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

SR ED Financing – Factoring Your Sr Ed for Working Capital in Canada

Canadian business owners and financial managers don’t find waiting productive. So why should you have to wait to finance (in effect it’s a factoring or discounting) your SR ED claim. You shouldn’t have to and we will show you how.

To be able to finance a SR ED claim you of course have to have a SR&ED claim. That makes common sense.Canadian business owners know when they have a significant investment in their research and development and commercialization projects. That is more than intuitive, because they are spending real dollars, often considerable sums, to maintain their competitive edge in products, services, and processes.That’s of course why your firm should be finalizing a claim and filing it as soon as you can in conjunction with your fiscal year end. Naturally once you have filed the claim you can wait anywhere from 3- 12 months for the refund chq to arrive from Toronto or your provincial component from your provinces capital city.

Do you have to wait to recover those funds? Of course you can if you choose, but your claim is financeable if you seek out and talk to a trusted, credible expert in this area. Why not finance your claim, recover those funds now, and continue your investment in leading edge research den processes to maintain your competitive stance within your industry and product or service sector?

So what are the basics of financing that claim . Let’s review them in detail and ensure you have the under pinnings of a successful SR ED financing strategy.

As we mentioned you have to have filed your claim to begin financing it.In our experience the whole process, we tell our clients, takes two to three weeks if your full co operation is provided. Naturally if timing is important you could start the process a little in advance of filing your claim.Any Sr Ed calim can be financed, but those that are prepared by competent parties are in effect ‘more financeable ‘as they have a credibility and experience factor attached to them.

Does your own firm’s financial status play a part in the financing of your SR ED? We can say with assurance that 90% of the SR ED financing questions rely very specifically on using the SR ED as collateral for the financing. But naturally your firm has to be able to demonstrate some sense of on going viability with respect to sales prospects, etc. However lets be honest, many firms are usingSR ED tax credits because they are in growth or start up mode, so that should not deter you fromcontemplating and discussingthe financing of your SR ED .

A normal SR ED financing application includes the usual business info data you would submit with any business financing – i.e. info on your firm, its financials, info on the owners, etc. Loans or advances against your claim are generally made at 70% loan to value; in effect you immediately receive 70% of the total amount of your SR ED tax credit calim. The balance is remitte3d to yourself, less financing fees, when you calim is approved and funded in Ottawa.

A proper SR ED financing is structured so that you won’t make any payments while you wait, so it’s a pure cash flow and working capital strategy.

In summary, utilize your tax credits to recover significant portions of all your R&D expenses if you are a privately owned Canadian company. Ensure you consider a SR ED financing strategy if you wish to accelerate SR ED spending or simply use the funds for any general worthwhile purpose.Speak to a trusted, credible and experienced SR ED financing advisor to structure a claim that makes maximum financial sense for your firm.

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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/SR_ED_Financing_Factoring_Sr_Ed_For_Cash_Now.html

Film Television and Animation Tax Credit Financing – Canadian Solutions

Financing solutions and models continue to be sought after in the Canadian film televison and animation tax credit financing area. Additionally other working capital solutions for Canadian productions in this area are also available and generally less known as to their existence and their ability to assist productions of Canadian content.

Early in 2010 , as is by now well known by most players in the industry, the Canadian government at both the federal and provincial level ‘super charged ‘ tax credit grants and incentives . Rates and credits increased for specified expenditures by as much as 5-10 per cent in most areas of these tax credits. Additionally a fund was even creating for Intellectual property, with a projected funding of ten million dollars.

Productions with Canadian content are aggressively being produced and savvy principals in Canada are both taking advantage of these credits, and also financing them on an interim basis, or on completion.

A combination of private investing, government non repayable tax credits and even some participation by Canadian banks create a ‘tour de force ‘of financing assistance for Canadian content. Although a significant previous factor in Canadian growth was the cheaper Canadian dollar even the dollar at par now has not hindered Canadian productions in all three key areas, film, television, and digital animation. (And let’s not forgot those lesser known sisters - book publishing and music!)

Productions in Canada are of course financing in the same manner as almost anywhere else - equity by owners, tax credits, loans, and distribution deals. The most recent tax credit incentives in effect replace film tax shelters of previous days. In our opinion this method is more transparent, available, and takes a lot of the negativity associated with ‘tax shelters ‘.

So how do principals access tax credits and how can these tax credits be financed. Did you also know that financing is available on an interim basis also, so for properly documented productions you can obtain interim financing assistance that in many cases becomes a key up front component of your financing and will allow you to complete your project more advantageously from a financial perspective ?

What are the basics of this type of financing – let’s review them. To say that film, TV and animation financing is a boutique industry in Canada is of course an understatement. For that reason we strongly recommend that you work with and speak to an experienced and knowledgeable advisor in this area. To access financing you must ensure your project or projects are eligible to be certified for any one or more of the six major tax credits that are available, for example, in Ontario. (We will use Ontario as our example, but each province has similar regimes to assist yourselves.) You should ensure you have created a single special purpose entity, essentially the legal shell under which your production or project will be qualified.

Carefully choose which credits you are eligible for, and ensure you apply for proper certification as soon as possible. Improper or incomplete certification only (as in any business financing process) slows down and stalls your tax credit and the ability to finance it.

Maintain proper disbursement and payroll records – we strongly recommend to clients that they use a specialized accountant or firm in this area. If you can demonstrate your background and experience, have proper certification in process, and are committed to document the project through completion by proper filing of tax returns and financials your tax credit can be financed as immediately as when it is accepted and provided to your project . If you seek interim financing for the same project, and are committed to maintaining and demonstrating the quality in the key fundamental areas noted above you are eligible for accrual financing, or cash flow and working capital assistance immediately even prior to the certification of your project(S).

In summary, ‘Hollywood North’ appears to be booming again. The economy has picked up, consumers want entertainment in all key sectors, and even the Canadian dollar has not deterred investment in production. Tax credits have increased, and even better yet, by working with the proper experienced partner your credits can be financing when they are certified, or even earlier if you can document a strong go forward action plan on disbursements, payroll, and your experience in this great area of the Canadian economy. And by the way, speaking to an expert in area doesn’t hurt – extra tips and assistance may be worth thousands or hundreds of thousands of dollars in cash flow and working capital for your projects!

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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/Film_Television_Animation_Tax_Credit_Financing.html

Franchise Financing Canada – The Process and Approvals

Franchise Financing – Prospective franchisees in Canada want to know what is involved in obtaining the proper financing for their business. Many new franchisees are not aware of how franchises are financed and whats involved, so let’s share some critical information in this exciting and growing industry in Canada. Statistics show that franchises in Canada are in fact a huge part of the Canadian economy, and business and consumer franchises are involved in virtually every industry in Canada.

As a prospective franchisee you are either looking to purchase a turn key new opportunity from a franchisor or master franchisor, or you may perhaps be entertaining the purchase of an existing franchise that is already established . It goes without saying that you should carefully examine in that instance why the current franchisee is selling. More often than not it is because the current franchisee wishes to move on to another business or career, but you should examine why he is leaving for all the obvious reasons.

There are some innovative ways to finance your franchise in Canada. So how are franchises actually financed? The majority of them are done via a government programme called the BIL (also known as CSBFL) programme. This program is subsidized in rate and structure by the federal government and in our opinion is, bar none, the best small business financing program in Canada. It can of course be used for existing and new franchises. The program offers rates and structures that even larger corporations can’t achieve – i.e. Longer terms and amortizations, very competitive rates, and limited personal guarantees.

When clients approach us with transactions that are more difficult to structure an often used strategy we employ is the VTB. That stands for vendor take back, and allows the current owner in effect to reduce the total financing cost for the customer considerably. The owner takes a promissory note arrangement from you and these notes are structured for maximum flexibility to both parties. Lets to a quick example to show you the power of the strategy.

Lets say you are purchasing a franchise for 400,00.00 .00. The monthly payments on a 5 year loan for that amount of funding would be approx 7600.00. If the seller was willing to accept a 75,000 note from yourself to repay this portion later your new finance amount is 325,000.00 and your monthly payment are now only 6200.00. It goes without saying it’s easier to make a 6.2k / mo payment than a 7.6k/mo payment! In circumstances such as this good negotiating and the good intentions of all parties are required, that’s what makes a deal work, when both parties adopt a win win attitude.

Typical franchise loans tend to be in the 100-350k range in our experience. Much larger loans often involve the most well known names in their industry, and in many cases might have some real estate attached to the transaction.

We have found with great success that the ‘cobbling together’ of a franchise financing is, in the current economic environment, the most successful strategy. That usually involves our previously mentioned BIL franchise loan, perhaps some equipment leasing, and in some cases an unsecured working capital cash flow loan. A total package usually comes with a business Visa and an initial operating line of credit to suit the overall needs of the business.

To properly execute your franchise financing strategy you require a business plan and some carefull planning around what you need to purchase the business, and, as importantly how you will finance future cash flow, inventory, and growth needs.

In summary, franchise financing in Canada is unique and a specialized type of financing. We strongly suggest you seek and utilize a business financing expert in this area in order to help you determine your overall needs and how you will execute on a successful franchise financing. Its step one to being a new successful entrepreneur!

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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/franchise_financing_canada_process_and_approvals.html

Equipment Financing Approvals – Toronto and Area

Equipment Financing Approvals – You are a Canadian business owner or financial manager who requires lease financing for asset acquisitions. Although a majority of leasing firms are located in the Toronto area lease financing is of course available across Canada. We encourage clients to seek out and develop a business relationship with a trusted and credible lease financing advisor.

So what is important in getting a lease approval? Unfortunately most clients tend to focus on only one thing – the interest rate. The actual accounting reality around lease financing is that the interest rate is not even a rate per se as you are utilizing the equipment but not necessarily owning it. Anyway that point alone is a discussion for another day.

Naturally the financing rate attached to the lease is important, but face reality – your rate is always going to be commensurate with your overall credit quality – if your firm has excellent financials, is profitable, has good cash flow, is growing and is in a good industry sector we can assure you that you will always have a competitive rate within a ¼ point or so.

The lease credit decision actually plays a large part of the entire lease financing approval cycle. Factors that determine your overall final approval are as follows:

- Overall credit quality of your firm – ( key factors include your balance sheet, are you profitable, years in business, and amount of financing requested
- Type of asset you are financing
- Dollar size of transaction
- Special structuring requests

Traditional lease financing focuses on your ability to demonstrate you can make the payments – no surprise there of course. But how does your lease firm make that decision. Fortunately or unfortunately it’s a very mechanical decision – it’s a case of taking your cash flow from your financials - i.e. net income and depreciation combined together, and determining if that cash flow supports on an annual basis the next 12 months of payments .So there, we have just shown you how you can influence and present your cash flow repayment ability.

In many cases, certainly in the current more challenging business environment your financials might not be in a position to meet these cash flow calculations. That is where extra skill on your behalf (but more probably and properly achieved with a leasing advisor) is required to present what I have called ‘the weight of evidence ‘that you can make those payments and are worthy of an approval. Additional factors might include some potential restructuring of the lease term – i.e. a shorter term, or accelerate payments . Although many firms stress leasing as 100% financing the reality is that for the transaction to work for yourself and the lessor you should be expected to offer up a 10- 15% (sometimes more) down payment.

Typical other factors to be taken into consideration are your payment experience reports at a Commercial Credit bureau or Dun and Bradstreet, and miscellaneous factors such as years in business, cyclicality of your industry etc. In some cases offering up some additional equipment that isn’t financed as collateral will get you to the goal line.

In summary, lease financing approvals in Canada is a bit of both an art and a science .A proper presentation of your ‘weight of evidence ‘around your ability to pay should ensure you receive a satisfactory rate, term, and structure. And remember, it’s not always about the rate – pick a solid lease partner and work towards a long term relationship which will pay off ten fold over time relative to your lease financing needs.

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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_approvals_toronto.html

Working Capital Financing Canada – For Sales and Growth

Working Capital Financing in Canada is provided in a number of different ways to Canadian business owners and financial managers. Like anyone, you would prefer to deal with an ‘expert ‘in business financing, so we encourage you to seek and speak to a trusted and credible business financing advisor in your area of working capital need.

Working Capital solutions are provided by our banks of course and also by what we will call non-bank independent finance firms. Smaller and medium sized firms are often better served by non- bank firms who have a better understanding in many cases of their business needs as it relates to receivables financing, inventory financing, purchase order financing, equipment leasing, etc .

Clients always bring up the issue of ‘government grants and loans ‘. There are some grant type programs out there but in general they do not serve the needs of the average Canadian business owner as they relate to working capital.

There are two very viable grant and loan programmes in our opinion. They are the government guaranteed Small Business Loan , aka CSBFL , aka SBL loan, as well as the federal SR &ED program. The Small business loan provides equipment and leasehold loans to Canadian business owners, and is not capped at a new high of $ 350,000.00 . This in or opinion is a great term loan, and has excellent, we repeat, excellent rates, terms and structures. But the reality is that this is a term loan and is not a working capital loan per se. When clients come to us for ‘working capital loans ‘more often than not they are referring to cash flow needs for inventory, receivables, and equipment.

The other ‘ grant ‘ which in some ways could be construed as a working capital injection is the federal SR & ED program for your work on new products, services, and innovation in your business sector . This is a non – refundable grant that covers approximately 40% of all the cash you have spent in this area. We encourage all business owners in Canada, if it is applicable, to speak to an advisor in this area.

Most Canadian business owners are not aware of what is known as a cash flow loan. A more sophisticated finance term for this loan is a mezzanine or ‘sub debt’ loan. For smaller and medium sized businesses these loans tend to go up to the 250k range and are offered by a specialty lender which is funded by the Government of Canada. Larger cash flow and working capital loans tends to be in the 1 Million + range and are offered by non banks. These loans typically are unsecured, are used for working capital purposes, and have rates in the low to mid teens due to their unsecured nature.

In summary, working capital means different things to different business owners. Our focus has been on real cash flow and working capital for your business. Certain government programs might meet your needs in the areas of term loans, leasehold improvements, etc. But true working capital is the financing of current assets such as receivables, inventory, and purchase orders. Speak to a trusted credible financing advisor to determine which type of facility meets your 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 :
http://www.7parkavenuefinancial.com/Working_Capital_Financing_Canada_Sales_Growth.html

Factoring – Financing Canadian Receivables

Factoringfinancing in Canada is a proven, and growing in popularity method of generating cash flow and working capital for your Canadian firm. It often works best in conditions when your firm is experiencing higher than historical growth, or in many cases you are a start up or early revenue company who requires additional cash flow that you might not be able to attain from Canadian chartered banks.

In speaking to many clients factoring is clearly mis – understood. Last week we got a call from a customer who inquired whether we purchase bad, uncollectible accounts receivable. We indicated to that customer that what she in fact wanted was a commercial collection agency! Factoring in fact is the opposite of that, it’s the purchase of your accounts receivable ( and we mean the collectible accounts ! ) for immediate cash flow .

Factoring in Canada is somewhat of a fragmented industry, so we encourage you to seek and speak to respected and credible business financing and factoring advisor. The type of firm you end up dealing with in factoring will often affect how successful you viewed this type of financing strategy. There are a number of different types of factoring in Canada. Technically speaking we can refer to the types of factoring in the following manner –

Full notification invoice factoring (This is the U.S. and British model)

Non notification factoring

Spot factoring

Factoring in the context of a true working capital or asset based line of credit facility

We are always concerned that customers, armed only with a little bit of information or their first contact with a firm who only offers one type of factoring, will get themselves into the wrong type of facility, thereby tainting any future positive thoughts they might have on this type of financing. The bottom line again – you can speak to an unbiased expert on how this financing can help your firm, or you can choose a hit and miss approach and enter into the wrong type of financing facility. We will take option # 1 any day!

Let’s talk a bit about factoring in general as opposed to focusing on which type of factoring best suits your firm.This type of financing is essentially the purchase of one or all of your receivables, on a one of, of on going basis, to facilitate immediate cash flow.

Remember also that you are not incurring any debt when you are factoring – in fact your balance sheet improves because you are turning over receivables / working capital in a more efficient manner.

Because there is a cost associated with factoring you should generally be comfortable that you have the proper gross margins for the factoring of your accounts receivable.Very low margin businesses, even though they have good turnover are not always best suited for this type of financing.

In summary, factoring is growing in popularity. At the same time the myriad of types of firms that offer this financing, as well as the way in which they offer factoring can ultimately affect whether your firm is a successful user of this financing strategy. Investigate the benefits of this type of financing, ensure you understand who is offering it to you and which ‘factoring model ‘they use, allowing you to better determine if financing in this manner suits your cash flow and working capital needs . That ‘s proper business decision making!