BUSINESS FINANCING OPTIONS

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCING SOLUTIONS!

SMALL BUSINESS LOANS AND BUSINESS FINANCING 

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

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

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

EMAIL - sprokop@7parkavenuefinancial.com

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

 

  

THE IMPORTANCE OF BUSINESS FINANCING SOLUTIONS FOR CANADIAN BUSINESSES 

 

Funding businesses in Canada often comes down to recognizing what type of business financing loans make sense for your firm. In fact, not properly ascertaining what type of finance or business loan is needed makes sense, or that your company is qualified for is what it's really all about - It's all about ways to finance your business. Let’s dig in.

 

   

UNDERSTANDING YOUR BUSINESS FINANCE NEEDS  

 


"You can't build a reputation on what you are going to do." - Henry Ford


Let's dig in!

WHAT TYPES OF BUSINESS FINANCING ARE AVAILABLE IN CANADA - THE PROS AND CONS OF DIFFERENT BUSINESS FINANCING OPTIONS IN CANADA

It’s no secret that it's a challenge for small and medium-sized businesses in Canada to access capital in Canada. Canadian banks of course maintain that they do finance the SME sector in Canada but the traditional financial institutions' lending model has a lending process and rules and regulations that make bank financing a challenge for many businesses – The bank credit model for business lending focuses on established businesses with healthy balance sheets and firms who exhibit profitability and cash flow and can establish business credit.

IS ALTERNATIVE FINANCING THE SOLUTION – WHAT IS ALTERNATIVE FINANCING IN CANADA

Alternative financing solutions allow businesses to acquire capital outside of traditional banking and other regulated financial institutions. There are alternatives to traditional bank loans for Canadian entrepreneurs. In some cases even online finance is available. Businesses choose non-bank lenders and commercial finance companies for a variety of reasons :

Alternative lenders have different credit approval requirements when compared to banks

Qualification criteria are more accessible and timelines are much shorter compared to the amount of time banks and other financial institutions take to approve business credit

 
UNDERSTANDING CASH FLOW AND WORKING CAPITAL

 

Part of the confusion around picking the right type of business loans revolves around understanding the sometimes subtle ( and sometimes not so subtle !) differences between ' working capital, ''   cash flow,' 'profits' and ' asset turnover. You may want to ensure you understand those differences.

 
PROFITS DON'T EQUAL CASH - HERE'S A FAMOUS EXAMPLE

We all should be familiar with the idea that profit isn’t cash, and many a great company has stumbled and fallen around missing that difference. They're a classic example of that in the U.S. used in textbook studies - it revolved around the dept store W.T. Grant.

It was a public company, seemed to be doing well (keyword = ' seemed ‘) and went under to the surprise of all, including shareholders!  The reason - things on paper looked great; assets were huge. The problem - assets weren't turning, and there was no real cash. After the company went under, the accounting industry invented the ' cash flow ' statement, which is not a part of every financial statement.

 
GROWTH REQUIRES FURTHER INVESTMENT IN CURRENT ASSETS

 

The reasons that cash and profit don’t equate often come down to the asset turnover we have talked about. As your firm builds up inventory and sells products on credit terms, a huge gap develops between paper profits and cash in the bank.

 
WHAT ARE METHODS TO FINANCE WORKING CAPITAL

 

 

Companies finance working capital, which then becomes cash via short-term credit facilities. In Canada.

 

TYPES OF BUSINESS LOANS IN CANADA - UNLOCKING THE SECRETS TO SUCCESSFUL BUSINESS FINANCING

 

 

Bank Loans / Bank credit lines - Traditional bank loans and lines of credit

 

Commercial A/R financing facilities / Invoice Financing

 

Inventory financing arrangements

 

PO Financing

 

Tax Credit Financing

 

Non-Bank ABL Asset-based credit lines

 

Short Term Working Capital Loans / Business Credit Cards / Merchant Cash Advances

 

The ability to turn receivables and inventory into cash is the ultimate measure of a business's success.

 

GOVERNMENT-BACKED LOANS - GOVERNMENT PROGRAMS TO SUPPORT BUSINESS FINANCING IN CANADA

 

Some Canadian businesses look to the Canada Small Business Financing Program as a small business loan to fund equipment, leasehold improvements, and in some cases, even real estate. Helping small businesses get loans is what this government program is all about. The interest rate on the program is competitive. Startup financing options for small businesses are always a challenge for business loan applicants!

 

The ' SBL ' Program is one of the best low interest small business loans for startups in Canada via a financial institution, including franchise purchases.

In 2022 the Government of Canada made substantial changes to the program, as the program options and requirements had not changed for many years! All of these changes are very favourable for the Canadian SME sector.

Changes to the program include entirely new classes of financing that are offered, increased lending amounts, and a reduction in administrative burden to the financial institutions that support the program.

The new maximum loan amount for the SBL Loan has been increased to 1.1 Million $ - Along with financing equipment and other assets as well as leasehold improvements the program can now also offer financing for intangible asses and working capital – including a line of credit facility.

The previous focus of the program revolved entirely around equipment/leaseholds/commercial real estate.

Intangible assets include capitalized r&d and even franchise fees. Many entrepreneurs used the program for franchise financing.

Many aspects of the program now include extended amortization periods, thereby lowering monthly payments.

Interest rates under the program are based on a 3% over bank prime, which is a competitive rate for small business borrowing.

Many business owners and entrepreneurs can also access government crown corporation financing via bdc for access to small business financing options.

Businesses that have been in business for 2 years and who have business profits can access a variety of solutions for working capital and the purchase of assets and real estate. Financing can be used to acquire commercial real estate or buy a business or working capital via a term loan structure.

ELIGIBILITY CRITERIA FOR GOVERNMENT BUSINESS LOANS

It is probably the best bank loan an early-stage firm can achieve from traditional financial institutions such as banks or business-oriented credit unions. A business plan highlighting your products or services, financial needs, etc., is always recommended for many types of financing - 7 Park Avenue Financial business plans meet and exceed banks' and commercial lenders' requirements.

 

For most small business solutions, focus on repayment terms that suit your cash inflows and remember that a good credit score and personal credit history is most times ( but not all times ) a requirement for business owners.

 

 
KEY ASSET FINANCING STRATEGIES & ALTERNATIVE FINANCING OPTIONS

The business owner/ financial manager should also be watching cash availability and assets needed to run and grow the business. Here asset financing strategies are key - they include:

 

Equipment Financing Options for Canadian small businesses/equipment leasing

 

Bridge Loans

 

Sale-Leaseback strategies

 

 
MATCHING LONG-TERM FINANCING NEEDS WITH ... LONG-TERM FINANCING!

The key point owners/managers need to recognize in acquiring capital assets is that these assets will typically be used over several years, so it doesn’t make sense to deplete cash and credit lines today for benefits that will be received over time. It's all about matching small business loans or lease solutions to your specific needs via the right debt financing.

SOURCES OF STARTUP FINANCING - BYPASSING THE BANK!

Startup financing sources in Canada are another challenge facing the entrepreneur. Owners should also be aware that they must be able to demonstrate some source of their own equity capital in the business. 

 

Startup companies / new or smaller businesses can rarely access needed capital, in part due to the lending process and regulations around the lack of an established credit profile requiring financial statements and tax information and personal net worth and suitable credit score of owners.
 

 

Financing startups can come from sources such as the owner’s personal investment, friends and family, government grants and government loans, or assistance from local business incubators.

Many entrepreneurs view venture capital firms as a potential source of funds, but the reality is that only the smallest portion of Canadian businesses are candidates for VC capital. These businesses are typically technology-type companies and are firms that already have revenue traction and are in high growth mode.

 

And of course venture capitalists and Private Equity firms demand a large portion of your equity in exchange for their significant investments. Often angel investors might be a potential source of capital and expertise for your business around areas such as financial planning and equity financing  – again with the caveat that you are giving up partial ownership.

Many tech-type firms look to sources of funding such as CROWDFUNDING from a viewpoint of sourcing capital versus traditional loans.

Often local ‘ BUSINESS INCUBATORS ‘ are a welcome source of support for newer businesses, providing expertise and resources and shared services in the early stages of a business.

GRANT FINANCING

Grant financing / small business grants from federal and provincial government agencies is also available to assist many Canadian firms in help in raising capital, especially those involved in various levels of small business innovation research and development. Financing from grants will often help to cover certain levels of salaries and r&d.

 

Although business grants are not repayable they often come with challenging terms and often further matching funding is required. Talk to the 7 Park Avenue Financial team about grant financing strategies and Canadian government grants and loans for small businesses.

Many companies employ ‘ grant writers ‘ to source grant funding – as they are skilled and experienced at providing project descriptions and business plans, financial projections, and work plans, as well as completing government form requirements around the grant.

 

"It takes money to make money." - Titus Maccius Plautus

 CONCLUSION -  BUSINESS FINANCING AND LOANS IN CANADA

Remember to ensure that working capital and cash flow needs cover your ability to pay down debt and purchase or finance new assets needed in the business.

 

Tired of approaching family and friends and angel investors for raising money,  and, dare we say it, the venture capital journey ? ! Sources of finance for small business rarely includes VC's.

If you're focused on properly recognizing the right type of business financing loans and asset monetization strategies for small businesses in Canada, speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you in business funding that matches your needs and help you find final solutions to term loan or asset monetization finance solutions for your business's success.

Talk to the 7 Park Avenue Financial team for information and assistance on the financing options you need to grow your business to access loans from traditional lenders and alternative lenders.

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

 

What are financing options for small business?

 

Common financing options for small business to borrow funds include:

 

Self financing

Business Credit Cards

Small Business Loans

Government Guaranteed loans

Equipment Leasing

Community Development Futures Programs

Invoice Factoring

 

 

 What are SBA Loans 

 

SBA loans are government guaranteed loans from the U.S. Small business administration - These loans are not available to Canadian borrowers, but the program is similar to the Canada small business financing program which  has federal government guarantees on loans made by banks to business borrowers who might not otherwise qualify for traditional financing.

 

 

What are business term loans / longer term loans?

 

Larger asset purchase around land and equipment are typically financed with business loans of a longer duration. Typical terms range from 3-7 years depending on asset category being financed.

 

 

 

 

 

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

Your Guide To Asset Based Lending In Canada

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS!

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

Financing & Cash flow are the  biggest issues facing businesses today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

 

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

EMAIL - sprokop@7parkavenuefinancial.com

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

CASH STRAPPED? HOW ASSET-BASED FINANCING  SOLUTIONS CAN HELP YOUR BUSINESS GET BACK TO THRIVING!

 

WHAT IS ASSET BASED LENDING - ' ABL '

 

Asset-based lending in Canada is a Canadian business financing solution that provides Canadian business borrowers with a ' one-stop ' solution for their business credit needs line. 

 

BDC defines ABL very simply - ‘Asset-based lending occurs when a loan is granted primarily on the value of the assets the borrower offers as security “

 

Asset-backed lending, called " ABL' for short, it’s a business bank alternative to traditional unsecured loans from banks via the funding of your company's assets - creating greater borrowing capacity for day-to-day operating needs such as payroll expenses. Traditional operating facility advances offer much less borrowing capability in most cases. Let's dig in.

 

ABL solutions provide the borrower with financing based on the value of the assets of the business. Typically these assets include accounts receivables, inventories, fixed assets and commercial real estate if the latter is applicable.  Appraised values for fixed assets facility limits are the benefit of proper asset valuation for more growth financing funding via that greater credit availability.

 

These assets are pledged to secure financing and funding a business in this manner is a popular finance option for Canadian SME borrowers – as it provides access to capital and improves cash flow.

WHY CHOOSE  ASSET BASED LENDING SOLUTIONS

 
Although business borrowing costs are at all-time lows when it comes to cash flow financing, the main reason business owners/financial managers consider asset based credit lines is simply the flexibility and additional borrowing power they provide for specific assets in your business. The asset lender a welcome relief for firms that can't always access any or enough Canadian chartered bank financing via multiple forms of finance solutions such as term loans or business credit lines.

 
By the way, some of the most recognized and large firms also use ABL credit lines if only for the same flexibility they provide. They have made the choice to replace bank borrowing with commercial finance borrowing even though they categorically qualify for bank credit.

WHAT ARE THE BENEFITS OF ASSET BASED LENDING SOLUTIONS IN CANADA?

Asset based lending solutions provide a company with quicker access to capital compared to bank loan decisions which can be time-consuming – That is because loans are based solely on the value of the assets of the business – with less or no emphasis on business credit history – The vast majority of firms using asset-backed lending solutions utilize ABL based on the challenge of obtaining all the business capital they need to run and grow their business.

Additionally, asset based loan solutions are often tailored to the specific requirements of the company – This improved cash flow solution for the business allows a company to pay suppliers and meet short-term working capital needs.

Borrowers in asset based loans should ensure they understand the typically higher cost and the need to work with asset based lenders who can service their market and industry.

 
Sizes of asset-based credit lines range from 250k on the low end to tens of millions on the high end, with numerous players - both Canadian and U.S.-based providing Canadian borrowers with these facilities.

 
ASSET BASED LENDING RATES

Cost is, of course, always a discussion point when it comes to business borrowing. Although large creditworthy firms can borrow almost at the same or better prices than bank offerings the truth is that the majority of loan rates for Asset Credit facilities will always be more expensive.
 
It's a case of balancing costs against the benefits of all the financing you need for working capital and cash flow based on your revenues and assets.
 
As with any type of business financing, you have to balance costs with access to capital and flexibility and the time it takes to get approved. (ABL financing can happen in a matter of a few weeks if the borrower has all the proper up-to-date financials and asset lists)

Interest rates for asset-based lending solutions in Canada will typically range from 8% per annum to 1.5%  per month, and a number of different factors influence final pricing such as:

Transaction size,

Overall credit quality

Whether the ABL lender is a traditional or an alternative financial institution.

 

BRIDGING THE GAP – HOW ASSET BASED LENDING SERVICES WORK FOR SMALL AND MEDIUM-SIZED BUSINESSES IN CANADA

 

FORMULAS FOR ASSET BASED LOANS  CREATE A BORROWING BASE

 

Asset based lending rates are based on the types of assets that are used as collateral for the loan or line of credit –  More liquid assets on the balance sheet provide a higher loan-to-value ratio. Using accounts receivable as collateral for asset based loans is a key use of ABL -

 

Accounts receivable is often the largest current asset on the balance sheet and receivables typically represent the largest cash flow need.  Receivables are typically financed at 90% loan to value, while inventory financing through asset based lending is also widely used;  inventories are also financed based on the overall marketability of the inventory – Most companies have inventory in different stages, such as raw materials, work in process, or finished goods.

 

The uniqueness of an asset-based credit facility is that it can include the unencumbered value of equipment and vehicles owned by the company  - Also,  when it comes to asset based lending for real estate that is company property owned , commercial real estate, if owned by the business, can also be a component of the credit lien facility – or financed separately as a short term bridge loan.

DIFFERENT USES OF ASSET BASED FINANCE

 
In some cases, firms also used asset-based credit to acquire a competitor or re-arrange existing debt.  In other cases, ABL is simply a temporary bridge loan to get your company to where it needs to be without taking on more debt. Business owners/managers quickly pick up that if sales are growing and there are receivables and other assets to back them up, they have just discovered they now have all the financing they need.

 

Many companies find themselves in a cyclical or seasonal industry, placing even more pressure on predictable cash flow.

 
Canadians are always recognized as being conservative - if only for that reason some firms never check out asset-based lending as a good choice for their business - for whatever reason they associate not having bank financing in place with a stigma.

 

Not the case these days as many forms of alternative finance via asset based lenders are in fact the new ' mainstream, including the ability to refinance existing debt around asset lending values based on the true value of business assets.

 

Even some traditional financial institutions have become asset  based lending banks – although ABL bank lenders have a higher credit bar and a much higher minimum borrowing requirement – often starting at 5-10 Million dollars.

 
Let us not forget ratios and covenants. ABL lending is either covenant or ratio light or non-existent. It's your assets that back up the facility - not ratios. Banks love ratios in case you haven’t noticed!

 
In fairness, reporting requirements are often more stringent when it comes to ABL borrowing for asset-based loans. So be prepared to provide updated A/R, inventory and payable agings on an ongoing basis. Monthly is an absolute minimum but weekly reporting might also be required. It's the trade-off you make for the non-bank alternative via asset-based financing and getting a ' covenant light structure ' that appeals to many business owners.

 
CONCLUSION - ASSET BASED LENDING CANADA

"Finance is not the only thing that matters in business, but it is by far the most important." - Peter Drucker

Consider asset-based lending for more business credit availability via a flexible financing solution customized to your business and industry – Reap the benefit of no restrictive financial covenants and access to more capital when executing abl transactions.

If your business is a Canadian SME and you need to finance sales growth or focus on a financial turnaround let asset-based lending solutions help you avoid raising additional equity and avoiding equity dilution in your ownership of your business.

If you're looking for someone who understands cash flow lending and asset-based lenders and your business borrowing needs and you finally want to choose a non-business bank alternative to speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your borrowing needs and help to structure flexible financial solutions.

 

When comparing asset based lending to traditional bank financing businesses can properly assess their capital needs for credit and loan terms that make sense for their business.

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

 

   
How do asset based loans work?  

 

 In ABL financing lenders consider the value of your business assets and your sales growth which generates accounts receivable. Business assets typically financed by ABL lenders and asset lenders include a/r, inventory, fixed assets and real estate - in some cases intellectual property can be considered in the borrowing facility.  Asset based revolving credit and term loans can fund all types of business assets, not just physical assets.

Those assets collateralize the loan and the emphasis on borrowing power is based on the more liquid an asset is. Asset-based lending examples include margining of receivables in the 90% range, which is higher than unsecured bank financing for accounts receivables via traditional commercial banking. Banks place a large focus on cash assets on hand and operating cash flows.

 
What are examples of asset-based lending? 

Asset-based lending examples include the financing of accounts receivable, inventory, and fixed assets /property and equipment and rolling stock – Real estate can also be financed under asset-based guidelines. Equipment financing is often a substitute for some forms of asset based loans.

 

 What is the Process To Obtain An Asset-based line of credit?

The process to determine the eligibility in obtaining asset-based financing will involve the appropriate due diligence around asset values, financial statement review, and any other issues that are of interest to the asset-based lender around your company or your industry.  Businesses should be prepared to provide year-end and interim financial statements, as well as up-to-date agings on accounts receivable and inventory –

 

A review of that information will allow the ABL lender loaning money  to provide a term sheet/finance offer that includes advance rates, interest rates, and repayment terms and any required minimal financial covenants typical in an asset backed loan which greatly differ from conventional lending criteria to access working capital.

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

Top Funding Options To Buy An Existing Business In Canada

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LOOKING FOR BUSINESS PURCHASE FINANCING?

ACQUISITION FINANCING

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

        Financing & Cash flow are the biggest issues facing businesses today

                              ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT  BUSINESS FINANCING OPTIONS?

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

EMAIL - sprokop@7parkavenuefinancial.com

 

Unleashing The Secrets Of Successful Business Purchase Financing

 

THE ART OF SECURING FINANCING OPTIONS FOR  BUYING AN EXISTING BUSINESS IN CANADA

 

 

When business owners and entrepreneurs make the decision to buy an existing business they need some solid info about how to finance  the business purchase transfer for the transaction

 

Funding the business venture purchase is a critical part of buying a business  - Acquisition finance comes in the form of owner business equity financing, as well as loans from traditional or alternative lenders - in some cases complemented by seller financing from the business purchase transfer financing final solution. 

 

KEY FACTORS IN BUSINESS ACQUISITION FINANCING include loan terms and conditions and covenants and personal guarantees, as well as repayment option flexibility - as well as the ever-present focus on the interest rate and financing costs and external collateral.

 

Ensuring effective financing for business ownership for existing businesses allows a smooth business transition with funding that allows for repayment and financing costs based on general market conditions as well as loan terms and conditions that meet the buyer's needs.

 

 

Key Factors in Business Acquisition Financing

 
  Loan Terms and Conditions
  Repayment Options
  Interest Rates
  Collateral Requirements

 

So what are in fact the best ways to execute your strategy on business purchase financing? Let's dig in on expert tips for navigating business purchase financing successfully and choosing the right lender and funding source.

 

In many situations, clients tell us they often have the 'inside track' on a business or company that would accept a good offer based on the current situation of the seller. There are of course various reasons for sellers wishing to divest their business - these days succession and management buyouts are popular reasons.

   

3 GREAT REASONS TO PURCHASE AN EXISTING BUSINESS   

Obviously, there exist key reasons why buying an established company is a solid way to execute your business plans and business acquisition loans.  Key factors to consider buying a business often seem obvious -

Existing revenue and profits

Experienced management and personnel already in place

Elimination of start-up risk

Etc. !
 

 

Buying a business is an effective strategy to attract new and additional clients, as well as the ability to expand capacity, operations and headcount - Typically the company is already established and has a reputation in the market, as well as access to suppliers and distribution logistics.

 

SELLER FINANCING - A DIFFERENT TYPE OF FINANCING FOR BUYING A BUSINESS!

In many cases, some seller financing from the current business owner may in fact prove to be critical in financing your deal. Previous owners remain in a subordinate position via what's known as a vendor takeback, and often the skills and expertise of the seller are valuable in the early stages of the takeover. A seller note for  Business purchase financing for small business is often a great way to help close the transaction and has the potential to lower the down payment of the buyer.
 

 IS BUYING  A BUSINESS EASIER THAN STARTING A BUSINESS?  

A debate sometimes exists, but most experts believe it is easier to arrange funding for an established business. When cash flow and sales are positive they play a key role in establishing the ability to repay business acquisition loans of various types. In many cases franchises are part of today's acquiring of businesses - they have brand and reputation already in place. Qualifying for business purchase finance solutions is often recognized as easier than funding a startup. Understanding the process of business purchase finance is key.

 

THE VALUATION OF A BUSINESS - THE KEY TO UNDERTANDING FINANCING OPTIONS TO BUY A BUSINESS 

 

The concept of business valuation is key in purchasing a company. Higher valuations might in fact mean you have to finance goodwill when most lenders prefer asset financing solutions

We should point out that many businesses that are purchased are in some form of ' distress'. Here valuations are often attractive but the buyer must demonstrate confidence around ' the turnaround'. Valuations can be made through the buyer's own expertise, or you can use the services of qualified business valuators.

What are the key issues in valuation and financing? They include:

Quality of financials

Revenue trends

Cash flow and working capital positions (Throwing off cash is better than using cash!)

When we work with clients we spend a lot of time 'normalizing' those financials to ensure the right assumptions and costs are in place. Factors affecting the interest rate and financing costs will revolve around key areas such as debt load,   or the requirement to fund unsecured loans around intangible assets and goodwill or intellectual property, cash flow, and overall profitability.

In some cases, buyers may wish to obtain an independent business valuation and business advice from a third-party professional, which often happens for larger transactions.

 

  

HOW CAN BUSINESS FINANCING BE ACCOMPLISHED  

 

How do you finance a business acquisition in Canada? That's a question we get a lot at 7 Park Avenue Financial. Funds come from your own equity investment into the transaction,  and a combination of a VTB/ Seller financing component, as well as participation from a ban, commercial finance company, or an asset-based lender.  If the target company has enough assets the transaction can be significantly leveraged. Understanding the factors to consider around on funding of the business is key .

 

Business acquisition loan rates vary due to a number of factors - the size of the transaction, the overall credit quality of the target company, management experience, type of financing utilized vis a vis traditional financing or alternative finance.

 

Government SBL loans can also be used to finance a purchase under 1 Million dollars, which is the cap under the program. It is very rare, in fact, impossible to do a  'no money down' transaction in Canada. The 100% use of  ' OPM ' - other people's money simply doesn't happen

 

The Canada Small Business Financing Program is the equivalent of U.S. sba loans '. These loans are commercial loans using bank financing with the majority of the loan guaranteed to the banks and credit unions  by the government of Canada.  Talk to 7 Park Avenue Financial about how we can streamline the loan application process!  Buyers may also qualify for another type of government financing if they can meet bdc loan / bank loan requirements.

 

Business purchase financing for franchises is a popular use of the program .

 

We also prepare a business plan and projections as required by the government program - Our business plans meet and exceed the requirements of bank and commercial lenders.

The bottom line? Business acquisition finance can be facilitated through :

 

Term loans from traditional and alternative lending sources - credit lines , etc

Government loans

Asset-based loans - business asset financing - Alternative lending options for business - The role of business collateral is a key focus in asset-backed lending

Cash flow loans / Mezzanine financing ( when collateral requirements don't meet all the needs )

Seller financing/vendor take back notes to help complete an optimal financing structure

Commercial mortgages for commercial real estate transactions

 

CONCLUSION - YOUR LOAN FOR BUSINESS ACQUISITION NEEDS

 

Acquisition financing allows you to access business capital to purchase an existing business, including a franchise. Proper financing allows you to meet your entrepreneurial goals with the right financial resources tailored to your particular transaction  and will help you maximize the chances of being approved successfully.

 

"The most important aspect of business acquisition financing is to find the right partner to help you achieve your goals and support your vision." - Bill Gates, co-founder of Microsoft   - Let the 7 Park Avenue Financial team be the financing partner you need for your business

 

Speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor with a track record of success in how to finance business acquisitions via business acquisition lenders.

 

 

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

 How do you finance a business purchase? 

 

Buyers finance a business purchase via a combination of:

 

Personal equity injections

Government Small Business Loans

Seller finance

Bank term loans

Alternative lending sources

 

 

How do small businesses obtain financing?

 

Small businesses obtain financing via traditional and alternative  sources of business funding - that includes a bank loan or loan from another financial institution , financing from commercial finance companies as well as the potential ability to access government loans.

 

 

What is business purchase financing and how does it work?

 

Business purchase financing is a type of  commercial financing using a variety of types of loans to buy an existing business - Funds are used to acquire the assets of a business as well as to provide financing for ongoing operations and growth

 

What are the key factors to consider when evaluating financing options for a business purchase? 

 

Key factors to consider in buying a business include understanding the due diligence process around the evaluation of financial statements, operations of the business, as well as the true value of assets. Operational performance as well as existing liabilities of the business are also important to consider.

 

 

What are the risks and benefits of using alternative lending options versus traditional bank financing? 

Alternative lending options versus bank financing often offer faster turnaround approval times with more flexibility around repayment and overall deal structure. Asset-based lenders will often come at a higher cost but have the ability to provide more financing on a transaction. Buyers of a business should compare traditional versus financial institutions such as banks.

 

 

business purchase financing buying existing business

 

 

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

The SR&ED Loan Process - Financing Simplified! Unlock The Benefits Of SR&ED Tax Credits - Cash Flow!

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YOU ARE LOOKING FOR SRED TAX CREDIT FINANCING

INVEST IN R&D WITH CONFIDENCE VIA THE BENEFITS OF SRED LOAN FINANCING

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

        Financing & Cash flow are the biggest issues facing businesses today

   ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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

Or Email us with any questions on Canadian Business Financing

                                      EMAIL - sprokop@7parkavenuefinancial.com

 

 

 

THE SECRET TO MAXIMIZING SR&ED TAX CREDIT -  A SHORT-TERM BRIDGE LOAN

 

Is it possible to combine the benefits of SR&ED with the benefits of SRED tax credit financing for an SR&ED loan that makes sense?

It sure is and let’s help you understand some of those basics for Canadian companies. Let's dig in!

 

"The government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." - Ronald Reagan

 

Well,  not Canadian, but Ronald Reagan might have had it right, given Canada's commitment to helping subsidize r&d in Canada. Canada's  Scientific Research and Experimental Development (SR&ED) tax credit are one of the 2 most popular government programs in Canadian business ( the other one is the Canada Small Business Financing  Loan Program !), demonstrating Canada's commitment to helping customers with innovation and economic growth goals under a government incentive program that works.

 

It's important to note that companies who qualify for SR&ED eligibility claims are candidates for the sr&ed loan process to capitalize on government financial incentives - That ability to cash flow their tax credits via the collateral of the SR&ED claim allows a company to receive cash in advance of filing the claim, or even prior to filing their claim based on accrued work in their r&d process.

 

WHAT IS SR&ED TAX CREDIT FINANCING AND HOW DOES THE SR&ED LOAN PROCESS WORK?

 

If you are either filing an SR&ED claim for the first time or if you're a repeat "offender" - translated = you have experienced SRED claim success for years... then why not combine financing power with your claim and recoup your funds faster. In today’s world it seems always about speed it seems, so if the Canadian government is paying you to do research, and you can recoup and deploy those funds even faster by financing your claim, well, why wouldn’t you? Advance funding is always better than waiting.

 

 

HOW DO SR&ED TAX CREDITS WORK? 

 

Companies performing r&d  via the tax credit program can utilize their qualified sr&ed expenditures to access the refundable r&d credit under the sr ed claim process. Canada Revenue Agency/CRA sets some basic requirements for a business to qualify for the tax credit,  It's a 4 part test around ensure that the purpose of the work is focused on new functionality in performance and reliability and quality of the firm's products or services.

 

As well the company must demonstrate the elimination of uncertainty via a process of experiments that are technological in nature.


Our focus here in our shared information is financing your eligible claim... so we assume you are fully aware that if your firm is developing new products and services, manufacturing prototypes, improving processes, developing software, or advancing manufacturing... well ... We think you get the point! This is simply because your firm is a poster boy for SRED financing and an SRED loan and you should be filing to recover in the range of 35-40% of all your expenses.

Your credit is a non-repayable credit, so your ability to monetize your claim and get that cash flow working into your firm's operating cycle is key.

So how can those SRED tax incentives be monetized? Simply speaking it’s the ability you have to use your SRED receivable, because it is an account receivable, and finance it in a manner that you would just as if it were any customer - except that in this case, the customer is a pretty good paying client... i.e. the federal and provincial government.

Sound complicated? Nothing could be simpler. Let’s cover the basic process and focus back in on those benefits.  That cash advance for your r&d refund becomes a predictable source of cash flow without diluting owner equity. A business's ability to manage cash flow is key in early stages, so the ability to ensure cash flow that is recurring under r&d helps a customer grow.
 

 

 

 

HOW DOES THE SR&ED LOAN PROCESS WORK - WHAT STEPS ARE INVOLVED

 

To finance a claim you have to have a claim. It makes sense so far, right? Claims can be prepared by either yourself or someone that is commonly called an SRED consultant. We wouldn’t be perfectly honest by telling you that claims prepared by outside respected consultants carry far more weight than claims prepared internally by yourself or your accounting firm. It’s simply a case of relying on expertise.

 

We're often asked - Do I need a SR&ED Consultant ? That is up to you as the business owner or financial manager when it comes to technical reports and demonstrating applied research - these consultants play a large role in the Canadian sr&ed industry. They assist in preparing claims from a technical content and financial point of view and work closely with Canada Revenue Agency and provincial authorities where required. They play a key role in the sr&ed tax credit calculation work required under the program under CRA SR&ED and sr&ed credits accounting treatment.

 

Consultants in this area can assess claim eligibility as well as helping to file the claim. Consultants with relevant experience in your industry will usually be the best choice - Most sred consultants work on a contingency basis, which transfers the risk of  sred project to the consultant - some firms work on claims at typically accounting firm rates on an hourly basis. Industries that are common for r&d projects include alternative energy, medicine, oil and gas, software, life sciences and environment and renewal energy.

 

 

 

ELIGIBILITY CRITERIA FOR SR&ED FINANCING - DOES YOUR BUSINESS QUALIFY? 

 

What are the eligibility criteria for SR&ED financing and how do I know if my company qualifies?

After your claim is filed you complete a simple financing application consisting of info about our firm, your current financial situation, as well as providing the actual technical claim and tax filing copy. SR ED tax credit financing relies on your claim being filed - in certain special situations you can actually finance the claim pre-filing - but we'll leave that one for another day.

 

 

  

BENEFITS OF SR&ED TAX CREDIT FINANCING VERSUS OTHER BUSINESS FINANCING OPTIONS

 

  
The ability of many firms, particularly start-ups and tech firms that burn through a lot of cash, to recoup SRED funds is a key driver in the whole SRED loan process. Understanding the SR&ED loan process is easy - That cash flow in many cases is seen by our clients as the lifeblood and in some cases the largest amount of cash they will receive in the current year.

Many business owners don’t know that you can file for two years, which of course simply means you’re doubling the amount of cash you can claim and that claim is financeable when it comes to the benefits of sred financing via the bridge loan process.

 

     

COMMON CHALLENGES FOR SR&ED .. AND THE SOLUTION

 

   

Many smaller filings these days for SR&ED claims seem to be coming through faster in the form of cash refunds... If you have a larger or first-time claim it can take many months, potentially calling for a technical review of your project.

  

 

  

HOW MUCH CAN YOU GET FOR YOUR SR&ED CLAIM - UNDERSTANDING THE LOAN-TO-VALUE RATIO & REPAYMENT

  

  

That’s where an SRED loan and SRED tax credit financing come in because 75% of the SR&ED claim is generally advanced in the form of a bridge loan. You make no payments on the loan and the loan is, in effect settled when your final refund comes in from Ottawa. That allows you to utilize those funds for working capital, equipment, ongoing SR&ED work, and just any general corporate purpose.

 

Understanding the eligibility criteria for sr&ed financing and the  sr&ed loan process and how to secure the sred loan is easier than you think - allowing your company to maximize the benefits of sred loan financing at very competitive rates. Canadian banks and traditional financial institutions are not the SR&ED tax credit loan providers in Canada.  And yes, you can finance your claim if you have not filed it yet.

 

Maximizing the sr&ed tax credit financing solution is easier than you think when it comes to fuelling growth -  with funding often provided in a matter of a couple of weeks - Talk to the 7 Park Avenue Financial team about the benefits of SRED financing versus waiting for your tax credit refund. We'll show you easy it is to navigate the sr&ed loan application process.

 

CONCLUSION - GET AHEAD OF THE R&D GAME WITH SRED TAX CREDIT FINANCE TO OPTIMIZE CASH FLOW

Speak to 7 Park Avenue Financial,  a trusted, credible, experienced Canadian business financing advisor in the SRED tax credit financing area.

 

This will increase your chances of a successful and timely approval, with most financings for an SRED loan happening within a 15-20-day period.  That’s an SR&ED cash flow optimization strategy that makes sense for Canadian businesses via innovative funding needs that accelerate one of Canada's best funding programs for business. right?

 

  

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

 

What is SR&ED financing?

 

SR&ED financing is a tax incentive program under the Scientific Research and Experimental Development program. Businesses that are Canadian-controlled private corporations performing r&d  in scientific or technological uncertainty are eligible to access financial support that helps in cash management in their r&d work.

 

The tax refund is in the form of a refundable tax credit and allows the company to access capital as it strives to overcome a technical challenge in its industry, Eligible expenditures can be financed after claims have been filed, or accrued sr ed work in the current fiscal year and can also be financed for eligible projects.  Focusing on technological advancement and technological uncertainty - with many companies working in software development.

 

WHAT ARE SOME IMPORTANT TECHNICAL TERMS TO UNDERSTAND IN SR&ED & SRED FINANCING

 

There are some key terms that will help business owners better understand the SRED program and the sred loan process -

Eligibility criteria: Companies must meet certain conditions to be eligible for sred approval and sred financing -  The Canadian government provides billions annually under the sr ed program for Canadian and foreign-owned businesses in Canada.

 

Tax Credit: this is a credit against income taxes owing or a refundable tax credit

R&D Activities: research and development activities   is work done in experiment development and investigating and technological development

Claim Preparation:  SRED claims must be filed  under a certain process  that allows a company to receive the tax credit

Tax credit rate: a certain percentage of r&d expenses are eligible for sred

 Loan-to-value (LTV) ratio  SRED Loans are advanced at a value of the total claim and are typically in the 75% range - Loan repayment is structured as a short-term bridge loan with no payments being made during the term of the loan - the loan collateral is the sred claim itself -  In the underwriting process the sr&ed lender asses general eligibility for sred financing

 Underwriting: The process of evaluating a company's financial situation and creditworthiness to determine its eligibility for the SR&ED loan. While there might be other financing options for a company to access capital  ( term loans, working capital advances) these forms of financing can be expensive and can add debt to the balance sheet.

 

What are the requirements for R&D credit?

There are 4 key requirements for Canada's r&d credit - businesses must show a qualified purpose around improving a part of the business through performance, reliability, etc. Additionally, the focus must be on eliminating uncertainty via the process of experimenting in a technological manner.
 

 

 

How much does an SR&ED consultant charge?

 

Sred consultants charge either an hourly rate or in some cases a contingency fee based on a percentage of successful claims of a sr ed refund.Consultants focus on maximizing refunds based upon their expertise in different industries. Claims on contingency avoid the cost and time in preparing claims andhelp to avoid rejection of claims by Canada Revenue Agency. Consultants focus on keeping proper records and providing CRA with the information it needs for the r&d credits.

 

 

Sr ed Tax Credit Financing Sred Loan Solutions

 

 

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

Revolutionary Tax Credit Financing Options You Need To Know About / Unlocking The Potential Of SR ED Loan Financing

 

YOU ARE  LOOKING FOR CANADIAN  SR&ED TAX CREDIT FINANCING! 

SR&ED TAX CREDIT FINANCING - YOUR ULTIMATE GUIDE

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

        Financing & Cash flow are the  biggest issues facing businesses today

                              ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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

EMAIL - sprokop@7parkavenuefinancial.com

 

 

 

THE SECRET  TO MAXIMIZING SR&ED TAX CREDITS?   FINANCING !!

 

"Development is taking the research and turning it into something useful." - H. Dean Kamen

 

  

WHAT IS SR&ED TAX CREDIT FINANCING  

 

SR&ED (SRED) tax credit financing is a solid strategy used by more and more Canadian business owners and financial managers who wish to accelerate the benefits of Canada’s SR ED program.  Let's dig in on sr&ed tax credit financing options -

 

 Cash flowing, monetizing, or factoring via sred tax credit funding (they all mean the same thing!) your Canadian SR ED claim can accelerate cash flow and working capital for your privately controlled Canadian business that is utilizing SR ED credits under the government's program.

 

"Without financial resources, innovation remains a hobby." - John Doerr

 

In many ways the financing of your SR ED credit actually allows you to maintain your competitive edge, as the combination of your non-repayable tax credit and the immediate financing of it are a ‘double whammy‘ in the face of your competitors who might not use this strategy.

 

 

 

  

  

TURN YOUR SR&ED TAX CREDIT INTO A SOLID SOURCE OF FUNDING FOR YOUR BUSINESS  

  

  

 

A banker we deal with recently told us that current industry statistics show that many companies who are in fact eligible for the SR ED credit aren’t even applying for it, let alone financing it. Therefore when your firm maximizes the total value of your claim and then generates instant cash flow on that claim you are clearly leading the pack in this regard. That's the benefit of sred tax incentive loans.

 

  

HOW CAN I USE SR&ED TAX CREDIT ADVANCES  TO GROW MY BUSINESS  

 

Many clients tell us that they utilize the SR ED funds that they finance to assist in acquiring new equipment that allows them to maintain a competitive edge in their markets. The reality is of course that funds via  SR&ED financing solutions can be used for any general corporate purpose, which might be things such as equipment acquisition, advertising and marketing, reduction in payables or debt, or of course continued investing of even additional research and development efforts.

 

  

HOW DOES SR&ED TAX CREDIT FINANCING WORK?  WHAT DOCUMENTATION IS REQUIRED FOR  THE SR&ED TAX CLAIM  

 

So what is the cash flow and working capital potential in your SR ED, and how do you unlock that potential under the tax credit financing process?

 

If you are already filing for SR ED credits you are no doubt working with the assistance of your client, or, alternatively, someone that is known as a SRED consultant. Having a solid resource in one or both of these parties allows you to maximize on your potential claim. 

 

What is the role of SR&ED Consultants ?  Firms hiring a sr&ed consultant to rely on these experts to hand paperwork and documentation around their project to both identify the project clearly to CRA, as well as document the maximum allowable amount under SR ED - Quality claims will also avoid sr&ed audits by CRA.

Companies complete CRA form T6661 which is the actual narrative around the project and the challenges faced by the business in the sr&ed project.

Once you have filed your claim we recommend that you consider immediately financing the claim. Naturally, you don’t have to do this, and can simply wait the 3-12 months that it might take Ottawa and your particular province to review the claim, adjudicate it, and process it for payment. But, as we state, why not consider financing the claim?

 

  

HOW DOES A  SRED TAX CREDIT LOAN WORK?  WHAT ARE MY SR&ED TAX CREDIT FINANCING OPTIONS?  

 

Clients ask us how the actual process works. It is quite simple really. Your claim is generally financed at 70% of the total value of the amount you and your accountant and consultant have claimed. You can receive cash immediately after it is filed.

 

In certain cases you can actually receive funds for the claim prior to financing – that whole process is called SRED accrual financing. Some of the basic criteria are simply that you must have filed a claim before, have a solid reputable party preparing it, and be prepared to demonstrate good records and accounting around those expenses you are intending to claim.

 

 WHAT ARE THE BENEFITS OF SR&ED TAX CREDIT FINANCING 

 

So how can we summarize in a ‘bottom line' manner? It's simply as follows – you should be filing SR ED claims if you are eligible. On filing you have the option of financing that claim, so you are bringing immediate cash flow and working capital to your firm on funds that are not repayable to the government.

 

Funds can be used for any company purpose, and proper utilization allows you to maintain a competitive advantage over your competitors. That’s using research as a cash flow generator – a solid financing strategy!

 

Financing sr&ed tax credits for startups is always possible, even if you are a first-time filer or pre-revenue/early stage.

 

 WHAT ARE THE INTEREST RATES AND REPAYMENT TERMS FOR  THE SR&ED TAX CREDIT LOAN 

 

Financing rates for Sred Loans are very competitive for this form of non-dilutive financing. No repayment is made during the term of the loan, and loan facilities are closed out when Canada Revenue Agency pays the refund - Loan advances can be made after the business files its claim, or, if the company chooses financing can be approved prior to filing, ensuring a continuous road to cash flow on the claim.

 

Financing your refundable tax credits allows a business performing r&d to generate cash flows which can help the company run on a day-to-day basis as well as grow - all while not having to access additional owner equity and dilute ownership at a critical growth stage in the company.

Businesses can finance claims when they are completed and filed, or a company can choose to fund as they accrue their work in their project .  Most financings are approved within a 2-week period from start to finish via a basic application and information on the company.

 

 

 

CONCLUSION - HELP AND EXPERTISE FOR YOUR REFUNDABLE  TAX CREDIT LOAN

 

Get the cash you need to grow your business with SR&ED tax credit loan solutions. Find out how a SRED loan can help your business thrive in the new economy! Talk to the 7 Park Avenue Financial ( tax credit financing experts )  team about SRED tax credit financing services to grow your cash flow needs via maximizing the benefits of sred funding/tax credit financing as well as other financing options for business to assist in cash flow and cash management in your business.

 

 

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

 

WHAT IS SR&ED

Canada's  Scientific Research and Experimental Development (SR&ED) Program provides investment tax credits via a refundable tax credit to Canadian businesses that focus on r&d.  Companies of all sizes from start-ups to large corporations, and even public companies access the program - Most firms focusing on SR&ED receive a tax refund, and thousands of Canadian businesses access over 3 Billion dollars annually.

 

 WHO IS ELIGIBLE FOR SR&ED TAX CREDIT FINANCING 

 

SR&ED Tax credit financing for SMEs is available for any Canadian-controlled private corporation to claims research and development under Canada's  Scientific Research and Experimental Development (SR&ED) investment tax credit - R&D performed by the business must be done with a focus on the advancement of scientific knowledge and for the purpose of achieving technological advancement in science and industry. Companies that are not private receive a non refundable tax credit to reduce income tax payable in the tax year- i.e. public companies who conduct research around scientific or technological uncertainty.

 

WHAT ARE SR&ED ELIGIBILITY CRITERIA

 

Businesses qualifying for a SR ED refund/tax incentives must be able to prove criteria around technological advancement, and technological uncertainty and be able to provide information around technical content and the processes the business undertook in the research and development.

Project documentation must demonstrate the employees involved in the research and the amount of time spent on the project. The largest portion of any sr&ed claim typically involves wages and payments to subcontractors.

 

Financing via cash advances for the sr&ed claim can be funded via third-party commercial finance companies who fund the tax credit claim either prior to the refund being claimed or after the business has filed its year-end financial statements and documented their evidence-based documentation for innovation the business has focused on in their research and development.

 

 WHAT AMOUNT OF EXPENDITURE CAN BE CLAIMED? 

The amount of eligible expenditures that can be claimed in SR&ED falls under the categories of eligible salaries and wages, payments to subcontractors on the sr&ed project and materials cost pertaining to the sr&ed work under the category expenditure limit. Canadian controlled private corporations, aka "  CCPC's) " claim for specific percentages of these expenditures under the sr&ed expenditures for credit calculation.

Supporting documentation around the qualified expenditures must be kept by the business around actual work completed, people involved in the work and the calculations done by the firm under CANADA REVENUE AGENCY /CRA guidelines.

 

Stan Prokop