– Sale Leaseback Financing Canada

Canadian business owners and financial managers realized in 2008-2009, despite economic and financial challenges, that they had significant equipment and assets that were available to generate additional working capital and cash flow for their firms.In essence they were equipment rich and cash poor, as a significant amount of assets was tied up.

How can your firm free up the cash flow and working capital in these assets and put those funds to work for sales and profit generation? The answer is a sale leaseback strategy.

In many instances if you owe money on the equipment those payments can be stretched out to lower amounts, and at the same time improve working capital and liquidity.

Is it difficult to engineer a sale leaseback financing. The answer is categorically no if you employ a trusted, credible and experienced advisor in lease financing in Canada.

The one caveat that we warn clients on is that the sale leaseback should not be greater than the book value on your financial statements of the asset being financed.

If in fact that value was greater you would incur a tax on the financing which might negate the positive aspects of the sale leaseback.

So how do you get your sale leaseback financing completed? In effect you are selling your equipment back to the lease company, so you are required to prepare an invoice and a bill of sale. That invoice of course means that you are warranting that the equipment is free and clear of liens and that you have valid title to the asset.

So how does the lease company register their interest in your asset? In Canada they do this under a simple filing under the Personal Property Security Act – ‘PPSA ‘.

There are a large number of assets that actually hold their value, sometimes increase in value, and in some circumstances only depreciate a modest amount. In that case we recommend to clients that they invest a nominal amount in an appraisal – this may well generate a larger amount of working capital and cash flow coming back into your firm. Prudent customers will generate an appraisal known as a fair market value appraisal – unfortunately many lenders will focus on a liquidation value appraisal, which is of course much more conservative .

Are there different documents used in a sale leaseback transaction? No! They are the same lease type of documents that you would expect in any type of equipment financing transaction.

Carefull attention should also be paid the ‘type ‘of lease that you consider in such a transaction. You essentially have two choices in Canada regarding such a structure; they are capital leases and operating leases. If you choose the former you have a stated intention to own the equipment again when all payments have been made; an operating lease signifies your intention to use the equipment, upgrade it, or return it at the end of term. Each of these two types of structures has different balance sheet and income statement effects.

In summary, sale leaseback financing allows you to generate working capital and cash flow from unencumbered assets. It can be done for any asset, including real estate by the way. Work with a trusted, credible, and experienced lease advisor to ensure you structure your transaction properly for maximum cash flow and working capital gain.

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

Factoring in Canada – Receivables Financing that works!

Factoring in Canada is four things:

-New and increasingly accepted

-Misunderstood

-Different than in the U.S.

-Growing more popular every day as an alternative vehicle to business financing

Canadian business owners and financial managers keep hearing about factoring , and when we talk to clients who are pursuing this financing option it is increasingly clear there is a lot of mis information and‘ noise ‘ about this unique type of financing that needs to be clarified .

So why is there so much mis information about factoring and how can business owners in Canada get the ‘real story ‘. Part of the problem is that factoring, in our opinion, means different things to different people, both within the industry itself, and also to the Canadian business owners. Similar to the terms ‘ cash flow ‘ and ‘working capital ‘the use of the term is interchanged in a variety of ways .Also, factoring isn’t a home grown solution, and migrated to Canada from the U.S. and Europe, where it has been in place for hundreds of years.

Factoring, also know as receivables financing, or ‘ invoice discounting ‘ is best utilized when firms are growing rapidly, have sales and verifiable invoices, and require injections of working capital for that a/r investment that otherwise might not be available through traditional sources such as the bank .In 99% of cases that we deal with where a client is a ‘ start up ‘ the initial financing through a factoring facility is a critical and valuable tool in the early growth of the company .

Let’s get back to the confusion around factoring. Traditional factoring in Canada is in fact simply the sale of your receivables, and their purchase to a factor firm. The most immediate benefit is the immediate receipt of cash, which eliminates the need to wait for anywhere between 30-90 days for payment from your customer. Over the years it is inherently obvious that every firm out there recognizes that delaying payments to your suppliers is an instant form of cash flow. However, when you are on the receiving end of that, waiting for your money, that is poor consolation!

Does your business receive 100% of the invoice value when you sell your invoices either individually, or bundled in a larger amount of invoices? The answer is ‘no’ – You generally receive on the same day anywhere form 75-90% of the invoice value. The balance is held back as a hold back or buffer, and paid to your firm immediately on final receipt of payment from your customer. At that point factoring would be ‘free ‘, but it isn’t, there is a further deduction for the commission or financing cost by your factor firm. That cost is one of the greatest issues facing Canadian business owners, because it is anywhere in range from 9%/annum to 2-3% / month.

The costs associated with factoring in Canada have to be viewed in the context that although they are higher than traditional bank financing that point becomes moot because your firm probably cannot qualify at this point for a true Canadian chartered bank operating facility. So factoring simply allows you to grow your firm when you can’t obtain sufficient financing otherwise.

So now we have understood what factoring is, and why it has become a tool within the Canadian business financing tool kit.That’s the easy part. The challenge for Canadian business then becomes –

-What type of firm is the best one for my company and industry

-How does this financing work on a daily basis

-Am I comfortable enough to let the factor firm notify my customers regarding invoice verification and payment

-Is there an alternative to involving my suppliers and customers into this financing process

We advise clients that the best factoring facility in Canada is one in which your firm can bill and collect its own receivables. That type of facility is called non notification and is as close to traditional financing mechanics as one can get.

So whats our bottom line summary – it’s simply as follows. Factoring in Canada is only mis understood because business owners don’t have access to solid unbiased information on how it works, what it costs, and how it benchmarks as an alternative to traditional financing. Certain factoring facilities in Canada exist that are very transparent to your firm and its customers. Factoring has higher costs, but those costs can grow your sales and profits considerably. Seek out the advice of a trusted, credible and experience advisor in this somewhat misunderstood area of Canadian business financing.

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

Film , Television, and Animation Tax Credit Financing Canada

Growth in film, TV and animation productions in Canada is very strong in 2010. The planets have aligned via an improving economy, a generous increase in the tax credit themselves, and more access to cash flow and working capital for these productions via creative financing.

Although the Canadian dollar is as strong as it has every been the reality is that talent continues to migrate into Hollywood North.

How can your tax credits be financed? Why should you consider financing them? We can categorically say that there is financing available for your Canadian productions and in some cases co-productions. Owners of these productions, often set up as SPE ( Special Purpose Entities ) should consider financing when they see a need for interim working capital to complete the current project, and , in some cases, to monetize the tax credit , allowing the owners to move on to another project . Both cases make good business sense!

The changes by the federal and provincial governments in Canada have been viewed unanimously as very positive for the industry. Grants and tax credits have been increased, and these vehicles have become an important add on to the traditional debt, equity, and distribution financing for Canadian productions. To some extent some of the Canadian banks have also started to get involved.All of these financing vehicles are the alternative to previous strategies such as tax shelters, which are no longer in vogue, and in fact not even currently legislated .

To finance your film, TV and digital media credits it is important to seek out the resources of an expert, which will save your production time, and at the same time allow you’re to maximize the cash flow of the tax credit. Utilizing the appropriate party can also potentially allow you to finance your credits on an accrual basis, which simply means that eligible productions can be financed all along the way – providing an even more immediate monetization of your future claim . That in it can be extremely valuable as a cash flow ‘super charger ‘to your Canadian production.The huge amount of new content in Canada via Canadian productions, co-productions with other countries, and the massive amount of new cable channels, etc bodes well for financing availability.

How do you go about financing that credit? The basics have to be followed. And, as noted seek out the services and expertise of a solid advisor in this area. Ensure your production is properly incorporated and that your have a system, infrastructure, and resources available to document your project from an accounting, payroll, and tax credit filing point of view. Also, ensure you appropriate tax filings for your productions are up to date.When these key elements are all in place you can receive financing, either after your tax credit has been filed (and potentially before) for up to 80% of the final claim value. Financing amounts differ based upon traditional analysis of management, owner’s background, quality of your actual filing, etc.

In summary, owners of individual productions in Canada should make an all out effort to ensure they qualify for and file for any one of the 6 tax credits available. Credits and filings vary a little from province to proving. Bottom line is they are generous. Your credits can be monetized to generated immediate cash flow and working capital for your production. If you need additional or interim financing is needed seek an expert to finance your claims.

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

SRED Financing – SR&ED Finance Loans in Canada

SRED Financing is your firm’s ability to take immediate cash flow and working capital advantage of our SR&ED tax credit claim. This program, (formal name = Scientific Research and Experimental Development) is bar none the best tax incentive program in Canada. Other than being taxable as income the refund you receive from the government is a non repayable grant. What could be better than that?

The irony in this great program is simply that almost 70% of companies in Canada that are eligible for the program do not even apply, let alone receive their funds!! It clearly is a source of untapped cash flow and working capital for your Canadian business that should be maximized to the hilt.

The other 30% of Canadian firms who use the program utilize it around their efforts to develop new products and services, building prototypes, and solving technological challenges.

So your Canadian controlled private company utilizes and files Sred filings. Did you know your claim can be financing immediately after you file it, literally the same day. Specialists that work as ‘SR&ED consultants are experts in preparing your claim and in Canada your sred calim can be prepared at your cost – and you keep all the proceeds of the government grant, or alternatively, your claim can be done on a contingency basis, at no cost to yourself, and the consultant usually keeps anywhere from 10-30% of the total refund received.

However most Canadian business owners and their Sred consultants do not know that your claim can be financing, either during the preparation of your claim, (yes, before your file, if you qualify!) or immediately on filing of your claim.

Generally with this type of financing you receive immediately approximately 70% of the value of your claim. The other 30% still comes back you of course,but its simply a bit of a buffer to cover financing costs and any risk that a portion of the claim will be disallowed or clawed back .

When we think in terms of specialty financing we can categorically state that SRED financing is specialty financing in Canada. We urge clients to locate a business financing advisor who has credibility, experience and background in this area.

The SR ED financing process is not as complicated as you seem if you are well prepared and have access to good assistance. Its as simply as completing a basic business financing application, ensuring proper back up is in place and valid . That includes info on your company, the Sr Ed claim itself, your previous Sr Ed claims if you have filed previously etc.

The reality is that SR ED financing can be completed within 2-3 weeks of starting the process. The beauty of this type of financing is that no payments are made on the sred loan. In effect you can say that you have factored or discounted the Sr Ed claim. You are simply waiting for your cheque from Ottawa, and are making use of the working capital and cash flow now. That’s a solid interim financing strategy for many firms, and that cash can be used for reduction of payables, investments in new equipment, additional staff, etc. The bottom line = any general worthwhile corporate purpose.

In summary, of course ensure you are taking advantage of Canada’s Sr&Ed program. Once that is the case you have the option of financing your claim, allowing you to maximize the true benefits of the program, i.e. the recovery of your R&D expenses in the most time efficient manner possible. That’s a solid financial strategy.

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

Financing a Franchise in Canada

Clients who are contemplating purchasing a new or existing franchise in Canada are always asking how financing a franchise works in Canada.The Canadian franchise industry is of course huge and covers almost every type of business in Canada. Certainly the majority of franchises seem to be in the Hospitality and QSR (Quick Service Restaurant) industry, but in actuality every type of business has some sort of franchise model attached to it. The franchise concept is many an entrepreneurs’ answer to the Canadian dream of growth and profits through business ownership and self employment.

It should not come as a surprise to Canadian entrepreneurs that there is no one single option of solution for financing a franchise in Canada. The reality is that a number of possibilities exist, and in some cases you must use a combination of these sources to complete the financing successfully.

The main source of financing in Canada for franchising is a government ‘subsidized’ and ‘guaranteed ‘loan from the Federal government. The program has two names, the CSBFL, and the BIL. These are acronyms for the government’s formal name for the program.

We firmly believe that this is the best program, bar none, for rates, terms, and loan structures in Canada. While the program is available and applicable to all Canadian businesses the majority of businesses in Canada that are franchised fall under this program.

That’s the good news, the less than good news is that in many cases you cannot totally complete your business franchise purchase with this loan financing on it own. Why is that? Simply because the program is structured and has limitations on what can be financed.

What can be financed under this program? The answer is 3 items only-

Equipment

Leaseholds

Real Estate

So if your acquisition of a new franchise involves anything other than these three items additional financing sources are needed.Those additional financing sources tend to come from your own personal resources, otherstructured term loans, and in some cases a vendor take back from either the franchisee you are buying theexisting business from,or potentially the franchisor itself . Don’t focus too much on the latter because in case you haven’t guessed by now, franchisors or master franchisors are interested in selling you a franchise so they can build another franchise unit into their network! They aren’t in the finance business per se.

The benefits of the franchise loan structure of the BIL/CSBFL program are significant. For a starter they carry only a 25% personal liability, and secondly the rates (3% over prime) (In 2010 Canadian primes continues to be very low!) are excellent. Under the spirit of the program the loan finances 90% of your eligible expenses. But don’t think that only a 10% equity or personal investment by yourself is going to get you approved. You should in general be thinking of anywhere between 25%+++ as your own personal contribution to the business.

In summary, financing a franchise in Canada is a unique specialty type of financing.You don’t want to do it wrong the first time and endanger your prospects of success by poor planning and mis information. Speak to a trusted business financing advisor who has credibility, experience and background in this area of Canadian business financing. With proper planning and assistance you will be on our way to achieve the Canadian dream of business ownership through the franchise model.

Asset Based Line Of Credit vs. Factoring in Canada

An asset based line of credit and factoring are terms that are becoming increasingly well known in Canadian business financing. These are two types of financing once considered non traditional and mis understood by Canadian business owners and financial managers are becoming more and more popular.

What is the difference between these two facilities and which one might be best for your firm?

Small and medium sized businesses in Canada continue to be challenged by working capital needs. That is simply the cash flow that’s required to run your company on a daily basis. As your current assets (receivables and inventory mostly) build up you find they cannot be liquidated as fast as they might be able to. Naturally some of that cash flow is required to service your long term debt also.

When Canadian business has too much money tied up in accounts receivable and inventory it must consider financing alternatives to address that issue. Two of those financing alternatives are asset based lines of credit (we like to also call those ‘working capital facilities ‘, as well as factoring.

Clients are always asking us which one is best for their firm. We believe that a true working capital facility is probably better than factoring, but the reality is that many firms cannot qualify for a true working capital facility.

However, both types of financing facilities will indeed have the same effect on your cash flow, namely improving it! , and at the same time reducing the need to borrow funds on a long term basis.

It is very important to note that both an asset based line of credit and a factoring facility is not ‘ debt ‘ – you are not borrowing at a fixed rate and increasing the overall debt load of your company . Both facilities simply ‘cash flow ‘or ‘monetize’ your current assets in a more efficient manner.

The reality is that when you do free up that additional cash flow by using one of these two facilities you, as we noted, reduce your dependence on external funding or equity needs. Your firm now has the flexibility to address day to day issues, and grow.

Clients ask then what the main difference is between these two financing facilities. It’s actually quite simply – a factoring facility is simply the sale of your accounts receivable for immediate cash on an ongoing basis. On the other hand an asset based line of credit provides that same level of immediate cash, but your firm hasn’t ‘sold ‘the receivables, you have simply provided them as collateral. The other main difference is that in many cases a true asset based line of credit will also cover inventory also, in many cases increases your cash flow availability by 50% or more.

We recommend that you speak to a trusted, credible and experienced business advisor in these matters to determine which facility is best for you. In many cases a smaller firm might not be able to qualify for a true asset based line of credit so factoring will be the only solution.

In summary, asset based lines of credit and factoring is coming into their own in Canada as true business financing facilities. Both facilities have different criteria for approval, and overall an asset based line of credit, or working capital facility, is probably the best facility for your firm – if you qualify. Investigate carefully and determine which type of financing might be right for your firm

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

Best Leasing Rates in Canada via a Leasing Specialist

Savvy Canadian business owners and financial managers know that leasing is not always about price, it often should focus on issues such as structure, terms, covenants, etc. However, having said that, how does the business owner ensure that he is in fact getting a rate that is very competitive, if not ‘the best ‘that his firm can achieve?

Let’s look at the factors that affect lease pricing. Lease financing in Canada is a specialized industry, and we encourage clients to ensure they seek out and work with a trusted, credible, and experienced lease financing advisor in this area of acquisition financing.

So what factors affect your lease rates – first and foremost it is overall credit quality. But let’s review some of the inherent math of leasing to ensure you can make that overall credit quality work for you.

The overall amount of the asset you are financing affects the rate in many cases – larger transactions with higher credit quality also play a large component in the overall final rate. Lease financing in Canada can range from five thousand dollars to 50 million dollars and of course everything in between. The other key factor you should realize is that the term of the lease (in other words the length or amortization of the lease) is also a critical factor in final lease pricing. Longer terms tend to drive better rates. Why is that? Simply because the lease firm is locking in a guaranteed yield on the transaction, and when that yield is even longer in term that affects you’re pricing – usually for the better.

Realize though that in certain cases your overall credit quality of your financial may necessitate a shorter term being offered or approved. In that case lease pricing tends to go up. So a Canadian business who thinks they can get the best rate for a 2 year lease is often mistaken – lessors in Canada tend to prefer lease terms of three to five years.

Many of our clients are unsophisticated financially, so when it comes to lease financing and pricing them also do not fully understand how some structuring features in leasing affects their pricing. When you are asked to provide a lessor with either a down payment or a security deposit this increases the overall yield to the lessor – so you are laying out cash and financing less, therefore driving the rate up.

Utilizing a financial calculator (not a regular calculator) will allow you to exactly determine the exact rate you are being quote. By simply entering values for:

- term
- value of your deal financing
- monthly payment quoted
- end of term obligation

Will allow you determine the exact rate you are being quoted.

If you think the rate is too high you of course have the option of calling every lease company in Canada, revealing your financial information, and negotiating a rate. By the way, we don’t recommend that! The best solution is to work with an experienced leasing specialist to ensure he or she feels you have a ‘competitive ‘best rate. The dangers of doing that on your own are that your financial condition is quickly spread all across the industry, and secondly credit reports on yourself and your firm are potentially drawn and lowering your overall credit scores for your firm and yourself as a potential guarantor

We also advise clients that working with larger more established firms will generally drive the best rate for your transaction. Why is this? Simply because these firms themselves are funded in a more cost effective manner than small firms who are capitalized from private type sources.

In summary: rate of course isn’t everything, but it’s important. Understand the key elements of how a lease price is calculated; work with a trusted advisor to ensure you understand how your firm’s credit quality will be adjudicated. We also note that the type of asset and its overall collateral value play a role in your best lease pricing.

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