Working Capital Loans and Financing Canada

Working Capital Loans and Financing is a term that has different meanings to Canadian business owners and financial managers. One of the most popular (we actually feel it’s the best) loans for small and medium sized businesses in Canada is a loan commonly known as the Government SBL, or Small Business Loan.The essence of this loan is great rates, terms and structures – i.e.3% over prime, nominal personal guarantees and re payment terms of 5-7 years.

Sounds great, right? Yes, we agree. But many business owners seeking working capital loans are dismayed when we tell them that the program only finances three things and it’s many times not the three things they are looking for. They are looking for Cash! The program only finances equipment, leaseholds, and real estate.

Working Capital loans are actually available from what people consider traditional sources. One of the Crown Corporations within the Canadian government actually focuses very significantly on cash working capital loans. These loans are structured as term loans, have fairly competitive rates, and repayment terms of 5 to 6 years. They are also unsecured, which means they rank behind and senior lender or security you might have in place. The only commitment to repay is the guarantee of the company as a promise to pay, and a full or partial guarantee by the owners personally. We point out that the majority of business loans and financing in Canada does in effect require some level of guarantees from the owner.

A great way to address why your Canadian firm requires working capital loans and financing is to address the root of the issue, which is to fully understand your receivable and inventory requirements. Those are the key drivers of any working capital need.The holy grail of working capital is when you can grow your business, reduce inventories and turn them faster, and increase receivable collections. Increasing a/r collections either via more efficient methods of collection, of selling your receivables as you generate them ( that’s called invoice discounting or factoring ) is the most optimal way to generate working capital financing .

Naturally the challenge in doing all that is to ensure you can still maintain your projected sales and profit growth.

If your company has a significant inventory investment at all times you can obtain direct loans in Canada against that inventory. Bank financing traditionally is the route many larger and established businesses take when they required working capital for inventory purchases. However when your firm can’t qualify for the full extent of financing that you need then a direct inventory working capital loan is best.

Our recommended working capital loan is actually not a loan that adds additional debt to your balance sheet. It’s a facility which margins your receivables and inventory to proper market valuations. This generates the additional cash flow and working capital you are looking for, and, as importantly, doesn’t add debt to the balance sheet.

The best way to generate your own working capital loan to your firm is to improve collections and delay payments to suppliers. The latter must be done carefully of coruse, so as not to mis manage vital supplier relationships. However, clearly it’s every man for him in business financing, so you should focus on negotiation the best payment terms you can with valued suppliers who will usually extend solid payment terms when they see you as a viable and long term customer.

So whats our bottom line summary on working capital loans and financing in Canada.It’s simply that you might not necessarily need a true loan and in fact should be accessing your working capital accounts such as inventory and receivables for financing. But true working capital loans are available in Canada – work with a trusted credible advisor to find a solution that meets your needs.

-

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

Canadian Lease Financing – Equipment Leasing Options Canada

Canadian Lease equipment financing continues to be one of the most successful means for a company to acquire assets of all types.

Unfortunately most clients we talk to are always focused on rate, which in many cases is only one small piece of the Canadian asset, based lending puzzle, and solution.

In Canada equipment of all types can be leased - that includes capital expenditure items from 5k to 50M dollars.

What should Canadian business owners focus on and seek guidance on when acquiring assets via the leasing option. We think three things are important -

- Who to lease from
- What are the key elements of a successful lease structure?
- What is required for an approval that meets your firms needs Vis a Vis rate, term, and structure.

In Canada the leasing industry is very fragmented. Like all other parts of the financial services industry the business has gone through major tumult in the last couple years, particularly the 2008-2009 global financial meltdowns.

So who are the players and why is it important to know who you are leasing with, as long as you are approved? Good question?! Let’s explore the answer.

In Canada the leasing industry is self regulated via a national association called the CFLA. The companies that make up the industry are:

- Major international conglomerates and their Canadian subsidiaries
- Canadian owned private independent finance firms
-Captive finance Companies
- Independent lease originators, also known as intermediaries

So why is it important to understand who you are dealing with? Time is money, and a significant amount of time can be spent with a lessor who you think might be able to do the transaction for you, but ultimately your firm might not fit the asset and credit criteria required .

We referenced the major international conglomerates; a well known example might be GE. The reality is that these firms predominately focus on very high ticket value transactions with commensurately high credit quality criteria. We have spoken to many customers who have invested time, commitment fees, etc only to find they were in effect dealing with a firm that was unable to satisfy the size of their transaction.

Private independent lease firms in Canada tend to have niches - in the industry the term is ’ credit box ‘. That simply means they only solicit a certain type of asset and credit quality - any transaction falling outside the box becomes not doable. Again, you may have totally wasted your time.

We are the first to advise clients that if they can get lease financing via a captive finance company or a vendor program via the manufacturer there is only one recommendation - ’ Take the Deal!" Vendor and Captive programs are highly incented to finance assets at competitive rates and sometimes overlook the rational credit quality that is required to get a deal approved.

Recall that our final lessor category is independent finance originators, aka intermediaries - we hate the term broker by the way. The key benefit of working with a trusted, credible, and experienced advisor in lease financing in Canada is simply a time/ money scenario. You can spend hours, days, and weeks negotiating with firms who ultimately can’t do your transaction. Along the way you may have laid out commitment fees as well as having your firms financials viewed by a number of different parties with whom you may never do business .

Our experience is that people prefer to deal with experts. Why wouldn’t you want to work with an expert that can assist you in achieving the optimal rate, term, structure, etc? Simply things such as a recommendation on the type of lease you choose (capital or operating) can save you firms either thousands in interest, or have a significant effect on monthly payments. That is a solid acquisition financing strategy!

==

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

Purchase Order and Inventory Financing in Canada

Canadian business owners and financial mangers are often challenged by the need to finance either, individually, or both, inventory and purchase orders for major new customers, contracts, etc. Is this type of financing available in Canada and how does it work?

With grown and revenue prospects come challenges. A large part of that challenge is simply the need to access cash flow and working capital now to facilitate those new orders and large contracts with either new or existing customers.

Clients we talk to normally have a very typical challenge – they have a large, sometimes huge! New sales opportunity. That opportunity requires an abnormal build up in inventory via those new contracts and purchase orders.

It is logical for every Canadian business owner and financial manager to initially survey their existing financing arrangements and determine if those financing arrangements either meet the needs of the new orders, or if additional financing is required. If you company is relatively new, or sometimes even at the start up stage that type of traditional Canadian chartered bank financing will be very difficult to achieve .

Naturally the other resources that could pull you’re financing together in this area and personal and outside resources, which most entrepreneurs either have reluctance for, or in some cases find it difficult to access and complete funding via that mechanism.The worst thing any business owner wants to do is of coruse to decline those purchase orders or contracts.

Purchase order financing, or alternatively, inventory financing, is a solid mechanism whereby you can access funds needed for your P.O. fulfillment. Depending on how you structure your transaction the P. O. financier may cobble together an assortment of receivable and inventory and equipment collateral in order to assist you in fulfilling your orders. In some cases, especially when it is demanded by your customer, the P.O. Finance firm can even issue a letter of credit on your behalf.

Purchase order and inventory financing can be applicable for all size of firms; however clients we meet with are either in start up mode, have had some financial challenges, and area unable to access what we would term as traditional working capital.

It should be stated of course that the actual purchase orders and inventory requirements that are being financing must come from reliable firms, either here in Canada or elsewhere. Their general reputation and stability must be able to be confirmed. That is of course done through areas such as public records, commercial credit reports, etc. In some cases our clients providing you with the purchase order might be a large well known public entity – all the better of course.

The benefit of purchase order financing is that it places emphasis on the overall quality of the deal, and your ability to fulfill the contract. Unlike traditional financing your balance sheet and income statement, with all those banker ratios, covenants, etc do not necessarily come into play in this type of financing. For that reason purchase order and inventory financing is a ‘boutique ‘‘specialized ‘type of financing that is more expensive than traditional financing. Business owners can significantly offset that expense by ensuring they have good gross margins on the transactions.

Manufacturers, wholesalers, and distributors are probably the best candidates for purchase order financing. When you meet with a credible, experienced and trustworthy advisor in this area that initial focus is simply document ting the transaction, i.e. info on your firm, the transaction, and the standard application and due diligence that comes along with any type of business financing in Canada .

Your firm should investigate purchase order and inventory financing if you feel you are a strong candidate for this type of financing based on your inability to access traditional financing to meet your sales goals. Work with an experienced partner, ensure you understand the application and diligence process, and you should then be able to successfully capitalize on this great alternative financing strategy.

--

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

Film Tax Credit Financing – Cash Flow your Canadian Film Tax Credits!

Canadian productions continue to enjoy increased tax credit benefits in the film, television, and animation industry in Canada.Aside from other financial benefits of ‘Hollywood North ‘the federal and provincial governments in Canada have significantly increased tax credit incentives

Financing these tax credits, either when they are filed and eligible, or, in advance of your filing can add significant cash flow and monetization to your projects in the area of film, televison, and digital media can be the make or break point in your overall financial success in any initial production.

The reality of the current environment in this industry as a part of Canada’s business landscape is very compelling. Filmed productions are increasing, and the Canadian government has very publicly stated and realized that it recognizes the revenue and tax benefits to Canada of this industry. They clearly have stepped up to the bar and show that commitment by increasing in the past year tax credits in almost every major category , and at the same time implanting first time tax credits in other aspects of the industry, i.e. the new digital media and animation sectors . Employment has started to grow again in the industry, and hundreds of projects are on the go.

Key to the financial success of your productions is the ability to monetize, either now, or later the key tax incentives that the Canadian federal and provincial governments have provided.

To highlight these tax credits as aggressive in some ways is almost an understatement. Production and labour credits have been increased – and several nuances have even further added to the mix. As an example, productions outside of major centres such as Toronto can add additional financial backbone to your tax credit. Just changing the locale of some you’re your shootings to outside suburbs and other towns and cities in Ontario (we will use Ontario as an example) simply increase your tax credit refund.

It goes without saying that all the government tax credits in this area have simply assisted the private sector to come back strongly into the picture. In some cases even our famously conservative Canadian banks have stepped up to the plate a created some niche departments within the banks to address film financing.

Let’s focus back in on the financing of our tax credits. Film tax credit financing in Canada is a boutique niche industry and we would recommend that you seek out and utilize the services of a credible and experienced financing partner in this area of business financing in the entertainment industry.

Your Canadian tax credits can be financed as soon as they are filed, that’s simply a strategy of ‘why wait for your cheque? In many instances if you can document a track record in the industry, solid budget and financial records, and certification eligibility then you can be considered for accrual financing. That is a very powerful financing strategy, allowing you to receive fund along the way prior to final tax credit filing. That’s a solid cash flow and working capital strategy for your production.

In summary, the current tax credit environment in Canada is very conducive to tax credit financing assistance. Tax credits can be monetized significantly in advance of your final approvals and cheques from the federal and provincial governments. Productions with strong validation can be financed on an interim accrual basis. Investigate film, televison and animation tax credit financing today.

---

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

SR ED Financing -Canadian SRED Financing

The only thing worse , we think than not knowing about Canada’s SR ED grant program is probably the fact that Canadian business owners and financial manager don’t know that their claims can be financed immediately to access cash flow and working capital now .

Yes, SR ED claims in Canada can be financed. Clients are always asking us how these claims are financed, what amount can they receive, and how can a SR ED claim be financed when it fact it could be challenged by a SR ED reviewer. Let’s cover off some of those issues.

First of all your Sr Ed claim is generally financeable a 70% loan to value. That technical jargon of course for simply meaning that if you can receive, as an interim cash flow and working capital loan approximately 70 cents on the dollar now for your claim. You of course are fully entitled to the other 30% - we are simply saying that portion is not financed – It essentially works as a buffer for any reduction in the claim by Ottawa. Those reductions in your claim might be a simply temporary clarification that is needed by CRA in Ottawa to approve that claim in its entirety.

Clients ask us if there is a sure fire way of allowing their claim to be approved in full. Probably the best answer we can provide is simply to say that by working with a good SR ED claim preparation consultant you are of course ensured more integrity in your claim. Your accounts can in fact submit a claim on your behalf, but we caution Canadian business owners and financial managers to ensure that they have a solid understanding of their accountant’s specialization in this very boutique area of accounting and business.

Quite often if a claim is temporarily clawed back and credible and experienced SR ED advisor can submit additional proper back up on your behalf to help ensure FULL approval of the claim!

All Sr Ed claims can be financed – however it is a bit easier to obtain full financing of your claim if you have successfully filed in the past. That’s just simple logic which indicates that your firm has a higher ability of being approved. However the bottom line is that a first time SR ED claim can be financed- if properly documented and preparedit is fully eligible for the 70% loan to value – in some cases the first time claim might be financed at a lower loan to value ratio . The bottom line, cash flow and working capital are still accessible for that claim!

The total advantage of financing your SR ED claim is very simple. You have the choice of waiting for your cheque from Ottawa. (That might also involve delays in the final adjudication of the technical aspects of your claim). Alternatively, you can access cash flow and working capital now for your Sr Ed claim.

The process for financing your claim is simple. We strongly recommend you work with a trusted, credible, and experienced financing advisor. The overall process simply involves a standard business financing application, proper documentation of your claim and its filing, and then standard legal doc’s surrounding collateralization of the claim being financed.

In summary, if you are filing SR ED claims take advantage of financing those claims. Cash and working capital are available now. Monetize your claim and use that cash flow to further increase your sales and reduce business liabilities. That is a solid financial strategy!

--

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

How to Be A Success in Financing a Franchise in Canada

Financing a franchise in Canada should be an integral part the entrepreneurs business planning when acquiring a franchise in Canada. Our shared information here is applicable to franchisees who are buying a new unit directly from the franchisor, or alternatively an established business opportunity from an existing franchisee.

The excitement often pales a bit after the entrepreneur has chosen a franchise opportunity to focus on and then realizes that he now has to focus on financing that business. Typically clients ask us if financing a franchise in Canada is different from starting up any other business opportunity.The reality is that there is some pro’s and cons to financing a franchise, and the basic premise of our advice is to ensure that the business owner is well informed about his financing options .

Depending on the type and size of the franchise that you purchase you will have to make some sort of personal investment in the business. Naturally clients are always asking us to quantify how much they must put up as owner equity. You can perhaps guess the answer, and it is of course, “It depends!”

That is simply because each franchisor must insist upon, based on their own experience in their multi unit business experience, that a certain specific amount of owner investment helps to guarantee success.The other side of the coin is simply this, which is that the type of financing that you choose will in many times dictate what amount you are required to put in as owner equity. The final piece of the puzzle simply that depending on the overall breakdown of assets and intangibles in your business that will play a large role in what can be financed and what cannot.

In Canada various different options exist for Canadian franchise financing. The most popular method by far is a loan program that is underwritten by the Canadian government; the formal acronyms for the program are BIL, or alternatively CSBFL. In our experience 90% of franchises in Canada, in some manner are underwritten within this program.

By spending some time and working with a recognized franchise financing expert who has credibility, experience and success in franchise financing will pay a multitude of benefits for the budding Canadian entrepreneur.

As challenging and difficult it might seem to both purchase and successfully finance a franchise in Canada it simply often is a questions of sitting down either on your own or with a trusted advisor and determining how cash flow works in the franchise business you are considering purchasing .

The most successful franchisees that we work withare in a position to make at least a ‘ reasonable ‘ investment in the new franchise and have carefully considered the cash flowsinn’s and out’s of the business they are acquiring .

The optimal position you should be in is to be in a relatively solid personal financial position, have a decent personal net worth, and have some financial ‘buffer ‘in place to ensure the franchise investment can get off to a good start. In Canada, generally speakingyou need to have a Credit Bureau beacon score of 650 to ensure financing approvals.Higher is better of course.

In summary, Canadian franchise financing is both a business opportunity as well as a challenge. The majority of franchises in Canada are financed under a special government program. Other forms of financing such as equipment loans and working capital loans often supplement the entire process. Work with a trusted, credible financing advisor to ensure you understand your options and have planned well from a financial perspective.

--

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

Working Capital Financing for Canadian Business

Canadian business owners and financial managers know that working capital planning and assessment are key any businesses growth. The term working capital is used in various contexts, and at the end of the day is simply a synonym for operating liquidity.

Text books tell us that there is a clear definition of working capital, namely going to your balance sheet and subtracting current liabilities from current assets. That’s a great textbook definition, but let’s visits the real world together on what that means.

Your working capital allows you to plan and pay for your daily operating needs, plus of course to reduce your long term obligations that you might have in leases or loans. The absolute number of dollars in your net working capital as defined by our definition above does not really matter. (Although positive working capital is better than negative working capital!)

What is important is the turnover and management of your working capital accounts – those accounts are:

Inventory
Receivables
Account Payable

Simple business logic tells us that if your inventory and receivables are turning over properly, and you’re managing your payables (by delaying them to the maximum amount possible per your terms with suppliers) you will be achieving working capital management success.

When you business is building up receivables and inventory the pressures on liquidity are increased. They can only be addressed by injecting permanent working capital into your business via a working capital term loan, also called “subordinated debt ‘when it’s a larger loan, or by implanting traditional or alternative financing strategies to increase cash flow turnover.

So what are those options to managing and improving your short term working capital and cash flow requirements? The most traditional one is of course an operating line of credit from a Canadian chartered bank or credit union. This type of facility has the lowest overall cost and can be accessed anytime on an ongoing basis.

Many clients tell us that they address some of their working capital needs through use of Business Visa credit cards. This clearly adds additional capital, you are paying for what you use, but in our opinion does a poor job of separating the owners personal credit from the business – as these types of cards are closely tied to personal net worth’s and credit scores of the owners.

Two other very viable solutions come into play for consideration of working capital gaps. They are the use of factoring, which allows you to generate same day cash flow for your invoices, although you pay a discount fee to get the money immediately. While somewhat unheard of in previous years this method of financing gains more traction everyday.

The other solution in a more traditional sense is to ensure you are using lease financing or sale leaseback financing to minimize cash flow out when you are considering purchases of assets. Solutions such as this save the business owner from committing additional funds into the business via owner equity which he may not be able to, or not want to do. It certainly isn’t unusual in Canada to see business owners ‘lend ‘their company money in times of need, often with no fixed repayment schedules. However, as we have noted, the better solution is effective turnover of receivables and inventory or accessing alternative working capital solutions such as factoring, inventory financing, as well as purchase order financing for large contracts.

In summary, business in Canada always has working capital challenges. Those challenges are diminished when you are focusing on proper turnover of A/R and inventory. When additional funds are required you should turn to operating facilities to meet your needs, which can be traditional or alternative in nature. Speak to a trusted and credible business advisor to understand which options make sense for your firm.

--

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/working_capital_financing_canadian_business.html