Business Working Capital Financing

Business working capital financing may, or may not have to come from your bank – it might even come from yourself which we will also explain.

Canadian business owners and financial managers are looking for real alternatives when it comes to working capital financing for cash flow, profits and growth. The reality is that business prospects in 2010 are getting better and better it seems and feels, while business financing availability isn’t necessarily reflecting that, as most firms have experienced.

If you are a start up firm then the overall financing challenge is even more pronounced.

Is it possible to get a working capital or operating credit line from a Canadian chartered bank? Is there an alternative to that type of financing? Our answers are a resounding ‘yes ‘!For both questions.

Canadian chartered banks offer working capital and revolving credit facilities that are based on both the overall assets financed – i.e. receivables and inventory – however there is a significant amount of emphasis placed on balance sheet and income statement rations, covenants, external collateral, and personal guarantees. If you can get past those then clearly more often than not you have a solid working capital facility at great rates – given thatinterest rates in Canada are at all time lows .

But, is the bank the only way to fund your business for working capital and cash flow. Absolutely not.Credit lines are available from what typically are called non-traditional sources, but the reality is that in the current environment non traditional financing is fast becoming ‘traditional ‘.

There are numerous firms which provide what we term for our clients as ‘ working capital facilities ‘ , they may also be called asset based lines of credit, and in some cases where just receivables are involvedfactoring or receivable discounting becomes a businesses main source of cash flow and working capital . And, as we stated, all of this is outside the traditional Canadian chartered bank environment.

We recommend you at a minimum at least explore non bank working capital financing by working with a trusted, credible and experienced business financing firm that can both explain and deliver of working capital and cash flow solutions for your business.

Naturally you can supplement working capital with a variety of long term options which include a lease financing facility for equipment,tax credit financing if you have a Sr&Ed claim, aCanadian government small business loan for leaseholds and equipment expansion, ora specialized term loan available fromCanada’s government bank . That specific type of loan will inject permanent working capital into your firm, as opposed to short term operating facilities.

The advantages of non bank working capital financing is that on average you will be eligible for much more margining on your working capital requirements . What does this mean – simply that as your inventory and receivables grow you will be able to climb up the liquidity ladder without being capped at a certain limit? The ability of a business owner to know that he has access to working capital as his business grows is key of course.

Non bank working capital financing for business working capital comes usually at a higher cost than traditional bank financing. But we encourage clients to do a careful analysis of what that additional capital can do for their firm in several key areas of business success:

Sales and profit growth

Supplier relations

Ability to purchase and pay more effectively

Ultimately as a business owner you want to be able to know that your liquidity can grow as your business grows.

In summary, ensure you understand both your working capital needs, and even more importantly, your options. Investigate your options thoroughly and you should be on your way to business financing success.

--------

Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:

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

Equipment Leasing Canada - Your best rates, Your best Terms!

Equipment Leasing – Canada: As a Canadian business owner or financial manager you want options for financing new and used equipment. (Yes, used equipment can be lease financed also!)

Clients always ask if a certain type of equipment can be financed – the reality is that pretty well every business asset can be financed, even if the transaction requires special structure or pricing.

Although we don’t necessarily agree with our clients view that rates and pricing are the most important aspect of equipment leasing the reality is of course that ultimately your overall combination of rate, structure, monthly payment, and type of lease, etc must be competitive.

‘What’s my rate?’ is not our favorite question, but we usually respond that as a business financing client in Canada you actually get to pick your own rate!

Customers naturally think we are joking, but as we explain, the reality of equipment financing in Canada is that your overall credit quality and the asset you are financing determines your rate. For most transactions in Canada whether you like it or not your lease pricing is determined by something called historical cash flow. That has its advantages and certainly disadvantages.

The leasing company looks at your historical cash flow and then makes a determination around your ability to make future payments.
Naturally if you had a challenging year (who didn’t have a challenging year in Canada in the 2008-2009) timeframe that presents a potential problem. However that issue can be relatively easily handled by something we call ‘structuring ‘, or simply the ability of putting together a lease with particular emphasis on flexibility in actual per cent age interest rate, the term of the lease, the options you have at the end of the lease, and any special situations involving payment alternatives – for example seasonality in your business, etc.

If we had to make on key point on obtaining the best structure in a lease its simply asking customers to remember that the overall structure of the lease has to make sense to you as the borrower and of course the lender from a viewpoint of overall credit quality and risk .

Many businesses are not aware that a significant number of soft costs can be financed in your equipment lease. These could include training; install fees, maintenance contracts, and consulting on some occasions. That’s a true working capital and cash flow saving.

Many firms tout ‘100% financing ‘as one of the main benefits of lease financing – the reality is that in most situations today there is some sort of down payment or security deposit. The alternative to a lease is of course a loan, and in that case you are more likely to get 100% financing, but you certainly won’t have the advantages of a true lease financing option.

Lease financing in Canada is available to all sizes of firms, including start ups. The quick summary of major benefits is simply as follows:

- Financing equipment conserves cash flow and working capital – No major cash outlay is required

- The lease financing approval process takes considerable less longer than other traditional financing applications

- There are a number of tax and accounting advantages to lease financing in Canada

So what’s our bottom line summary on equipment leasing – Canada. It simply that you should view it as a major option in acquiring any business asset. Speak to a trusted, credible and experienced advisor who can show you how a solid pricing and structuring can assist you in acquiring any asset you require to generate sales and profit growth.

---------

Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/equipment_leasing_canada_best_rates.html

Inventory Finance – Canadian Inventory Financing

Inventory Finance provides often much needed capital as an overall component of your working capital strategy . The challenge in Canada is to ensure you have the right mix of working capital financing for an inventory financing strategy, and that it compliments your other external financing.

In times gone by inventory financing was most often provided by Canadian charted banks as a product of the overall revolving line of credit, which of course usually included receivables also. The ability of a company to free up cash that is tied up in inventory is critical for a firm’s cash flow.

We recall recently reading a line as follows “If you working capital is positive you need cash flow financing ‘. The working capital definition referred to is of course the classic textbook definition of going to your balance sheet and subtracting current liabilities from current assets.

However, most of us operate in the real world, not the textbook world, so you do we financed inventory that we as business owners and financial managers know is good collateral?

What the Canadian business owner and financial manger must realize is that your bank or independent inventory financier is not interested in ever getting back your inventory. That should lead you to focus very strongly on your ability to project your inventory turnover, its overall marketability, and your ability to qualify the inventory into several categories – which include raw materials, work in process, and finished goods.

Success breeds challenges, because when you are turning over your inventory you need to replace it, and quite often the financial investment you have made in inventory is still part of your overall cash conversation cycle – which is of course : inventory, receivable, cash, in that order .

We tell clients that in our opinion the optimal inventory financing facility in Canada is a facility known as an asset based lending facility ; we have also called it a ‘ working capital facility ‘ in addressing these discussions with clients .

These facilities, when combined – i.e. inventory and A/R is powerful working capital drivers –simply because unless bank facilities that are ratio financial statement performance driven, they are in fact collateral and true value driven. So a proper facility, when set up, margins your receivables and inventory to their true agreed upon values .What we are of course saying is that if you have slow moving inventory and uncollectible receivables you will be a poor candidate for an inventory financing facility.
We caution all clients to ensure they seek out expert advice in this somewhat niche area of a Canadian business financing. Inventory finance is clearly a specialize area of the Canada’s business financing landscape.

In order to achieve a proper facility focus on maintaining adequate inventory reports and controls, ultimately a perpetual inventory system is the best method of securing inventory finance because it of course helps focus on the true picture of your inventory movement .

Your firm’s ability to produce valid purchase orders, contracts, and proper inventory accounting are a key plus in successful inventory finance. A solid proposal, prepared with the assistance of a business financing advisor perhaps, will include a financial and executive summary review, inventory records and control documentation, and you ability to show repayment of the inventory loan as well as good fluctuations.

You can also spend a lot of time in Canada searching out for inventory financing that doesn’t exist. It is highly specialized, and the number of firms is in the handful, so focus on working with the right parties so as not to waste your valuable time.
Inventory finance works best when you can clearly demonstrate a need, and the ability to show the inventory financing facility will generate additional sales and profits. If you have good margins that will help offset some of the additional costs of such a facility. Simply your ability to generate more cash from inventory and to purchase smarter should in fact be a new benefit that will reap additional profits.

Typical inventory financing arrangements tend to be on facilities that are 500k and up, but with the right combination of A/R and inventory a smaller facility is possible.

Ultimately, in assessing and inventory finance strategy you should know the costs, as well as the benefits that an inventory financing facility will bring to your business.
---

Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/inventory_finance_canadian_inventory_financing.html

Film Finances Canada – Monetizing Your Film Tax Credits in Canada Today Via our Secret Strategy!

The reality of film finances in Canada has changed dramatically over the last couple years.Unlike many aspects of business financing though, they have improved, and tax credit financing is a large part of that improvement.

Our information is particularly beneficial to independent owners and producers – it naturally goes without saying that the larger studios and film finance conglomerateshistorically review your production in any of our three entertainment segments,( film / tv, digital animation ), they buy into your concept or production, and then they fund it via their own often substantial resources .

Naturally if your production can get on board that above boat that is truly a perfect world, however the reality is that the majority of production, even larger names one with ‘name actors ‘still struggle to find proper financing. The truth is simply that the financing of a project comes from a variety of solutions that are cobbled together to form a full financing complement for your production.

Film finance is no different than the financing of any business venture – it all comes down to two components, debt and equity.Your job is of course to maximize the right mix of those two essential elements of any type of financing.

Equity financingis your springboard for your venture naturally , however today’s reality in the Canadian marketplace is that the ‘ soft money ‘or non equity portion of yourproduction in film, tv, or digital animation can in fact come from the various tax credit incentives made possible by combined federal and provincial initiatives in Canada .

Want to know a secret? It’s the secret we refer to in our teaser title in this document. Here it is à 99% ofthe entertainment worldmight believe that tax credits for film financing in Canada can only be monetized when they arefiled and certified , using traditional year end accounting guidelines . That is not necessarily the case! You can also, in many circumstances, access film finances via an ‘accrual strategy ‘. In that case we determine your overall sense of eligibility for future credits, and you receive the cash upfront , based on certain per cent ages, allowing you to immediately access the ‘ soft money ‘ that we have previously started to discuss . That’s a solid working capital and cash flow strategy for your production, which at the same time brings valuable cash flow and working capital into your project on an up front basis .

The quick example we can utilize in a film type scenario (it could just as easily be TV or animation) is the proverbial 1 Million dollar budget. If you utilize the right tax credits in Canada, which are non repayable of course, then you can immediately access cash flow in the 400,000- 500,000.00 range for your project. Given that you probably have raised some equity already those funds, plus the tax credits have you probably financed to the 90% of the total project at this point. That simply leaves the ‘gap‘, which all of a sudden is less of a challenge than you, thought.Canada doesn’t have as robust a banking focus on film TV and animation financing, but there are a number of methods to still fill ‘the gap ‘.

Financing for tax credits in Canada is often done on an approximately60-80% loan to value based on the value of the credit. Each situation is a little different only because of the size of the production and resultant credit, as well as the team you bring to the table Vis a Vis proper accounting and financial documentation of your project.

Speak to a credible, trusted and experienced advisor in this area to monetize your film finances in Canada based on your tax credit financing strategy as a key component in overall project success.

------------

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

SR&ED FUNDING - 5 Key SRED Funding Loan Basics!

Canadian business owners who take advantage of Canada’s SR&ED program have one up on their competitors if they not only file a SRED but utilize Sr&Ed funding as part of their overall Sr&Ed company strategy. The program is by far the best program in Canada that incorporates a non repayable grant for your firms R& D work. Many clients hear about ’ government grants and loans ’ and ultimately realize these are not as available as one would think - however SRED is everything you hoped for and more.

The true power of the SR&ED PROGRAM comes when you accelerate your claim and turn it into immediate cash. Most of our clients, as sophisticated as they might be in their sred filings actually also haven’t heard that in certain cases your sred can be considered for financing prior to filing. That whole process is called SR&ED accrual financing.

Let’s examine 5 key basics in our overall sred and Sr&Ed financing strategy that you must know or be aware of - they are:

1. Sred financing is highly specialized - seek and work with a trusted, credible an experienced sred financing consultant

2. The only thing you need to know about financing a claim is that you must have a claim! It is a simple business financing application with supporting back up on your Sr&Ed

3. SRED’s are financing at 70% LTV - More on that below

4. You can finance a claim as soon as it is filed; starting earlier simply accelerates the process

5. We refer to a SRED ‘ loan ’ - the reality is that no additional debt is added to your balance sheet, because the loan is offset by the asset, the claim itself ! You are simply monetizing, or ’ discounting ’ you claim.

As you can see by now the whole process of a sred funding is simply the financing or factoring of your claim. You are selling your right in the receivable now in lieu of cash that you will receive from the government many months from now, in some cases close to a year.

Let’s back track and share more info on our 5 key basics. As we noted Sr&Ed funding is specialized. Work with an expert for two reasons - maximizing the value and finance rate on your transaction, as well as ensuing the whole process goes smoothly. You should not view the sred loan process any differently than you would any other financing, you apply, you provide supporting back up, and you receive your funds after the normal sort of due diligence. The collateral, if we can call it that, is the SR&ED claim itself.

With respect to # 2 simply focus on the fact that you should consider financing the claim if it will generate a reasonable amount of working capital and cash flow that you need today. To be honest most claims that are financed are in the 200k ++ range, but smaller claims can be financed.

Point #3 had us referring to loan to value - you can expect to receive an immediate advance on approx 70% of your claim - the balance should be viewed as a holdback - its still your money, but final financing costs, plus any adjustments the government makes to your claim are accounted for in that 30% buffer that is held back by the sred financier.

“When can be obtaining our funds “is really the meaning of our 4th point. The entire process takes approx 2-3 weeks as it covers your application, review of your sred, normal financial due diligence, and the clarification of any issues raised by your firm or the sred finance firm . And the good news here is that again the term ’ sred funding loan’ is a misnomer, you don’t make any payments, and finance charges simply accrue and are deducted from the final accounting of the claim. That covers our 5th point of course.

So is there a bottom line - of course there is. It is simply that you should be aware of this great program for Canadian business - if you have a claim and require additional cash and working capital consider a sred funding to solve that challenge.

---

Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/sr_ed_FUNDING_SRED_LOAN.html

SR&ED Tax Credit Financing - 5 Things You Need To Know

As a Canadian business owner or financial manager your company should be taking advantage of Canada’s SR&ED (also pronounced sred) program for tax credits. The most obvious benefit of this program is that monies advanced to your firm are in the form of a non repayable grant. We tell clients you can’t get any closer to the concept of ‘free money’ in Canadian business that the SRED program.

Did you also know that you can turn that ‘grant receivable’ into a sred loan as soon as you file your claim – in fact in some cases with the right consultant you can generate funds even before you file!

Let’s explore 5 Key Things you need to know about SRED Finance

1. it’s a specialized finance – more on that later

2. If you have a claim you can finance a claim – it’s as simple as that

3. You can generate approximately 70% of the total value of your sred claim (combined federal and provincial portions) as immediate cash flow under a Sr&Ed financing or a sred factoring scenario

4. The time to complete a sred financing is usually two to three weeks – the sooner you start and plan the better

5. SR&ED Tax credit financing does not add debt to your balance sheet – your financing is collateralized by the sred itself

Let’s clarify all those additional points in more detail so you can be well equipped and informed to consider a sred financing.
A sred loan is clearly something that anyone outside of the sred environment hasn’t even heard of - and for the portion of Canadian business that does take advantage of sred claims we can assure you a good portion of that business population doesn’t even know you can finance of ‘ discount ‘ your claims . It’s more or less like selling a receivable that is due your firm –you are simply receiving the cash now.

In Point # 1 we talked about sred finance being specialized – you should clearly seek out and speak to a sred business financing advisor. That will allow you to understand the basics, determine how much you can receive based on claim value, and work through a basic application to get your transaction financing. A Sred loan should be really just viewed the same as any other business financing – getting back the usual application forms and our clients quickly understand that the essence of the financing doesn’t necessarily revolve around rations, covenants, outside collateral , etc, but in fact focuses on one item –your Sr&Ed claim itself .

Point # 2 revolves around the financing of your actual claim. Any claim is financeable, but we caution client that this type of financing makes more sense when it involves a claim in excess of $ 200,000.00 – That should not deter smaller recipients, small claims can be filed, but in reality they make less economic sense for the lender .

In Point #3 we referenced 70% as a guideline for most of sred financing in Canada. So what about that other 30% - lets clarify that. Your firm is advance 70% of the claim on filing – the other 30% of course still belongs to you. That amount is more or less viewed as a ‘holdback’ which helps carry some of the financing costs, and also covers off any possible downward adjustments that Ottawa might make on our claim adjudication. As SRED participants know your claim is viewed from both a financial and technological point of view.

Point # 4 involves of course the favorite questions of most clients - how soon can we get the funding?! As we stated, with your full co operation on providing copies of your claim, info on who prepared it, as well as basis business financing application criteria, you can receive funds in two to three weeks. Most firms are pleased to know that sred financing in Canada does not involve ‘payments ‘on the loan. In some ways the term Sr&Ed loan is a misnomer because it is really the factoring or monetization of your Sr&Ed receivable .Therefore you simply receive the funds and financing costs are deducted from the back end when Ottawa processes your claim and cheque.

As we have already stated the sred tax credit financing does not impact your financial statements, other than of course allowing you to put to use valuable cash flow and working capital as a result of the financing.
Consider a sr&ed tax credit financing when it makes sense to access additional working capital and cash flow and when you don’t want to wait for your funds over a long period of time!

----

Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/SR_ED_Tax_Credit_Financing_canada.html

Franchise Finance – Info You Must Know re: Franchise Financing and a Franchise Loan In Canada

As a Canadian entrepreneur considers a franchise purchase you want franchise financing info re the Canadian environment. When we meet with clients the questions is always very clear –

What do I need to know about franchise financing and how can I get a fast track to franchise loan approval.

Let’s cover off the basics in order that you are well prepared for the full completion of a successful franchise acquisition. That of course includes selecting the right franchise for you ( we leave that up to you !) but lets ensure you are well equipped to cover off franchise financing success on your own or with the assistance of a trusted, credible and experience franchise financing advisor .
Many fundamentals in franchise finance are key, and you should ensure these are in order prior to contemplating a franchise loan for the purchase of a new or existing franchise. (Many of our clients contemplate existing franchises that are being sold for some reason or another – they feel they can better validate chances of success by assessing the business results, location, etc.)

Speaking generally, you should ensure that you have a reasonable credit history and personal credit score. Whether you like it or not the two main credit bureaus in Canada allocate a score to every consumer and borrower in Canada – we can generally say that your personal bureau score should be in the 650+ range to acquire the best, and proper franchise loan approval.
Many clients we talk to believe the ‘franchising fee ‘being charged by the franchisor can be financed. You need to understand that is what people in the finance business call a ‘ soft cost ‘ and you should generally be prepared to use your own working capital for that issue as apart of your total financing plan . Naturally that amount still counts as a part of your overall equity contribution.

We should focus in on that point for a bit – You do not borrow in Canada ‘successfully ‘using the OPM model. OPM stands of course for other people’s money. Business borrowing, whether you are General Motors or an independent franchisee, has to be based on a combination of debt and owner equity. While in some cases you can achieve successful financing in Canada with a 10% deposit, in general the current economic climate calls for a 25- 40% or so owner equity contribution.

Where do clients get this ‘personal equity contribution’ that is a critical part of your franchise plan. In general it comes from savings, the liquidation of investments, or in many cases a collateral mortgage. The one positive feature of a collateral mortgage equity contribution is simply that rates, terms and structures are low and variable. I.E. low rates due to the current rate environment in Canada, and flexible repayment structures, i.e. no pre payment penalties, etc.

The positive advantage of arranging franchise financing for a resale franchise is that you can validate the profit and cash flow potential of the business. We should add that we are always a little bit concerned when a client assures us he or she can over turn the financial position of a failing franchise. Clearly a case of buyer beware we would say.

However, as we have stated, purchasing an existing franchise gives you great insights into the ownership and running of the business – including insights from the owner, i.e. the current franchisee. One can forgive the franchisors for being bullish and optimistic on their business, as their business is of course selling franchises.

We recommend all clients incorporate a business when applying for a franchise loan, if only for the reason that it is prudent to separate your business life from your personal life re liabilities, assets, etc.

So whats our bottom line – it’s simply that franchise finance in Canada is as complicated as you want it to be. Work and seek out a trusted, credible and experienced franchise financing advisor who will assist you in putting together the right franchise loan structure that meets lender and personal needs. That’s a solid financing plan!

---------

Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/franchise_finance_franchise_financing_loan.html