Buying A Business In Canada And How To Eliminate 4 Risk Elements

Assessing Patient Health ( When You’ re Buying A Business In Canada )

OVERVIEW – Information on buying a business in Canada . How to analyze the risk that comes with any company purchase




Buying a business in Canada involves (some) risk, so is there a HOW TO when it comes to eliminating some of that risk? We think there is... so let's dig in.

Have we got a story for you? Yesterday, scouts honor, we got a call from a client of ours 15 years ago. He wanted some advice on how to buy a business and whats involved... including the proverbial question “how much money do I have to come up with in addition to the financing?

While we are still getting over a client remembering our services for 15 years it got us to thinking on ways to provide him with solid clarity around the risk inherent in any business purchase. We think there are probably 4 key areas you have to focus on when looking for financing on your business buy.

In effect we’re talking abut the health of the patient. So when you understand how healthy or unhealthy that patient is you can address the issues of profitability and financing that are key to overall success in any venture. Interpreting that overall ' business health' is critical.

To asses risk you really have to put yourself in the exact same position as those smart Bay Street guys. They also look at 4 key areas:

Debt - Present and future

Liquidity and Cash Flow

Profit

Asset turnover


While the Bay street gang

focuses on words such as ' financial ratios' we've always preferred to call them ' relationships'. And once you understand those relationships you're in a position to make an informed business decision. In many cases you can draw on your own past business experience to wade through and understand some of these finance and number relationships.

It's also important to look at our 4 criteria over time, not just as the moment, as a business changes its balance sheet and income statement literally every minute as you sell and collect , utilize assets, etc.

Debt load is key to any business purchase and financing. Existing debt must be repaid or refinanced, and typically any business you buy should have no more than 2 or 3 times debt versus your owner equity. That number varies by type of industry and the ability of any company to generate cash flow. Ultimately you wish to ensure that the cash you can generate can repay fixed or operating debt.

We haven’t met anyone yet that disagrees with ' CASH IS KING '

so focus a lot of time on short term current assets - and understand how inventories and receivables turnover and how they can be monetized for more liquidity .

Every entrepreneur intuitively focuses on sales growth - a company is cheap when it’s for sale if it’s in a death spiral. So understanding sales growth potential, client payment terms, gross margins and net income potential is key.

We're big on item # 4 in our patient health scenario - Asset turnover. Just your ability to turn existing assets more efficiently - i.e. collect A/R faster, generate more inventory turns, dispose of unused assets, etc can help fix your ship without any external help and financing that is unneeded.

Once you’ve assessed the health of any company you wish to purchase it can be financed in several manners. They might include:

Government Business Loans (THE SBL)
Commercial bank facilities - term and operating
Non bank asset based lines of credit
Bridge loans
Vendor take back options

Looking for a ' how to ' when it comes to buying a business and financing it in Canada. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success who can assist you with your business purchase needs, and a lot of solid advice along the way!



Stan Prokop - founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com


Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.

Info re: Canadian business financing & contact details :



7 Park Avenue Financial = Business Purchase Financing Expertise


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7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
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Email = sprokop@7parkavenuefinancial.com





















































Stan Prokop

A ‘ How To ‘ Primer On Canada’s Government Loan . SBL Small Business Financing Makes Sense

Industry Canada sponsors, but does not administer the SBL small business financing government loan program. Government initiatives are solid source of start up and growth capital for thousands of start up and medium sized firms in Canada. The government small business loan is suited perfectly to provide you a source of funding you might otherwise not be able to achieve.

We also might add that many clients approaching us for assistance and info on financing often ask about ' grants ‘, or info on Community Futures funds . These two programs are also a source of Canadian business financing, but not one we'll be discussing today.

First things first in our ' how to ‘... and that’s simply that Canadian business owners and financial managers need to understand the government is the guarantor of the loans, but not, we repeat ' not' the administrators of the ' SBL' (Small Business Loan) program. That clears up a lot of confusion for our clients, who often mistakenly perceive having to deal with the government on a loan as potentially being somewhat bureaucratic. That’s not the case.

So who does administer and run the program - you might have guessed by now that is our Canadian chartered banks, and some other miscellaneous institutions, but primarily the banks. Adding to the confusion is often the perception that the government crown owned business bank, commonly know as ' BDC ' offers the program. Would make sense right? Guess what, they don’t have anything to do with the program.

The basics of the program are simply that your firm can finance up to $ 500,000.00 under the government guarantee to the bank. (In actuality the government guarantees 90% and the bank assumes a 10% risk scenario) However, you need to understand the500k limit pertains only to real estate; typically the cap on the program is 350k.

What can be financed under the program? It's not as broad as you think. Items financed are essentially equipment, leaseholds, software, etc; the bottom line is assets and software .A major mis conception we often have to explain to clients is that cash and working capital is not part of the program.

Terms? They are great. Really great. Rates are only several points over bank prime , terms can be up to ten years, and oh yes, guarantees, only a limited guarantee is required by the business owner, you in fact are not required to co sign or guarantee all of the loan . We can categorically assure you that thousands of others business in Canada do have the owners personally signing for the full amount of the loan.

Pre payment? Although we find many business owners in Canada ask us about pre payment the reality is that most loans probably run to maturity. But if you did choose to pre pay this is one of the only business financings in Canada that you can pre pay without a penalty.

To qualify for the loan the business owner must have a reasonable personal credit history, some element of a down payment to cover the 10% which the bank is on the hook for, and of course a solid executive summary or business plan that is typical of any business financing request. These can be prepared efficiently for a low cost by a trusted , experienced and credible Canadian business financing advisor, who can steer you through the ' how to's ) of the Canadian government loan for small business financing . You'll want to investigate the SBL!




Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/how_to_government_loan_small_business_financing_.html

Discover The Foremost Method Of How To Get Financing When You Buy a Franchise Opportunity in Canada

In business, a discovery that either makes you more competitive, or in our case ' successful ' is clearly a good thing. Let’s review the most popular method of financing a franchise opportunity and how to go about ensuring you achieve that success.

It's not secret that the franchise business has survived the economic downturn of 2008 and 2009 quite positively. Thousands of franchisees are springing up in Canada and both banks and other lenders clearly view your decision on buying a franchise as an area they are prepared to support.

The decision to buy a franchise is sometimes easier than how to arrange your financing for the business, because we think in many cases you have been able to match your skill sets and interests to a business you have probably wanted to get into for quite sometime. Financing that opportunity is probably an area that you’re not necessarily comfortable in if you don’t have a finance background.

However, don't despair, because if you are properly armed with the right strategy and info and advisory support you are in a strong position to complete your financing.

So what exactly is the foremost method of arranging finances when you buy a franchise? It comes as a shock to many that the majority of financing in Canada is done under a government loan program called the BIL/CSBF program. The government? Absolutely.

Consider this. Would you not agree that if you arrange financing for your business under a 5 or 7 year term loan, at rates that many established businesses can’t even get, and, here’s the kicker, you don’t even have to provide a 100% personal guarantee for the financing. Enough said, we think we have made our point.

Unfortunately just knowing about the program doesn’t guarantee financing your opportunity will be successful. You need to understand the parameters of the program, how to prepare a proper submission around your new business, and finally, ensure you meet some general criteria around what will constitute a solid approval.

Naturally the whole opportunity becomes even more serious based on the total cost of the franchise and the personal investment in time and funds you are prepared to make in the business. Generally in our experience you can expect to receive only minimal support or financing advice from the franchisor. In many cases that is simply because there are various legal ramifications around franchisors providing you with estimates or guarantees of profits, and success. But lets be honest also, the franchisors business is selling franchises, not financing your new business opportunity.

The key essentials of the BIL program are a solid business plan that provides a good overview of the franchise opportunity, your background, and most importantly, the numbers. Does it surprise you that the lender focuses on how they will get repaid - it shouldn’t. So your business proposal should be realistic and focus on cash flow, profits, and debt repayment.

In summary, how to pick and buy a franchise is a challenge we'll leave up to yourself. Financing a franchise is straightforward if your arm yourself with the most popular financing option, have a clear proposal, and ensure you meet very basic criteria such as an investment on your part in funds, as well as standard application paperwork .

Speak to a trusted, credible, and experience Canadian business financing advisor in the franchise area if you need assistance in how to arrange financing for your franchise opportunity.
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Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/how_to_buy_franchise_opportunity_financing.html