Two Unique Canadian Cash Flow Strategies

Canadian business owners and/or their financial managers might not necessarily be fully familiar with two sold financing strategies, the sale leaseback of assets, and the potential ability to enter into a securitization facility. Let's cover off some basics.

 

CONSIDER THESE ADDITIONAL IMPLICATIONS IN EVALUATING SALE LEASEBACCKS

 

When it comes to a  sale leaseback scenario there are some accounting, tax and financial statement issues that we also encourage clients to consider. It might be time to give your accountant a call!

 

WHY A SALE LEASEBACK

 

So when in fact does doing a sale leaseback make sense? Although it is often used when the company cannot obtain bank financing, that is not always the case and it's still a beneficial long term strategy when your company requires a capital infusion of some sort.

 

The interesting thing about this method of refinancing is that quite often the assets in questions are of value, and are not pledged to another lender. They belong to the company and can assist the company who is, as the expression goes ' asset rich ' but ' cash poor '.

 

WHAT ASSETS MIGHT BE CONSIDERED IN THE SALE LEASEBACK PROCESS

 

Typical assets that are used in a sale leaseback include phone and computer systems, manufacturing equipment, heavy construction machinery, rolling stock, real estate,  ... etc!

 

The strategy itself could not be more simple- your company sells the assets, or real estate,  to a leasing or finance firm in exchange for immediate working capital. The asset or assets in question are simply leased back to the business with the full intention of reacquiring the asset.

 

One area of caution is that complications can ensure when its time to confirm you have the ability to enter into a transaction such as this. Simply speaking, other creditors of your firm may be asked to confirm they hold no security in the collateral being refinanced... that just makes sense.

 

UNDERSTANDING THE TRUE VALUE OF YOUR ASSETS

 

Because different assets have different life cycles and value its important to get a firm understanding upfront as to the true total financing capability you can extract from this type of transaction.

 

Payments under a sale leaseback loan or lease are commensurate with your credit quality as well as the true liquidation value of the assets. That’s not how you might look at the transaction, but we assure you the lender does! It's all about the balance sheet!

 

WHAT IS SECURITIZATION

 

On to our other relatively unused and unknown financing,  ' SECURITIZATION '.  If your firm is over-leveraged or simply doesn’t have access to the liquidity you need.

 

In some ways securitization is a more complex type of sale leaseback - however, instead of financing your hard assets you are financing future cash flows that come from receivables, or what we can broadly call ' cash flow contracts '.  Oh, and by the way, larger public companies do this all day, every day as a way to enhance balance sheets.

 

Although some of the mechanics of a securitization might be viewed as complex by a small firm, medium-sized or larger firms simply collateralize those rights to collect in their A/R or contracts. They more often or note are responsible for any shortcomings in future collections.

 

Naturally for the securitization lender they are looking at both sides of the coin, the quality of your cash flows coming in, as well as the overall credit quality of your customer base. Here issues such as concentration, geography, type of asset, etc come into play for the final financing decision. Lenders can protect themselves even more by holding back some of the funds; in effect, they are over collateralized.

 

So, whether it’s a leaseback transaction of hard assets or securitization of cash flows your company might to well to investigate each method to see if it works for your firm.

 

CONCLUSION

 

More and more businesses in Canada, pandemic times included, are looking at commercial financing solutions such as the leaseback transactions to bring additional liquidity into the business. It is a complementary solution to existing credit facilities that might be in place such as senior lender credit lines, etc.

 

The ability to also potentially negotiate repayment under current cash flow circumstances is also appealing to business owners, as well as our aforementioned interest rate consideration.

 

While in some cases the consideration around a leaseback might be simply the current low-interest-rate environment, it more often than not is cash-flow considerations. The ability to use the assets in your business to evaluate cash flow options is simply additional financial flexibility in your capital structure goals.

 

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in evaluating these great, and unique business financing mechanisms.

 

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

Securitizaton - Just The Facts

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Can Someone Please Explain 'Securitization' to Me?

Securitzation is a financing term that is not commonly used by the average finance person, let alone the average lay person who has no detailed knowledge of business financing and alternative financing. The term ' securitization' became increasingly well known during the financial and liquidity crisis that the world experienced in 2008/2009. We discovered that one of the main causes of the world wide financial collapse was, in effect, the securitization and marketing and sale of mortgages.

Securitization is an alternate form of funding for corporations. When it works well it is an excellent source of funding for many organizations. Securitization is a form of structured finance.

How does it work? A company or organization takes certain assets that are desired by various investors. These assets are most typically receivables, contracts, car loans, credit cards, mortgages, etc. The quality of these assets is key in the entire securization process. We watched the financial world fall apart when people discovered those securitized mortgages that were bundled in the United States had a very low credit quality.

One of the reasons investors like securitized assets is that the risk is spread among hundreds, probably thousands of different borrowers. This diversifies risk. We continually here how one needs to diversify to control risk, whether in business or in our personal financial affairs. The cash flows that come out of that pool of assets backs up the quality of the investment by the buyer of the securitized asset.

For a transaction to be properly securitized there has to be a strong level of predictability in the repayment of the loans, leases, mortgages, etc.

How are Securitizations structured? The assets become known as a' pool 'of assets. Financial analysts or the credit rating agencies ( Standard & Poors, etc ) assign a credit rating to this newly created SPV. ( Special Purpose Vehicle ). Investors buy this pool of assets because they theoretically understand the asset quality and the risk. There are many subsets to the risk which we wont cover in our article - for example concentrations of assets or customers, etc

The pool of assets is usually ' serviced ' by the seller. He collects and maintains the portfolio - of course it has he who also created the portfolio of assets. The ongoing collection of the portfolio flows back to the investors who purchased it.

Securitization has become more and more popular because it has provided great liquidity to the financial markets.

In summary, the securitization flow chart is as follows:

A seller creates the assets

A SPV is formed around those assets

Investors purchase the SPV

A trustee monitors the flow of cash, collections, etc.

Of course as one can imagine all sorts of lawyers, accountants and financial analysts have a healthy hand in various aspects of the above process flow!

The benefits of securitization can be summed up as follows:

* It provides cash flow to many companies who would otherwise have to wait years for customer payments, etc
* Profits from the sale of the pool of assets allow a company to grow and create more assets
* When properly structured there are certain balance sheet enhancements - i.e. the company selling the pool gets cash but does not take on debt.



7 Park Avenue Financial :

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 .







7 Park Avenue Financial

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

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' 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

Securitization & Other Cash Flow & Business Financing Solutions In Canada

Here's the Good Stuff On Securitization & Other Cash Flow Solutions

Information on securitization as a cash flow financing tool in Canada . Business finance solutions can come in non traditional formats that still provide solid working capital needs for Canadian corporations

Business financing in Canada comes in many forms . Securitzation is a financing term that is not commonly used by the average finance person, let alone the average lay person who has no detailed knowledge of business financing and alternative financing. The term ' securitization' became increasingly well known during the financial and liquidity crisis that the world experienced in 2008/2009. We discovered that one of the main causes of the world wide financial collapse was, in effect, the securitization and marketing and sale of mortgages.

Securitization is an alternate form of funding for corporations. When it works well it is an excellent source of funding for many organizations. Securitization is a form of structured finance.

How does it work? A company or organization takes certain assets that are desired by various investors. These assets are most typically receivables, contracts, car loans, credit cards, mortgages, etc. The quality of these assets is key in the entire securization process. We watched the financial world fall apart when people discovered those securitized mortgages that were bundled in the United States had a very low credit quality.

One of the reasons investors like securitized assets is that the risk is spread among hundreds, probably thousands of different borrowers. This diversifies risk. We continually here how one needs to diversify to control risk, whether in business or in our personal financial affairs. The cash flows that come out of that pool of assets backs up the quality of the investment by the buyer of the securitized asset.

For a transaction to be properly securitized there has to be a strong level of predictability in the repayment of the loans, leases, mortgages, etc.

How are Securitizations structured? The assets become known as a' pool 'of assets. Financial analysts or the credit rating agencies ( Standard & Poors, etc ) assign a credit rating to this newly created SPV. ( Special Purpose Vehicle ). Investors buy this pool of assets because they theoretically understand the asset quality and the risk. There are many subsets to the risk which we wont cover in our article - for example concentrations of assets or customers, etc

The pool of assets is usually ' serviced ' by the seller. He collects and maintains the portfolio - of course it has he who also created the portfolio of assets. The ongoing collection of the portfolio flows back to the investors who purchased it.

Securitization has become more and more popular because it has provided great liquidity to the financial markets.

In summary, the securitization flow chart is as follows:

A seller creates the assets
A SPV is formed around those assets
Investors purchase the SPV
A trustee monitors the flow of cash, collections, etc.

Of course as one can imagine all sorts of lawyers, accountants and financial analysts have a healthy hand in various aspects of the above process flow!

The benefits of securitization can be summed up as follows:

* It provides cash flow to many companies who would otherwise have to wait years for customer payments, etc
* Profits from the sale of the pool of assets allow a company to grow and create more assets
* When properly structured there are certain balance sheet enhancements - i.e. the company selling the pool gets cash but does not take on debt.

If you're focused on alternative forms of business financing including :

A/R Financing

Non bank asset based lines of credit

SR&ED Tax Credit Financing

Unsecured Cash flow loans

Royalty Finance

Bridge Loans

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 innovative cash flow solutions that work for your firm.




Stan Prokop - founder of 7 Park Avenue Financial –

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 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 & Contact Details :


http://www.7parkavenuefinancial.com


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

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' 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

Looking To Plug the Cash Flow Drain? Consider Sale Leaseback Of Assets Or Securitization Financing As Solutions !

Two Unique Canadian Cash Flow Strategies


Information on a sale leaseback strategy for assets your firm owns . Consider Securitization Financing as an additional cash flow generater!





Canadian business owners and / or their financial managers might not necessarily be fully familiar with two sold financing strategies, the sale leaseback of assets, and the potential ability to enter into a securitization facility. Let's cover off some basics.

When it a comes to a sale lease back scenario there are some accounting , tax and financial statement issues that we also encourage clients to consider . It might be time to give your accountant a call!

So when in fact does doing a sale leaseback make sense? Although it is often used when the company cannot obtain bank financing, that is not always the case and it's still a beneficial strategy when your company requires a capital infusion of some sorts.

The interesting thing about this method of refinancing is that quite often the assets in questions are of value, and are not pledged to another lender. They belong to the company and can assist the company who is, as the expression goes ' asset rich ' but ' cash poor '.

Typical assets that are used in a sale lease back include phone and computer systems, manufacturing equipt, heavy construction machinery, rolling stock ... etc!

The strategy itself could not be more simple- your company sells the assets to a leasing or finance firm in exchange for immediate working capital.

One area of caution is that complications can ensure when its time to confirm you have the ability to enter into a transaction such as this. Simply speaking, other creditors of your firm may be asked to confirm they hold no security in the collateral being refinanced... that just makes sense.

Because different assets have different life cycles and value its important to get a firm understanding up front as to the true total financing capability you can extract from this type of transaction .

Payments under a sale leaseback loan or lease are commensurate with your credit quality as well as the true liquidation value of the assets. That’s not how you might look at the transaction, but we assure you the lender does!


On to our other relatively unused and unknown financing, ' SECURITIZATION '. If your firm is over leveraged or simply doesn’t have access to the liquidity you need it's one unique method of financing a company in Canada .

In some ways securitization is a more complex type of sale leaseback - however instead of financing your hard assets you are financing future cash flows that come from receivables , or what we can broadly call ' cash flow contracts '. Oh, and by the way larger public companies do this all day, every day as a way to enhance balance sheets.

Although some of the mechanics of a securitization might be viewed as complex by a small firm, medium sized or larger firms simply collateralize those rights to collect in their A/R or contracts. They more often or note are responsible for any shortcomings in future collections.

Naturally for the securitization lender they are looking at both sides of the coin, the quality of your cash flows coming in, as well as the overall credit quality of your customer base. Here issues such as concentration, geography, type of asset, etc come into play for the final financing decision. Lenders can protect themselves even more by holding back some of the funds; in effect they are over collateralized.

So, whether it’s a sale leaseback of hard assets or a securitization of cash flows your company might to well to investigate each method to see if it works for your firm.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in evaluating these great, and unique business financing mechanisms.





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 9 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 :

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