and expect the odd personal visit here and there!  We meet many business owners who wonder what their bank looks like!  But of course, there are a lot of great bankers in Canada who know their clients business. There is no defined credit limit in asset based financing as the facility grows as your assets and sales grow for your products and services.

CONCLUSION

 

Don't feel that the non-access to funds via a business credit line puts you in 'crash landing' mode. Take advantage of different financing options in order to get approved for the funding you require . Understand your needs, alternatives, and seek out a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding 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

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

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Financing receivables can be a key ' igniter ' in your firm's search for business credit that works for your cash flow needs. Accounts receivable factoring and the cost of factoring in your search for business funding requires some special analysis and expertise.This method of financing can often ' unfreeze ' your working capital. Let's dig in and show you how to fix the business credit freeze.


How Does Factoring Invoices Function On A Day To Day Basis

The entire FACTORING process is the cash flowing of your receivables after your firm has provided either its goods or services to your client. There is a defined process that allows your company to receive funding on completion of your sale and the invoice to the client.

Factoring clients are best suited to these financial solutions when their business is growing and traditional capital is not available. In fact, while traditional financial institutions are focused on credit limits, annual reviews, etc factoring solutions are very flexible and limits can very easily be raised if your sales are growing. In fact business owners control their own limits based on their decisions as to how much of their receivables they wish to finance and when to submit those invoices for financing.

After your firm has invoiced your client you provide a copy of that invoice to the receivable finance firm you are utilizing . Many firms offer very different types of versions of what we could call ' traditional factoring' but essentially you will receive your funds withing a day or so of invoice submission .  The amount you receive on the face value of the invoice is typically  80-90% of the invoice amount . You receive the balance of the invoice when your client pays, at which time a fee of approx  1-2% is deducted as the ' factoring fee ' .

This latter point of a factoring fee must be stressed and understood when looking at this type of accounts receivable financing . Why ? Many business owners and financial managers view the factoring fee as an ' interest rate ' when in fact it is simply a cost of the service for providing the financing, A better way to think of it is that is a reduction in your gross margin of that 1-2% range that we expressed previously . This whole area is one of the largest misnomers around FACTORING and its true cost. Your true financing cost in factoring will revolve around the agreed upon fee charged, and your ability to negotiate the amount that will be advanced on each invoice. Those are two, but not all, of the  key drivers in calculating your cost of financing .

Why Does Factoring Work ?

Factoring works simply because it turns your sales into working capital, allowing you to accelerate cash flow via the financing of a/r.  Business owners will not be surprised to know that it takes typically anywhere from 30-90 days these days to collect your accounts, your stated payment terms notwithstanding!

It should be noted that the advance rates on each invoice tend to vary by industry - the trucking/freight and staffing industries are two examples of high users of this method of financing sales so the advance rates are quite high - that's a good thing ! It should be noted that some costs considered as ' miscellaneous ' by some such as account set up, bank lockbox fees, and credit checks can add up and should be considered in your total cost analysis.


Accessing the cash allows you to address the day operating cash needs of your business. If your company is in a position of either having to , or offering, extended payment terms for your suppliers and your have sufficient gross margins then FACTORING is a solid potential solution for your business.

In certain cases a business might be able to take advantage of taking on a new or larger client that previously was not able to be considered based on size and the working capital investment your firm would have to make in carrying a/r or funding additional inventory.

A firm having a large number of clients that generate a large number of invoices could utilize  FACTORING as a method to reduce the collection costs and investment in staff to facilitate financing.

A  key benefit of factoring is that it does not bring debt onto your balance sheet - it is not a loan ! Rather it is the monetization of what is typically your largest current asset - A/R. As we mentioned many firms are stalled in sales growth due to their inability to fund the working capital component of sales . The FACTOR solution allows you to take on those clients with ease .

Many firms experience what the pros call ' bulge finance needs ' ; this might be at times of the seasonality of the business , or other reasons . That's when the FACTORING solution makes sense.

Factoring is often viewed as a ' bridge ' to more traditional financing, typically Canadian banks . Being able to demonstrate a successful factor finance facility allows your company to build a track record in stability, thereby improving your commercial credit history .with one of them. In times of economic crisis, pandemics included alternative financing sources such as  AR Financing allow your firm to weather the storm .

Every business owner can relate to the constraints Canadian chartered banks come under  for the financing of business in a downturn -  Downturns might be company-specific or part of a general industry-specific or broad economic downturn. That situation tends to lead to a downward spiral in many firms as business credit tightens . FACTORING COMPANIES typically finance companies in good times and in less than good times.

Can Factoring Improve Profits?

Many businesses considering factoring finance tend to compare it to more traditional business finance solutions such as those services offered by banks. Many suppliers and vendors to your business offer early payment discounts  - one such common offering is' 2% net 10 days '. That allows you to deduct 2% of the suppliers invoice based on paying early. Firms that have incoming cash tied up in a/r are of course unable to take advantage of this discount . But factoring solutions allow you to take that discount, thereby lowering a very significant amount of the factoring fee! In some cases you can purchase in bulk allowing you to further lower your cost of goods , thereby improving margins. As we have noted firms that are constantly battling the cash flow challenges can rarely take advantage of the two examples we have outlined.

Factoring Costs Laid Bare!  Assessment of 3 Critical Facts In Invoice Finance

We have already mentioned the factoring fee, that is the actual charge by your commercial financing partner to finance invoices on an ongoing basis.  The decision on what that fee is becomes based on a number of factors assessed by your factoring firm. Those data points include  your clients overall industry profile, your own firm's general creditworthiness , and the amount of the facility you require.

The next key factor can be significantly  a cost significantly controlled by yourself,  namely your average DSO / collection period. So if you turn over your receivables more quickly that monthly factoring fee stays low, as the charge is based most often on a 30 day collection period. Therefore your costs would increase if your client paid in 60 days. Companies with good credit extension policies are a winner in the factoring game.

 Example Of Factoring Cost :
 Invoice Amount -  $ 20,000
 Factoring fee - 1.5% = $300
In the above example your firm would get 90% of the 20,000 as soon as you invoice, namely $18,000. 
The balance of $2000 less the $300 fee is paid to your immediately on payment by your client.
In the above example you have not incurred debt, become cash flow positive immediately on invoicing, and continue to maintain general creditworthiness with your suppliers, operating costs, etc.
 A  harsher reality of factoring solutions is the fact that many firms these days simply cannot  meet the demands of Canadian banks when it comes to accessing the business credit they need. Alternative finance solutions such as factoring and asset based lending allows your firm to leverage it's assets and sales revenue potential. Thousands of Canadian businesses utilize this method of cash flowing sales when they otherwise could not achieve. While in the majority of cases the factoring firm, or asset based lending firm becomes your ' senior lender ' these facilities also can be complementary to other business credit you have in place. It's all about your total exposure to your lenders versus the amount of  collateral you have in receivables and other assets.Trends now show that thousands of businesses in Canada find themselves unable to get the financing they need. Whether they are ' cut off ' or simply ' restricted' in getting capital into their firm the repercussions can be anywhere from being mild to severe, severe of course meaning closing your business.

So why is receivable finance funding different, and how does the business owner/manager asses the cost of factoring A/R into a sensible arrangemen

The essence of invoice discounting, aka ' factoring, aka ' invoice discounting ' is simply the ability to monetize sales directly into cash as you generate revenue. That in itself is a powerful statement. Where things go wrong is when your business locks itself into a facility that either costs too much, is unwieldy to operate, and simply doesn't mesh with your day to day operations. By the way, that absolutely doesn't have to be the case!

So if banks also margin receivables for cash flow for your business wouldn't Canada's chartered banks be the optimal solutions for cash flow finance. Well they would be that perfect solution if your business qualifies, and if you do qualify do you in fact have access to all the credit you need to grow the business when it comes to seasonality, large orders, cash flow bulges, slow paying clients, etc. The answer is that while our banks in Canada provide the best and most ' low cost ' solution the reality is that not everyone qualifies.

The short answer to bank versus non-bank funding in Canada, when it comes to A/R finance is that the bank bases its decision on your sales, profits, and balance sheet; Factoring, on the other hand, bases its finance formula only on your sales and the invoices generated from that revenue. Oh, and by the way, funding is in fact ' same day '. And it's only as complex as you want it to be, and the industry itself, unfortunately, does not always do a good job of explaining facilities; sometimes employing smoke and mirrors to hide costs and day to day facilitation of the financing. That's when you need clarity!




You have the ability to negotiate what is known as a  ' non recourse ' facility which allows you to transfer all the credit risk to your financing firm - albeit at a cost.

The key to a successful A/R finance program in Canada is your management of the program. The type of facility you enter into, as well as your ability to control what you finance and when is critical. And, as a kicker, our recommendation to clients is ' confidential ' facilities that allow you to bill and collect your own receivables in a manner that allows the competition to do only one thing - figure out where you are getting all that cash . Always keep in mind that the firm financing your receivables is typically more concerned with the overall quality of your customer based, so any firm that is perhaps facing financing challenges is not eliminated from being able to source funding. Knowing you have a strong underwriting partner to fund your sales is a key success factor in any business.

Finally, the concept of ' notification' and ' verification' should be high on the list of factoring due diligence. These two terms arise out of what we at 7 Park Avenue Financial call ' old school ' factoring, and involves occasional or constant verification of invoices with your clients.  At 7 Park Avenue Financial we tend to view this form of factoring as somewhat ' intrusive ', so our recommended and preferred solutions is Confidential Receivable Financing, allowing you to bill, and collect your accounts without any notification to clients, suppliers, etc. All the benefits, and less of the hassle!

Whether you're a start-up, medium-sized firm, or a large corporation, financing receivables can be a huge part of your business success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor today who can assist you with the facility that makes the most sense for your unique 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