Inventory and Purchase Order Financing – Canadian Solutions

Inventory and Purchase Order Financing in Canada is a niche, specialized area of business financing for Canadian firms . Prior to contemplating of securing this type of financing we encourage you to talk to a credible business financing advisor with experience in these areas.

The need for for inventory and P.O. Financing in Canada arises generally from two areas of demand for clients – they are growing too quickly and have secured new orders and contracts which they need to finance. Secondly, since inventory for many firms is a key component of your current assets the Canadian business owner has traditionally found it challenging to finance inventory through traditional institutions such as our Canadian chartered banks. In the majority of companies in Canada all working capital revolves around the turnover of inventory and receivables – Depending which industry you are in and what your product is the inventory line on your balance sheet can be very significant in relations to your total working capital.

If your firm turn over inventory, say for example, in 60 days but finds you need to now keep 90 days of inventory on hand your cash needs are therefore growing, really those needs are the new equivalent of another 30 days of sales.

Most companies know of how calculate their investment in inventory – it’s a simply calculation you should probably be monitoring monthly. The calculation is as follows:

Average inventory/average daily sales = days of sales in inventory

It’s that simple a calculation.

In Canada you might have to consider alternative financing of your inventory outside your banking or regular arrangements. Really this is a form of what we call asset based lending, with of coruse inventory as our focus.

How much finance can you get for your inventory? You probably know the answer already, which is of course – ‘it depends’! Depending on the quality of your inventory, and its turnover you should be able to receive anywhere from 40-60% in our experience. The greater the commodities value of your inventory the greater financing you will get.

Purchase order financing continues to be another unique challenge for growing, or many times smaller firms in Canada. It’s a vicious cycle the Canadian business owner of financial manger is very familiar with – their suppliers want payment up front, your customer won’t pay you in 30-60 days, and you’re caught in the middle with the manufacturing or delivery dilemma. Banks traditionally cannot assist you in this need, as they will tend to focus on traditional borrowing criteria. But the purchase order financier will pay your suppliers on your behalf, take collateral on the inventory, and monetize that inventory into cash when you create your receivable and shop goods. Purchase order financing is expensive, generally in the 2-3% range per month, so you should view this as a reduction in your gross margins. If you have good gross margins you can significantly benefit from P.O. Financing.

In summary, inventory and purchase order financing are needed by many Canadian firms who cannot otherwise finance their business traditionally. These two types of financings are specialized and should be entered into with a proper level of analysis re costs and benefits. Speak to a trusted, credible and experienced advisor in asset based lending in Canada to determine if these two financing strategies are right for you.

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Stan Prokop is founder of 7 Park Avenue Financial. Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/Inventory_Purchase_Order_Financing_Canada.html

Sr&Ed Financing – SRED Loans in Canada

Canadian business owners and financial managers certainly appreciate and utilize one of the best (maybe ‘the’ best?) government grants in Canada – the Canadian SR&ED program administered by Ottawa and the provinces.

But did you know that you can ‘supercharge’ your SR ED grant by monetizing that claim into cash flow now?! The reality is that if you have filed a SR ED claim now you can immediately convert that claim into cash flow and working capital now for your business.

You are probably focusing on SR ED as a program because it allows you to remain competitive within your industry; as the world goes ‘ global ‘ your Canadian firms ability to stay competitive in your local or international market is key .

Clients ask us questions in two main areas “

- Why should we financing our SR ED claim
- How do we finance that claim?

Receive cash now for your filed SR ED claim can in effect inject immediate working capital into you claim. And remember that financing your claim is not the process of taking on more debt; you are simply cash flowing or monetizing that SR ED receivable now, in an effort to use that capital to continue and grow your business. Many firms we work with consider their SR ED claim as the largest receivable they will have that year.

Also, let’s talk about timing. If you have filed a first time SR ED claims it certainly would not be out of line to say that you might have to wait close to a year for your funds. Remember of course those funds are non – repayable. So if you have cash coming a year from now why, and its non repayable, why wouldn’t you consider financing your claim and putting that cash to work now. Clients as what they can use those funds for – the answer is simply, any, we repeat ‘any’ general corporate purpose. So that could be:

- Reduce payables
- Purchase new equipment
- Invest in marketing
- Start your new Sr ed process for the next fiscal year

The reality is that its company’s funds use them as you would another other injection of working capital.

So what is the process of financing a SR ED claim? To say that sred financing is a boutique and niche industry would be an understatement. Would you consider entering into a new business without the benefit of working with an expert? We don’t think so, so seek out a trusted, credible and experienced advisor in your area to maximize your Sr Ed loan.

The process, with an expert in tow, is simple. It involves a basic business application, the usual due diligence around any type of financing (info on your company, owners, etc) and the documentations that collateralized the SR ED into an asset to be financed.

How much can we get? Are the final questions from clients? The answer is that 99% of the time your sred is financed at 70% - that means that you receive 70 cents on the dollar now for your claim, with the balance coming when you claim is approved by Ottawa.
Sr Ed is a national program and your sred claims can be financed in any province in Canada.

In summary, business owners should avail themselves of the SR ED program. They should also consider financing their claim which allows them to inject working capital immediately into their firm. Speak to an experienced credible advisor in the area and maximize the benefits of this great Canadian grant program!

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Stan Prokop is founder of 7 Park Avenue Financial. Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/Sr_Ed_Financing_SRED_Loans_Canada.html

How to Finance A Canadian Franchise – Franchise Financing and Lending in Canada

Canadian entrepreneurs continue to explore franchise acquisitions in Canada as a way to maximize on the business opportunities provided by the franchise industry. Entrepreneurs evaluate franchising because it provides them with an ability to generate sales and profits from established business models – they can build equity in businesses and enjoy the benefits (perceived or otherwise!) of self employment and entrepreneurliasm.

As you start to formulate your ideas around purchasing a franchise the concept of how o you will finance your new business should be very close to the top of your list. Many clients we talk view the actual financing of the franchise as the largest obstacle to achieving self employment success.

The reality is that anyone with a reasonable business and work background, coupled with a stable financial situation (good credit bureau history, etc) should be able to successfully finance their venture.

Is there a secret to franchise financing in Canada! Yes, there is, and don’t by surprised by the answer – which is simply that you must have a thorough and solid proposal in hand, and the right people need to see that proposal. Unfortunately that isn’t as easy as it seems.

So how are franchises in Canada actually financed? During the last couple years, due to the world wide economic slowdown/recession franchise financing became a smaller fish bowl so to speak. The methods in which franchises were financing in some cases actually disappeared, and in most cases simply had the ground rules changed relative to whats required and how its works and how long it takes.

In Canada franchises are financed by, in most cases a government sponsored and subsidized loan that comes under a program known as the CSBF loan program. Additional a very select number of firms offer specialized franchise financing loans, and in our experiences we have complimented these two programs with basic lease financing of assets plus in most cases a working capital cash flow loan or an introductory line of credit to facilitate daily operations and long term growth.

So is there a key to success. Absolutely, and it starts with a solid executive summary and business plan that has some reasonable financial projections and assumptions attached to it. The basic elements of that document are the business description, an overview of the basic business model and industry, financial projections, and a focus on the strengths of your business and its expectations of profits. Those profits will of course be cash flow to repay your franchise loan and debt.

We recommend to all clients considering and entrepreneurial career as a franchisee in Canada to discuss your franchise financing options with a credible and experienced advisor in franchise financing. Keep your financing objectives at the very top of your list early on in your process, plan well, and present your proposal once, and properly. You will soon be en route to a successful new business with sales and profit growth!

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Stan Prokop is founder of 7 Park Avenue Financial. Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/How_To_Finance_A_Canadian_Franchise.html

Working Capital Loans – Cash Flow Business Financing Canada

Working Capital Loans in Canada provide cash flow business financing for Canadian business owners and their financial managers. When you achieve a cash flow loan of this type the overall financing rate tends to be very attractive.

Generally a working capital loan is a 3 to 5 year short term / intermediate term facility. Repayments are made monthly out of business cash flow, and typically the working capital loan is viewed as permanent business cash flow.

In many cases a working capital loan can have some collateral attached to it such as equipment or other business assets.

These type of facilities are made through 3 types of organizations-

Chartered banks
Independent Finance Companies
Government owned Crown Corporation

Achieving success in a working capital loan scenario will come with some conditions, as business owners will normally be required not to take out excessive funds from the business, and must be able to demonstrate that they have the cash flow in place to repay the loan. This is typically adjudicated via traditional cash flow analysis – the lender simply wants to see that you have current and projected funds flow to meet your repayment obligations.

As we stated, there is only a small handful of organizations that typically provide such business financing IN Canada. Canada’s chartered banks provide the lowest rates , while other firms and organizations have a higher cost of borrowing which is passed on to your firm as the borrow .

Working capital loans should be considered for a variety of reasons – some of these are – capital improvements, equipment purchases, and working capital to support cash flow and inventory.

It is important to ensure you are entering into a working capital loan arrangement for the right reasons – as working capital loans should not be confused with asset based lending on items such as receivables, inventory, equipment, real estate, etc .

Typically a working capital facility loan will require the guarantees of the owners of the firm. One of the smartest things you can do in positioning a facility such as this is to provide a crisp well thought out cash flow analysis – (an updated business plan wouldn’t hurt), to give the lender the comfort that you can make payments. In your document you should know that the lender will be looking at total debt to equity once the loan is in place, and also that you have cash flow coverage to repay.

In our experience with clients working capital requests tend to be in the 50k-250k range. Larger facilities than this become known as mezzanine debt, or subordinate debt – these are fancy terms for ‘unsecured cash flow loans ‘.

In summary, working capital loans are available in Canada from 3 different types of entities. It is important to position your request properly, and carefull attention to the metrics that the lender will be looking at will pay off for your firm. Speak to a trusted, credible advisor in business financing who will help you maximize the benefits of a true working capital loan facility.

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Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :

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

Equipment Financing – Expert Advice for Canadian Lease Financing

Canadian business owners who are armed with some basic equipment financing knowledge can significantly increases their chances of approval, and, equally as important, ensuring the Canadian lease financing they are looking for comes with rates, terms, and general structures that are commensurate with their overall credit quality and business financing needs .

A lease and equipment financing provider has some basic needs around your initial application for financing. Some of the key areas you should focus on are detailed below.

Leasing is available for firms with all durations of ‘time in business ‘. Although a start up firm can be financing via a lease financing solution your overall time in business can be a great factor to increase your chances of a proper approval. Equally important is the overall industry and business model you are in – as on occasion some industries are out of favor. In 2008-2009 the auto industry was clearly ‘out of favor ‘.

Lease financing is a segment of ‘asset based lending ‘- therefore the asset you are financing has a considerable role in determining your overall approval and pricing. Equipment that is financed generally tends to depreciate, so your lease firm will focus on the value of the equipment during the term of your lease. As an example a lessor could only reasonably expect to recover 5 or 10% of a computers value three years from now, simply because a computer and telecom equipment in general as asset classes depreciate quickly .

Equipment that is not purchase for bona fide vendors and manufacturers also on occasion can present financing challenges. Therefore if you have a choice work with repeatable dealers, wholesalers, manufacturers, etc.

Any lease firm will draw commercial credit reports on your firm and look for payment trends to suppliers – if personal guarantees are required on private small and medium sized firms quite often a net worth statement and credit bureau check will be asked form . Quite frankly these types of information and credit diligence are associated with any borrowing, whether that is a corporate credit card, a business loan application, etc. In reality lease firms in Canada probably provide the quickest overall approval times than any other type of business financing. Many lessors use automated credit scoring systems and smaller transactions fewer than 50k for example can actually be sometimes approved in a matter of minutes or hours.

Lease transactions in Canada can run into the many millions of dollars, lease financing is one of most vibrant financing initiatives in the country – so expect on larger deals that a higher level of due diligence will be performed on your firm for larger lease facilities .

Finally , leasing is all about ‘structure ‘ so you should feel free to be creative in your lease structure request in order to maximize the particular benefits of lease financing that you are trying to achieve – they might include lower rates re your credit quality, seasonal payments, flexible end to term options etc .

In summary, business owners should learn some key leasing basics around what is required to make a lease approval successful. Being armed in this manner will ensure a more prompt approval and the overall approval you are seeking re asset type, term of lease, and flexibility at end of term. That is sensible, proactive financing. Seek the advice of a trusted and credible lease financing advisor who can assist you in maximizing benefits!

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Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/equipment_financing_expert_advice_canadian_leasing.html

Equipment Leasing – Canadian Financing Solutions

Equipment leasing in Canada is based on the premise that your business requires financing to acquire new assets to stay competitive and profitable. Business owners and financial managers in Canada who understand that the majority of assets they purchase depreciate in value understand why lease financing works.

Lease financing in Canada involves the acquisition on your behalf, by the lessor, of equipment you wish to use in your business. Almost any type of asset, tangible, and sometimes intangible (i.e. software -) can be leased.

How does lease financing work? It’s quite simple. The lease firm purchases and owns the equipment and ‘rents ‘it back to your firm over a specified period of time. Typical lease terms in Canada are more often than not 5-7 years.

There are a variety of key benefits associated with lease financing – one of them is simply ease of acquisition. For transaction under $ 50,000.00 most lease financing is adjudicated and approved on an application only basis – i.e. no disclosure of financial statement required. Generally leases for more than this amount requires a more thorough application, often including your financial year end statements and perhaps an interim statement update also. In lease financing its all about cash flow, so your firm should be able to demonstrate a proper mix of historical, present, and future ability to make the monthly payment.

So yes, lease acquisition financing is a very simple process. We advise clients that wish to lease that the true challenge in lease financing in Canada is actually structuring your lease properly with respect to the type of lease you choose.

At the end of lease you wish to fully understand what your rights are wit respect to purchasing the equipment, purchasing it for a ‘ fair market value ‘, or in many cases, extending the lease because the asset still has value to your firm with respect to its ability to generate profit for your firm .

The other good news re lease financing in Canada is simply that it’s available for businesses that are in every stage of growth, from start up to major established corporations. Quite frankly, as is the case in a lot of banking scenarios transactions for smaller or start up firms are based significantly on the credit history and business experience of the owners, so Canadian business owners should be prepared to demonstrate the proper credit history and business acumen.

There is no limit to the amount of financing that is available in Canada for lease financing. During the economic crunch of 2008 and 2009 many lease firms actually got assistance from the government to keep the wheels of lease financing moving. Markets have stabilized and funding is generally as abundant as it ever was for the right types of assets and credit quality.

In summary Lease financing is very simply and has clear benefits. As we noted the challenge is in getting approval for the right transaction in terms of credit approval, rate, and overall lease structure. Speak to a credible, trusted, and experienced advisor in this area to ensure you are making the best use of this valuable Canadian financing strategy.

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Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/Equipment_Leasing_Canadian_Financing_Solutions.html

Invoice To Cash – Factoring for Canadian business

Converting an invoice to cash is a top priority for Canadian business owners and financials managers. Factoring continues to slowly increase it’s presence in the Canadian market place, and some of the largest corporations in Canada actually successfully use this type of financing strategy. However for the purposes of our information shared here we will focus on the whats, whys and how to be of factoring for small and medium sized companies in Canada.

Once a business owner both understand and starts to ‘ buy into ‘ this type of financing the only challenge at that point is ensuring that they enter into the right type of facility .

The Canadian factoring market is significantly different from the U.S. and European markets where factoring originated. It is therefore important for Canadian business owner who consider this type of receivable financing to know their options and to have a solid sense of how the financing works.

Canadian factoring companies fill the gap when a firm cannot obtain satisfactory receivable financing from their Canadian chartered bank. Many clients tell us they do have some for of bank financing in place, but it essentially does not meet their needs re growth and facility size. In many cases clients have had a challenging 2008-2009 and have no financing facilities in place whatsoever. Then there are of course starting up firms who virtually have no ability to qualify for standard Canadian operating facilities that are enjoyed by more larger and established firms.

Factoring works for your firm when you have decent receivables but there are issues on your balance sheet and income statement that prohibit you from obtaining the amount of financing you need on an ongoing basis . This working challenge is further exacerbated when you have large new contracts or volatile growth spurts based on the uniqueness of your industry.

There are two types of factoring in Canada, ‘notification factoring ‘, and non- notification factoring. Both work well if you understand how they are structured and priced, however we favor non notification factoring in our recommendations since we feel it more closely suites the Canadian way of doing business.

In notification type factoring the process is very simple and mechanical:

- Your firm invoices your customer
- You generate an invoice
- You receive a large, almost same day cash advance against that invoice (typically 90%)
- Your factor firm verifies the invoice with the customer prior to disbursing funds
- The factor firm more often than not collects the invoice, an remits to your firm the remaining balance due yourself, less their financing fee

Non notification factoring is dramatically different - with that type of facility more due diligence is spent on your firm and its way of doing business, invoicing, creating proper financial records, etc. Your company bills and collects all its invoices, and you receive funds immediately after you ship and provide proof of delivery.

Factoring pricing in Canada has dramatic price swings. Factoring rates range from 9% per annum to 2-3% per month. Factors that determine your price are the over all facility size, your usage of the facility, the overall quality of your customer based, and ,unbeknownst to your firm, how the factor firm itself is funded, usually either privately or institutionally .

In summary factoring works in Canada. Choosing the right facility is usually a larger leap of faith than buying into the concept of this type of financing. Speak to a trusted, credible and experienced advisor in this area to ensure you understand the benefits of this valuable and popular method of Canadian business financing.

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Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details :
http://www.7parkavenuefinancial.com/Invoice_To_Cash_Factoring_for_Canadian_business.html