Sr&ed Tax Credit Financing – The Only Two Things You Need To Know about sr&ed finance

SR&ED Tax Credit Financing is somewhat misunderstood, or in fact not really considered by many Canadian business owners and financial managers in Canada. We use the word ‘considered ‘simply because many SRED claimants are not aware that their SR&ED claims can be financing as soon as they are filed – in some cases prior to filing!

So let’s return to our topic – what are the two things you need to know about financing your sred tax credit. We’ll keep it simple –

1. You have to have a Sr&Ed claim to obtain financing for the claim!

2. A sred financing claim is in fact similar to any business financing application – frankly it’s quite simpler and more focused!

Is that it? Yes, it’s as simple as that. SR&ED tax credit financing is one of the most unique ways to bring valuable cash flow and working capital back into your firm. Just the very nature of sred itself suggests that your firm relies heavily on the credit to recover the capital you have spent under the government’s quite generous non repayable grant.

So let’s return to our point # 1 – to finance a claim, you need a claim. The SRED program in Canada is the governments rebate; in effect it’s a grant, back to Canadian business for any investment you make in research and development. More and more information is coming out everyday from government and private sources which suggest that many firms who are eligible for the program either aren’t aware of it, or even more disappointing, don’t know how to go about preparing and filing a claim. We are often amazed when some clients infer that it’s ‘too much trouble ‘to prepare a sred claim.

A couple of points can be made on this subject. We have met a small handful, and we repeat small handful! Of clients over the years who prepare their own filings. This of course is possible, legal, and in some business owners minds ‘cost effective. The hard reality is that most firms don’t have the technical and financial know how to complete a claim on their own. (Apologies to the firms which successfully prepare a file their own claims – you know who you are!)

The majority of claims in the sred area are prepared by what is known as sred consultants. We tell clients that these consultants are high specialized, are up to date on current government sred and accounting matters, and in most cases work on contingency – meaning that they prepare the claim at their own risk and time, and charge a fee which is totally based on success of the final claim approval. If Canadian business owners and financial managers don’t choose to pay a contingency fee then they can play a flat rate based on the sred consultant’s time on the claim and filing. Naturally more often than not the sred fee has to be paid as soon as the claim is completed, even if you still have to wait several months to a year to get your funds.

More importantly, as it relates to the financing of the sred claim, a claim tends to be more financeable when it is prepared by a reputable consultant in this area. And in fact when you claim is financed, either at time of filing or prior, the sred consultant can also be paid in full or in part out of the financing.

So the bottom line on our point # 1 is simply – make yourself aware of the program if you are not, prepare a solid claim with the use of a reputable consultant, and be knowledgeable that the claim can be financed during preparation or at time of filing .
Let’s move on to point # 2- Clients ask, is it really that simple to finance a Sr&Ed tax credit. There is only one answer, which is of course yes. You should treat your sred tax credit financing just as any other basic financing. Because this area of Canadian business financing is somewhat of a boutique are you should ensure you are working with a credible, trusted, and experienced advisor in this area.

Let’s cover some of the very simple key basics around the financing of your claim. Most firms are eligible, under the program itself, to receive anywhere from 20-50% of your expenses in the R&D area. Your sred claim will ultimately have a final value, which is made up of the federal and provincial portions combined. Let’s assume its 200,000.00 as an example. You and your accountant have filed your year end financials, and included a sred claim of 200k. What happens now if you want to finance that claim. The reality is that you simply have to fill out a standard business financing application – just as if you were borrowing for any other matter. In our case the ‘collateral ‘, if we can call it that, it’s the sred claim.

Important to note hear that you are not incurring debt or creating a ‘ loan ‘ on the sred – Your balance sheet stays intact, you are simply ‘ monetizing ‘ the sred claim in order to generate working capital and cash flow now . Generally you receive approximately 70% of the claim as an advance, with the 30% held back and payable to yourself in full when you final claim is audited, approved, and that cheque from the government is ‘in the mail ‘! The financing feels itself, associated with the tax credit financing are deducted from that final 30% holdback. You can generally create a sred loan for a period of a minimum of 60 days, but most sred financing generally last from 3-12 months, depending on the size of your claim, its eligibility with CRA, and whether you are a first time filer.

So whats our bottom line – it couldn’t be simpler:

- Make yourself aware of this great program – prepare a proper claim with someone who is experienced
- If you are focused on cash flow and working capital needs consider financing your claim and directly monetizing this great program

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

Franchise Financing In Canada – Three Things You Need To Know

If you were aware of some of the most critical factors in determining franchise financing success in Canada would your chances of entrepreneurial success increase significantly. We thing so, and lets examine what can take you over the top in franchise financing success.

1.Is Franchise Financing Different from other forms of Financing in Canada?

2.How are franchises financed?

3.How much do I need to invest personally and how long does the process take?

We categorically assure our clients that franchise financing is a specialize type of financing in Canada. It is clearly a unique and specialized subset of business financing, and many Canadian entrepreneurs realize sometimes too late that they were ill armed in success negotiation of a business financing during the acquisition of their proposed franchise. One of the positive things we can say about franchise financing is simply that the 2010 economic environment for business financing has improved considerable and franchise lending is clearly in that category . Banks and other institutions have clearly recognized that the environment of downsizing, self employment and the purchase of an exiting successful brand or business all has aligned in the form of a higher level of visibility for franchise loans.When entrepreneurs think of business financing they think in terms of liens of credit, or term loans. Franchise financing is in many ways different because you are either purchasing a new or existing franchise and the components of that purchase vary significantly from that of a regular business financing need.

What are the components of a franchise financing loan and why are they somewhat different? Those components are the franchisee fee, existing or new assets, potential new or existing leaseholds, plus, equally as important, the need for long term working capital to run the business successfully. That is why franchise financing is both different and specialized!

So let’s move on to point # 2 - We agree that franchise financing is specialized in Canada. So how does the entrepreneur finance that new or excising franchise? When we meet with clients we don’t necessarily feel that an existing franchise is either difficult to financing, or in fact requires a different financing strategy. There are financial advantages and disadvantages to financing both new or existing franchises. Some of the key issues we review with clients when contemplating either a new or existing franchise financing are as follows –

How will ‘ goodwill be handled on the balance sheet if your are buying an existing franchise ?

Why is an existing franchise priced higher often thatn a new one -( the answer is of course that the business is even more establishd and has verifiable sales and profits and cash flow .

What will future financing need be vis a vis new or existing franchise purchase – will significant leaseholds or working capital investments be required .

Again, there is no right or wrong answers – just prudent homework and planning .

Franchsies in Canada are financed by personal equity,bank loans, occasional franchisor assistance ( generally not available ), utilization of the government small business loan that is particularly suited to franchises, and , finally, working capital term loans and lease financing .

Will anyone of the above finance your entire purchase . The answer is no. Financing success for your business will be determined by your proper and final mix of the above franchise financing alternatives in Canada.

Let’s move on to our final point – what amount of down payment – we will call it ‘personal equity ‘is required. The answer is that amount will either be mandated by the franchisor or your franchise lender, as well as your own desire and belief to either minimize of maximize your personal investment. When we sit down with clients with strongly focus on a proper mix of all of the above financing mechanism based on the size of the franchise, the asset base ( some businesses are service , and not asset oriented ) and the owner own view of risk and financial rewardwhen it comes to the proper combination of debt and equity financing .

So, in summary, is franchise financing a guaranteed thing in Canada – Definitely not? Can you improve your chances immeasurably by understanding how they are financed, what level of investment you need or should make? Definitely. Work with a trusted, credible and experienced advisor in this area to ensure the financing component of the entrepreneur dream is a key aspect of your overall business planning.

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

Small Business Bank Loans in Canada – Three Things You Need to Know

When looking for a small business bank loan in Canada many business owners and financial managers quickly realize they are treading on very specialized ground. Let’s examine three things you need to know that will allow you to feel that bank financing in Canada is not insurmountable. The general sentiment among small, medium, and in some cases large corporations is that bank financing is both difficult and challenging in the Canadian marketplace.

Let’s examine three key points that will assist most business owners with overcoming obstacles to Canadian bank financing .They are as follows –

1. Are you looking for operating financing or term financing with your bank – there is a difference!

2. Could a popular program subsidized and supported by the Canadian federal government be the solution to your working capital needs

3. What are the minimum requirements to obtain specialized bank financing

A line of credit or a bank term loan? Is there a difference. There definitely is! If you are looking to either purchase an asset or expand your business your focus should be on the preparation of sufficient data to support that financing request. We feel strong that to be considered for such financing you probably should have an established relationship with the bank already, either on a personal or a corporate basis. It would also help if you had already established some form of operating facility. A bank term loan to acquire an asset, or perhaps make an acquisition comes with a fixed repayment and term, typically five years. You should only consider a bank term loan if you feel you can demonstrate enough financial stability or growth potential. In many cases we recommend to clients that we also sit down with the banker and share some our long term plans and prospects – in many cases discussion can be started around the future acquisition of assets of even a competitors business.

In many cases your firm simply needs an operating facility. If you are an established business, have growth and profit potential, and a relatively clean balance sheet you are in a position to negotiate an operating facility for receivables. Typical facilities margin your receivables at 75% and inventory typically might come in at 40%. We encourage clients to carefully discuss what we will call ‘bulge needs ‘with your banker. This is in many cases where the client and bank relationship falls apart, because the business owner assumes that the bank will support increased temporary needs for the business. If you take your annual revenues and divide by 12 your monthly sales are XX $. However most business owners know sales growth comes in spurts based on incoming orders, contracts, and yes, even the seasonality of your business or industry. Preparing and supplying either a business plan or cash flow projections are invaluable tools to gain credibility wit your banker, and, by the way, you’ll understand your business better.

Let’s move on to point # 2. We tell clients the best bank loan in Canada is not really from the bank! What do we mean by that? The answer is a BIL. And of course our clients ask ‘What’s a BIL ‘! That is the technical name for a bank loan that is both financed and subsidized and guaranteed by the federal government. Many business owners simply refer to the program as the SMALL BUSINESS LOAN from the government.

The banks in Canada administer this program and we feel by far it’s the best solution for small and medium business in Canada when it comes to a bank loan. The key things you need to know are that the loan only covers two things – equipment and leasehold improvements. Well actually its three things, as real estate can be included also. The real estate limit was recently in the past year bumped up to 500,000.00$ dollars, which is a great way to acquire your facility.

Terms of this loan are as good as it gets a rate of 3% over prime, limited owner guarantees, and flexible terms and payback. We spend a lot of time with clients explain this program and ensuring they take advantage of if when they can. Most business owners are disappointed to hear that this facility does not cover cash loans, and that it is not an operating line of credit, but a term loan.

Bank term loans have been the means of assisting many companies to grow, as well as allow continued operations during a temporary but anticipated slump. As one of the most common types of loans on the market, banks often offer competitive rates for a bank term loan. Any business that is thinking about the possibility of taking out a bank term loan would do well to shop around for the best rate and conditions possible.

Let’s move on to our final point. By understanding the key requirements of bank financing you can significantly improve your chances of approval success. Work with a trusted, credible and experienced advisor in commercial bank financing origination. Being properly prepared with historical financials, a business plan, a cash flow forecast, and a bio of owner experience improves your chances ten fold of arranging bank financing in Canada. As a footnote, we have always strongly believed it’s the banker, not the bank, so seek out with assistance a bank who has a strong interest in getting your business and growing with you on a long term basis.

Bank financing in Canada – possible? Yes . Probable? No guarantees of course, but your chances of financing success improve considerable as soon as you adopt that old boy scout motto – be prepared !

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

Loans for Working Capital - Two Things Canadian Business Owners Need to Know

The search for loans for working capital, and relating financing needs tends to be never ending for Canadian business owners and financial managers. Let’s examine two key aspects of working capital financing in Canada.

1. Working capital needs are both short term and long term – Which solution does your firm need?

2. Once your company has determined the type of working capital you need what are your options and how to do pursue those successfully and in the least amount of time?

We’ve stated that working capital is both a short term and a long term need. Let’s examine that key point. When we talk to clients about working capital needs it becomes apparent they are often confused by ‘textbook issues ‘as compared to real world issues. The textbook of course tells us that working capital is a simple calculation – go to your balance sheet, subtract current liabilities from current assets, and , voila! There’s your working capital. The perfect answer, right? The reality is that business owners must consider two key elements not often covered off in the textbook – they are

- What is the right amount of working capital for my firm based on historical, current and future needs – is it a temporary need or a short term need. Also, turnover of current assets is critical and many Canadian business owners and financial managers don’t know how to measure turnover. Recall our textbook definition of working capital as stated above. The reality is that if you have a large number that’s working capital goodness, right? Not necessarily, because if those assets of accounts receivable and inventory aren’t turning then your working capital is sluggish and your investment is the buildup f those key assets are in fact significantly impaired.

We’re talking about short term needs vs. long term needs as we have stated. You may have had historically enough cash flow for working capital to satisfy your overall sales growth needs. But what if you have a large new order or contract you need to fulfill. That more often than not necessitates a short term need for cash flow to fulfill purchase orders, contracts, etc.

So what have we learned – simply that working capital can be measured - however it has to be analyzed with respect to your firms ability satisfy current and future revenue needs . Clients we talk to often have trouble understanding the working capital dilemma, which is simply that your sales and profits are not necessarily tied to your cash flow. Determining that too late is usually a painful experience for most of our clients.

So how can we ‘alleviate the pain ‘? Let’s move on to point number two, which is what options are available to Canadian business owners seeking working capital financing.

Two options are in fact available for your firm when considering a working capital solution. One of those options is to take on more debt, and enter in a working capital term loan – this is simply a cash term loan with a fixed repayment and term – typically three to five years. For larger firms this might be called subordinated debt, or mezzanine financing, but for smaller and medium sized companies in Canada we can simply say ‘it’s a working capital loan ‘! This type of financing puts permanent working capital into your business and allows you to feel comfortable that you can meet short term obligations such as lease payments, etc. If there is a disadvantage to this type of financing its simply that in reality you are adding more debt to the balance sheet, as the working capital loan is debt .

Does working capital always have to be additional debt? Definitely not. The other solution is to monetize your working capital assets. By working with an experienced, trusted, and credible working capital advisor you can monetize current assets such as receivables, inventory, and equipment, without taking on further debt. Yes you are leveraging those assets, but the reality is that your balance sheet rations still stay intact. For smaller and medium sized firms in Canada these solutions come under several names, working capital facilities, asset based lines of credit, or even a standard operating line of credit with a Canadian chartered bank that allows you to margin receivables and inventory .

In summary, we have covered off the need for business owners to determine what type of working capital they need, albeit short term or long term . Solutions available come in the forms of working capital term loans, or, perhaps a more attractive option, the monetization of those working capital accounts to leverage cash flow.

Focus on your working capital needs, determine the best solution, and obtain expert advice on the best method of increasing cash flow for your firm for current and future needs.
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Stan Prokop is founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies and specializing in working capital, cash flow, and asset based financing . In business 6 years the company has completed in excess of 45 Million dollars of financing for Canadian corporations .
For information on Canadian business financing and contact details please see :
http://www.7parkavenuefinancial.com/LOANS_FOR_WORKING_CAPITAL_CANADA.html

Financing for Equipment Three Things You Need to Know About Canadian Equipment Leasing

Financing for equipment is sometimes a challenge for Canadian business owners and financial managers. What if you had a solid understanding of 3 key elements of Canadian equipment leasing and financing. Let’s explore some key information around three critical elements of lease financing –

1. What can be financed?

2. What are the type of leases and rates available to my firm?

3. What is the best way to obtain a prompt approval at the best rate, terms and structures for my business asset acquisition?

So what assets can be financed in Canada? The reality of that answer is that almost every business asset can be financed, and moreover, two other key points need to be made. In many cases even intangible assets can be financed – a solid example is software for your business, or even the additional add on requirements that come with many asset acquisitions – these might include installation, warranties, maintenance, shipping/delivery, etc. And, furthermore asset financing in Canada definitely includes the financing of used equipment, which is a major part of the Canadian equipment financing industry.

Millions of dollars of used equipment, purchased here or in the U.S. or other international locations are financed annually. We add two critical cautionary items of note here – in certain cases and appraisal or asset valuation or inspection might be required if the asset is new , and in many cases a down payment might be required on a used piece of equipment . These two points would still clearly not negate the major benefits of financing a piece of used equipment. Why used? Simply because many assets in many industries still have a very useful economic life after a typical usage of 3-5 years, for example thing production equipment, etc. In many instances, especially with the use of the internet and auction sites pricing on used equipment might be exceptionally favorable.

One other solid tip is to get your lease financing approved in advanced, as this might allow you to negotiate a better price with the vendor given you are pre approved and the vendor knows they will be paid directly from the leasing company.
Let’s move on to our second point, which is simply that there are some critical technical aspects to lease financing that are very important for business owners to be aware of . First of all you should ensure that you understand there are two types of lease financing available – to keep it simply we will simply call them, as the industry does:

Capital leases

Operating Leases

Which one is best for your firm?

We always dislike saying to our clients ‘it depends ‘but the reality is that the choice of lease type should be driven by your final motivation with the asset. By that we simply mean that you need to determine, in advance! , if you intend to own the asset at the end of the lease, or if you simply want to use and return it after an agreed upon amount of time, usually 2- 5 years, although shorter and longer terms might apply (that’s the flexibility of lease financing).

Choosing the type of lease you pick will significantly impact how the lease is carried on your books, and also it is a critical factor in driving pricing. Operating leases will always be priced with a lower monthly payment as the asset is returned to the lessor at the end of the lease. Clients ask us ‘what if we later determine the asset still has a useful economic life and we wish to keep it? Again, here is where the flexibility of lease financing comes in, because you are allowed in an operating lease to pick one of three options at end of term – you can return, purchase, or upgrade. Actually there’s a fourth option, which is simply to agree to extend the lease for a pre agreed upon amount of time.

Let’s move on to our final point, which is simply – You have made the decision to acquire an asset through lease financing. How do you go about that in Canada? We advised clients to work with a credible, experienced, and trusted lease financing advisor - even basic assistance around the final rate, term, and structure could save you many thousands of dollars in payments. Or at the same time, negotiating on your behalf any critical areas such as down payment, limited personal guarantees, or end of lease options can all be the make or break point in Canadian lease financing success. Additionally, the lease financing industry in Canada is very fragmented and consists of captive firms tied to manufacturers, independent Canadian and U.S. firms, and very specialized firms that only do or finance certain things.

In summary , arm yourself with some critical knowledge of lease financing and you will be rewarded with the knowledge that you have chosen the best financing method for the acquisition of new and used equipment and business assets in Canada

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Stan Prokop is founder of 7 Park Avenue Financial - http:// www.7parkavenuefinancial.com
Originating business financing for Canadian companies and specializing in working capital, cash flow, and asset based financing . In business 6 years the company has completed in excess of 45 Million dollars of financing for Canadian corporations .
For information on Canadian business financing and contact details please see :
http://www.7parkavenuefinancial.webpage66.com/financing_for_equipment_canadian_leasing.html

Factoring Financing – Three Things You Need to Know About Receivable Financing In Canada

You have made the decision to consider factoring financing as an overall business financing strategy. In some cases you may be factoring and receivable financing currently, but are not happy with a number of key issues that weren’t discussed when you set up your facility. Let’s explore the three things you need to know around factoring financing in Canada, and debunk some of the myths and mis information that is out there on this subject.

These are:

1. All factoring Companies are the same

2. Factoring is expensive

3. Factoring is intrusive to my customers and suppliers, but my firm has to live with that

The reality in Canada is that as a country we came late to the factoring party. Factoring started in the U.S. and Europe, and has been established for hundreds of years. As a result the factoring that tends to dominate Canadian business financing, both in business model and pricing is heavily influenced by a small number of foreign firms.

We should probably do a very short ‘primer’ on factoring to ensure we’ve got the basics in place. Factoring, or receivable financing is the sale of your invoices or accounts receivable to a third party. It is very dominant in certain industries, i.e. trucking and transportation, staffing, etc, but quite frankly is now prevalent throughout Canada in many industries. What differentiates factoring is really the three points we’ll discuss – who is offering it to you, what it costs, and how does it work.

We recommend to clients that they deal with Canadian firms when considering a factoring option. Because this business financing is somewhat unique, and mis understood we strongly recommend you work with a trusted, credible, and experienced advisor in this area who can guide you through what many consider the factoring maze.

So let’s get back to our three key areas: First factoring firms vary in Canada by size, geography, and financial capability. You need to align yourself with a party that is most suited to your type of business, the size of your receivables portfolio, and the ability to deal on a one on one basis on any issues that come up .As we stated, it seems common sense that your best partner will be a Canadian firm who as direct representation in your geographical area.

Lets move on to point # 2 - Is factoring expensive? We always hate saying this, but the answer is that it depends. Receivable financing certainly has the aura of being expensive, and unfortunately most clients we meet are always focus on rate. A few key points need to be made, so let’s be clear on this issue. First of all factoring in Canada has a discount rate of between 1-3% per month. We use the term discount rate because the industry itself doesn’t view the rate as an interest rate; it views it as essentially a reduction in your overall gross margin. Let’s use a quick, clear example. Let’s say you have an invoice for $ 100,000.00. Factoring allows you to get approx 90% of the funds on that invoice the day you generate the invoice. (The balance, 10%, is paid to you when your customer pays,) and out of that holdback comes, say a 2% discount fee to the factor firm) the factor industry view that 2% as a commission for financing your invoice. If your customer pays in 30 days Canadian business can be forgiven by saying – I paid 2% per month, that’s 24% per annum that is expensive.

One of the main points we can make when advising clients on a proper factor financing facility is that the funds you get on immediate cash conversion can be used to purchase inventory at a better price for cash, or alternatively, you can take the many 2% net ten day discounts many suppliers offer . If that was the case on all your business we can make the statement that you are recovering 100% of your financing costs via this strategy, plus you have unlimited working capital .That’s financial power.

For our third and final point we address the issue of customer intrusiveness. We alluded the U.S. and U.K. firms who follow a very clear process on the receivable financing for your firm – they send your invoice to your customer on your behalf, they corresponded with the customer , and they call your customer for money .But , and this is a large ‘ but’ did you know that with proper negotiations and the use of a proper advisor you can negotiate and implement a facility that allows you to bill and collect your own receivables, while at the same time getting all the benefits of factoring – i.e. immediate working capital and cash flow?
In summary, factoring can be easily mis understood.

Assess what you think is wrong or might not work with this method of financing, and develop a receivables financing strategy with the knowledge that you will not be making the mistakes of others who are less and ill informed.

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

Small Business and Medium Sized Business Inventory and Purchase Order Financing in Canada

Inventory and Purchase order financing are two of the most sought after and challenging financing strategies for Canadian business owners and financial managers. The reality is that if you can ensure you don’t have adequate working capital and cash flow to finance inventory, and of course receivables, your business will be ham strung in respect to your ability to grow sales and profits.

The essence of an inventory financing strategy is to ensure that you have capital and cash flow as part of a revolving facility or loan to purchase inventory from your valued suppliers, and convert that inventory into receivables, cash, and of course profits.
Inventory financing and purchase order financing in Canada comes in various forms. The most traditional form it comes in is of course as a component of your bank operating facility. Canadian chartered banks ‘margin ‘receivables and inventory. The challenge in the global financial climate of 2010 is of course your firm’s ability to negotiate such financing on terms favorable to both yourself and the bank.

In our experiences banks tend to me for focused on lending on receivables, which can easily be converted into cash. The harsh reality is that many banks and lending institutions in Canada don’t understand the true value of your inventory, and quite frankly we think they can be forgiven for that , given the multisided of industries in Canada, as well as the fact that inventory comes in three components .

The three components of inventory are raw materials, work in process, and of course finished goods. The mix or ratio of those three components is going to vary in each firms industry.

Our own experience is that when our clients can generate inventory financing as a part of their overall operating credit strategy is they usually come up with something in the 40% range. That is to say that your bank will advance, at any given time, up to 40% of the inventory that you are carrying at your cost. This tends to be a comfortable buffer for the banks, but in many cases doesn’t provide the cash flow and working capital you need to grow sales and profits. We hasten to add of course that bank operating facilities that include an inventory component are closely tied to the overall financial health and financial perception of your firm.
Are there other solutions for inventory and purchase order financing in Canada .Yes, there are, we can also certainly say they are limited.

We suggest you align yourself with a business financing expert who can explain to you those methods, which include a straight separate purchase order or inventory financing facility that is outside of your banking arrangements. In those cases the experienced p.o. and inventory lender will determine a valuation on your particular inventory and lend against that. In most cases this simply involves paying your suppliers up front for your inventory needs, while they collateralize your inventory and the receivables that will flow out of that inventory. This type of financing is expensive, but has to be benchmarked against the possibility of your firm losing sales, contracts, and competitive stance in your marketplace.

At the end of the day Canadian business owners and financial managers have to simply address the following issues:

- Is my firm losing valuable sales and contract opportunities to competitors due to our inability to finance and pre pay inventory

- Are we prepared to lower our overall gross margin by 2-3% points in favor of increasing sales and profits?

Speak to a trusted, credible and experienced business financing advisor in this area : A rational inventory financing strategy can then be developed around those two key points.
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http://www.7parkavenuefinancial.com/Small_Business_Inventory_financing_po_financing.html