ABL Lending Versus Bank Financing - What is Right For Your Business Exploring Alternative Financing Solutions - A Deeper Dive Into ABL Versus Bank Lending

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YOU ARE LOOKING FOR ASSET BASED FINANCING / ABL LENDING  BANKING SOLUTIONS

BEYOND BANKS - THE ABL / ASSET BASED LOANS  LENDING SOLUTION FOR CASH FLOW / WORKING CAPITAL

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

        Financing & Cash flow are the biggest issues facing businesses today

               Unaware / Dissatisfied with your financing options?

Call Now! - Direct Line - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

Email - sprokop@7parkavenuefinancial.com

 

 

UNDERSTANDING THE ASSET BASED LENDING SOLUTION – WHAT IS IT  / HOW DOES IT WORK? 

 
Are you enjoying life as a commercial borrower in Canada -?

We can't even imagine some of the answers to that question, although we have certainly heard a lot of the stories!  Let's examine why a new breath of fresh air – Asset based lending, aka  ‘ABL lending ‘ has become a favourite and very unique banking and asset financing strategy in Canada.

 
WHAT IS ABL LENDING? 

 

ABL lending is also commonly known as asset-based lending / asset-based financing -  This form of funding a business via an asset based loan utilizes the technique of collateralized loans by financing business  physical assets such as accounts receivable, inventory, and fixed assets - as well as in some cases commercial real estate if held by the business. ABL, although commonly used as an alternative to bank financing, is focused on the assets of the business, versus the typical bank credit profile - Banks focus on strong business credit scores, as well as in many cases requiring personal guarantees and external collateral -  ABL, on the other hand, focuses solely on business assets.

 

COMPARING ASSET-BASED LENDING VERSUS BANK CASH FLOW LENDING  – PROS AND CONS

 

One of our favourite expressions these days is that the old ways don’t work anymore.

 

As it relates to today’s subject of business financing we're talking of course about commercial banking facilities in Canada, and focusing primarily on firms that have challenges raising working capital and cash flow facilities that work - thereby qualifying for an unsecured loan.

It often comes down to a comparison of the two types of financing, traditional Canadian commercial banking, and our favourite new kid on the block, ABL lending and banking. We use the term new but quite honestly it’s simply a Canadian business financing facility that hasn’t been heard of by many Canadian business owners and financial managers for a variety of reasons.  Maybe some people prefer to hide a good thing and keep it secret.

 

COMPARING INTEREST RATES AND FINANCING COSTS IN BANK FINANCE VS ABL LENDING SOLUTIONS

 

 

 

THE ADVANTAGES OF ASSET BASED LENDING – FLEXIBLE, FAST, AND FINANCING BASED ON YOUR SALES AND ASSETS!

So what's better, a 'regular' commercial banking facility via a Canadian chartered bank, or ABL lending and financing via a true asset based line of credit?  Regular commercial facilities are extremely focused on criteria for mutual success - we say mutual because we hope everyone agrees that your firm and the lender both have to win. (By the way, we are on our client's side in that battle).

 

Borrowers, however, must understand that financing costs in asset-based lending solutions are commonly higher and companies must be able to report properly on the company's assets via financial statement updates, as well as provide information on sales, receivables, payables, etc.

In certain cases, other assets such as  intellectual property or ' brand ' might qualify for additional financing within the credit facility.

 

THE ROLE OF CREDITWORTHINESS IN A BANK FINANCING SOLUTION

 

score history and ratios, personal guarantees, liens and covenants

Got what it takes for a Canadian commercial banking facility?  You know the drill - you need reasonable leverage, no significant events that are negative in nature, covenants that are a combo of income statement and balance sheet based - for example, fixed charge coverage, etc.!

 

Canadian banking loan approvals place a heavy emphasis on business credit score history and rations, personal guarantees, and liens and borrowing covenants related to the credit facility. Businesses should also expect to have best practices for inventory management.

Traditional lending is of course alive and well in Canada – banks provide commercial loans/business loans for an unlimited amount for financing that meets bank creditworthiness criteria.

Lines of credit and unsecured loans come at competitive interest rates from banking financial institutions. Companies must ensure they met business credit score criteria and must be in a position to provide personal guarantees as well as adhere to loan covenants and financial ratios as set out by bank underwriters

 

ABL LENDING ELIGIBILITY

But hey, what about ABL banking and asset financing - what's required there?  Are you ready? Just assets!

That’s the appeal of asset-based banking and financing - it focuses almost solely on current assets, key categories being, of course, receivables and inventory.  Where our commercial banking friends focus in a dramatically different manner in analyzing and funding your business, the ABL focus is simply on asset monitoring and ensuring you can borrow on a daily basis at the highest of advance rates based on real-world values of your assets. Oh, and by the way, 'strange events' are fully allowed - so you have a challenge, an acquisition, a special loan situation, a year of bad luck... You will still be forgiven by ABL lending and banking.

CONCLUSION – THE RIGHT FINANCING OPTION FOR YOUR BUSINESS

 

ABL loan solutions provide a business with access to working capital and enhanced cash flow that otherwise might not be available from traditional bank lending.  ABL facilities are flexible and often custom-tailored to a particular business or industry - that flexibility in the type of repayment provides access to capital that otherwise might not be available.

Want to ensure you have maximum availability on borrowing against your assets on a daily basis - speak to a trusted, credible and experienced Canadian business financing advisor about an asset based line of credit that makes perfect sense for your company. 

 

Speak to the  7 Park Avenue Financial team about our expertise in working capital loans and accounts receivable financing solutions that combine inventory financing and equipment financing in a secured lending non-bank lending solution. Debt financing via alternative financing solutions can be the growth capital you are looking for to grow your business.

 
 
 
 FAQ FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

 

What is asset-based lending?

 

Asset-based lending /ABL is a type of financing that uses the assets of a business as loan collateral. Typical balance sheet assets that are financed include accounts receivables, inventories, and fixed assets. Widely used as an alternative to traditional financing institutions such as banks many companies in the SME sector utilize ABL credit lines and term loans as a senior lender solution to the company's funding needs.

 

How  does ABL lending differ from traditional bank financing?  Why choose asset based lending?

The difference in ABL lending, when compared to traditional bank finance solutions, is that banks focus on financial fundamentals around strong balance sheets, cash flow, and profit generation. Cash flow financing is a cornerstone of bank unsecured lending. The emphasis in bank financing solutions is also on the personal guarantee of the owners and the potential need to provide external collateral.

 

Secured lending can assist businesses in obtaining financing when traditional finance cannot be accessed. Additionally, ABL loans are often used in business turnaround and the restructuring efforts of a company.

Asset based lenders focus on the sales revenue and business assets, deemphasizing limited personal credit history, low personal credit scores, etc.

 

 How can a company determine whether ABL lending is right for them?

 

Companies considering ABL lending should consider their cash flow needs in day-to-day funding of operations, and the ability to provide asset coverage around key business-specific assets.  Multiple forms of collateral can make up an ABL financing line of credit or term loan- and the ' covenant light structure ' of ABL is a key benefit of this method of financing.

Businesses that cannot achieve some or all of the bank financing they need to run and grow their business are solid candidates for asset-backed lending solutions. Business owners should also be prepared to understand the interest rates and cost of financing in accessing ABL capital. A broad range of industries and businesses in the Canadian economy utilizes asset backed loans.

Companies using ABL products such as financing  for receivables can receive up to 90% of the face value of the receivables - allowing the company to pursue  growth opportunities  via more financing and liquidity around the borrowing base investment in A/R - The positive impact of accounts receivable financing on cash flow and working capital should not be underestimated when considering the investment companies make in carrying trade receivables.

 

 

 

 

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

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

Financing A Business In Canada Here's Some Golden Rules For Working Capital and Loan Solutions

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 Alternative Lending Cash Flow Solutions And Tips For Canadian Business Financing

Financing a business in Canada. A challenge? Let's just say that's an understatement when it comes to working capital, debt, and ongoing management and recognition of financial problems and opportunities. Are there some ' Golden Rules' we could follow. We here at 7 Park Avenue Financial think so so lets cover off some loans for business in Canada.

In some cases your firm might be growing too fast, and just at the time that when you are ready to either expand or take on larger orders and contracts your operating capital and business capital needs replenishing without having the funding you need to address growth challenges. Every company, small and large eventually needs more access to capital, for small and medium firms making a financing error can lead to impaired financials and even business downfall.

Firms with poor working capital typically are poorly managed and unable to meet cash flow needs, but on the other hand a constant reliance on new working capital often has the company demonstrating that it is investing all their cash to grow the business and increase return on investment.


Here is where expert advice and right choices come in, as the wrong debt must be matched to your cash inflows, and even more challenging is the fact that uncertain economic times, pandemics included making it very difficult to find business capital.

The amount of financing you need to run a business depends on how you operate it within your industry . Finance experts call that the ' operating cycle ' and it's simple, namely the amount of time it takes for a dollar to flow through your company from order to collection of the sale via your receivables. The ability to maintain positive working capital throughout that process dictates the amount and type of financing you need.

The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating cycle, and the business owners’ goals for future growth. However, while very large businesses can get by with negative working capital because of their ability to raise funds quickly, small businesses should maintain positive working capital figures. Even issues such as seasonality of a business can greatly affect cash flow needs.



Regardless of the product name, all financing solutions consist of either debt, equity, or a hybrid combination of both. Keep in mind that there are no “good” or “bad” solutions. The best solution for you depends on your specific circumstances and requirements.


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

Working capital loans , whether they be a term loan to inject permanent working capital into the business,or alternatively a short term loan, typically 12 months in duration are used to cover off short term operating needs such as payables, financing your investment in accounts receivable, salaries and wages, etc. It is improper to use shorter term working capital facilities for long term needs such as financing fixed assets/equipment, or real estate, etc,

From an understanding point of view we don't want to go too far down the textbook route in explaining working capital but it's important to simply know that its calculated by subtracting current liabilities from current assets on your balance sheet. Let's leave it at that.

But if there is a shortfall in that number, or the ratio is really tight you need short term liquidity financing of some sort - The good news is that more and more there are some new, creative and alternative financing options available to business owners seeking SME COMMERCIAL FINANCE. That SME " small to medium enterprise " segment in Canada is one of the largest parts of the entire Canadian economic landscape.

How to Get a Working Capital Loan

Numerous traditional and alternative lenders have the financing options you probably need to run your business. In general the same fundamental criteria apply to their level of due diligence into your business - i.e. years in business, annual revenues, is the business preparing proper financial statements that accurately reflect the state of the business, etc. Businesses that are smaller should realize that their personal financial affairs and how they are managed are viewed by the lender as a reflection of how the business finances are managed. Therefore decent credit bureau/fico scores are important.

HOW IS A WORKING CAPITAL LOAN REPAID?

In selecting a financing facility for your business you and your commercial lender should have a sense of repayment ability. Short term working capital loans are widely popular these days, in many cases online portals are used to apply, and lenders use algorithms to determine the amount of loan and repayment timing. Many business owners and their financial managers don't realize that the loans may sometimes be asked to be repaid weekly, but monthly is also common.

The loan amount for these facilities often called ' merchant advances ' is based on a formula of your annual sales, typically 10-20%, as well as factoring in your time in business. Interest rates and cost of financing tend to be some of the highest in Canada for these loans. The appeal is of course speed and flexibility of approval.




We have mentioned the need to separate short term borrowing for long term investments in your business. So for acquiring fixed assets equipment leasing and commercial mortgages are proven options to acquire assets/real estate. In some cases a firm might be looking to invest in leasehold improvements.

On' catch-all ' for financing assets, leasehold improvements, or real estate is the Government of Canada Small Business loan program, providing up to a $1,000,000.00 of financing with a government guarantee behind the majority of the loan. Seek out the services of an experienced Canadian business financing advisor who can help you acquire this loan. Key benefits are attractive interest rates, repayment flexibility, nominal personal guarantee, and financing for investments such as leaseholds that are typically harder to finance as they are intangible assets.

It is the perfect loan solution for building acquisition or modernization via leasehold improvements, as well as covering the purchase of new and used equipment. Since the largest portion of your loan is guaranteed by the Canadian government through this Industry Canada program that allows banks to lend to businesses that might not otherwise qualify for the funding they need.

So in financing a business it is really about what the finance experts call ' sources and uses ' of funds and what type of financing suits your firms specific company or industry needs.

Canadian Bank Financing

Often seen as the ' go to ' solution for general working capital, operating loan, and other financing needs the Canadian banks offer unlimited funding and flexibility for firms that qualify. The attractiveness of a bank revolving line of credit is that it is low cost and can be used only when you need to draw done funds. The banks are very focused on repayment !; so you must be able to demonstrate historical and present cash flow generation. Loans are structured to meet your business needs but borrowers quickly become aware of the more stringent credit qualification and criteria for firms to access bank financing. Those criteria include established businesses for the most part, and focus on the size of the business, quality of the balance sheet, debt to equity ratios, and personal covenants and outside collateral requirements.

The vast majority of businesses in Canada can qualify for both Factoring, as well as the related type of facility, Purchase Order Financing. Factoring financing is probably the fastest growing type of working capital financing when it comes to how to finance a business in Canada. While some call it a receivables loan it is in fact just monetizing your a/r for cash flow.


Since cash flow problems often stem out of a company's inability to collect it's receivables in a timely fashion any commercial or government-related receivable can be financed for immediate cash. At 7 Park Avenue Financial our recommend factor finance solution is ' Confidential Receivable Financing ', allowing you to bill and collect your own receivables without any intrusion by a third party.

If your firm had very good gross margins and can sustain the 1.5-2% fee associated with the financing your firm can become an ATM machine, generating cash as fast as you generate sales revenues. The flexibility and faster access to cash are the great appeal of receivables finance.

Another type of specialty finance related to your ability to take on larger orders and contracts is purchase order financing. This type of financing pays your supplier directly, allowing you to fulfill orders and contracts that might otherwise be lost to competitors for lack of working capital. Similar to factoring finance P O Financing has a higher cost but if your firm has good gross margins it allows your company to grow substantially larger without owners having to put up more equity. Alternative lending in Canada via solutions such as we have described is very much on the rise .

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



A lot of your financing for loan capital of any type will probably come from external financial solutions. They might include a line of credit, bank debt, working capital term loans, receivable finance, inventory finance, equipment leasing, and monetization of tax credits. Those tax credits typically are covered under Canada's SR&ED program and if you have refundable tax credits they can be easily monetized under a SR&ED Loan facility. That accelerates the refund of your valuable investment in r&d capital.




However, you also generate cash internally, and you need to know how to measure that.



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



Also consider your current capital and debt structure and how your balance sheet will look after financing is completed. As an example, something to think about is that working capital and cash flow can be generated through monetization of assets - this doesn't really bring debt to the balance sheet, so you've achieved your goal without increasing debt.



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



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





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



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



Another of those Golden rules is to have a solid sense or understanding of how outside forces, pandemics included, can affect your company's financial viability! If market conditions are continually volatile you clearly need to focus on longer term stable financial solutions.

WHAT ARE YOUR BUSINESS GOALS ?

Constantly stay on top of your cash flow planning, and consider the need for a proper business plan that accurately reflects the true growth and profit potential of your company. You might be focusing solely on growing sales, in other cases you might be going into new product lines or geographies, or investing in r&d. If you want to more clearly understand what business financing solutions are available for financing a business in Canada speak to a trusted, credible and experienced Canadian business financing advisor.



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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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

Small Business Financing In Canada

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Working Capital and Financing Options

Small business financing in Canada ' should ' mean that your company has access to all the working capital you need to both run, and grow, your business .

At 7 Park Avenue Financial we believe that is not impossible, but the business owner and his or her financial manager must have a solid understanding of the options and your company's ability to qualify for and execute on the option or options that make the both sense . Note that in some cases it might make sense to cobble together more than one option to achieve that ' cash flow nirvana' you are looking for .

The business reality is that cash flow doesn't discriminate - both companies in looking for SME COMMERCIAL FINANCE solutions, all the way up to the largest corporations need access to cash flow options. The challenge for smaller firms is that business finance loans are often more limited to the smaller company. So it's therefore important to know what those options are!


Accessing the cash flow challenge might be easier than you think . More often than not smaller firms though have the challenge of locating the expertise and resources they need to evaluate the business finance conundrum.


Two key elements of your first step to what we call 'working capital assessment 'are your gross margins and your turnover. That’s the big problem we have with text book / academic solutions to working capital - they point you to the text book calculation - give you a formula which essentially has you subtracting current liabilities form current assets, and voila ! the inference is you have working capital . However, our clients have never paid a supplier or completed a company payroll with a ratio!

Many firms have an ' inventory component ' to their business - These companies are typically non service type firms , which often are less capital intensive.

To properly assess your working capital needs focus on understanding your turnover - how much inventory do you carry, what are the days outstanding in inventory, and as importantly, or more importantly, are your receivables turning over .

Business experts tell us that for many firms 80% or so of the total of all the business assets you have are tied up in A/R, inventory, and, on the other size of the balance sheet let’s not forget accounts payable .

It is possible to have financial business financing success based on your new found knowledge and analysis of your cash flow and asset turnover.


Canadian business financing solutions to small business finance loans really revolve around a couple viable solutions. Typically, in our experience Canadian chartered banks cant satisfy your business working capital needs - if only for the reason that they rarely finance inventory and require significant merit in your overall financials, profitability, external collateral, personal credit worthiness, etc .

Solutions To Business Finance In Canada

 

There are very viable options that have the potential for a 100% turn around in cash flow :

A total working capital solution can be achieved by a they working capital finance solutions such as a non bank asset based line of credit. This solutions monetizes your accounts receivable and inventory into one borrowing facility .

This is commonly called an asset based line of credit that provides high leverage margining on all you business assets.


Other solutions, still as viable , yet somewhat misunderstood are securitization, and purchase order financing of new contracts and orders. (Your suppliers are paid directly for the orders you have in hand - what could be better than that?)

One of the most active types of ' instant small business financing ' Finally, coming up the road at lightening speed is factoring and invoice discounting. We mention them lastly but they are probably the most popular method, gaining traction everyday. Our favorite is confidential invoice financing, allowing you to control your financing .

Recommended A/R Small Business Financing : 

 Confidential Receivable financing, allowing your company to bill and collect your invoices in a normal fashion , turning current and future sales into instant cash flow.

We have identified several ways to determine the need for proper business financing ; we have outlined a number of solutions that will take the guess work out of working capital.

These loan and financing options are available with a bit of research and/or help from a trusted , credible and experienced Canadian business financing advisor who can provide you with timely and valuable assistance in your cash flow 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


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

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

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


Stan Prokop

What Is An Asset Based Lending Facility ?

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Commercial Asset Based Lending Works - Here's Why

Commercial asset based lending in Canada is basically a healthy alternative to traditional bank financing solutions that business owners and their financial mgrs are looking for to run and grow their companies . Most business people agree there is nothing better than healthy competition and asset based lending solutions, specifically business line of credit loans are a direct competitor to Canadian chartered bank facilities.


Dramatic changes in Canadian business financing have happened in the last ten years or so relative to the 2008-2009 worldwide recession . A number of ' new ' ways to finance your business make commercial borrowing facilities more accessible than every . Commercial lenders are offering viable solutions to working capital, debt, and cash flow needs sought by the Canadian business borrower.

These independent commercial finance companies, both 100% Canadian as well as some U.S. players doing business in Canada compete directly with traditional finance sources to offer a wide array of financing solutions for your SME COMMERCIAL FINANCE needs. Even internet solutions now empower the Canadian business borrower - those searching for ' abl asset based line of credit ' via an internet search find numerous offerings that can be specifically tailored to their needs.

Also on the rise are short term working capital loans - these loans arose out of the cash flow loans made to predominantly retailers and are now well suited to general business borrowing in pretty well every industry.

No secret that Canadian chartered banks often command the first train of thought when it comes to business finance for a revolving line of credit . Asset based business lending for lines of credit gains more traction everyday.


So let’s provide some clarity around ABL finance in Canada. If there is one differentiator of the product it’s simply that the total focus of the facility revolves around one word, ' assets '. Non bank asset based loans are more flexible than a traditional bank offering, and at a time when more is better they leverage your assets significantly greater than a bank facility. Remember that an ABL loan is typically from an unregulated lender; they have different sources of capital and don’t require key elements that are necessary in the Canadian chartered bank system.

Asset based business credit lines are not to be viewed as 'term loans ; They are simply a ' monetization ' of the assets you have in your business already - specifically receivables, inventory, equipment, and , if applicable, real estate.

While our banks focus on ratios, covenants, outside collateral, personal guarantees, etc the Asset Based Lender focuses predominantly on .. you guessed it .. Assets !


So why the sudden and growing popularity in asset based lending in Canada. We think the answer to that is the fact that it covers every type of industry, retail, manufacturing, service, etc. But more importantly it also addresses your company life cycle. Even more important is these credit facilities tend to grow almost automatically with your sales levels, allowing firms to capitalize on new markets, larger orders, new major customers, etc.


An asset based ABL finance facility can be achieved for a start up, an established growing firm, and yes, those firms that have suffered severe financial challenges. In the ' old days' (yes we remember them) it was not uncommon for forms of asst based lending to be viewed as a ' last resort' type of financing. Fast forward to today and some of the largest corporations in the world, in Canada included; utilize this financing as opposed to a traditional bank facility. So something must be working!

In order to assess your firms suitability for this type of line of credit businesses should be prepared to offer up to date financial statements , and proper agings of receivables, inventory and equipment lists if appropriate . Note - only unencumbered fixed assets may be considered as a part of your credit facility . Many firms of course have liens on some fixed assets they are leasing or are borrowing against .



Speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success to better understand how asset based loans can monetize your firm’s assets into an ABL business credit line facility that provides you with maximum working capital and asset leverage.




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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

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

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


Stan Prokop

Financing A Business Purchase In Canada . A Buyout Financing Loan .. Done Right !

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Management Buyouts & Latest News for December 2019 You Need to Know on Business Loan To Buy A Business

Financing a business purchase in Canada requires both a strategy doesn't have to be as hard as you think if you have the right information. What sometimes makes buyout financing or a loan strategy complicated is the good news; there are a variety of options available that make sense to you the purchaser, and the owner.



Business people and mangers looking to orchestrate a management buy out or business acquisition wants one thing: A solid simple strategy for both valuation and financing! The goal should be quite clear: agreeing on price and value, and then rising the right mix of debt finance and owner equity capital that suits the asset and capital base of the business going forward.



Of course valuing the business is often the first and largest challenge. That is complicated by the size of the firm, whether it’s a service or an asset / product based business, and whether the firm is a going concern, or heaven forbid, in dire straits.



What should be a good starting point in valuation - no surprise to us, its one of our favorite terms - ' CASH FLOW '! That means taking a look at what cash flow has been, and what it could be. That requires a solid handle on revenues and a proper forecast for those sales.



Asset valuation is a good step # 2. That naturally involves some method of appraisal of asset types such as equipment, real estate if there is any attached to the sale , vehicles, and those all important ' current assets ' , Receivables and Inventory .



We often find ourselves in the middle of a valuation issue when assisting clients with a business purchase - suffice to say there is an occasionally a huge difference in value as placed by the owner or the purchaser. We're often reminded of the old saying that best deal is often when both the purchaser and the seller both feel they didn’t get the best deal!



Taking a good hard look at how the seller presents financial statements is key to financing a business purchase successfully. Here's where the majority of clients we speak to need some good experienced assistance. Areas of focus are:



Collectability of receivables

Revenue recognition policy on sales, contracts etc

Lease obligations - (premises/equipment)

Fixed asset list value

One time losses i.e. why/what happened

Owner/management compensation



With reference to the last point, ' COMPENSATION' we see numerous cases where a hard look at current compensation can save thousands of dollars to the new owner/manager. And that includes the strategy of taking the previous owners kids and family members off the payroll!



If we had to summarize an all inclusive strategy in looking at the business financials we would say it involves simply a solid hard look at:



Debt

Liquidity

Profits

Assets



Easier said than done though, right? But a lot easier with some experienced assistance for an advisor, etc.

Useful Tools For Acquisition Financing

When it comes to actually financing the purchase this can be through bank term loans, asset based lending deals, unsecured cash flow loans, and even for smaller business purchases (under 350k) the Govt SBL loan.



Speak to a trusted, credible and experienced Canadian business financing advisor on assistance for financing a business purchase and a buyout financing loan / finance strategy... that works!







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 area 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.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

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

Stan Prokop

Working Capital Finance Loan Advice – What Business Credit Is Available For Your Firm

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Working Capital and Cash Flow Mechanisms for Canadian Business

Information on working capital finance requirements and solutions for business credit for Canadian businesses . Your business doesn’t need a 'loan ' Do you really need a ' loan ' and are there are alternatives to monetize assets into cash flow . P.S. Yes there are!

Have you checked the patient recently for oxygen and blood status? We're talking of course about your business, i.e.
working capital finance which is a true key measure of business credit health. Does a working capital loan need seem like a necessity as your business grows? Let's examine the why and more importantly the ' how ' of cash flow financing in Canada.

It is not hard to determine why there is such a focus on working capital finance in Canadian business - its simply because your ability to both manage, and access cash flow alternatives become the ultimate measure of short term financial health . We say short term because your overall capital structure and debt / equity relationship are of course the other piece of the business finance puzzle. Today we're focusing on short term health!

You know you are in good shape from a business cash flow perspective when you are in a position to meet your short term obligations - typically those are payables and any loan payments becoming due on a monthly basis within the year. If your cash on hand, receivables and inventory turnover are unable to meet those obligations consistently ... well ... its clear you need a working capital solution.

The reality of course is that cash flow fluctuates, and there are times when you have what is known to bankers as a bulge requirement - it is those times you need that access to working capital we spoke of.

So how do you determine what type of business credit financing you need, and, as importantly, how much. Sophisticated larger firms use the capital budgeting process to determine asset needs and why type of investment is required. It’s essentially the mix in the financing of your company - i.e. owner equity, debt, and financing of current assets, which is our focus - ' working capital'!

The good news about working capital finance is that if it is done properly it doesn’t incur debt, or reduce your owner equity - it just increases cash flow and business credit access. To some extent the term ' loan ' in working capital actually reflects a line of credit scenario, not taking more debt on to your balance sheet.

It is possible though in Canada to get a working capital term loan, for larger and medium size companies this is known as sub debt. Payments are fixed and in general the loan is unsecured and based on your cash flow ability to repay, both historically and projected.

If that is not the solution for your firm, what is then? The other solutions are a true bank operating facility, if, and sometimes that’s a big if, you meet bank criteria for lending. Other real world and more probable solutions for working capital finance business credit are asset based lines of credit , working capital facilities of a non bank nature around your inventory and receivables, or simple receivable financing via an invoice discounting facility.

In summary, working capital cash flow financing is not necessarily a ' loan ' per se, but there are options available for business credit financing in Canada. As we have shown you need to determine when you need that capital and why it’s important to have stand by facilities available. Speak to a trusted, credible and experienced Canadian business financing advisor on sourcing your proper working capital and cash flow 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


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

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

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



Stan Prokop