Asset Based Lines of Credit – Canadian Financing Solutions

Asset based lines of credit are an alternative to Canadian chartered bank financing in Canada. It is certainly well documented that Canadian business, small, medium, and even large has experienced general credit tightening by our chartered banks here in Canada. Business owners and financial managers are forced to consider alternative financing solutions which are certainly not numerous in natures here in Canada.

Asset based lines of credit are absolutely one solution to the financing you might be searching for. Surprisingly many of our clients have not even heard of this type of financing, much less understand it.

Many customers are actually forced to consider an asset based lending solution because of the concern of owners, lenders, and suppliers that their business does not have the ability to finance the firm properly. When suppliers and other lenders act aggressively on the belief that your firm can’t meet its obligations problems ensue!

One key point we continually make with clients, and we would recommend this to everyone is that you should be aware of your financing alternative before you are forced to be aware of them. Simply speaking, it behooves you to learn about asset based lines of credit. Although the ‘ABL ‘ ( short form ) financing facility has been around for years some people still associate it with distressed lending – it is not just that . It also is not borrowing or taking on additional debt, which is certainly a relief to owners.

So what is it then? It is just the financing of all your current (and sometimes fixed) assets as total collateral for borrowing. In fairness most of that financing is done on receivables and inventory

Because you are in effect borrowing more than you ever could have in a traditional financing arrangement there is some additional reporting requirements when you borrow under an asset based line of credit. But frankly when we talk to customers they indicate this additional reporting often helps them to understand their business better.

It is interesting to note that many firms utilize this type of financing for a long period, and view it as an excellent source of financing, while some business owners and financial mangers view it as a bridge to solve temporary working capital and financial statement challenges. Generally firms considering asset based lines of credit cant meet some of the ratios required for traditional banking and debt service, yet at the same time they have new contracts, need new assets, or more headcount , etc – with asset based financing being a solid solution to provide this additional capital .

In summary, asset based lines of credit are a business financing option. They are utilized in Canada by hundreds, even thousands of medium sized and larger firms. They are a form of non traditional lending that in reality is become mainstream. Asset based lines of credit provide the maximum working capital against your operating assets such as receivables, inventory and equipment...

Speak to a business financing advisor who has credibility, experience in this aspect of Canadian business financing. You can then determine that if it’s the right solution for your Canadian business.

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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_lines_of_credit_canadian_financing.html

Equipment Financing Specialist – Canadian Leasing Solutions

Equipment Financing in Canada is a specialized type of financing. Lease financing on its own goes back hundreds of years and is a widely accepted financing tool.Major companies in Canada utilize lease financing, why shouldn’t your firm.

Lease financing covers all sorts of equipment – that includes production equipment, transportation equipment, machine tools, computers, etc. In general most Canadian banks do not offer lease financing, although two of the Chartered banks have dedicated lease operations but require a very high quality credit quality.

You should consider leasing because it’s a simple to arrange financing agreement between yourself, your vender of the equipment, and the lessor. Leasing should not be considered complicated, however Canadian leasing practices and the parties that participate are much different than in the U.S. . . . It benefits Canadian business owners and financial managers to ensure they understand why leasing is so popular.

Two basic types of leases are available for the Canadian business owner – they are capital and operating leases.Operating leases are often promoted by manufacturers or vendors and they often include maintenance and insurance.You should consult with an Equipment financing specialist to ensure an operating lease is right for your firm.The essence of an operating lease is that your intent is to use the equipment, but not to own it. When you enter into an operating lease ensure that you have no intention of owning the equipment at the end of term. In this case your payments will be much lower than if your intention is ownership, and you will have the benefit of some balance sheet improvement, as this lease is not shown as debt on your balance sheet. The alternative lease is a capital, or financial lease, which denotes ownership.

We can’t over emphasize the need to work with a trusted, experienced and credible advisor in this specialized area of financing in Canada. Seek out a professional that will assist you in acquiring the equipment you need and answer any questions you have about the proper rate, term and structure that your firm deserves based on overall credit and asset quality. Equipment can be new or used, and a good lease financing specialize will be pleased to assist you in maximizing the benefits of lease financing, which include:

-Better use of working capital

-Often cheaper than a term loan

-Wont restrict your current banking arrangements

-Payment flexibility

-Fixed rate financing in today’s low interest rate environment.

Specialists in any industry are a benefit. Consult a lease financing specialist for your asset acquisition needs.

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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/Equipment_financing_specialists_canada.html

Lease Equipment Financing – Canadian Solutions

Canadian Lease Financing Solutions are available for Canadian business owners who are acquiring assets and business equipment.

When a Canadian business owner or financial manager considers a financing transaction he or she wants to understand the advantages and disadvantages of such a financing. When we meet with clients we clearly explain that no one financing solution is a perfect solution when evaluated against other alternatives.That certainly applies to leasing.

Are there actually disadvantages to a lease financing strategy? Here are a couple of things for you to consider. Naturally a lease is a fixed payment arrangement, so you do have a constant obligation to meet the agreed upon payments over the term of the lease. If you have chose a ‘ lease to own strategy then clearly you own the equipment at the end of the lease – in some cases certain equipment holds value and actually appreciates, but 99% of business assets, other than real estate, decline in value . Also, your accountant may tell you that some of the tax advantages of a lease are less attractive. A lease versus buy strategy may point out that it is actually financially advantageous to purchase or take out a loan.

Well there, we have given you four or 5 reasons why Leasing ‘might ‘not be the best financing strategy. Now though, let’s talk about ten or more reasons why Canadian lease equipment financing solutions in fact might be very attractive and appealing to your asset acquisitions!

The most obvious benefit of leasing as perceived by Canadian business owners continues to be that it allows your firm to conserve working capital. We talked bout how a lease versus by analysis by your accountant or financial team might show that leasing is not the best acquisition strategy – however in many cases, depending on criteria assumptions, it in fact may well prove to be a more profitable financing and cash flow strategy.

If your firm has bank loan or arrangements with any other lenders you are often, if not always subject to other covenants and restrictions they have imposed re collateral, personal guarantees, and ratio covenants. In a lease financing strategy the collateral is generally just the equipment, it’s a very stand along type of financing!And naturally those bank lines and arrangements that we just spoke of are not disturbed; you can still use them for day to day working capital and cash flow.

When clients ask how long it takes to get an approval and financing completed we generally indicate that can be done in a week or so with their full co operation. Generally that type of time line cannot be met with other types of financing. And payments and cash flows can always be structured to meet your financing needs. In effect you have arranged an alternate source of financing for your firm, and all financial gurus will advise you to ensure you have multiple, not just one, source of business financing.

In May cases you are acquiring business equipment and assets because of budget issues and leasing certainly helps to eliminate what our firm calls the ‘obstacle to innovation. Certain assets your lease will ensure you have in effect created a hedge against obsolescence.

Well, in summary, we have given you four or five reasons not to choose equipment financing in Canada as a financing strategy – hopefully you will weigh those against the ten or so great reasons to financing via leasing. Speak to a trusted credible an experienced advisor in this area if you wish more information.

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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/Equipment_financing_specialists_canada.html

Working Capital Financing – Canadian Solutions

Working Capital Financing – small and medium sized firms in Canada do not necessarily have the options that some major corporations have in putting short term and long term working capital in place for their business. Larger companies have somewhat easier access to credit, operating lines, and ability to tap into public or private equity.

But what options does the small and medium sized business have in Canada for generating working capital and cash flow?

Every business owner knows the challenge of not being able to accept large orders or contracts because of a lack of funding. And if they are in fact able to take on that business it of course means they wont get paid right away – they will have to wait 30, 60 or 90 days for their receivables to be collected .

Working capital itself assists your firm to meet its daily requirements and allows you to grow the business. It also allows your firm to extend credit on favorable terms to your customers.

Solution? There are a number of solutions to consider. If all firms were the same size and had the same problems we might have some easier decisions. The fact is though that when we meet with clients to outline working capital solutions each company is in a different industry, they have different business model, and their funding needs vary by size and nature.

Let’s recap some of the solutions available.

In many cases you may wish to consider an angel investor for your business – another way of looking at this is a strategic partner, perhaps a supplier or customer who sees significant benefit in working together with yourself.

Canadian chartered banks offer a number of programs, but you should ensure you feel you can meet bank requirements. Some of those requirements are that you have been established and the owners of the business have a good reputation and reasonably solid credit history. You should be able to produce financial statements and demonstrate that your receivables and inventory are turning. It’s great to produce a forecast or a business plan, which also assists you as a good planning tool.

Fortunately or unfortunately we have observed that many small businesses in Canada are financing by a certain amount of credit card debt. We can only say on this point that if you are able to meet the credit card payments and get a reasonably low rate credit card it is in fact a source of working capital, not the best one, but it works.

Another great working capital solution is to take out a home equity line of credit and loan it to your business. The business pays you back, and the loan interest is deductible – it’s a solid strategy in many cases.

The government of Canada offers a Small Business Loan program that is one of the best programs in Canada for Canadian business. The one technical point on this program is that it covers only equipment and leaseholds and real estate, so you should ensure these programs meets your exact needs. One other government entity on the federal side offers working capital term loans; these are cash term loans and are generally unsecured, with only the promise to pay of your company and yourself as owner. Rates are excellent for what you are getting.

One of the most power forms of working capital financing comes in two flavors – factoring, or an asset based non bank lending facility for receivables and inventory. These two facilities are probably the best working capital solution in Canada, as they give you full liquidity against your current assets, receivables and inventory. And as importantly, they don’t put debt on your balance sheet, just cash. That is a good thing!

Speak to a trusted. credible and experienced business financing advisor to determine your working capital needs and which solution works best for your Canadian firm.

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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_canadian_solutions.html

Equipment Finance – Sale and Leaseback Solutions Canada

Equipment Finance is one of the most popular and widely used financing strategies used by Canadian business owners and financial managers. It is a unique financing opportunity because it is kind of the opposite of a normal lease financing strategy. Why is that? Normally your firm has the need for equipment, and has cash flow and working capital to make the payment.

In a sale and leaseback financing the opposite is true. You have equipment, it’s paid for, and the capital is of course tied up in the fixed asset account of your balance sheet. How can you unlock that capital and put it to work to generate sales and profits? The answer is the sale leaseback strategy.

You should consider a sale leaseback strategy when you have a need to improve your liquidity. What is the sale leaseback – very simply speaking it’s the re financing of equipment you own under a lease strategy, so it is not a loan per se. There is one key accounting issue that we should point out though, and it’s simply that if you refinance that equipment and the financing is more than you are carrying the asset for on your balance sheet (you have depreciated the asset over time) then the excess you receive over book value might be taxed as a profit. Bottom line, talk to you accountant on that point.

Implementing a sale leaseback strategy for your Canadian firm is easy – along with the normal business lease application you will need to generate a bill of sale to the lease company that transfers title back to them and title will once again revert back to your firm when the lease is repaid.

Depending on the size of your transaction, or the number of assets involved it might be advisable to get an appraisal , in fact one might ever be a requirement, as opposed to a ‘ nice to have ‘. We point out to clients that often work in your favor as it gives you a sense of what the true value is of the equipment and it might increase the amount you receive under the sale and leaseback strategy.

Another benefit of a sale leaseback strategy is that it potentially will make your balance sheet look better. In many cases your current ratio improves because you use the funds to reduce payables. You are more liquid and can use funds for such things as buying more inventories and taking discounts for prompt payment

In summary, a sale leaseback strategy is a great way to improve working capital and your balance sheet. Speak to a trusted and credible leasing advisor and determine if you can take advantage of those benefits.

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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/equipment_finance_sale_leaseback_solutions_canada.html

Equipment Financing – Toronto Area

Canadian business wants and needs equipment financing. As the Canadian economy continues to improve your business has the need for new or replacement equipment.
You naturally want to do that in an efficient and economical manner. In general, all types of equipment can be financing – Some of the main categories of equipment that can be financed are:

Computers (‘Information technology” ‘IT ‘ )
Plant and production equipment
Software – (Yes, software!)
Rolling stock – i.e. trucks, trailers, etc
Specialized Equipment

Etc!

The challenge for the Canadian business owner is to understand the Canadian leasing landscape and determine which lease partner suits their needs.

Many of our customers focus on ‘rate ‘, or in effect the price. It goes without saying that your firms want a competitive rate, and clients are surprised when we say they get to pick their own rate! What do we mean by that? We simply mean that your company’s overall credit quality will always determine the rate and structure and term of the lease. However, in order to achieve that best rate or ‘ pricing ‘ you need to ensure your company is presented in the best light possible .

In order to achieve both a prompt approval and a solid structure we strongly recommend that you work with a trusted, experienced and credible lease advisor in your area. The ability to properly understand your needs, and to present them in the best light possible is critical.

What is involved in a solid lease equipment financing submission? In Canada many, in fact the great majority of leases under 50,000.00 can actually be approved without financial statement disclosure. You should clearly expect to be providing financial statements on transactions over 50k.

How is lease approval decisions made? No one factor determines an equipment lease financing approval. It’s quite frankly what our firm likes to call the ‘weight of evidence ‘. That simply means that several key factors such as your financials statement health, the current state of your industry, the asset quality, and your ability to demonstrate re payment are the key factors in any lease financing approval. Depending on the size and nature of the asset any one of those indicators might carry a bit more weight. From a technical point of view the ability to show cash flow repayment is very important.

Clients looking for lease financing often are surprised about a few things – examples are as follows –

-You don’t have to be an established business – lease financing can be for a start up or emerging company also
- Your equipment doesn’t necessarily have to be new, it can be used if you can demonstrate its value and that it has been maintained and still has a useful economic life
- You might already own an asset – let’s say it is not financed, you can lease it back to the lease firm and generate cash flow and working capital from that transaction!
- Banks in general in Canada do not provide lease financing – two of the Canadian banks have lease financing operations but credit quality must be quite good to achieve bank type lease financing
- Being declined does not necessarily mean that you can’t get the equipment financing – we simply re structure the transaction to meet the approval criteria – that might mean a down payment of a shorter term, etc

There! You just learned 5 interesting and valuable facts about lease financing!

If you are looking for Canadian lease financing speak to an experienced professional in the industry and ensure you take advantages of this great type of financing.

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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/equipment_financing_toronto_area.html

Invoice Cash - Working Capital Now for your Receivables

Invoice cash - How can Canadian companies address the problem of growth and lack of working capital. The majority of any firm’s liquid assets are tied up in accounts receivable. Over the years customer that paid in 30 days now take 60 or 90 days to pay your firm. This then places tremendous pressure on working capital. Thats the problem - is there a solution.

As a Canadian business owner you in fact feel that pressure every day - one business owner I know who has had his business for over 30 years says you aren’t an entrepreneur until you have ’ sweated a payroll ’ - which of course meets rising to the challenge of meeting that key payroll requirement for your employees .

How can a Canadian business owner of financial manager determine when working capital is tightening? They are some very basic calcs you can perform. There are a number of great indicators you can monitor - here is one - it’s the ’ Collection Period ‘. Simply take your accounts receivable and divide you your average daily credit sales the longer your Collection period number is the greater attention you need to pay to working capital. Receivables are a huge component of working capital. So what if you had a solution to obtain all the working capital you needed based on current and projected sales growth?

That solution is invoice cash, or the immediate factoring or discounting of your accounts receivable. If you have no bank line with a Canadian chartered bank, by sacrificing a couple of percentage points in your gross margin, you can immediately monetize your accounts receivable.

The ’ challenge ’ - if we can call it that, in the Canadian marketplace is simply setting up the right invoice cash facility. We advise our clients on focusing on a ’ non notification ’ facility. Factoring , or invoice cash, or accounts receivable discounting, came to Canada via the U.S. and Europe , where the process has been in practice hundreds of years . Canadian business owners are less willing to turn over their accounts receivable function to a third party finance firm.

We therefore focus on non- notification solutions for clients - a financing facility where you can bill and collect your own receivables, and still get daily, weekly, or monthly advances ( It’s your choice ) on your accounts receivable .

An ever better option is to marry an invoice cash facility with an inventory financing facility - you’ll be able to finance your inventory also. That means only one more thing - additional cash flow and working capital.

Speak to an experienced, trusted business financing advisor on your options for Invoice Cash, also known as factoring, in Canada. Putting together the right type of facility will allow you to generate needed working capital and cash flow to run ( and grow!) your business .

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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_2.html