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

Funding Business Turnaround - Growth Financing Secrets And Tips For Canadian Business

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(The Other Reason) Why Companies Fail (And How To Prevent It!)

Funding business turnaround. Whether it's growth financing or rescuing a company from that terrible spot known as ' dire straits’ no business owner/manager wants to ' crash '. So imagine our surprise when we read and talked to the management of a firm that put out a great article entitled ' WHY COMPANIES CRASH!  

 

WHY COMPANIES FAIL?

 

But wait a minute, when we read the article and discussed it with the writer we found it focused on some great, but not financial issues. Those issues included salary and compensation models that didn’t work, strange organization structures, and poor or non-existent business goals. Great stuff, and we'll leave those areas to consultants and others, but that is not our focus, which is failure due to lack of working capital, no financing, poor financing, or wrong financing. Let's dig in!

 

WILL CANADIAN BANKS HELP?

 

As we can imagine financing at a time when it's least available to your firm is.... difficult!  While we might assume ( or hope ) that Canadian chartered banks are the best or most likely to save a firm the hardcore reality is that bank loan rates and margins and a non-tolerance for excessive risk quickly rise to disappoint when growth and turnaround finance is needed the most.

 

In fact when Canadian chartered banks feel that your firm reaches  ' CODE 10' on their risk meters they actually move your account to a special loans category and increase your borrowing costs. Not what you had hoped!

 

FIRMS WITH ASSETS AND GROWTH  POTENTIAL CAN BE SAVED

 

Firms that have assets and growth and survival possibilities of course want to avoid bankruptcy and face the burden of losses owners, lenders and investors in your firm.

 

Assets are what often saves a firm that is a great place to start.  While assets can of course be sold off and liquidated. At that time surely the business owner couldn't have any more bad luck... but wait, and then Revenue Canada shows up also. It couldn’t be worse.

 

CREATIVE FINANCING STRATEGIES ARE NEEDED

 

But that’s when creative financing strategies employing the concept of asset-based lending can save the day. By carefully assessing and appraising the ongoing value of assets such as accounts receivable , inventory,  unencumbered fixed assets,, real estate ( if applicable ), and tax credits and patents. 

 

REFINANCING STRATEGIES THAT WORK

 

Careful crafting of such a facility allows a firm to pay off existing banks or lenders, come to suitable terms with those friendly CRA folks, and have ongoing capital for maintaining supplier and customer expectations.

 

When properly negotiated and documented proper borrowing structures can be put in place without onerous ratios and covenants that often control your ability to address growth financing and working capital.

 

  

BUSINESS FINANCING SOLUTIONS  

 

Numerous single and combination of finance strategies exist for funding business turnaround and growth. They include:

 

A/R Financing Accounts receivable financing solutions such as factoring and confidential receivable funding

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

 

When you're faced with the prospect failing due to financing seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your critical needs.

 

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

Acquisition Finance - The Heart Of The Matter When It Comes To Mergers Acquisitions Financing In Canada

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All Aboard The Acquisition Finance Mergers Acquisitions Financing Train! 

 Avoiding The Canadian Tragedy Of Poorly Executed Acquisition Financing 

Acquisition finance in Canada.  Whether the business environment is turbulent or going smoothly savvy business owners and managers are always looking for successful mergers and acquisitions opportunities with another company that... you guessed it... requires financing. Let's dig in.

 

In Canada, both traditional bank loans and alternative financing solutions lend themselves to a business or merger opportunity, therefore posing the question - ' How is this opportunity to be financed to ensure success ' and the right financing structure of term debt and operating finance. Financing an acquisition involves specialized finance skills.

 

In small to medium-sized acquisitions a tremendous amount of creativity on a transaction can come from innovative methods of seller financing, thereby reducing the cost of capital in the acquisition. Any form of seller financing obviously lowers the amount of external debt - traditional or alternative, that you are forced to take on.

 

Large corporations utilize private equity firms as an example for large complex transactions as well as the funding of publicly traded firms, but those types of solutions are not available to the SME borrower who must perform due diligence with limited external assistance and must therefore address financing the balance sheet on their own.

 

Here's one common challenge, we see all the time is that the seller has serious tax ramifications depending on the type of sale that is in motion. Only two real types of sale exist by the way -  ' ASSET ' or ' SHARE '.   Share sales in Canada are typically very impossible to finance, in that private companies offer no real liquidity event for the financier.  Naturally with public companies that’s a bit of a different story. The seller, unfortunately, is usually very ' tax conscious ' on the outcome of the deal, which many times makes the going difficult to close successfully and properly.

 

We point out also that when a motivated seller is open to some sort of Vendor Take Back scenario that also can become a potentially good source of income for the seller based on the interest charged on the VTB.

 

Smaller transactions in Canada require a commitment from the purchaser in the form of some sort of buyer equity, down payment, etc. Anywhere in the range of 10- 50% is required... and that's quite a range!  Business owners who have to invest their own capital in a deal source those funds from personal funds, savings, investments, etc.

 

Less money down on any deal is the ultimate double-edged sword on any acquisition finance deal. Leverage works for and against you, either propelling greater return on investment or significantly higher risk of failure based on too much debt - or the wrong debt.

 

Talk about a real double-edged sword! We point out also that lenders and other investors you may have lined up are generally ' impressed ' with an owner’s equity commitment to any deal. To paraphrase in the language of the people - you've got SKIN IN THE GAME! The vast majority of acquisitions in Canada typically come with a combination of debt, equity/ seller finance and cash flow finance combinations.

 

While many clients we talk to in the Small business and SME sector think they can approach ' VC's'  and Private Equity groups for assistance they rarely can meet the rigorous demands of those two types of external finance. Suffice to say you'll be giving up significant equity also, which in general is highly undesirable at a point when you haven’t realized the true financial benefits and returns of a good merger or acquisition over the long term.

 

In the small and SME sectors of business in Canada, a great way to finance a business purchase is the government Small Business Loan - aka the ' SBL '.This is the ' all Canadian version of U.S. 'SBA ' loans.  It offers tremendously attractive terms relative to what you are trying to accomplish and allows you to retain tremendous upside re your projected financial performance.

 

Two final very typical ways to accomplish financing acquisitions are to consider traditional bank financing and ABL (Asset-based lending). If you can meet some basic cash flow coverage and debt to equity ratios you're a solid potential candidate for well-priced acquisition finance with excellent and competitive interest rates in today's low-interest-rate environment.  Asset-based lenders will throw those ratios, generally speaking, out the window and simply focus on the assets you're acquiring and how they can be margined via term or operating solutions.

 

Avoid the tragedy of poorly executed business acquisition financing options when contemplating a merger or acquisition in the world of corporate finance. Strive for a good grasp of acquisition financing basics, which can be sought via your accountant, lawyer, or a trusted, credible and respected Canadian business financing advisor with a track record.

 

 

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

Equipment Financing Companies - Must Know Info On Business Lease Finance

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Equipment financing companies in Canada. We maintain that when it comes to a business lease for asset financing there is certain information on this subject is ' nice to know ‘, while in other situations its absolutely critical to your asset finance success - i.e. you need to know this! Let's dig in.

 

  

ANY ASSET, NEW OR USED, CAN BE FINANCED!  

Business owners and financial managers should always understand that just about any asset, even intangibles such as computer software as an example can be lease financed. The entire application process for leasing approval has never been shorter - transactions under 100k are often approved the same day, or even online, or within 24 hours. Larger complex transactions will always take a bit more time, but will invariably be approved faster than a business loan.

 

  

 

EQUIPMENT FINANCING IS A LONG TERM FINANCE DECISION   

 

When it comes to the asset financing decision it's all about short and long-term decisions and that timeframe can be all-important to your financing success.  More often than not the majority of equipment leases in Canada tend to be in the 3-5 year range. These are typical terms when it comes to plant and fixed assets and equipment; note also that interest on lease payments are tax-deductible in leasing.

 

MANY MANUFACTURERS HAVE CAPTIVE LEASE FINANCE SOLUTIONS

 

It might, but should not, come as a surprise that some of the largest asset lessors in Canada are manufacturers themselves, offering lease financing. They compete with independent commercial finance companies to finance their own equipment - bring incremental profit and additional sales opportunities into their picture.

 

 NO MONEY DOWN / NO DOWN PAYMENT? 

While we are big proponents of equipment finance we're the first to admit that on occasion terms such as ' 100% financing ‘, etc. are somewhat overused by the industry. More often than not down payments of security deposits of some sort are required, especially if your firm is not ' investment grade ' when it comes to credit quality. Lease approvals are available for almost any credit quality, in some cases, interest rates will vary depending on the final restructuring of your transaction to ensure credit approval for the equipment you need.

Business owners should know that any equipment can be financed ( new or used ) that might be medical equipment, construction equipment , rolling stock, computer leasing, software leasing - new and used.

 

EQUIPMENT FINANCING IS AN EASY WAY TO ACQUIRE ASSETS

 

Canadian business owners and finance managers like leasing because it’s a simplified process when it comes to asset acquisition.  Your firm simply negotiates the type and price of a business asset and the leasing company buys the asset, on your behalf, from the manufacture or distributor. It’s, as we have said, a solid alternative to equity financing or long-term debt on your balance sheet in the form of term loans.

 

HAVE YOU CONSIDERED THE OPERATING LEASE TRANSACTION?

 

Not all acquirers of business assets are familiar with operating leases.  A simplified way of looking at these transactions is simply that you should consider them as ' service ' type leases.

 

ADVANTAGES OF OPERATING LEASES

 

What then are the advantages of operating leases? There are several, they include the fact that the leases are not fully amortized so even with interest built into the transaction you quite often are not paying even the full amount of the value of the asset. 

 

How can that be, ask our clients? Simply speaking it’s that the lessor is making a bet on the useful economic life of the asset when you return operating lease assets at the end of the lease term. The lessor hopes to sell or release the assets under your operating business lease.  So there, the secret is out!

 

FLEXIBILITY AT THE END OF TERM OF YOUR EQUIPMENT LEASE

 

If there is one both beneficial and creative aspect to equipment financing companies offering operating type leases it's that they allow you a lot of flexibility during and at the end of the term of the transaction.  Your firm has the ability to return, upgrade or even buy the asset at mid or end of the term. Now that’s flexibility!

 

  

THE CAPITAL LEASE - YOUR '  LEASE TO OWN ' STRATEGY  

 

Capital leases are the opposite. They are fully amortized, cannot be cancelled, and the interest rate clearly defines the lessor profit to which they are entitled. (Hopefully, it’s a ' reasonable ' profit!)

 

  

HAVE YOU CONSIDERED A SALE LEASEBACK?  

 

Equipment financing companies will also consider sale-leaseback transactions. You take assets you already own and sell them to the leasing firm, typically to enhance your working capital or cash flow needs.  We have even seen our own chartered banks sell their bank towers in downtown cores, freeing up millions in capital for the banks themselves.

  

CONCLUSION

  

As we have said, there’s ‘nice to have ‘and ‘need to know ‘when it comes to business lease finance via Canadian equipment financing companies.  Financing equipment should not be a challenge for business owners in the SME economy. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in completing a transaction that benefits your company for your business needs.

 

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced

business financing consultant

.

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


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


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







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Business Cash Flow - Are You ‘ Pro’ ? The Case For Working Capital Finance Solutions And Management

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Is Cash Flow The Oldest Word In The World ...Perhaps?!

 

Business Cash Flow in Canada.  It always seems to us like a bit of an understatement when you talk to clients about working capital finance solutions and their importance. Business owners and finance managers know the challenge of raising capital or monetizing existing assets... or both!

 

WHAT FINANCE NEEDS DOES YOUR FIRM NEED

 

Naturally, financing needs are diverse. It could be operational cash flow, replacing existing assets, etc. Any change in working capital cash flow impacts your firm either positively or negatively. Even managing your accounts payable effectively in daily operating activities provides movement in your cash flows. Addressing the inflows and outflows of capital is the key to long term business success as you manage liabilities due within 12 months.

 

A FINANCING DROUGHT IN THE SME ECONOMY?

 

Is there an SME drought of some type in Canadian business financing? The commercials and ads we see every day seem to say not, but in talking to small business owners and managers finance often seems just a step away from crisis mode as they search for an increase in working capital.

 

What is business cash flow? At the end of the day it's simply the flow of funds in and out of your business - most often measured by a 12-month timeframe. That cash flow comes from sales revenues/accounts receivable collections, inventory turns, and the management of your payables.

 

 

Cash flow represents all the money that is flowing into and out from your business during a specified time frame. Cash flow can consist of accounts receivable, accounts payable, and inventory. ... Working capital refers to all the current assets as well as current liabilities in your small business.

 

2 KEY ISSUES IN BUSINESS FINANCE

 

When it comes to business cash flows and working capital resources it comes down to two basic issues -

 

Managing your assets - asset turnover and the flow of money in your company

 

Accessing traditional or alternative finance to meet your needs - Understanding the cash flow statement

 

Top experts tell us that surveys of business indicate that well over 50% of all businesses in the small to the mid-market sector in Canada, in all industries are either worried or concerned about their ability to finance operations. Therefore how to calculate the change in working capital must be job 1 for the business owner and financial manager. Changes in working capital are basically the changes that arise out of changes in current assets and current liabilities on your balance sheet. That the ' textbook ' answer for the working capital formula.

 

While simple mismanagement of your business assets is one reason for that the other is simply your inability to collect promptly from late-paying clients. In some cases, your clients actually might be temporarily unable to pay!  Our traditional lending institutions such as Canadian chartered banks are risk-averse - that has made them very strong in global profiles, but has left Canadian business shall we say ' unfulfilled '!

 

SOURCES OF CANADIAN BUSINESS FINANCING

 

Rather than wait for the government to step in resourceful business owners/managers have simply gone out and accessed alternative financing to meet their cash flow fluctuation needs.

Those sources of Canadian Business Finance Solutions  bringing capital and cash flow  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

 

WHAT IS THE MOST POPULAR NON BANK  METHOD OF WORKING CAPITAL FINANCE

 

Invoice (A/R Finance) is probably the most popular method of addressing the working capital challenge. Accounts receivable and inventory are the 2 key current assets on the balance sheet that represent potential business liquidity.

 

THE COST OF FINANCING

 

While owners and managers are justifiably concerned about the cost of financing they sometimes forget that how you manage your assets can significantly decrease your overall financing cost. And while some ' alternative ' finance solutions are viewed as too expensive there are numerous ways to offset the costs of any financing you undertake.

 

Don't forget also there’s a huge difference between taking on new long-term debt versus monetizing assets for cash flow. Let's utilize a quick example:

 

  

A WORKING CAPITAL  EXAMPLE  OF FINANCE SUCCESS  

 

Consider a firm that borrows 100,000.00 as a term loan over 5 years, putting new debt on the balance sheet. Interest on that debt might easily be 15,000.00 over a 5-year term, even at excellent rates.   Consider the business owner who monetizes 100k of A/R for a 30 day period. Cost is approx 2000$, and new sales create profits over and over again as sales are generated and assets turned via operating capital for the sale of your products and services.

Your focus should be on the overall working capital cycle of your company - simply the time it takes to turn sales into cash. The longer that cycle is represents the need for more investment into working capital that is in effect ' tied up ' and might signal the need for external financing.

 

 

CONCLUSION

 

Our bottom line - don't underestimate the need for business cash flow and the power your firm has when it’s utilized properly. While ‘ cash flow ‘ may not be the oldest word or term in the world we can't underestimate its importance to business survival.

 

How much money do you need and will your firm always have enough cash? Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business cash needs and working capital finance solutions.

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

Finance Factors In Canada / Decided If You’re For Or Against Receivable Factoring Cash Flow Solutions?

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 The Dreaded ‘ F ‘ Words - It’s Factoring, Funding and Financing Your Sales Hit A Cash Flow Home Run With Receivable Factoring Finance Factors In Canada 

 

RECEIVABLE FACTORING FINANCE FACTORS 

Receivable Financing Finance factors in Canada. When the Canadian business owner  / financial manager considers the weight of evidence for a factoring receivables he or she wants to be in a position to have the facts on how this method of financing sales works, costs, and attracts benefits otherwise not obtained. Let's dig in!

 

  

IT'S CRITICAL TO GET A STRONG SENSE OF YOUR TRUE CASH FLOW POSITION  

 

Whether your business is mature, a start-up, or growing like crazy you need to be in a position to ' model ' your cash flow. That's something you need for your own management of your business, as well as being available for any term or operating lenders.  The advantage of having such data is that over time you get a strong sense of your cash flow and working capital needs, giving you comfort on what’s coming in. and going out!

 

  

PROFITS DON'T EQUAL CASH FLOW   

 

Feeling disconnected lately?  One reason for that is what we see in talking to clients all the time - actual cash flow and profits are vastly different things. Are you really comfortable with the way your A/R tracks sales, or vice versa, and do you understand the implications of growth and working capital needs? Most firms are keenly aware it is more and more difficult to get paid on 30 day terms which historically were a norm.

 

That’s where Finance factors/factoring company solutions come in. An accounts receivable factoring solution reduces the time gap that it takes you to generate cash out of your products and services.

 

  

BANK FINANCING VERSUS FACTOR FINANCE - THE ONLY DIFFERENCE IS THE PAPERWORK!  

 

Unlike bank financing where you assign or collateralize your accounts receivable via a line of credit, the Factoring solutions is a straightforward immediate ' sale ' of your revenues as you generate sales. It gives you ' immediate funding ' and by that we mean basically the same day. So if you hopefully generating invoices for clients in the morning you receive the cash for that sale the same day. That’s cash flow optimization! Factoring differs significantly from a ' bank loan '.

 

  

FACTORING A/R IS A LONG-STANDING SOLUTION THAT CAN BE ACCESSED QUICKLY  

 

Although the function and the formula for accounts receivable financing seem either strange or exotic or unheard of to some in reality this form of financing has been around for hundreds of years. It is widely popular in the U.S. and gains more traction in Canada every day. Quite frankly it’s the alternative to having to put more equity in your company or arrange debt financing that you may or may not be eligible for. (And business owners can, unfortunately, spend a lot of time these days on financing solutions that are either wrong for them or unattainable)

 

Where confusion reigns supreme sometimes is when some of the terms, pricing and players in the Canadian accounts receivable financing industry seem a bit confusing to the factoring ' newbie '.

 

5  KEY POINTS IN UNDERSTANDING RECEIVABLE FINANCE

 

A short overview of some key issues, points to consider is as follows:

 

1.A/R factoring documentation is between your firm and the finance factors - the factoring agreement will spell out clearly the factoring fee and final advance rate  ( managing your a/r well and focusing on dso reduction will lower costs associated with carrying slow paying customers - funds are typically advanced within 24 hours of your invoice being generated.

 

2.Our absolute recommended solution is a confidential invoice financing facility whereby you bill, collect and finance your sales to the amount you require and need.

 

3.Generally, receivables under 90 days can be financed at any time. Your receivable might be 1 day old or 60 days old. It's your call on when you want to cash flow them relative to the invoice amount/amounts and what your cash needs are. The faster an invoice is paid will lead directly to lower financing costs.

 

4.The terms advance rate and discount fee are absolutely critical in understanding A/R receivable factoring in Canada. Typically 10% of the financing is held back as a buffer or hold back, and the charge to discount or finance that sale is in the 2% range for a 30 day period. So using a $100,000.00 invoice as an example you would receive 98,000.00 of immediate cash for that item. Proceeds from factoring companies could be used to generate more sales and service and profits from your goods and services  - and in fact, your payables could be offset by taking discounts for prompt payment with your own suppliers.

5. Your company has the option to choose non-recourse factoring or traditional recourse factoring,w whereby in the latter your firm continues to carry the credit risk. Companies may also opt to consider receivable insurance which is available from a handful of specialized finance firms, allowing your firm to lower bad debt risk.

 

CONCLUSION

 

If you wish to smooth out and normalize small business cash flow, be less afraid of growing or taking on larger orders and contracts, and avoid ' cash crunches ' the weight of evidence might just suggest you should consider receivable factoring. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with 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

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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.


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Stan Prokop
7 Park Avenue Financial/Copyright/2020