Working Capital Financing – Canadian Challenges and Solutions

Working Capital Financing - Your Canadian business is challenged to find the best working capital solution for your firm. Canadian business owners and financial managers have unique needs – factors that affect their needs are the types of customers they have, their industry characteristics, etc.

Let’s break tradition and insert the summary of our information we’ll share right here! Quite simply it’s that you have a choice of working or seeking advice from an expert or a non-expert in business financing. We’ll take an expert any day!

There clearly in the mind of Canadian business owners exists a gap in financing solutions. Working capital is needed by your firm for both long term and short term needs.

One of the best programs, bar none in Canada is a government sponsored guaranteed loan that goes by the name of CSBF loan, or BIL loan, and most people commonly call it the SBL Loan, which stands of course for small business . There is only one problem with it, as we tell our clients. It’s simply the program covers only equipment and leaseholds and real estate – and that aren’t working capital!

Working capital needs are commonly day to day needs - other terms for it are operating lines of credit and net working capital. The two most common assets in this category are receivables and inventory. So short term working capital needs need to be addressed within those two asset categories.

The best form of working capital financing is of course free financing – what is that you ask? Its supplier financing, because the credit suppliers grant you has no financing charges applied to it, and by delaying payment of your payables you are in effect generating cash flow and working capital. But that must of course be balance off by the need to maintain positive supplier relations in the context of a long term business relationship.

The biggest challenge in the working capital environment is fast or dramatic growth within your firm. Sales are great, fast growing sales are even better, but at the end of the day they require your additional investment in receivables and inventory.

How can your firm finance receivables and inventory. It can be done in a number of ways – those methods include –

- Bank operating lines
- Inventory financing
- Floor plan financing
- Asset based lending
- A permanent cash flow loan that injects working capital but is paid back on a long term basis

Most small and medium sized business we talk to have a major challenge in obtaining the proper overdraft or line of credit facilities from their banks. Quite often they also have a hefty inventory component in their working capital needs and are unable to get proper margining on inventory. In those cases we strongly recommend to clients that they focus on alternative financing – this comes at a higher cost but often times can be the source of financing that takes your company to the next level of sales and profit growth.

In summary, working capital challenges are complicated. You need to determine what your cash flow needs is, how they will be met, and if they aren’t being met by your current financing strategy consider alternative methods of working capital financing. And, as we stated, you can talk to a non-expert in this area, but we don’t recommend that!

Lease Financing Canada – Canadian Asset Financing Solutions

Lease financing in Canada is the acquiring of use of assets such as machinery, vehicles, and computers. Most Canadian business owners and financial managers have recognized for years that this type of financing is a great way to avoid large investments of capital in equipment. You use and profit from the equipment, but the lease finance firm owns the asset for the interim period of the lease.

Canadian business has almost unlimited choice in what can be leased. We advise clients that their only challenge in equipment financing is simply to ensure they have structured the right lease with the right finance partner that offers superior rates, terms, and structures.

Most of the advantages to leasing in Canada are already know to Canadian business owners:

- fixed lower monthly payments
- certain tax advantages
- preservation of working capital
- staying competitive by utilizing and acquiring more up to date technologies for your plant or office needs
- lease payments are expensed and if structured properly do not significantly impact your balance sheet

Naturally there is no ‘ perfect ‘ solution in business financing for all firms for all the time – In certain circumstances you might end up paying a bit more for the asset over time, also, most lease payments, as we noted are fixed, and if you used a loan strategy you might have access to variable rates .

Although most Canadian business owners utilize a lease to own strategy in general you should always be focusing on matching the term of the lease with the useful life of the asset.

We can’t over emphasize that each customer has unique needs and may benefit more from certain of the key benefits of leasing depending on their overall business model and financial structure.

Rates in leasing are important, but at the same time the ‘rate ‘on the lease should not drive your over all decision to finance with any one particular firm. Flexibility, favorable buyout terms, easy to understand documentation, and prompt credit approval are all key factors in equipment financing.
Overall credit quality of your firm is also a key factor in Equipment financing in Canada. We can categorically state that lease financing is utilized by start ups to the largest corporations in Canada. Therefore approvals for equipment financing are focused on the general over all credit quality of your company, and in the case of small business, the credit attributes of yourself as a business owner.

In Canada the players in lease financing are: Banks, Equipment Dealers, Independent finance companies, captive finance companies, and lease financing specialist with a wide access to the market.
In summary, lease financing is a solid strategy for equipment acquisition in Canada. Canadian business owners should weigh the lease versus buy decision carefully and determine which lease benefits are most important to them. Work with a specialist in the area based on your asset type, your firm’s credit quality, and any unique issues you might have in your firm or industry. Utilize lease financing to grow and profit in today’s competitive environment.

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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/Lease_Financing_Canada_Canadian_Asset_Financing.html

Floor Plan Financing Canada

Floor plan financing in Canada is clearly a niche financing industry. The landscape for floor plan financing has changed dramatically over the years, with this type of financing become a very specialized field.

When clients ask us for floor planning information several key points are always up for discussion. We will focus our article information on non-automotive floor plan financing.

Canadian wholesalers and retailers in non automotive markets often find it critical to keep sufficient inventory on hand for product sales, demonstrations, and order fulfillment. This type of focus on inventory is important to Canadian business owners and financial managers.

Your business has the need for inventory and floor plan financing that gives you’re the amount of credit limit you require to grow and prosper.

Interest rates charged on floor plan financing are important – equally as important is your ability to maintain enough gross margins to absorb floor planning charges and still generate a profit.

Floor plan financing in Canada is available for any wholesaler or retailer who is aligned with reputable manufacturers. Historically floor plan financing was for select industries but now it has broadened to a variety of consumer and commercial products. In the 1980’s and 1990’s floor planning of computers for OEM’s and Value added Resellers was an important component of the computer industry.

Floor plan financing is all about inventory. You need inventory as your products are sold to your customer based.

In many cases it also makes serious sense to ensure you have a financing program in place with the customer base also that is a logical extension of the floor plan financing that you yourself carry.

Floor plan financing is somewhat of a ‘ risk’ based financing, in that your floor plan lender always carries the risk that your firm might sell product ‘ out of trust ‘ – which is the finance terminology for the collateralization of your inventory by your floor plan financing firm . A significant amount of emphasis in any floor planning arrangement is the focus that is put on your firms overall all credit worthiness and ability to conduct business in an honest and ethical manner. Clearly your business model also necessitates that your have strong inventory and control systems in place which allow you to report regularly on the inventory that is financed.

In Canada the Person Property Security Act and the concept of ‘security interest ‘is the lending documentation by which your inventory is financed and collateralized.

While physical inspections and regular and ad hoc audits are a key element of floor plan financing clearly the use of technology and the internet has significantly enhanced your ability to interact with your floor plan lender . At the root of all floors planning is the ability for the manufacturer, yourself, and the floor plan financier to communicate effectively. The overall all credit worthiness of your company drives the final decision on what amount of maximum floor planning credit line can be provided.
We often speak to our clients regarding floor planning facilities on the need for your business to understand your inventory turns – in a perfect world you want to have a strong inventory turnover which will drive a lower cost of carrying floor plan financing .In many cases the receivables you generate out of a sale of inventory can help to bolster your overall floor plan financing arrangement.

The ‘ worst case scenario ‘ in any floor planning arrangement is your firms inability to pay the floor plan financing at which point measure are taken to repossess product . No one wants that of course. That’s the most negative aspect of floor plan financing – the positive aspect is that it provides tremendous financing power for sales growth.

Floor plan financing is a key element of business finance for any wholesaler or retailer of manufactured products by well known household and industrial names. Speak to a credible, trusted and experienced financing in this area to determine how floor plan financing in Canada works and how it may improve your revenues and profits.

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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/floor_plan_financing_canada.html

Banks, and Me ...

Canadian banks got zapped in a Financial Post article on April 14 called ’ SMALL FIRMS SCORE BANKS POORLY : STUDY ’ .

While CIBC and RBC got a solid scathing quite frankly every Canadian chartered bank got its share of criticism with respect to their commitment to small business .

This article could not be any closer to what this BLOG and my business ( www.7parkavenuefinanical.com ) is all about . We originate business financing for Canadian corporations of all size, from start ups to major corporations .

My own thoughts on this are very clearly - its the banker, not the bank. Doesn’t anyone get this ? We work with some great people at all these banks , in fact a large part of my own time is spent searching these people out and cultivating business relationships with them . In any large organization you have under’performers and over performers . We have contacts at these institutions who wake up every day and look for small businesses to finance . Many of their peers , in my opinion, dont do that .

When Canadian business owners and financial managers are looking for business financing do you think they go to the balance sheet and financial statement of the banks and determine which bank might have the most capital, cash on hand, etc . That doesn’t happen .

What they should do is try and find a banker who is sympathetic to their needs and who will outline financing options, and then champion that customers cause within their own organization based on their job parameters and the particular offerings of the bank .

It’s the banker , not the bank - can I be anymore clear?!

Stan

Sr&Ed Financing – Cash and Working Capital Now for your claim!

SR&ED financing (also known as SR ED / SRED Financing) is a very positive working capital strategy to monetize now your SR&ED tax credit filing.

Canadian business owners who have filed SR&ED claims in the past are already aware of the great aspects of this program, under which the Canadian federal and provincial governments provide a non repayable grant to your privately owned Canadian company for your expenditures relating to improved products and processes. The fact that you can recover a very significant portion of your salaries, materials, equipment and portions of overhead is in our opinion the best program in Canada as it relates to government actually really helping Canadian business.

Many clients approach us and ask about ‘government grants and loans ‘. While there are of course many such programs out there the SR&ED program is real money under a much defined process. And it is non repayable – that’s a good thing.

Let’s assume you are aware of the program, have filed claims, or are filing your first claim. The claim is of course filed at the same time you are filing you year end tax return. The claim can be prepared by yourself, but in our experience 99% of claims are best prepared by specialized consultants of your accountant.

So you have prepared a claim and you have filed it. Of course you can wait for your government refund cheque, but that process involves of course also going through the review of your claim by Canada Revenue and in some cases having a technical audit of your claim. The government website indicates that depending on when you are filing, whether it is a first time claim, and if you are filing for multiple years that you can wait anywhere from 4 – 12 months based on some of the above noted factors. CRA in Canada has a specialized team that works in this area and clients tell us that the overall review of your claim is a fairly standardized process – naturally the overall quality and back up your provide to your claim helps finalize proper adjudication and approval .

Can you get cash and working capital now for your claim? Yes you can. Simply work with a trusted, credible and experienced business advisor in this area and immediate financing can be provided for your claim.

Clients ask what the basic process is over view to get your filed claim financed. It is a very basic process not unlike any standard business financing application. The basic steps are as follows “

-Complete an application – i.e. business details, your current company financials etc
-Provide details of your SR&ED claim

A term sheet can be provided in a matter of days, and claims are financed at generally 70% of the total value of what you have filed, i.e. the combo of the federal and provincial portions. Financing can take place, in our experience in a matter of 2- 4 weeks. You can of course use your SR&ED loan funds for any general corporate purpose, and no payments are made during the loan period. The loan period ends when you claim is processed by Ottawa and you of course receive the other 30% of the claim at that time, less any financing fees.

Consider maximizing the Canadian SR&ED claim by turning your filing into immediate cash flow. That is a solid working capital strategy that assists your firm in growth and competitiveness.
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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/Sr_Ed_Financing_Cash_and_Working_Capital_Now.htm

Film Tax Credit Financing – Canadian Expertise and Cash Flow Solutions

Film tax credit financing in Canada is enjoying a mini boom and resurgence due to a number of positive factors. The economy is strengthening and government and industry bodies are both recognizing and capitalizing on the overall benefits to the film, television and animations sectors, which are the prime movers in the industry.(Music and book publishing traditionally rank behind these sectors.

Although the film and entertainment business in general might seem so much more esoteric than, for example, Canada’s manufacturing industry, it should not seem surprising that the business faces the same challenges as any other Canadian firm – namely financing via cash flow and working capital and fundamental product success.

What Canadian participants in the industry need to know is that your ability to finance projects viatax credit financing , accrual financing, and other financing strategies can significantly enhances your chances of overall financing success.As most industry participants know you don’t necessarily have to have a production hit to ensure you can still capitalize on financing and recovery of costs.(Having the market accepts your movie, show, or product is still very nice though!)

There are a number of late breaking industry changes in the market place that are extremely attractive and are therefore able to assist you in the financing of your projects. As we have noted, it certainly has help when federal and provincial governments have stepped up to the bar and committed millions of dollars of tax credit ability.

Your ability to capitalize on the financing of those credits could be a major factor in the successful completion of your projects.To re- enforce our point on government commitment the there is even intellectual property financing assistance in screen based industries.

The core of successful financing is knowing what is available and then implementing and utilizing innovative strategies around financing.

In any business you have a choice of working with experts, or trying to get financing things done on your own. By utilizing the services of a credible, experience financing advisor in this area you have the ability to broaden your financing possibilities.

When clients as us for tax credit financing assistance they are pleasantly please to hear that that they have the ability to monetize their tax credits into immediate cash flow and working capital. As a producer or other principal you simply might not be aware of the myriad of financing options available, even if it’s just the availability of various tax credits.

Many industry players might think their productions go to some sort of tribunal or jury for adjudication – in fact that is not the case. Your main focus in film and related tax credit financing should be as follows:

-Determining which credits you should use Vis Vis cash flow maximization – as an example for certain of the refund credits you have to choose between one and the other

-Getting certification in place

-Financing your certificates( Innumerous instances accrual financing is possible ; so cash flow is then almost instantaneous provided you meet basic criteria

Surrounding yourself with a credible team always helps in any industry.Knowledge of Small nuances in the programs can actually save, and get you thousands of dollars – a good example is the OFTTC credit and your willingness to shoot a production outside the GTA – In effect you are in a position to recover 45% of your funds at that time, with just that one issue being considered and implemented.

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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/Film_Tax_Credit_Financing_Canadian_Expertise.html

Franchise Finance Canada – Financing your Canadian Business Purchase

Franchise Finance in Canada calls for both you as the owner, as well a lender, to, on a combined basis, complete the financing you need for a franchise acquisition. In Canada you could of course be acquiring a new turn key franchise from a U.S. or Canadian franchisor, or in many cases also considering the purchase of an existing franchise.
Several key questions are always table by our clients – inevitably they are:

-How much do I have to put into the business as my own investment?
-Where do the other funds come from?
And, oh yes, how long does the process take!

We always encourage clients to start thinking of financing very early in the process. A great place to start is often, guess who? Your franchisor! That is simply because if they have a multi unit system already in place they usually have a strong indication of how these franchises were financed. Information you obtain from the franchisor or other existing franchisees is invaluable , as the franchise financing journey is a puzzle to many .We also are quick to add that you should never expect financing assistance from a franchisor in the form of loans, etc – The franchisor grows their business from selling you franchises, not loaning you money .
In the U.S. the majority of franchises are financed via the SBA, which stands for Small Business Administration . This is a government sponsored / funded loan, and Canada has a similar program that is commonly known by several different names – they are SBL, CSBFL, and BIL. All of these are acronyms for the same program.

You should most certainly incorporate your business to both gain access to business credit as well as limit personal liability. Personal liability under the Canadian version of the program is limited to only 25% - that’s a great deal for the business owner, as it of course limits your risk.
Most franchises in Canada are financed via this program. Sounds good so far right. We simply point out to clients that achieving success in this financing program is simply a case of:

- ensuring you understand the basics of the program – i.e. what it does not do
- complying with the information required by the program

When planning your franchise financing focus on what amount you can contribute personally to the business, and also understanding the components of financing you need. What are those components? They are:
- Soft costs ( example – franchisee fees, pre paid rent, etc )
- Equipment
- Leaseholds ( if required )
- Working capital

We can’t over emphasize the need to work with an experienced and credible business financing advisor who preferably has a track record of franchise financing success. A thorough business plan, the right advice, and understanding you’re financing needs – all are critical elements to franchise financing success!

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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/franchise_financing_canada_business_purchase.html