From Startups to Corporates: A Canadian Guide to Equipment & Technology Financing

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YOU ARE LOOKING FOR INFORMATION ON EQUIPMENT FINANCING IN CANADA! 

Navigating Equipment Financing: What Every Canadian Entrepreneur Needs to Know

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Finding the Right Lease: Equipment Financing Strategies for Canadian Firms  

 

Introduction: Understanding Equipment Financing in Canada

 

Canadian entrepreneurs and financial managers should be well-informed about essential factors when considering an equipment financing and leasing transaction for an equipment purchase within the Canadian marketplace.

 

Without adequate knowledge and insights into these crucial aspects, one might be unprepared for a leasing strategy. In this guide, we will explore the types of leases available in Canada, their advantages and disadvantages, and how to make an informed decision tailored to your needs at the most competitive interest rates.

 

 

Types of Equipment Leases in Canada / Capital Leases vs. Operating Leases: What’s the Difference? 

 

The Canadian market has two primary lease categories for funding equipment purchases: capital leases and operating leases.

 

Your choice between them depends on whether you aim to own the equipment eventually or merely utilize it. The choice significantly influences the pricing and financial structure of the transaction.

 

• Capital Lease: This option allows you to make fixed payments over time, ultimately resulting in equipment ownership. The payments cover the equipment's cost and financing charges, allowing you to retain ownership at the end of the lease.

• Operating Lease: Typically lasting around three years, an operating lease enables you to pay for equipment used over a specified term. It’s especially suitable for technology equipment like computers and offers significant cash flow and balance sheet benefits.

  

 

Advantages of Equipment Leasing for Canadian Businesses  

Key Benefits and Considerations

 

Leasing equipment offers various obvious advantages to Canadian businesses, which include:

 

• Cash Flow and Working Capital Preservation: Helps maintain liquidity.

 

• Higher Loan-to-Value Financing: Usually requires only a nominal down payment. 100% financing is often available

 

• Credit Facility Preservation: Long-term asset acquisition is matched with a long-term lease, preserving other credit facilities.

 

• Collateral Considerations: In most cases, the financed asset is the only collateral needed.

 

• Tax and Write-off Benefits: Consult your accountant to maximize your transaction using tax incentives and investment credits.

 

 Potential Disadvantages and Risks of Equipment Financing 

 

No single financing strategy fits all firms.

 

Leasing might have perceived or real higher costs. If undertaking a  sale-leaseback financing and the asset's value is below the sale price, you might face a capital gain tax. Understanding insurance, installation, purchase options, and potential restrictive covenants is essential.

 

Key Takeaways :

 

1. What is equipment financing?

   • A flexible business loan or lease to acquire equipment.
   • Payments made over time  to match the term of the lease with asset useful life
   • Avoids the need for hefty upfront costs and a down payment

2. What types of equipment can be financed?

   • Technology, machinery, vehicles, and more.
   • Includes office technology, medical equipment, and heavy construction machinery.

3. How does the equipment financing process work?

   • Efficient approval processes
   • The simple application process, prompt evaluation.
   • Funding is often disbursed within a day.

4. What credit score do I need to qualify for equipment financing?

   • Determined by multiple factors, not just credit score. The focus is on the asset

5. Can any industry get equipment financing?

   • Suitable for most industries, including healthcare, heavy equipment financing construction, IT, etc.
   • Tailored solutions are available for lease and loan repayment terms

6. What are the benefits of equipment financing for new or used equipment?

   • Preserves capital, increases cash flow, offers fixed low rates and flexible terms.
   • Potential tax deductions, no large down payments needed - allowing preservation of existing credit facilities

7. What is the difference between equipment leasing and equipment financing?

   • Leasing: pay to use without ownership.
   • Financing: purchase and own while repaying over time.

8. Can used equipment be financed?

   • Financing options for new and pre-owned equipment. Used assets must be commercial transactions at arm's length

9. What are the tax benefits of equipment financing?

   • May provide tax benefits under CICA accounting rules
   • Deductions for the full purchase price of qualifying equipment.

10. Can I pay off my equipment financing loan early?

• Early payoff allowed; specifics depend on the agreement terms of each lease

11. What types of payment plans are available for equipment financing?

• Tailored to business needs, including monthly, quarterly, and seasonal payments.

12. Why should I choose 7 Park Avenue Financial for equipment financing?

• Decades of experience, and quick approvals.

13. What happens at the end of an equipment financing term?

• Typically, ownership of the equipment and specifics varies by agreement.

 

  

Conclusion:   

 

Leasing remains a vital source of long-term working capital for Canadian businesses.

 

A careful understanding of the types, benefits, and potential downsides can guide you in making an informed equipment financing decision. Don’t overlook this significant option, but use the insights provided to tailor a lease financing strategy that aligns with your firm’s unique requirements.

 

At 7 Park Avenue Financial, our core competency lies in financing solutions for business equipment and technology, furnishing small and medium-sized businesses with the equipment, vehicle, and software financing they require at competitive rates, all while cutting out the frustrations typically associated with traditional bank loans or another conventional financial institution.

 

Our clients enjoy the simplicity of filling out a straightforward application without requiring tax returns and financial statements to finance equipment when not necessary-  receiving a decision promptly.

 

7 Park Avenue Financial provides customized solutions and extensive equipment finance solutions for rolling stock, furniture, and software lease and loan agreements at competitive interest rates ( fixed or variable ) unaffected by inflation. We make the process of getting started as uncomplicated as possible - whether its traditional financing or non-bank finance alternatives.

 

7 Park Avenue Financial has provided financing solutions for Canadian businesses for over 17 years by consistently delivering business financing solutions in areas such as business equipment financing and leasing solutions and cash flow financing funding that businesses like yours demand.

 

 

  

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION  

 

What is equipment financing, and why is it important?  

 

Equipment financing for business funding of assets allows businesses to lease or purchase equipment without paying the full cost upfront. It helps conserve cash flow via structured monthly payments to match payments to cash flow, maintain credit lines, and enable growth. Often miscellaneous soft costs can also be bundled into the transaction. 

 

What's the difference between a capital lease and an operating lease?  

 

A capital lease leads to equipment ownership around equipment needs , while an operating lease/ fair market value lease is more like renting, allowing use without ownership. Both have different financial implications.  

Are there any tax benefits to leasing equipment in Canada?

 

Yes, leasing equipment can provide tax write-offs and investment credits, maximizing the financial benefits of your transaction.

 

What are the potential drawbacks of equipment leasing?

  

 

Drawbacks might include perceived higher costs or potential capital gain taxes in some sale-leaseback scenarios. It's essential to understand the specific terms and covenants.  

 

How does equipment financing affect my cash flow?  

Equipment financing lenders allow the company to conserve cash flow by spreading payments over time, which can be crucial for liquidity and financial stability.

 

  

Is equipment financing suitable for small businesses or startups?

  

 Equipment loans and leases can be tailored to suit businesses of all sizes, including small businesses and startups, providing flexibility in growth and operations. For small ticket transactions often only a one page credit application is required - Credit scores of owners do not significantly impact approvals in this method of asset financing and there is no minimum annual revenue requirement.

 

  

How can I determine the right lease type for my business?

  

 Evaluate your long-term goals, such as whether you want to own or use the equipment. Consulting with a financial expert such as 7 Park Avenue Financial for equipment financing needs can help tailor a strategy to your needs. Small transactions can often be approved same day or in just a few hours. 

 

What kind of equipment can I finance?

  

From technology like computers to heavy machinery/ construction equipment, a  wide range of equipment or technology for any business use can be financed through capital or operating leases.

 

  

How can I ensure I get the best equipment financing deal?  

 

Thoroughly understanding the types of leases, benefits, and potential downsides and consulting with a financial advisor can ensure that you choose the best financing strategy for your business.

 

Is equipment the only collateral required in leasing deals?

 

In most cases, yes. The   financed asset in the lease/loan agreement via equipment financing companies in Canada is typically the only collateral needed, making it a less risky option for many businesses.

 

 

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

Understanding Cash Flow For Business and Why Receivable Factoring Just Might Be The Solution

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Understanding the Financing Needs of Canadian Businesses

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        Financing & Cash flow are the biggest issues facing business today

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Receivable Financing: A Viable  Trade Finance Cash Flow Solution for Canadian Businesses  

 

 

Choices.  Alternatives.  Robert Johnson, an old blues legend, wrote of being at the 'crossroads' and had choices.

 

Canadian businesses, small and medium-sized enterprises (SMEs), constantly seek reliable options within the Canadian business financing marketplace. Whether small players or large corporations, the need for cash flow & working capital solutions for business growth remains constant.

 

 Alternative Financing through Accounts  Receivable Factoring

 

For those facing challenges obtaining sufficient working capital financing from traditional banks, receivable factoring emerges as a viable solution. Unlike banks, which often consider the overall financial picture, receivable factoring focuses solely on the asset.

 

If your company can secure complete financing from a Canadian chartered bank, you likely have the ultimate cash flow protection. Yet, very few businesses fit into this category after the global business financial downturn of 2008-2009 and the COVID epidemic.

 

Receivable factoring might be more costly in certain instances, but it enables you to operate your business differently.

 

Understanding  Receivable Financing – A Useful Tool for Business Growth

 

Receivable financing, also known as factoring, has long existed as a financing tool. However, it has remained somewhat under the radar in Canadian business financing, often viewed as an alternative method of business financing option.

 

How Does Receivable Factoring Work?

 

In essence, receivable factoring is the sale of your receivables to a third party, either as a one-time transaction or on an ongoing basis. You receive funds almost immediately, focusing solely on the value of your receivable. It doesn't create additional debt for your balance sheet and provides control over your receivables, monetizing them to the extent you desire.

 

Control and Usage of Funds in Business Operations

 

The key advantage is control. You decide how much to borrow, when, and how to utilize the funds. Generally, our clients invest these funds to foster more growth and profits in their businesses.

7 Park Avenue Financial recommends Confidential Receivable Financing, allowing businesses to bill and collect their own receivables while at the same time achieving all the cash flow benefits of a non-bank receivable finance solution.

 

Perceptions and Reality of Receivable Financing Costs

 

While the perception is that receivable factoring as a cash flow solution is expensive, the reality may differ. Typical costs of a factoring fee range from .8 - 1.25%  per month, but the benefits include unlimited sales and profit growth, the ability to take supplier discounts, enhance supplier relationships, purchase smarter, and increase A/R and inventory turns.

 

Conclusion - Is Receivable Financing Right for Your Business?

 

Only you can determine if receivable financing and factoring is the working capital solution your business needs. The availability of choices and alternatives you may not have previously considered makes this a viable option.

 

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you in choosing the best financing path when you find yourself at a crossroads.

 

  

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

 

What Is Receivable Factoring, and How Does It Work?

Receivable factoring is a financial transaction where a business sells its receivables (invoices) to a third party (called a factor) at a discount. This provides immediate cash flow for the business without waiting for clients to pay their invoices to payment terms. The factor takes on the responsibility of collecting the payment, allowing the company to focus on growth and operations.

 

Why Would a Business Choose Receivable Factoring Over Traditional Bank Financing?

 

Traditional bank financing via traditional financing institutions often considers the overall financial health of a business and may have strict requirements. Receivable factoring focuses solely on the quality of the receivables and doesn't add debt to the balance sheet. This makes it more accessible for businesses not qualifying for traditional bank loans, with many factoring companies providing a quicker and more flexible cash flow solution.

 

 Is Receivable Factoring Expensive, and How Are the Costs Calculated?

The cost of receivable factoring typically ranges between 8% / annum to 1.25% per month for factoring fees, depending on the agreement with the factoring company. While invoice factoring for commercial or government clients might seem more expensive than a line of credit via traditional loans or a merchant cash advance,  the benefits like unlimited sales growth, the ability to take supplier discounts, and increased inventory turns often outweigh the costs of a factoring agreement.

 

What Are the Benefits of Receivable Factoring for Canadian Businesses, Particularly Small and Medium-Sized Enterprises (SMEs)?

 

 Receivable factoring offers numerous benefits for Canadian SMEs, including immediate access to cash as the factoring company pays the firm immediately - often same day, enhanced control over finances and cash flow issues,  and the ability to grow without the constraints of slow-paying clients. It also allows businesses to operate without taking on additional debt, making it a strategic tool for the financial management of operating expenses as well as business expansion.

 

How Can a Business in Canada Get Started with Receivable Factoring, and What Should They Consider?

 

A business interested in receivable factoring can start by contacting a reputable Canadian factoring company or financial advisor experienced in this area.

Considerations include understanding the terms of the agreement, the receivable factoring cost involved, and ensuring that the chosen accounts receivable factoring company partner aligns with the business's unique needs and goals. Speaking with a credible Canadian business financing advisor can help navigate these considerations and ensure a successful implementation of an invoice financing strategy.

 

How Does Factoring Affect Cash Flow?

 Factoring positively affects cash flow by providing immediate access to funds that would otherwise be tied up in accounts receivable. By selling invoices to factoring companies, a business can quickly convert outstanding invoices into cash, thus improving liquidity and enabling more flexibility in managing expenses, investments, and growth opportunities.

 Is Factoring an Operating Cash Flow?

Yes,  debt factoring/accounts receivable financing, is considered an operating cash flow for short term financing. It's part of a business's daily operations, converting sales made on credit terms into immediate cash. Factoring accounts receivable enhances the operating cash flow, reflecting the cash generated from the core business activities.

 

 How Do You Account for Factoring Receivables? Factoring Receivables Accounting

 Accounting for factoring receivables depends on whether it's a sale of receivables (without recourse) or a loan (with recourse).

• Without Recourse: In non recourse factoring, the receivables are removed from the balance sheet, eliminating payment risk and the cash received, along with any fees, is recorded. Any loss or gain from the transaction is recognized in the income statement as the factoring company takes responsibility for credit risk.

 

• With Recourse: In recourse factoring, receivables may remain on the balance sheet, and the cash received is recorded as a liability. The fees and interest are recorded as expenses. The exact accounting treatment can vary, so consultation with an accountant or financial professional familiar with the applicable accounting standards is recommended. The factoring company assumes no risk for bad debt when the company is selling unpaid invoices.

 

What Happens to the Cash Flow If the Account Receivables Increase?

 

  

If accounts receivable increase without a corresponding increase in cash collections, it may indicate that more funds are tied up in unpaid customer invoices until the customer pays the invoice - as measured by the days sales outstanding formula.

This could lead to a decrease in available cash flow. Factoring accounts receivables / unpaid invoices can counteract this effect by converting those increased receivables into immediate cash, thereby maintaining or even enhancing the cash flow.

 

Without account receivable factoring or other financing strategies, a significant increase in accounts receivable might strain the company's liquidity and hamper its ability to meet short-term obligations and invest in growth opportunities.  

 

Citations - Mian, S., & Smith, C. (1992). Accounts Receivable Management Policy: Theory and Evidence. Journal of Finance, 47, 169-200. https://doi.org/10.1111/J.1540-6261.1992.TB03982.X.

Sopranzetti, B. (1998). The economics of factoring accounts receivable. Journal of Economics and Business, 50, 339-359. https://doi.org/10.1016/S0148-6195(98)00008-3.

 

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

Important Things You Need to Know About Equipment Financing

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Innovative Solutions from Equipment Financing Specialists: A Canadian Perspective For Business Borrowing To Finance Assets

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        Financing & Cash flow are the biggest issues facing business today 

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Equipment Financing in Canada: A Comprehensive Guide 

 

Introduction to Equipment Financing and Leasing in Canada

 

Equipment Financing in Canada is a specialized category within business financing. With origins going back hundreds of years, lease financing has become a mainstream tool for major Canadian firms. But why not smaller businesses? From manufacturing to technology, equipment leasing can be a versatile solution for companies of all sizes.

 

 

Types of Equipment Covered 

 

 

Lease financing in Canada encompasses various types of equipment, including production tools, transportation equipment, heavy machinery, computers, and more. Heavy equipment financing is a prominent field applicable to new and used assets. Notably, most traditional banks in Canada don't offer lease financing, except for a few chartered ones with strict credit requirements.

 

 

The Simplicity of Leasing 

 

Canadian business owners should consider leasing due to its straightforward structure. It involves a three-way agreement between you, your vendor, and the lessor. Though different from U.S. practices, leasing in Canada is far from complex. Understanding why it's popular can provide significant benefits to Canadian businesses.

 

  

Unveiling Equipment Leasing and Financing Options

Capital vs. Operating Leases  

 

Canadian business owners have two fundamental options: capital and operating leases. Operating leases usually come from manufacturers or vendors and often bundle maintenance and insurance. However, consulting an Equipment Financing Specialist is wise to ensure an operating lease aligns with your goals.

 

 Operating Lease

The essence of an operating lease is that it's used for temporary possession, not ownership. These leases can improve balance sheets and lower payments if ownership isn't the ultimate goal.

Capital or Financial Lease

This alternative lease denotes ownership and might suit those who eventually own the equipment.

 

 Working with 7 Park Avenue Financial, a Lease Financing Specialist

Navigating this specialized area of Canadian financing requires a trusted, experienced advisor. An Equipment Financing Specialist can help your business acquire the necessary assets and guide you through rates, terms, and structures based on your credit quality and assets.

  

 

The Benefits Of  Lease Financing  

Equipment, whether new or used, can be acquired through lease financing. Engaging with a proficient lease financing specialist can help you tap into various benefits:

• Better working capital utilization
• Cash savings, often eliminating down payments
• Often more affordable than term loans
• Efficient re-application processes
• No hindrance to existing banking arrangements
• Flexible payment options
• Pre-tax savings rather than after-tax profits
• Financing leverage to keep regular bank lines untouched
• No ownership dilution
• Fixed-rate financing in a low-interest-rate environment

 

Conclusion

 

In any industry, specialists provide invaluable insights and advantages. For equipment financing needs in equipment acquisition and technology acquisition in Canada, call 7 Park Avenue Financial, a lease financing expert.

 

Connect with the 7 Park Avenue Financial team, trusted,  credible, and experienced Canadian Business Financing Advisors with a proven success record in business finance. They can assist in fulfilling your capital requirements and help your business thrive.

 

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

 

 

What is Equipment Financing, and How Do Equipment Financing Specialists in Canada Help Businesses?

 

Equipment financing is a specialized lease or loan to purchase business-related equipment such as machinery, technology, or transportation assets. In Canada, Equipment Financing Specialists offer expert guidance in choosing between capital and operating leases, ensuring alignment with the company's goals, and maximizing benefits such as flexible payment options, fixed-rate financing, and balance sheet improvement.

 

How Do Capital and Operating Leases Differ in Equipment Financing?   

  

Capital and operating leases are two main categories in equipment financing. Capital leases, or financial leases, aim toward eventual equipment ownership. On the other hand, operating leases are designed for temporary possession without an intention to own. Equipment Financing Specialists in Canada can provide insights into which option best fits the business’s needs, considering factors like working capital utilization, asset quality, and credit requirements.  

  

 

 Are Equipment Financing Options Available for Both New and Used Equipment?

Yes, equipment financing in Canada covers new and used assets for customized financing solutions - Whether it's production tools, heavy machinery, or technology equipment, leasing options are available. Equipment Financing Specialists can guide businesses in making informed decisions, balancing the benefits, and understanding the rate, term, and structure suitable for their specific situation.

 

 How Does Equipment Leasing Affect My Business's Balance Sheet and Tax Position?

 Equipment leasing can significantly impact a business's financial statements and tax position. With an operating lease, the lease is not shown as debt on the balance sheet, providing some improvement in financial ratios. Payments may be considered operational expenses, leading to potential tax benefits. Equipment Financing Specialists can offer tailored advice and customized solutions on the best leasing solutions and structures for a company's financial and tax scenario.

 

 What Should I Look for in an Equipment Financing Specialist in Canada?

When seeking an Equipment Financing Specialist in Canada, look for credibility, experience, and a proven track record in business finance success. An expert in this field will assist with asset acquisition needs, answer questions about flexible terms and the proper rate, term, and structure, and help maximize the advantages of lease financing via an easy process.

Connecting with a trusted and credible equipment finance specialist ensures that your firm receives the best financing solution, support, and expertise it deserves in this specialized area of financing.

 

 

 

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

The Art.. and Science of Buying a Distressed Company In Canada

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YOU ARE LOOKING AT BUYING A DISTRESSED BUSINESS IN CANADA! 

Buying Distressed Businesses in Canada: Risks, Rewards, and Financial Strategies

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        Financing & Cash flow are the  biggest issues facing businesses today 

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 Guide to Acquiring a Distressed Business in Canada: Insights and Financing Strategies

 

 

Introduction 

 

In Canada's dynamic business environment, investment opportunities in private company distressed businesses are ever-present.

 

Acquiring a distressed business may seem daunting for entrepreneurial individuals as prospective buyers or existing business owners.

 

But it can be profitable with the right strategy, guidance, and financing. This article will explore the essential factors to consider, the challenges to navigate, and the financing options available to support purchasing a distressed business in Canada.

 

Potential Rewards of Buying an Existing Business in Canada

 

Distressed businesses can represent a golden opportunity for determined entrepreneurs in Canada. With the economic struggles caused by events like the Covid Pandemic, businesses seek rescue or acquisition.

 

Financial institutions are lending again, paving the way for potential gains. Rigorous due diligence is imperative, as entering a bad transaction post-agreement can lead to unexpected challenges.

 

STARTUPS VERSUS ACQUIRING A DISTRESSED BUSINESS

 

Many startups stumble not because of incompetence but due to insurmountable obstacles that deter their success path. By focusing on acquiring distressed businesses, entrepreneurs can leverage existing momentum at a discounted price while working towards profitability, mitigating some of the risks associated with starting anew.

 

The Complexity of Buying a Troubled Business

 

The failure rate for new businesses can be overwhelming. The alternative of purchasing distressed companies across various sectors and turning them around can alleviate this fear and has it's own advantages. While the venture is still high-risk, the potential rewards are often worth the gamble.

 

Negotiations with Lenders and Creditors 

 

Generally speaking, when taking over a distressed company, liaising with creditors and devising a strategic, operational plan is crucial. A well-thought-out approach ensures that necessary improvements are made without drastically impacting cash flow. The ability to search public records for judgment liens etc is essential.

 

  

Your Due Diligence Process - The Essential First Step  

 

The world of distressed business acquisitions is rarely perfect. Understanding the "buyer beware" principle is vital in finalizing or negotiating a purchase price adjustment.

 

A thorough due diligence investigation is crucial when acquiring a distressed business, as there may be limited recourse after the purchase. This investigation must rigorously analyze why the company is struggling, including factors like debt, significant liabilities, loss of key management, or poor execution. Only after understanding these issues can the buyer and their team develop an effective strategy for the acquisition

 

Conducting diligent investigations before the purchase, including considerations for legal aspects, intellectual property, contracts, and patents, is crucial to protect oneself from unforeseen liabilities while evaluating potential distressed assets.

 

  

Managing Debt and Assessing Growth Finance Options  

 

Evaluating the level of debt when considering a distressed business for acquisition is a key factor. Proper business financing and a sound financial restructuring process will determine whether the company represents good value or just a cheap price.

Understanding why a distressed business fails is vital. Analyzing past management decisions and operational failures helps devise a solid plan to turn the business around. Has the company lost key management is a crucial question to investigate.

 

 Key Takeaways: 

 

Evaluating Your Opportunity:

 

1. Valuation and Potential Upside:

   • Is the valuation low enough to compensate for the risks?
   • Is the potential upside high enough?
   • Note: The price is the most attractive element of buying distressed companies.

2. Expertise Alignment:

   • Does the business fall within your area of expertise?
   • Caution is advised if you are not familiar with the market sector.

3. Potential for Turnaround:

   • What resources or plans can you provide that the owner didn’t have?
   • Identify the problems causing distress, and act like a doctor for the business.
   • Consider the quality of the post-transaction team, technology, automation, and customer stabilization.

Finding and Acquiring the Distressed Business: 4. Finding the Business:

• Via a broker specializing in distressed company transactions.
• Through word of mouth, business information sites, or online bankruptcy court filings.

5. Assembling a Team:

   • Consider hiring a lawyer specializing in distressed business transactions.

6. Types of Acquisition:

   • Through bankruptcy or a non-bankruptcy 'fire sale'.

7. Performing Due Diligence:

   • Talk with the company's employees to understand the internal state.
   • Retain the best workers and align their interests.

8. Understanding Customer Perspectives:

   • Speak with customers if the business is service-based.
   • Be aware of customer goodwill and potential problems during bankruptcy.

9. Benefits and Risks:

   • Acquiring distressed companies can grow the customer base and revenues cost-efficiently.
   • Carefully assess unique risks and rewards and assemble the right team for success.

 

Conclusion

 

Buying a distressed business should only be done if you understand the issues and plan to turn it around with a clear exit strategy.

 

The idea that purchasing a troubled business is a bargain is misleading, and such investments should be approached like any other, with careful research and due diligence. If the business is part of an industry with declining demand, making a reasonable profit might be unfeasible, and investing in a distressed company requires selecting one with a future demand for its product or service.

 

Still, Acquiring a distressed business in Canada is a complex yet potentially rewarding venture. Entrepreneurs can capitalize on these unique opportunities with careful planning, astute financing, and expert guidance, such as from 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with business acquisition requirements.

 

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK

 

What is Due Diligence?

Due diligence is a comprehensive investigation conducted before an asset acquisition to determine the value and purchase of assets. Thorough due diligence is vital for ensuring a fair and transparent transaction. It is a critical component in the buying process for businesses and ensuring you avoid unseen potential significant liabilities.

 

 What is a Stalking Horse Bid?

This term refers to a strategic bidding process where a potential buyer makes an initial offer before other interested parties or waits for others to bid to determine their position. This tactic is commonly used in distressed business acquisitions.

 

What is a distressed business?


A distressed business is a company struggling financially and unable to meet its obligations. It often needs urgent restructuring or acquisition to avoid bankruptcy and move toward a favourable transaction structure under fair consideration.


How can buying a distressed business be profitable?


Acquiring a distressed business at a discounted price and implementing the right turnaround strategy can generate significant profits as the company recovers and grows.


What are the risks of acquiring a distressed business in Canada?


Risks of a distressed target include potential hidden liabilities, extensive debt, operational challenges, and the possibility of failing to turn the business around, resulting in a bankruptcy process.


How can I finance the acquisition of a distressed business?


Financing options include bank loans, commercial finance companies, or seeking guidance from financial advisors specialized in acquisition finance like 7 Park Avenue Financial.


What is due diligence, and why is it essential?


Due diligence for prospective buyers of the seller's business is a thorough investigation of all aspects of the company, such as assets, liabilities, and potential risks, to ensure a fair and transparent transaction.


What's the difference between asset purchase and share purchase?

When acquiring a private company, the ability to purchase assets rather than shares/equity is generally preferable for two main reasons: obtaining a stepped-up tax basis in the assets and minimizing unwanted liabilities.

 

In the case of a severely distressed company, there may not be tax benefits to an asset deal. Still, it remains the wiser option to reduce liability/risk due to potential undisclosed liabilities or issues like potential tax liabilities and fraudulent activities. Each deal must be unique and negotiated with professional guidance, including tax counsel.

Asset purchase involves buying specific assets and liabilities, while share purchase involves buying the entire company's ownership. Asset sales often reduce risks and liabilities around any potential fraudulent transfer of assets of seller's creditors, for example, or successor liability claims.


How does management assessment help in buying a distressed business?


Assessing past key management decisions and operations helps identify the root causes of failure, guiding your strategy for turning the business around. Accessing key information in the target's business is critical to understanding past day-to-day operations and business dealings.

Assessing past key management decisions and operations helps identify the root causes of failure, guiding your strategy for turning the business around.

Accessing essential information about the target's business is critical to understanding past day-to-day operations and business dealings. It is necessary to build the best possible case that "fair consideration" or "reasonably equivalent value" will be paid for the business.



Can distressed businesses be found in all industries?


Yes, distressed businesses can be found across various sectors, each offering unique opportunities and challenges for potential buyers in a distressed asset sale under a competitive bidding process when other buyers are involved.

 

Several businesses for sale in all industries may be financially distressed, prompting management to seek a sale, even within entire troubled sectors. Specialist intermediaries with turnaround expertise can be helpful, especially if the buyer has proven to be decisive and efficient. Investors should be ready to sort through many poor opportunities and be aware that good ones may have competitive bidding, making the actual value of a distressed company hard to determine.


How can 7 Park Avenue Financial assist in acquiring a distressed business?


7 Park Avenue Financial offers expertise in acquisition finance, providing insights, advice, and support in acquiring distressed companies in Canada.

 

 

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

Why Do Companies Factor Receivables ? Cash Flow !

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YOUR COMPANY IS LOOKING FOR CANADIAN FACTORING FINANCING!

Cash Flow Revolution: How Factoring Receivables Could Be Your Business's Secret Weapon

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

 

 

Revolutionizing Canadian Business Financing: Unveiling the Power of Receivables Factoring

 

 

INTRODUCTION 

 

Receivables invoice factoring has a rich history in Canada, spanning over four decades. However, the surprising reality is that numerous business owners and financial managers remain unfamiliar with this potent financing tool and its mechanism of pledging receivables. This article delves into the factoring world, highlighting its dynamics/benefits.

 

 

SOME BACKGROUND ON FACTORING RECEIVABLES FOR CASH FLOW 

 

Interestingly, the origins of A/R factoring can be traced back to the fashion and garments industry. It's a peculiar twist of fate that factoring itself is now in vogue across various sectors. This section explores the evolution of factoring, highlighting its diverse applications and growing significance.

 

FACTORING VERSUS TRADITIONAL BANK LOANS - THE NEW SHIFT IN FINANCING

 

While many companies lean towards pledging receivables to secure a line of credit from traditional banks, the harsh reality is that numerous firms fail to meet the stringent criteria set by Canadian chartered banks.

 

As a result, alternative financing solutions like factoring and invoice discounting come into play, offering similar cash flow solutions albeit at a higher cost. This section compares the merits of factoring against traditional bank loans, emphasizing the accessibility and flexibility of factoring for businesses.

 

 

HOW DOES FACTORING WORK? 

 

For most Canadian business owners and financial managers, the limitations of a capped line of credit are well-known.

 

The borrowing facility is often tethered to personal guarantees, collateral, and loan covenants that curtail business operations. This segment uncovers the intricacies of factoring, detailing its function as an avenue to unlock immediate advances against accounts receivable. The constraints of traditional credit lines are contrasted against the advantages of factoring, highlighting its potential to accelerate growth.

 

 

DIFFERENT TYPES OF FINANCING TAILORED TO YOUR BUSINESS NEEDS 

 

In the realm of factoring, diversity thrives. Various options cater to different business requirements, from full notification invoice discounting to asset-based lending.

 

This section delves into the different facets of factoring, elucidating the nuances of each type. Traditional vs. non-notification facilities are explored, emphasizing how Confidential Receivable Financing empowers businesses to retain control over credit relationships and operational decisions.

 

 LET THE 7 PARK AVENUE FINANCIAL TEAM DISPEL FACTORING MISCONCEPTIONS 

 

 

Factoring in Canada is defying stereotypes that associate it solely with distressed companies. Contrary to these assumptions, many prominent corporations in Canada leverage factoring through asset-based lending arrangements. This segment challenges common misconceptions and underscores factoring is a strategic tool that drives growth and profit enhancement.

 

  

EMBRACE NON-NOTIFICATION FACTORING  

 

The path to optimal factoring involves collaborating with a seasoned business financing advisor with a proven track record. By gaining expert insights, businesses can harness the advantages of a proper non-notification working capital factoring facility. This section emphasizes seeking guidance to make informed decisions that amplify growth and financial success.

 

  

 KEY TAKEAWAYS  

 

  

 Unlock Your Business's Capital: Invoice Factoring Is Fast and Flexible Funding for Small Business Owners

 Invoice factoring cash flows tied-up capital from outstanding receivables.

 A/R Financing is a reliable funding option for predictable cash flow. Numerous factoring companies cater to new, growing, and established Canadian businesses.
  The Process of Factoring: From Submission to Cash in Your Bank Account

   Businesses submit invoices for funding.

   Business owner receives cash minus a fee.

  The customer pays the factoring company as per invoice terms.

   Exploring Factoring Types: Tailoring Financing Solutions to Your Business

   Whole turnover, selective, and spot factoring options for small businesses

   Recourse and non-recourse factoring structures.

   Pros of Factoring: Debt-Free Funding and Quick Access to Capital

   Debt-free and non-dilutive financing.

   Faster turnaround compared to traditional bank loans.

   Unlimited capital access and time-saving benefits.

   Cons of Factoring: Considerations and Drawbacks to Keep in Mind

    Verification of invoices may require customer contact for companies not using Confidential  Receivable Financings.

    Understanding Factoring Costs: Funding rates are 9% / annum - 1.125% / mo range.
    Factoring applies to businesses of all sizes and industries.

    A common practice for commercial clients in staffing, oil and gas, freight factoring / trucking companies, and other manufacturing and distribution sectors 

 

CONCLUSION  

 

Factoring receivables is more than a financial transaction; it catalyzes transformation. As Canadian business owners embrace the diverse benefits of factoring, they pave the way for innovation, expansion, and sustainable growth. Want to work with a leading financing company/business advisor who wants to be a business partner?

 

Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor helping reshape Canadian companies' business financing landscape.

 

 

  

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

 

What exactly is receivables factoring, and how does it differ from traditional bank loans?

 

Receivables factoring is a financing solution where a business sells its accounts receivable to a third-party (factor) at a discounted rate in exchange for immediate cash. This contrasts with traditional bank loans that involve borrowing money and repaying it over time with interest. Factoring provides quicker access to funds without incurring debt.

 

 How does factoring help businesses overcome the limitations of capped lines of credit?

Traditional credit lines often come with restrictions like personal guarantees, collateral, and covenants. Factoring eliminates these constraints by converting outstanding invoices into cash, allowing businesses to maintain a healthy cash flow and fuel growth without relying solely on credit limits.

 

What are the different types of factoring available for Canadian businesses?

 Factoring comes in various forms, including full notification invoice discounting, asset-based lending, and non-notification facilities. Full notification involves managing credit and collections, while non-notification options like Confidential Receivable Financing let businesses maintain control over customer relationships and credit decisions.

 

Is factoring mainly for struggling companies, or can successful businesses also benefit?

 Factoring is not just for distressed companies. Many thriving businesses, including some of Canada's largest corporations, use factoring to optimize their working capital and enhance cash flow. Factoring can act as a strategic tool for growth and profitability.

 

 How can I ensure I'm making the right decision with factoring?

Seeking guidance from experienced business financing advisors such as 7 Park Avenue Financial is crucial. They can help you understand the nuances of factoring, tailor a solution to your business needs, and ensure you leverage the advantages of a non-notification working capital factoring facility for sustained growth and financial success while providing competitive factoring fees.

 

Is cross-border factoring available?

Yes, cross-border factoring is available from most firms who offer factoring services - Cross-border factoring involves companies from different countries engaging in factoring transactions. However, it can be more complex due to variations in legal and business practices between countries.

 

Is factoring available for startups also?

 

Yes, factoring can be available for startups from different factoring companies, although it might depend on the specific circumstances of the startup. Some factoring companies might require a certain level of operational history for smaller or a minimum volume of receivables from medium sized businesses before providing financing.

 

How does Receivable Financing / Factoring impact the balance sheet?

 

Factoring involves selling accounts receivable to a third party (the factor) at a discount. This transaction affects the balance sheet by increasing cash (or reducing accounts receivable) and increasing liabilities. The sale of receivables generates immediate cash but also creates a liability to the factor.

 

How Can Factoring Help With Business Expansion?

 

Canada Invoice Factoring /invoice financing can help business expansion for SME / Mediumsized companies by providing immediate cash flow from unpaid invoices. This cash can be reinvested into the business for various expansion activities such as purchasing inventory, hiring new employees, expanding marketing efforts, or entering new markets.

 

Is credit insurance available when factoring receivables?

 

Credit insurance is often available for receivable factoring from many of the best factoring companies as an add-on to factoring services. It protects the business against the risk of non-payment by customers if an invoice remains unpaid for goods and services delivered. This can be especially important when dealing with high-value invoices or customers with uncertain creditworthiness.

 

How does factoring a/r compare to traditional financing?

 

Factoring and traditional financing (like bank loans) differ in several ways. Factoring companies in Canada provide quick cash for immediate working capital based on outstanding invoices for a factoring fee. Traditional loans and bank financing involve borrowing a lump sum with periodic repayments. Factoring is often easier to qualify for and is linked to a business's receivables, while loans may require collateral and a strong credit history.

 

How is factoring a tool for working capital and cash flow management?

 

Factoring/accounts receivable financing via an invoice factoring company improves working capital and cash flow by converting unpaid invoices into immediate cash. Instead of waiting for customers to pay their invoices, a business can receive a significant portion of the invoice value upfront from invoice factoring companies via invoice factoring services that can help to cover operational expenses, meet payroll, invest in growth initiatives and meet their cash flow needs.

 

How do you qualify for factoring?

 

Companies with commercial clients selling on trade credit terms to generally credit-worthy customers are eligible for factoring finance solutions. Typically, companies do not qualify for traditional bank financing and are incorporated in Canada with reasonable sales revenues.

 

Do businesses need good credit for factoring?

 

Companies that do not have solid financial or good business credit are still eligible for factoring finance solutions. Financing is based on the credit quality of the clients of the business.

 

What documents do factoring companies need?

The requirements from a factoring company include the following:

Copies of invoices that are to be financed showing proof of goods and services delivered

General business application

Aged accounts receivable listing - invoices older than 90 days are not eligible for financing

Business bank account information

Articles of Incorporation / Ownership details / Business I.D. #

 

 

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Why Equipment Leasing In Canada Dominates The Acquisition Of Assets For Your Business : Right Choice 101

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YOUR COMPANY IS LOOKING FOR CANADIAN  LEASE EQUIPMENT FINANCING! 

Why Lease Equipment Financing is the New Essential for Canadian Businesses

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

 

 

Revolutionize Your Asset Acquisition with Lease Equipment Financing 

 

  

INTRODUCTION: The Growing Demand for Equipment Leasing Solutions  

 

Equipment lease financing has become a crucial part of the business landscape in Canada, providing an efficient and cost-effective alternative for asset acquisition.

With business credit often being a hurdle, the requirement for equipment financing options is rising. This solution is one of the most viable alternatives to traditional purchasing methods, especially for Canadian entrepreneurs.

 

  

What  Assets Can Be Leased?  From Construction to Computing - A Broad Spectrum  

 

The term "equipment" encompasses various business assets vital for Canadian enterprises. This includes but is not limited to:

• Construction machinery
• Aircraft
• Computers and Technology
• Telecommunication assets
• Software solutions (Yes, software too can be financed!)
• Manufacturing plant machinery and more.

 

  

The Bottom Line - Flexibility in Choice  

 

In essence, equipment lease financing can cover virtually any asset necessary for your business operations.

 

  

Crafting the Perfect Lease - Tailoring to Your Needs  / Competitive Rates and Beyond  

 

While many customers are initially drawn to the prospect of a competitive lease rate, we stress that selecting the right lease type, duration, and structure is equally essential. These factors must align with your business model, financial standing, and cash flow requirements.

 

 Seasonal Businesses and Unique Structures 

 

 

Whether you run a seasonal business that faces fluctuations or have specific industry needs like bulk orders during holidays, lease financing can be uniquely structured. Options for seasonal payments, quarterly or even annual payments can be crafted to suit your business’s particular needs.

 

Inclusive Financing – More than Just the Equipment

 

Lease structures often cover more than the equipment itself. The lease can encompass associated expenses, from financing taxes to installation and maintenance, such as computing technology or advanced shop floor machinery.

 

Preserve Capital & Lines Of Credit and Reap Financial Advantages

 

Our clients recognize the necessity for equipment but value the preservation of capital and working capital. Leasing enables them to maintain cash on hand or utilize bank operating lines or asset-based lending facilities.

 

Tax Benefits and More

 

Business leasing offers various financial and accounting advantages, including often tax-deductible lease payments, which set it apart from traditional bank loans and other financial instruments.

 

Lease versus Buy – Making the Right Choice

 

Conducting a thorough lease versus buy analysis is advisable to ascertain the optimal method for business asset acquisition.

 

Conclusion: Maximizing the Benefits of Equipment Lease Financing in Canada

 

The proper utilization of leasing offers both financial benefits and overall business advantages. Talk to 7 Park Avenue Financial, a trusted and experienced Canadian business financing advisor, to explore these opportunities.

 

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

 What is lease equipment financing, and how does it differ from buying equipment outright? 

 

Lease equipment financing allows businesses to use essential equipment by paying regular lease payments instead of purchasing the equipment outright. Unlike buying, leasing doesn't require a large upfront investment, providing flexibility in cash flow management. It can also include various options at the end of the lease term, such as purchasing the equipment at a reduced price or upgrading to newer technology.

 

Can any type of business equipment be leased, and what are some common examples? 

 

Yes, various business equipment can be leased, ranging from heavy machinery to software. Common examples include construction equipment, airplanes, computers, telecommunications assets, software solutions, manufacturing plant machinery, and more.

 

 

How can lease equipment financing be tailored to fit business needs or seasonal variations? 

 

Lease equipment financing offers flexibility in structuring payment terms to match a business's unique needs or seasonal variations. For example, a lease can be structured with seasonal payments for businesses that experience fluctuations in revenue, or it can include quarterly or even annual payments. This custom structuring helps align leasing costs with the business's revenue and cash flow patterns.

 

What are the financial advantages of leasing equipment instead of traditional bank loans? 

 

Leasing equipment often provides several financial advantages over traditional bank loans, including potential tax benefits, as lease payments may be tax-deductible. Leasing doesn't tie up capital in a depreciating asset and often allows for financing of the full cost, including taxes, installation, and maintenance. It also provides flexibility to upgrade or change equipment as business needs evolve.

 

How can I determine whether to lease or buy the equipment for my business?

 

Deciding between leasing or buying equipment requires careful consideration of various factors, such as your business's financial standing, cash flow, growth plans, and the type of equipment needed. Conducting a thorough lease versus buy analysis, considering aspects like total cost, tax implications, and flexibility, will help you determine the right path for your business. Consulting with a financing expert specializing in lease equipment financing can also provide valuable insights tailored to your situation.

 

What are the tax benefits of leasing assets in Canada?

 

Some common tax benefits associated with leasing assets include :

1. Deductibility of Lease Payments: Generally, lease payments for business-related assets are considered operating expense and can be deducted for tax purposes. This can lower the taxable income for a business.

2. No Capital Cost Allowance (CCA) Complexity: When purchasing an asset, a business must use the Capital Cost Allowance (CCA) method to depreciate the asset over time. Leasing avoids this complexity, as the lessee does not own the asset and, therefore, does not need to calculate the CCA. This can simplify accounting and tax reporting.

3. Off-Balance Sheet Financing: Depending on the type of lease, it may be considered off-balance sheet financing. For example, an operating lease/ fair market value lease does not appear as a liability on the balance sheet, which may enhance the appearance of a company's financial position.

4. Flexibility: Leasing may offer more flexibility for businesses that need to adapt to changing technology or business needs. This flexibility may not have direct tax benefits but can have overall financial benefits, particularly for assets that quickly become obsolete.

5. Potential GST/HST Benefits: In some cases, the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) on lease payments may be recoverable as an Input Tax Credit (ITC) if the asset is used for commercial activities. This can provide a tax benefit to businesses by offsetting some of the costs of the lease as a business expense

6. Cash Flow Management: Since leasing often does not require a substantial upfront investment like purchasing, it may help with cash flow management when structuring monthly lease payments. While this is not a direct tax benefit, it can improve a company's financial position.

It's worth reiterating that Canadian tax law can be complex and subject to change, so it's always a good idea to consult an equipment finance specialist or a  Canadian tax professional who understands your situation. Different provinces may also have unique tax considerations relating to leasing so that local expertise may also be valuable.

 

What are other financing options versus equipment leasing?

 

Equipment Leasing

• The lessor holds the title to the equipment in equipment finance
• Offers the option to buy at the end of the lease via customized solutions
• Can provide fixed-rate financing for the monthly payment
• Equipment leases typically do not require a large down payment to the leasing company

Business Loans

• Allows you to retain the title to the purchased equipment around traditional financing such as a term equipment loan versus solutions via leasing companies
• Secures the purchase against existing assets.
• Interest rates may fluctuate throughout the loan term, causing budgeting issues.
• Often requires a larger down payment, sometimes up to 20% of the total equipment cost.

Invoice Factoring

• A method of purchasing equipment by leveraging accounts receivable.
• Allows quick conversion of outstanding payments into cash by selling invoices to a factor.
• Ideal for startups and small businesses, with up to 90% of the value paid depending on customer creditworthiness.
• Funding is usually available in a matter of days, making it popular in industries like manufacturing and transportation.

 

How does equipment leasing affect the balance sheet?

 

Equipment leasing affects the balance sheet depending on the type of lease entered into: either an operating lease or a capital (finance) lease. Here's how each affects the balance sheet:

Operating Lease

• Asset: The leased equipment is not recorded as an asset on the lessee's balance sheet.
• Liability: Lease payments are typically considered an operating expense, so there's no long-term liability recorded.
• Expense: Lease payments are expensed on the income statement, reducing net income.
• Impact: Since the asset and corresponding liability are off the balance sheet, the company's debt ratios might look more favourable.

Capital (Finance) Lease

• Asset: The leased equipment is recorded as an asset on the lessee's balance sheet, reflecting ownership or control over the equipment.
• Liability: A corresponding liability is recorded, representing the obligation to make future lease payments.
• Depreciation and Interest: The asset is depreciated over its useful life, and the interest on the lease liability is expensed.
• Impact: This approach aligns more closely with traditional financing, where an asset is purchased with borrowed funds, potentially affecting financial ratios like debt-to-equity.

In summary, the classification of the lease will determine how it's accounted for on the balance sheet and its impact on the financial statements and ratios. The chosen method should align with the accounting standards relevant to the entity's jurisdiction.

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