Benefits of a Commercial Equipment Lease for Canadian Business

Canadian business owners and financial managers are constantly challenged to come up with financing alternatives for both working capital and the asset acquisition.

Let’s focus on why a commercial equipment lease provides your firm with some of the best financing benefits and alternatives. In order to be successful in financing equipment it is important to know several key things - we can summarize those in a few critical categories:

- Understanding what lease company is the best fit for your firm

- Focusing on what benefits are important to you in an asset acquisition

- You must have the ability to de-mystify lease pricing and rates and structures to ensure you are getting a competitive market rate and structure

When you make the equipment asset purchase decision you are always faced with what is known as the ’ lease vs. buy ’ scenario. We don’t intend to make out information shared here an accounting lesson, but either using a lease vs. buy calculator or template, or, even better, speaking to your accountant you can easily come up with a rudimentary analysis of what the best financing option is . If it is lease financing then you are ready to move forward.

We talked about our critical point # 1 - which is simply to understand who your best lessor might be. The factors that determine this might seem like common sense - they are: The type of asset you are acquiring, the dollar value of the asset, and the overall credit quality of your firm you are in a position to focus on the firms that finance this type of asset.

The good news is that there are hundreds of lease financing sources in Canada - the flip side of that coin is that you might not have the time to invest in speaking to 100 different firms.

In most cases in makes a lot of sense to seek out the service of a lease financing expert who will be in a position to source the optimal funding as well as the best rate, term, and structure.

We advise all clients that, if they can, they should try and determine if the manufacturer provides financing - this is known as ‘captive ’ financing and 99% of the time is your best deal - and fastest approval . That’s simply because the mfr. finance arm is incented to move product, as well as earn some income on the financing of course!

We talked in point # 2 about focusing on benefits - Leasing has numerous benefits. It would be rare that every benefit applies to every firm - so we recommend to clients that they outline what is most important to them with respect to the financing of this asset - those considerations might be a lease to own financing, or in some cases, an ’ operating lease, which is akin to a short term rental, although a typical operating lease might range between 2-3 years in duration. The benefit of that type of financing is simply that your benefit from the use of the asset, not the ownership of it, and profiting through use of the asset is what it’s all about in business.

We tell clients that we aren’t necessarily overly proud of the way the industry sometimes confuses customers with a myriad of terminology and options, these includes references to FM, skip payments,
First and last, full payout, bargain purchase option, etc.

The most important piece of advice we can give a client is simply that by properly positioning their current financial position, demonstrating profit through use of the asset, and knowing whats important to them re payments, approval, lease term, etc should in fact allow them to maintain a control position in any lease financing negotiation.

Be an informed lessee in your search for a commercial equipment lease, understand that the market is competitive and people do want your business, and focus in on what financing equipment benefits work best for your firms sales and profit prospects.

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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/commercial_equipment_lease_financing_equipment.html

Equipment Financing - Capital Leasing Options That Make Sense

Equipment financing decisions are among the easiest decisions your firm can make when it comes to business financing – it only takes some simply research to be a well informed and successful lessee in the Canadian equipment financing marketplace.

The age old questions for Canadian business owners and financial managers in Canada has always been the same – should I buy the equipment or should I lease it via capital leasing options that make sense for my firm.

We use the expression capital leasing option which you should know references the fact that you probably intent to own the equipment at the end of the term of lease after payments have been made.

The reality is though that equipment leases come in two flavours – a capital or finance lease where you intend to own the equipment, or, the alternative, an operating lease whereby you use the asset for the term of the lease. At the end of this type of lease you have three options, you can return the equipment, upgrade or extend the transaction, or purchase the asset for an agreed upon ‘fair market value ‘from your lessor. Operating leases tend to be very attractive to your firm if your overwhelming desire is to ‘use ‘the asset, not to ‘own ‘the asset.

Equipment leases and equipment financing in general is clearly the alternative to bank financing or taking out a term loan for the equipment. Most businesses in Canada time and time again tend to utilize equipment financing in many cases simply because it is easier to get approved as well as you tend to be in a position to close the financing in a much shorter time frame – i.e. no bank negotiations, etc .

Because of the diversity and breadth of the Canadian equipment leasing industry the reality is that financing is available for all types of equipment and all types of ‘ credit quality ‘ – credit quality of course being the perceived overall financial condition of your firm .

We encourage clients to seek the services of a trusted, credible, and experience business leasing and financing advisor who can steer them easily thought the diverse group of lessors who have different appetites for overall credit quality, as well as the asset type that you are seeking to financing .

We should also mention that almost any asset in Canada can be financed, from high end costly industrial equipment leasing all the way to something more esoteric as computer software. The fundamental precept of lease equipment financing is that the asset itself is the main collateral for the loan. Naturally you should be in a position to properly address and present a case that you will be able to make the payment on the lease via the production nature of the asset for your firm. The two concepts that a lessor looks at is primarily cash flow and your overall debt position Vis Vis equity.

As your firms builds equity in the asset as you repay your lease this allows you at some future time to leverage this fixed asset based and utilize these assets for refinancing for more working capital and cash flow, etc. This basic concept is known as sale leaseback financing.

Entire books are written on the advantages of leasing – they can be summarized as follows:

- Your ability to acquire the asset you need while removing the key obstacle of ‘ cost ‘

- Term – You want to be in a position to match the term of the lease with the expected useful life of your asset acquisition
- Tax advantages – talk to your accountant, as in many cases it is more advantageous to lease rather than purchase or take out a loan
- Payment flexibility – payments can very often be matched to the seasonality and cash flows of your business

The current business environment has made it very difficult for firms such as yours to obtain the proper business financing, whether that be working capital, operating facilities, or, in our case here, asset acquisition.

Utilize equipment financing as a key part of your business financing toolkit!

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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_financing_capital_leasing_options.html

Film Financing in Canada - Use a Tax Credit Consultant for Tax Credit Financing and Cash Flow

When we speak to clients who are independent film producers, directors, and owners of film, TV, and digital animation projects in Canada they are the first to offer up that one of the largest obstacles to success is typically the financing of their project.

Tax credit financing in Canada continues to play a major role in the financing of projects in our three aforementioned entertainment categories that dominate the industry. Independent producers, directors, owners, et al can certainly be forgiven for feeling they are caught in the middle of the global economic challenges that plague all business , not the least of which is their own industry .

While initial debt and equity capital for your production is often identified in the early stages there is still a gap in the total financing of your production. Monetizing your Canadian film tax credit can assist you in eliminating that gap!
Naturally production costs, as well as those required monies associated with print and advertising are going up – foreign and pre sales certainly help, but buyers and marketers clearly are getting more sophisticated and picky.

Canada is clearly in a position to be enjoying increase production, while the reality is that many countries in the world in fact seem to view fewer productions as coming out in the future, albeit more targeted ones.

Canada’s current very robust tax credits in film, animation and TV rival those of anywhere in the world in overall production credit generosity. In many cases certain credits approach 45- 50%!

A tax credit consultant in some ways is in a more enviable position than you the project owner, that is because he or she does not have to worry about making a ‘ hit ‘ . When you use tax credit financing in Canada, and are able to demonstrate a proper finance plan, what amount of tax credits you expect, and have a credible reputation on other projects you are somewhat assure of getting full funding for your tax credit .

These credits can be financed at time of final filing and certification, or, even more creatively, you can take advantage of accrual financing and receive funds prior to the tax credit being filed. As you should know the tax credit financing is not a loan per se, it’s simply the monetizing of your claim and the collateralizing of the tax credit.

To take advantage of Canadian tax credit financing in film, televison, and digital animation you are encouraged to seek the services of a trusted, experienced and credible business financing advisor in the tax credit area in Canada .- someone who has worked with independent producers and has access to the player that provide this type of capital , institutional or otherwise .

By working with the right partner you will be in a position to arrange one of the critical pieces of the puzzle in film, TV and animation financing, the Canadian tax credit.
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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/film_financing_canada_tax_credit_consultant.html

SR&ED Funding – New Rules – SR&ED Financing – No Change!

Thousands of Canadian businesses use the governments SR&ED (aka SRED) program to recover billions of dollars spent by Canadian firms on experimental research and development on their products and services and technologies.

Let’s focus on 2 things you need to know in the 2010 SRED business environment in Canada.

1. First of all, there are some new rules and processes around submitting your claim and the manner in which it is written. We will leave that to the sred consultants and Sr&Ed firms who prepare your claims. However some of the key points are that the government has mandated a new process for the submission of your claims.

We can somewhat safely assume that any new government process change on a federal and provincial basis is a learning curve for everyone, including the government we surmise. The essence of the changes is a move to simply simplify and better automate the entire process, which one assumes ultimately will have a major benefit for all , you the sred claimant , as well as the parties within CRA who handle SR&ED. We were somewhat surprise to hear that in actuality you now have only 1400 words within which to identify your submission, and that doesn’t even allow you to include photos, diagrams, etc.
Some other key factors that you and your sred consultant will have to take into account is your ability to slot your company and project within an industry code and specific description around exactly what advance in technology or process that you were attempting to change .

The bottom line quite simply is that in order to ensure your claim becomes eligible you will have to have a slick well prepared document that ensures you ‘ sred gates’, if we may call them that . That might well be the changing of documentation you prepared in the past Vis a Vis backup attachments, photos, long narratives, etc.

Work with your sred consultant to ensure that as the new system and processes take affect you have maintained the quality of your claim.

2. Now the good news – financing your sred quite frankly hasn’t changed Vis a Vis the process, which we feel quite simply is the same as any other application for business financing process. Financing your sred still makes a lot of sense if your firm can in fact turn a non repayable government grant into working capital and cash flow immediately.

Work with a trusted and experienced sred financing consultant to ensure you maximize both the amount you can finance, which is typically 70% of the total value of your combined federal and provincial claim, and, more importantly – knowing that you’re financing can usually happen within a couple weeks if you have a solid sred claim. Typical backup includes of course the claim itself, information on owners and the business, as well as your ability to address any issues or questions surrounding your sred or your company’s current financial position.

SR&ED financing can quickly reverse any working capital challenges you have, in a matter of weeks usually which is the time it takes to finalize a sred loan and have funds advance. The key collateral focus is of course the sred itself, and no payments are made on the sred financing – the funds advanced to you are netted against the final cheque from the government, less any financing costs.

Consider a sred financing strategy to give your firm what we could call a double kicker – first of all you have received a non repayable grant from the government, and then you have monetized that sred claim to accelerate your cash flow and working capital .Clearly a solid business financing strategy for -Canadian 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/sr_ed_funding_sr_ed_financing_sred_loan.html

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