Purchase Order Financing Canada

More and more clients ask how Purchase Order Financing in Canada works. In many cases a purchase order financing or inventory financing solution is the method by which there company can take itself to the next level of growth and profit.
Historically firms with large inventory or purchase order financing requirements have found it difficult, if not impossible to access P.O. or inventory financing – that is slowly, and we repeat, slowly changing in Canada.

One of the hidden benefits of this type of financing, which is more expensive than traditional financing, is the fact that it allows you to demonstrate to more traditional lenders, i.e. Canadian chartered banks and asset based lenders, that your firm can establish higher levels of sales with clients you might otherwise not be able to facilitate with your services and products.
The main users or firms in need of purchase order and inventory financing are rational industry firms such as exporters, importers, firms in wholesale distribution, and of course manufacturing companies.

The entire concept of purchase order financing is based on whats going to happen, not what has happened. The essence of the financing is the ability of your supplier to be paid by the inventory finance and purchase order finance firm in advance. That of course allows you to complete your transaction a d ship goods and services and bill and collect your receivables.

The one key technical point of inventory and purchase order finance is the fact that the firms that finances these two items often has no interest in financing your receivables – they are in fact just specialized lenders that are experts in inventory and purchase orders and letters of credit . That raises a technical point you must understand, which is simply that the inventory and p.o. (Purchase order) finance firm expects to be paid when you generate an account receivable. Therefore it is critical that you either have a factoring facility in place, of that your bank line of credit allows you to facilitate the drawdown of that account receivable.
When you utilize an inventory or purchase order financing firm in Canada it is now clear that you are relying on your finance partner’s credit to facilitate the purchase and payment of your inventory and products.

While business financing has always been a challenge, it has become more pronounced in after the 2008-2009 global meltdowns in business financing. So while you can expect to pay higher rates for financing inventory and purchase orders the reality is that you can increase sales significantly as other traditional finance entities have backed away from this type of financing .

The overall process for purchase order financing is fairly straight forward - based on our inventory and purchase order and contracts in hand you identify the supplier arrangements you need to make in order to facilitate products. Payment is made to your suppliers via cash or a letter of credit. If your gross margin is 30% and your purchase order is for 100,000.00 then naturally the purchase order or inventory finance firm usually is willing to advance 70k to your supplier as payment in full. At that point when goods are shipped and a receivable is generated then your p.o. finance partner expects to be paid.

In summary, purchase order financing – Canada is an excellent alternative financing mechanism that in many cases can in fact work well with your current financing arrangements . Speak to a credible, trusted, and experienced advisor in this area to take advantages of situations when lack of capital is an obstacle to your future sales and profits!

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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/Purchase_Order_Financing_Canada_2.html

Franchise Finance Lenders – The 4 Most Critical Things You Need to Know about Franchise lending

Clients are always asking us, who are the franchise finance lenders in Canada. At that point they have made the decision to invest their time and money in a new entrepreneurial business, and have chose to either purchase a new franchise, or, in some cases and existing unit. (There are a number of reasons why current franchisees want to sell their unit to you – but you should carefully explore the reason for the sale for the obvious reasons)

So what are the 4 most important things you need to address, assess, think about, and action in your decision to finance a franchise. We feel they are as follows: They are by no means in order of importance, but at the same time you probably won’t be successful until you are in a position to have satisfactorily addressed all the issues:

1. You should have some experience in the industry, of feel confident that you and the franchisor have the ability to get you up to speed in training if it is a new industry for yourself - ( We caution you that the number of franchise lenders in Canada place a certain amount of focus on management experience ). However, if you can demonstrate good business acumen and previous success that certainly will help the franchise financing process.

2. You must demonstrate that you have a solid business plan - yes this had to be; written out’ so to speak. If you do not have the interest or ability in generating such a document you should seek the services of a trusted, credible and experienced business financing advisor to prepare such a plan. In our opinion the reasonable costs associated with such a plan are in the 750-1000$ range , which is a small portion of your overall investment and if it produces the financing you need, as well as delivering on a reasonable financial action plan that surely is money well spent .

3. Location / Location/ Location! That phrase is of course used a lot in real estate business – if your franchise is one in which a location is important you should clearly seek out a location that will assist you in driving revenue and sales growth for your industry. We caution many clients that their own belief in the value of the franchise and their own skills in taking the business forward cannot always overcome a bad location. So if that’s a key element in the franchise you are considering purchasing then one of the ways in which you can address that issue is usually free – it’s simply speaking to a local real estate agent, preferably one with business, not consumer experience, and getting advice and opinions on the location you are contemplating.

4. Capital – Money! The financing of your franchise in Canada comes from the two key elements of business. These two key elements are the same for your franchise as they are for a mega corporation such as IBM – The two elements are:

Debt

Equity

The equity portion of your investment is your own personal resources. You should never entertain the thought of obtaining 100% financing for a franchise – while that generally wont fly with any franchise lender, at the same time you would probably be over leveraged and a suitable candidate for business failure .

So how are franchises financing in Canada. Who are the franchise finance lenders?

The best and most popular program is a government loan that is underwritten by the federal government, the technical name for the program is the BIL program, and most Canadian business people know the program as the Small Business Loan. It goes up to $ 500,000 in some cases and is by far the most popular method of obtaining franchise financing, in tandem with you own investment, which can be anywhere from 10-50% per cent of the total amount you require . In recent years the bar has been raised on your personal equity contribution into the business.

In summary, franchise lending in Canada is a somewhat of a unique boutique type of finance. Work on our four fundamentals we have presented – also seek out the services of someone who is a trusted, credible and experience franchise lender who can assist you in your transition to franchise purchase and franchise financing success.

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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_lenders_franchise_financing_.html

Asset Based Loans and Cash Flow Factoring and Financing Alternatives in Canada

Asset based loans come in a variety of alternatives within the Canadian business financing market. On top of the account receivable you generate from sales and sales growth Canadian business also has investment directly related to inventory, equipment, and on occasion real estate.

The challenge is simply to monetize those critical current and fixed assets into cash flow when you need it, in a manner that makes sense for your firm. The most obvious way to generate cash flow and working capital from your business is to directly monetize accounts receivable via a cash flow factoring facility.

Naturally this can be also accomplish with a chartered bank operating facility, but if this is not feasible your ability to monetize receivables when you need to is best done via a factoring or invoice discounting facility .

When we sit down with clients and talk about the sometimes higher cost of non bank asset based financing in Canada one of the things we focus on is the cost of equity. Although asset based financing in its many derivatives ( bridge loans, factoring, financing against equipment equity, inventory advances, etc) may be a more costly method of financing your business we can categorically say, and the text books will back us upon this one, that equity financing is much more expensive.

A business either borrows funds, or injects owner equity into the business, and equity capital can be expensive when considering its dilutive nature relative to total ownership. And the reality is that the right amount of debt is in fact a great way to optimize leverage and increase return on investment and return on equity - a great way to measure owner and manager performance .

The key benefit of asset based lending is its ability to generate cash flow for you when you need it. Cash flow and working capital needs ebb and flow daily, weekly, monthly, annually, seasonally... you name it, it is always changing. When you send invoices, build up inventory, or pay suppliers, that is all part of the cash flow conversion cycle in any business.

Your ability to focus in on assets that can generate cash when you need it is a true working capital success scenario. The best thing you can do in preparing to consider a true asset based loan or asset based lending facility is to ensure you can properly demonstrate the ongoing sources and uses of your funds, and in particular the turnover of those funds . The ability to clearly understand your days sales outstanding, annual inventory turns will significantly impact your ability to source and obtain the right asset based loan facility.

The most obvious facility we mentioned is factoring or invoice discounting – for the purposes of information we are sharing now on this subject the best advice we can provide is very simply – choose the right factoring partner and firm – which is best done via the seeking out of a trusted, credible and experienced asset based lender in Canadian business financing .

The key benefits you will derive from a properly constructed cash flow factoring facility are the amount of capital you can immediately borrow against receivables, plus the knowledge your limit will grow easily as you increase sales revenue. In many other forms of business financing receivable advances are limited to formulas and tied to financing performance of your company – that is not the cash with cash flow factoring.

Investigate the benefits of asset based loans, which may come in a format that works for your business financing success.

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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/asset_based_loans_cash_flow_factoring.html

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.

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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.

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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.
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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.

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