Invoice Cash – Immediate Cash for accounts receivable

Invoice cash – What is the problem and what is the solution? The problem or challenge is a classic one for Canadian business owners and financial managers. It is that sales are growing fast, but, guess what? The receivables associated with those fast growing sales and converting into cash. In fact they are tying up your working capital for 30, 60, and sometimes 90 days. How can you tell if this is happening? Well we are sure it’s fairly intuitive to most customers, but you can actually do a very basic calculation on this to verify. We also tell our clients there is one easy way to fix the problem,

We advise our clients to track something as simple as the ‘ Turnover of Working Capital ‘ – Take your sales for the time period, example, month, or year , and divide by you working capital which is calculated by current assets minus current liabilities . If your ratio is trending higher you will find that you are having more working capital challenges.

Our clients often ask for solutions though, not a financial ratio as we have presented above! Invoice cash, also known as factoring or receivable discounting is one solution to the above working capital challenge. This solution also assumes you have been unable to get any, or enough, bank financing to fund your business.

How does this solution work – it’s a simple process of generating your invoice as you sell your product, and then on a daily, weekly, or monthly basis (it’s your choice) sending these invoices to the factoring or invoice discounting firm. They will on a same day basis send you approx 90% of those funds immediately. You have just generated IMMEDIATE cash flow for your business. The other 10% of the invoice is paid to yourself when your customer pays, minus a ‘ discounting fee ‘ , which is a carrying or financing charge for the factoring firm .

Canadian business owners need to ensure they have the right facility. We encourage clients to get the type of facility where they continue to bill and collect their own receivables during the factoring process. Also, the Canadian business landscape relative to invoice cash/ factoring firms is much different than in the United States.

As a Canadian business owner or financial manager contemplating a factoring facility you should consider the following key points:

-What fees are you paying – ensure your fee is clearly understood and has no miscellaneous costs

- Ensure you can bill and collect your own receivables – many factor firms will want to take over to some degree your invoicing and collection function

- Ensure you are dealing with a firm that understands the Canadian landscape – many firm are simply branches of U.S. organizations

- You should ensure that your capital requirements can be met and that the firm can fund companies in your facility size range. More cash flow means more growth, more profits, and more competitive success for your Canadian company. That is a good thing!

--

Stan Prokop is founder of 7 Park Avenue Financial - 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 see: http://www.7parkavenuefinancial.com/Invoice_Cash_Immediate_Cash_for_Ar.html

Inventory and Purchase Order Financing in Canada

Inventory and Purchase Order Financing in Canada are two of the key elements of Asset based lending and financing. What do Canadian business owners and financial managers need to know about this type of financing?

Inventory financing is unique – we say that simply because unless you are working with a specialized lender most financiers, bankers, etc do not understand inventory – naturally if you don’t understand something it is difficult to lend against, which limits financing of course !

You need to work with a lender who will take the time, and already has the expertise to assess the critical element of your inventory, which is very simply what is it worth on an ongoing basis. As a business owner looking for additional working capital and cash flow you want to maximize the amount of financing you can extract from inventory. Your inventory and receivables are huge components of your on going working capital needs.

What are some of those key elements in inventory financing? They are as follows – first of all you want to always ensure that you don’t enter into an inventory finance facility that requires your to store product at a third party warehouse . That becomes cumbersome and adds some additional cost to your facility.

When we discuss client inventory financing needs we also try to ensure they are bundled into an asset based facility that includes accounts receivable – this certainly is not necessarily required, but simply makes the entire ‘ cash conversion cycle ‘ run more smoothly . As you know your cash conversion cycle is simply the ongoing process by which cash becomes inventory which becomes receivables which becomes cash again!

When you establish a solid inventory financing facility you simply are maximizing working capital on an ongoing basis by having pre negotiated a maximum loan to value of your inventory – What do we mean by this and how does it work? Well simply explained its putting in place a facility, which, as an example, allows you to draw down on a certain per cent age of your inventory on hand. You simply provide a list of your inventory, as an example, on a monthly basis, and draw funds against that summary listing. A quick simple example – lets say you are selling shoes to Big Box retailers, and you have 400, 00.000 of shoes on hand every month to satisfy customer needs. If your inventory financing facility is margined at a pre agreed upon 60%, (as an example) you can draw on working capital $4000.000/00X .60 = $240.000.00.
In many circumstances we run into your firm either had no or limited inventory financing, so you have just created 240k or additional working capital for your firm.

Let’s discuss Purchase order financing also! It’s a case of drawing working capital out of orders from customers who are deemed sound. You use the funds to satisfy those orders, gain additional revenue, and increase your overall competitive presence.
P.O. Financing is a gap or bridge financing allowing you to take on larger orders/contracts... With your suppliers paid you can convert inventory into receivables and start the process all over again.
. Your suppliers are paid in advance by the p.o. financier, which frees up your working capital. Key requirements of a good P.O. Financing facility are good reputable customers, PO financing facilities of 100k and up, and your ability to demonstrate you can offer the P.O. as collateral. In some cases insured receivables might make sense also
Not everyone knows about or understands these two types of financings; speak to an expert who has credibility and experience to maximize your use of this type of financing.

-->

Stan Prokop is founder of 7 Park Avenue Financial - 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 see: http://www.7parkavenuefinancial.com/inventory_and_purchase_order_financing_in_canada.html

Film Tax Credit Financing Canada – Cash Flow Tax Credits Now!

Financing Film, television and digital multimedia productions in Canada is less of a challenge whenyou have access to interim capital to assist in completing projects and of course moving on to the next one!

There are a number of excellent new programs at government levels that allow you to monetize tax credits which in many cases now come in the form of a rebate - that rebate can now be monetized to recover a significant portion of expenses related to offerings in various media sectors .

Whether a Canadian business is manufacturing nails or shoes, or created digital content for the entertainment masses cash flow continues to be king. As Canada emerges from the worldwide liquidity debacle of 2008-2009 business seems to be getting better in all areas, and media and entertainment projects are again emerging and flourishing.

Accessing interim capital through strategies such as tax credit financing allows your team to complete projects and access additional capital in the form of equity or gap financing as an example.We are the first to admit that most media and entertainment people quickly realize that in Canada there are certain limitations to chartered bank financing, term loans and subordinated debt for media and entertainment productions.

Recognizing this challenge, while at the same timeseeing potential revenue and economic benefit from this industry, the government has stepped up to the table and developed programs to refund a healthy portion of production expenses back to the industry .

And to make matters even better, by working with an experienced , trusted, and credible advisor in this industry you canmonetize, orlets call it ’ cash flow ’ these refunds into working capital and .

So how do you achieve that cash flow? You do that by simply ensuring that the proper costs associated with your production and the intellectual property are documented, certified, and approved under your project. The rebate or tax credit is then financed as a short term discounting or in effect a ’ factoring’ of the claim. There is only one bottom line, which is you get your funds now and can place them back into the project to both recoup costs and also of course to complete the project.

As various parts of government have committed millions of dollars to these rebate credits why would you not want to accelerate the benefits immediately?!If the government and the industry are breaking new ground in this area of financial assistance you want to be able to take advantage of it - that surely is for certain.

The interesting part of this whole scenario is that the credits now virtually cover all aspects of media, and now also include video-game development and interactive media.There is also a breakthrough in the new legislation which doesn’t have the government entities in a position to choose between what projects might work and what projects might not be successful.

Most business people outside the industry often wonder why these rebates our offered, but more and more data is emerging that reflects the fact that thegovernment and economy as a whole benefitsten times over from such investments .Ten times over is great R O I.

Speak to a trusted and credible film tax credit advisor to ensure you are able to access this great funding strategy.

--->

Stan Prokop is founder of 7 Park Avenue Financial - 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 see: http://www.7parkavenuefinancial.com/film_tax_credit_financing_2.html

Film Tax Credit Financing in Canada – Accelerating Payment of your Tax Credits

Film, television, and digital multimedia financings are always a challenge to Canadian based productions, but recent trends in the industry allow for a number of new and aggressive ways to finance your ongoing productions . For many participants the playing field is somewhat complex, as it is a mixture of industry, government and private sector financing that ultimately bring financing and cash flow to the success of your work . No one seems to be disputing the tremendous growth in the industry , particulary in Canadas major entertainment centres of Toronto, Vancouver , and Montreal .

Canadian content is king when it comes to financing strategies . As the industry if financed on a much larger scale in the U.S. there is always a challenge for Canadian productions in all entertainment sectors to find both short term working capital and significant long term capital and equity . The support the industry is getting from both provincial and federal sectors continues to be quite overwhelming .

The financing of tax credits in film, tv , and digital media , either through the Scientific Research and Experimental Development program, of the various other supported programs is one of the strongest ways to achieve interim working capital and help to balance your debt/ equity investments in any particular production .
The good news is, that with the experience of a trusted and credible financing advisor in this area even accrual financing can be applied to these sorts of tax credits . That only means one thing of course – getting your funds immediately, and not waiting for the ultimate tax credit refund under the particular program under which your production is domiciled .

We are often asked if Canadian chartered banks play a role in these types of financing, and the answer is – yes, but very selectively . We have met and worked with specialized personnel from the banks in the area, and they clearly are ‘ boutique functions ‘ of the bank as a whole . Naturally though access to funds themselves is not a problem, as Canadian banks continue to be a world leader in liquidity, tier one capital levels, and access to funds .

So how do entertainment entrepreneurs access this capital . We simply believe that you must seek and search out experienced, trusted and credible advisors in this area . Financial people tend to be somewhat unable to predict ‘ hits and misses ‘ in the entertainment and media sector, we’ll let the creative type do that , but if there is access to financing available through areas such as tax credit financing, gap financing, accrual financing, etc its safe to say lets let the financial people handle that!

In our experience tax credit financing tend to be a minimum of 200k+ and up in Canada, and can of course go into the millions of dollars , so access to capital and who you are working with is very important . Naturally since out tax credit system and the financing of those credits infers a ‘ Canadian content ‘ ‘Canadian Equity ‘ requirement the additional pressure of having to finance just in Canada by virtue of the tax restrictions places just a bit more challenge of financing .

When does tax credit financing work best – In our opinion its when current programs are maximized and monetized simply from a timing perspective, accessing your capital now, not at some later point in time .

Your ability to discount now that future receivable or revenue stream is one of the greatest tools you have in financing prodcutons and content from a debt perspective . Actually its not even really debt, because you are simply monetizing or discounting an asset such as a tax credit receivable . You are raising cash flows against current receivables .

In Canada there is several billion dollars of tax credits awarded annually to the industry, so the ability to monetize these prior to final approval and audit , subject of course to your certification eligilbility , is one of your greatest assets from a financing and cash flow perspective .

--------

Stan Prokop is founder of 7 Park Avenue Financial - 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 see:
http://www.7parkavenuefinancial.com/Film_Tax_Credit_Financing_in_Canada.html

Franchise Financing – Loan approvals in Canada

Franchise financing approval in Canada is a key aspect of the entrepreneurs challenge to purchase and build a business. Canadian business people purchase franchises because they wish to profit and be successful on an already proven business model. We of course assume they have picked the right franchise!

What mistakes can be made in franchise financing as it relates to the purchase of a new or existing franchise?Naturally solid planning and careful preparation of a business plan increases the chance of success.

Whether a business is a franchise business or not the under pinnings of a successful finance strategy are important to long term success. Business owners, bankers, other lenders and financial analysts always look at the relationship between debt and equity – in simply language that means how much you yourself are putting into the business and how much you are borrowing. If you borrow too much you are considered ‘over leveraged. Therefore in the course of purchasing your franchise you should be prepared to make a personal investment in the business also – that’s a given – it cannot all be OPM, which is and an acronym for ‘Other Peoples Money ‘.

So of course when we meet with clients they always ask ‘how much do I have to put into the business? The answer is as follows – many franchisors will actually insist on a certain amount of money being put down , because based on their actual experience with their own locations and other franchisees over time there develops formulas as to what is an optimal investment byyourself .

Also keep in mind that if you, as an example, are purchasing, say, a large unit of a restaurant chain that transaction might be in the 1 Million dollars range. Let’s say you put 25% down of 250k. Another franchisee might be buying a service oriented business that does not have and furthermore does not require fixed assets such as leaseholds, equipment, etc. If that business cost 100k to purchase a 25% down payment is of course only 25k, much less than the 250k other franchisee had to put down in absolute dollars. So our point is simply that if the purchase price of your franchise is asset intensive, and has a higher dollar value you must naturally assume that a large absolute dollar amount of financing is required. That probably is clearly the appeal of many service based franchises that do not require assets.

So how are asset based franchises financing in Canada. There is in our opinion a large amount of dis information on franchise financing in Canada – therefore new and prospective franchises are encourage to speak to a trusted and credible franchise financing expert . That is simply because you will know your options and strategy much better. It certainly doesn’t hurt, if you can, to speak to other franchisees in the franchise system that you are looking at purchasing.

In some respects there is a benefit to purchasing an existing franchise from a current franchisee in the system you are looking at. Our observation is that those units come with a higher price, for the simple reason they are proven already, they have sales, profits, and cash flows that you can analyze , with your franchise financing expert, to determine the overall viability ofthe business .

We have worked with a number of prospective franchisees who actually are comfortable in buying a franchise that is not doing so well because they strong feel they can turn it around. So there are in effect buying a business that is proven, but temporarily distressed in some manner, usually relating to issues such as poor sales revenues, etc.

Franchises in Canada are financed predominantly by one major government program that is in existence – we have found that by utilizing this program, and complimenting that financing with a working capital term loan and lease and equipment financing (if applicable) helps to ensure overall franchise financing success.

In summary, ultimately you as a business owner have to be comfortable with what you are purchasing – but you should also take comfort in knowing that franchise financing is available in Canada, and simply needs to be tailored to the type of business you are buying, its size and asset requirements, as well as the utilization of proven and available financing methods such as the government CSBF program we referred to.

Investigate your opportunity, plan financing carefully, execute on that financing and your chances of success increase immensely.

========

Stan Prokop is founder of 7 Park Avenue Financial - 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 see: http://www.7parkavenuefinancial.com/franchise_financing_loan_approvals_in_Canada.html

Asset based Financing and Lending Canada – What is it?

Asset based Financing – Canadian business owners are asking us what this term means and how they can utilized asset based financing for their cash flow and working capital needs and purposes .

Asset based financing in our opinion and experience means different things to different people. For the purposes of sharing information here we will focus on asset based financing as being a non traditional (but clearly growing in popularity) means of financing Canadian business.

In many cases companies either have a temporary challenge or a unique special situation need. Some of the examples of these needs are strong sales growth, or perhaps due to market or competitive reasons you have experienced balance sheet erosion due to the somewhat difficult business environment of 2008 and 2009. Ironically, one of the greatest things that can happen to your firm - explosive sales growth – can actually become a huge financial and operational challenge, as many business owners have experienced.

The term ‘ asset ‘ of course more often than not refers to equipment, and that is a classic subset of asset based financing . Equipment of course covers a broad range of asset categories and our customers utilize this strategy to free equity in equipment and harness that into working capital and cash flow.

How does that work – its quite simple. Although business owners in many cases have a strong sense of what some of those assets are worth quite frankly that is not what counts. It all comes down usually to an appraisal being done on the equipment, and when the appraisal comes back a loan is made against the appraised value. Usually business owners can expect to receive a fairly high percentage of the liquidation value of the equipment, but this amount tends to be less than the fair market value of the asset .It is very important to understand that the asset has to be free and clear of any liens or charges. In cases where a small amount might be owing to another lender that amount can be paid out and bundled into the new loan transaction.

In the equipment area of asset based lending companies need to realize that these advances are structured totally on asset value, unlike a bank that places a lot of emphasis on your cash flow, balance sheet ratios, debt covenants, etc. There is a huge difference in how an asset based lender looks at your asset and advances funds against it, versus a Canadian chartered bank.

There is technically no limit as to the amount that can be advanced against equipment, although most transaction we see in the marketplace is certainly less than 5M dollars.

In summary, asset based financing means different things to different people. One of the key context areas of this type of financing is equipment financing – Canadian business owners can almost consider this a bridge loan to inject temporary working capital into assets that are unencumbered .

Whether your firm is growing quickly, has restructuring issues, or other unique situations you will benefit from talking to an experienced, credible, and trusted financing advisor in this area.
---

Stan Prokop is founder of 7 Park Avenue Financial - 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 see: http://www.7parkavenuefinancial.com/asset_based_financing_canada.html

Working Capital Financing Canada – Canadian cash flow solutions

Working Capital financing- Canadian business owners and financial managers often recognize the need for working capital and but are often challenge in two key areas - what solutions are available and are the working capital solutions temporary or current , or permanent .

If you are a Canadian business owner that is looking for long term working capital your needs revolve around future projected growth, expansion, or in some cases simply the hiring of additional marketing personnel is a solid long term cash flow need .

Generally speaking if you are looking to grow sales and profits working capital is the solution to that type of challenge. One of our clients sells textiles to major box retailers in Canada - sales have grown and the company actually had a great year in 2009 ( many firms did not!!) and feels they can grow business by 100% in the current year , based primarily on new product lines and customers . So you ask, what is the problem? The answer in two short words - working capital.

If you are carrying the additional inventory and receivables that come with that growth you have a working capital challenge. Therein lies the challenge of course - what type of solution do you need, and how do you find it. Naturally you want a facility that meets your needs, can grow with your firm, and is structured under the right terms and rates.

If you have a proper working capital facility that should generally require no additional working capital.

The key thing to remember when you are looking for working capital is the term ’benefits to cash flow ’ - What do we mean by that ? Simply that if you are looking at adding new personnel, or new computing power or technologies that you will receive the benefits of those assets over time - if that is the case why would you pay for them tomorrow . The bottom line is that it is extremely beneficial to match your cash outflows with the benefits of your new assets, over time! And in a perfect world you want the ability to ensure you can grow that working capital need.

Many business owners simply don’t know or understand where that cash flow comes from.

It comes from two areas, your ability to maximize on your current assets, i.e. receivables, inventory, and purchase orders, or new debt that you are willing to take on in the form of a cash flow working capital loan.

If we refer to the former solution Canadian chartered banks offer the best rates, terms and structure for maximizing working capital. The challenge simply is that you are not always able to get the capital you need for growth in the Canadian chartered banking environment.

The key to understanding your needs is your ability as a Canadian business owner or financial manger to understand your working capital cycle - i.e. how fast do you collect your receivables, how does your inventory turn, and what are your payment terms or pressures from suppliers. By having a clear understanding of those numbers you can determine working capital needs, and also assess what the proper solution is. In short term working capital that means several things - a new or better banking facility, financing your receivables through a more aggressive non bank working capital facility. This could be either a factoring arrangement for receivables only, or a more extensive

Asset based lending arrangement. In medium sized to larger firms in Canada it could also be effectively addressed by a mezzanine or sub debt cash flow loan.

Talk to an experienced, credible and trusted business financing advisor who can ensure you understand your options in the working capital area.

--

Stan Prokop is founder of 7 Park Avenue Financial - 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 see: http://www.7parkavenuefinancial.com/Working_Capital_Financing_Canada_4.html