How to Choose the Best Invoice Factoring Company in Canada

A client once asked us how to go about choosing the best Invoice Factoring Company in Canada. We replied with a question, which was simply, would you prefer in any aspect of your business and personal life to work with an expert, or a non expert. The answer is of course obvious. Experts are good!

If you are looking at alternative sources of financing for your business and don’t feel comfortable in assessing all the options, benefits, and of course the pitfalls we recommend that you seek the services of a trusted, reputable and experience and successful business advisor in this area.

Factoring, also known as receivable discounting, or aka ‘receivable financing ‘is one of the fastest growing parts of business financing in North America. Thousands of firms in Canada factor their invoices and in many cases the firms utilizing this financing are newer firms, perhaps in total start up mode, or in some cases they are established businesses that for whatever reason cant access traditional financing such as a bank line of credit or operating facility.

Although many other types of term financing are available for your business, the use of an invoice factoring company is really the main source of working capital and cash flow for many businesses on a day to day basis. This type of financing works for Canadian business in challenging times (we are just coming out of the 2008-2009 global meltdown) and in good times. The reality is that good times bring strong growth and many businesses are unable to finance strong growth simply because more current assets than current liabilities requires financing – putting it more simply, you nee capital in order to maintain higher levels of receivables and inventory
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The challenge in choosing the right Canadian invoice factoring company is simply knowing how pricing and daily practices and procedures work. It is simply as that.

The true benefit of receivable financing is simply that you receive funds on the same day that you invoice, assuming your invoice is legitimate and goods and services for that invoice can be properly recognized as earned an treated as revenue .
So what do you need to know in assessing the proper factor partner – We can boil the technical pricing issues down to three main issues – they are:

1. How much will you receive as soon as you generate your invoice - practices differ widely in Canada, and you can receive as much as 90% or as little as 75%?
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3. The most widely discussed and mis understood issue is what discount fee you are being charged by the invoice factoring company – Our clients view this as the ‘ interest rate ‘ but you should clearly understand that all dialogue with your financing partner will be in terms of a discount rate .

4. Time to pay – or your average days sales outstanding. Prudent business owners and financial managers know the payment habits of their customers, and of course seek to enforce their own payment terms with their customers to the best of their ability without damaging the client/customer relationship by being too aggressive. Let’s assume you can negotiate a 1% / month factoring discount rate with your invoice factoring company – If your terms are 30 days and your customers pays in 60 –90 days you’re financing costs actually double and triple in the case of a slow pay customer.

In summary, factoring is becoming a very accepted method of financing in Canada. The landscape is dominated by Canadian and foreign owner firms, some are small, some are large, some bring U.S. and U.K. practices to Canada thinking they will work. They work for them but they might not work for your firm.

Experts are good things to have – just as you rely on a good accountant or a good lawyer. Speak to a business financing expert to determine what benefits of factoring work for you, how the financing would work relative to your business model, and which invoice factoring company is the best fit for 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/invoice_factoring_company_factoring_receivables.html

Why Asset Finance, aka Asset Based Lending is the Ultimate Working Capital Financing Solution to your Business Challenges

Can you please explain asset finance, or asset based lending to me? Is a common question we get from clients who want more information about Canada’s newest business financing solution? They keep hearing how this solution has solved the problems of their competitors and want to know more.

So is it a difficult concept to understand? Hardly. Asset based financing, often called ‘ABL’ by those in the industry, is simply the method of obtaining the maximum working capital you need from your assets, which include typically receivables, inventory, and in many cases some equipment and/or real estate. That’s as simple as it gets. It is a little different when we explain how the whole process works, but simply view it as your ultimate working capital tool for financing your business.

Although it’s been in existence for many years, in the past asset finance or asset based lending (we also call it a ‘working capital facility “) is coming into vogue. It doesn’t take rocket science to understand when, given traditional financing almost totally collapsed in the 2008-2009 global meltdown, and customer began searching for options and alternatives to their business financing needs.

Lenders like asset based financing simply because they are using their expertise and knowledge in your assets to help you cash flow your business.

Although many companies turn to asset based lending when they cant access traditional bank financing the reality is that this type of financing has some unique characteristics that allow you to utilize the financing for major expansions, acquisition of a competitor, or even more common, a ‘bridge ‘financing prior to re structuring your firm and accessing the traditional capital markets again.

As we stated, it’s very simple for us to explain to clients what an ABL facility is, it’s a bit more complicated to get them to understand how it works. The best way to explain it though is to simplify it all and say that you should consider asset finance via a working capital facility as simply a ‘ revolving line of credit around all your business assets ‘. Can that be anymore simply to understand? We don’t think so.

Typically the process is as follows - After the traditional ‘ application ‘ process there is an agreed upon value put on all your business assets - as we said , 99% of the time the assets under this financing include receivables, inventory, equipment, and in some cases real estate . The most common assets though are receivables and inventory.

Your firm provides regular monthly, and in some cases weekly updates on the values of these assets, and you in turn use your regular bank account to draw down on funds, as you need them, to run your business. Similar to a bank revolving line of credit facility your asset based financing facility fluctuates everyday as a dollar of capital flows through your business – you purchase product, you generate a receivable, you collect your receivable, and of course the process repeats itself. The beauty of this type of facility is that as your assets grow the line of credit grows with you – you can truly say that you have unlimited financing.

Asset based financing, or asset finance in Canada is highly specialized. Speak to a trusted, credible business financing advisor in this area to ensure you understand the options, and of course the benefits, of this unique and creative method of business financing.

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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_finance_asset_based_lending.html

Sources of Financing for Working Capital Cash flow in Canada

Tapping into sources of financing must for most business owners and financial managers in Canada seem like finding the hold grail of financing; particularly after the tough time they had in 2008-2009 after the global economic meltdown.

The problem , or should we call it a challenge for business in Canada is the ability to source working capital and cash flow , and long term financing as prospects for growth, sales and revenue seem to improve and the cash flow and working capital prospects seem to have gotten tougher!

When we meet with clients who have been denied bank loans we can of course commiserate, but at the same time Canada’s banks seem to have survive somewhat unscathed compared to bank failures all over the world. The bottom line quite frankly is that Canadian business is looking to alternative sources of financing for working capital, cash flow, and asset acquisition. The Canadian government has a full scale bank that is a non bricks and mortar bank, i.e. not branches, and they are committed to providing working capital and equipment financing.

However, the bottom line reality is that if you can access the business financing you need you should consider non bank financing, because it is these firms that seem to be the current bench strength in asset and receivable financing – these firms include:

Leasing companies

Asset based lenders – equipment, receivables and inventory

Purchase Order and Inventory financing firms

Factoring firms – i.e. receivables

Tax credit monetization firms – i.e. sred/Sr&Ed credit financing

When we talk to clients they often use the term ‘government grants and loans ‘– We feel that term is not realistic, in that that the only two real world programs out there are the Canadian SR&ED program, which is the non repayable grant for r&d, and also, the government Small Business Loan – A lot of misinformation exists about this loan as it only finances equipment and leaseholds – many clients seem to think it provides cash, or working capital financing. It does not!

There is always the equity consideration, but most business owners we meet have already contributed the maximum equity they can, and are reluctant to borrow further from personal resources, and the proverbial ‘ friends and family ‘.

Working capital financing in our terms means several very clear solutions –

Monetizing your current assets such as receivables and inventory

Cash flowing items such as Sr&Ed credits

Entering into a government working capital term loan

Negotiating a working capital/receivables financing facility – which in larger dollar terms is referred to as an asset based lending (ABL) arrangement.

When looking for sources of financing for working capital and cash flow is sure you understand the meaning behind the jargon. Determine whether you are looking for liquid operating capital, or a longer term working capital solution. Seek out and speak to a trusted, credible, and experienced financing advisor who can guide you through the Canadian working capital maze and determine what the best cash flow and source of financing is for your long term growth 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/sources_of_financing_working_capital_cash_flow.html
http://www.7parkavenuefinancial.com/commercial_equipment_lease_financing_equipment.html

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