What If Your Firm Could Get Funding Today for Your Future SR&ED Tax Credit Financing ?

Most Canadian businesses don’t fully explore the power of Canada’s SR&ED program, but what if you could fully harness the financial benefit of the program. The reality of the program is of course that if you are participating properly in the program you have completed your annual claim and are waiting for your cheque. And hopefully an audit on your claim won’t further prolong the waiting for those funds.

In talking to many clients we can safely say that most firms who have a commitment to r&d probably could use put those funds to alternative uses – those uses might include working capital for daily operations, purchase of new equipment, and yes, even continuing again their whole research and development process . Therefore as powerful a tool as a sred claim is the reality is that it itself can create short term cash flow problems. Those challenges are on top of the ones Canadian business owners and financial managers face every day, slow receivables, demanding payables , opportunities to purchase more inventory , or in some cases invest in equipment and long term fixed assets .

So how would your overall cash flow and working capital position change if you could monetize the sred claim the minute you filed it, or, in some cases even before that. If you could convert the sred claim into cash today you could more easily address the challenges in cash flow and working capital that we spoke of above.

SRED, aka SR&ED tax credits are financeable! So you ability to finance your claim simply allows you to receive approximately 70% of your claim today in the form of a SRED Loan. And remember, that’s not additional debt on your balance sheet, since the sred loan is in fact offset or collateralized by the full value of your actual sred refund. (We tend, like many Canadian business owners, to use the works sred and sr&Ed interchangeably).

So , all of a sudden you have double kick started your participation in sred , as you are receiving non repayable grant money today, and putting that to purposes such as expanding your business, hiring additional staff, reducing obligations to suppliers, or finding yourself in the position ( perhaps for the first time ) to take supplier discounts for prompt payment . Can you only imagine that one!?

So how difficult is it to finance your sred claim. That answers in two words – not very! It involves a very typical business financing application, as well as full backup for your sr&Ed claim, including who prepared it, details of any previous year’s submissions and approvals, etc. Even if your firm is experiencing financial challenges you are still very much in the position of being able to discount, or in effect factor your sred claim, because that is the asset that supports the financing .

Clients often ask how long the whole process takes, and we indicate that with your firms full co operation a sred financing can be completed in a couple weeks. There are numerous smaller issues that need to be addressed or clarified, so we encourage clients to speak to a trusted, credible and experienced sr&Ed finance expert who will no doubt help them accelerate the sred financing.

So our bottom line is not now ‘what if ‘you could finance your sred claim, it’s now ‘what would your firm do with that additional cash flow and working capital. That’s a good problem to have.

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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_Tax_Credit_Financing_2.html

Financing a Franchise – Whats the Deal on Franchise Financing in Canada?

Minor details. You have made the commitment to purchase a new or existing franchise in Canada and must attend now to that final detail – you need to figure out how financing a franchise works in Canada! Franchise financing is a specialized industry in Canada, and your ability to investigate and source and finalize the proper franchise financing will of course be one of the reasons for your success as a Canadian entrepreneur operating within your franchise segment.

Whether you are Canada’s largest corporation, or the owner of a Canadian franchise its all about debt and equity. Simply put it’s the balance between how much you will borrow and how much of your own funds will go into the business. The franchise finance landscape in Canada is littered with many cases of business owners who did not match up, so to speak, the right amount of debt and equity.

There is an interesting point we can make about whether there is in fact a perfect formula or combination to the optimal amount of borrowing or personal funds that go into your new business. It’s a financial concept called R O I – which stands for return on investment. Let’s use a simple example to illustrate our point. If a franchise cost you one hundred dollars, and you paid all cash for it with personal funds and your profit in the first year was one hundred dollars then your overall return on investment is not great, as you can see. . However, if you borrowed 90 dollars, and put in ten dollars of your own money and your profit was that same one hundred dollars then you have generated a ten fold return on investment.

So that’s a good thing , right – well not necessarily, because your business has a lot more debt than ownership equity, as a result you are deemed to be very leveraged – if sales go down or profits aren’t achievable the owner has , in the creditors eyes, very little stake in the business .

Enough though of some of our textbook financial analysis we have just illustrated – what happens in the real world of franchise financing is what our clients want to know. The reality is that over the past several years, due in part to the current poor financial environment, owners have been obliged by lenders to put more and more equity into a new franchise. Although in some cases a 10% down scenario is possible, the reality is that number approaches 30-50% in most situations.

So a large part of the planning around financing a franchise should involve a couple things; your business plan or cash flow model should understand what amount of debt the business can handle, and in particular you should also understand the working capital needs of the business. It is not recommended to only focus on buying the business, as sooner or later you will have working capital or growth needs, so take that into account also.

Your financial planning around your financing should take into account the franchisors experience in the financial needs of the business – in a perfect world it is important to try and talk to some existing franchisees as to how their overall financing strategy works.

In Canada the majority of franchises are financed by a special federal government program called the BIL, or in some cases aka CSBF loan program. You need to ensure you meet the general criteria of this program. In our opinion no one financing method can really accommodate all your franchise financing needs, so we advise clients to consider a number of approaches including the above noted program, equipment financing where relevant, and in some cases a working capital term loan. Naturally all of this financing is under pinned with your own personal equity contribution into the business, which we discussed earlier.

So what is our take away on financing a franchise in Canada – there are a couple as we noted. Plan the financing of your franchise early on in the process and integrate it into your overall decision to purchase the business. Calculate what works out best for you relative to the ROI equation – what do you need to borrow, and what funds are available to put in yourself.

Speak to a trusted , experienced and credible business financing advisor in franchise financing to ensure you understand your financing options and that they can be presented to the lender in the best possible light . That’s a successful Canadian franchise financing strategy!

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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/financing_a_franchise_franchise_financing.html

Why an ‘ABL’ Might be your Best Choice for a Business line of Credit

Canadian business owners and financial managers will quickly acknowledge that is more challenging than ever to successfully obtain a business line of credit. That same challenge is why an ABL is fast becoming the business financing vehicle of choice for many Canadian firms. Great, say our clients, but what is an ABL?!

ABL is an acronym for an ‘asset based line of credit ‘. This business line of credit is a working capital facility, similar to your bank facility that provides working capital on a regular basis against inventory, receivables, and in many cases equipment and real estate if that is applicable. We can argue the case forever on whether Canadian banks are providing the right amount of financing and support for small , medium, and yes even large businesses in Canada – we don’t think we’ll get full closure on that discussion .

Therefore let’s simply assume you either can’t qualify for a chartered bank business line of credit or that you perhaps do, but the facility doesn’t meet your needs. That’s where an ABL, or asset based line of credit comes in.
So whats the solution and how does it work ask our clients. It’s a simple, no nonsense form of financing provided by non bank type firms. You can choose to call it alternative financing, but we can assure you this form of ‘alternative financing ‘is becoming more mainstream and popular every day.

Because the chartered banks focus on traditional metrics such as your overall financial performance, outside collateral, personal guarantees, etc you will find the overall ABL process much simpler and common sense. It’s simply a case of borrowing against your real assets, with little or no reliance on the issues we outlined above relative to a bank type facility.
The specialty of an asset based line of credit provider is simply their strong knowledge of your industry and assets – so because of that your ability to generate almost unlimited working capital becomes very obvious very early on in the picture. What do we mean by that? Simply that if you have receivables, assets and equipment you can always borrow against them on an on going basis – typically you can draw down on 90% of receivables, 40-70% of your inventory values, and pre agreed upon amounts on the appraised value of unencumbered equipment .

Typically companies that are the best prospects for this type of financing are firms with fast growth and in some case a limited track record – i.e. a start up, etc.

In some cases this type of business line of credit could possible be complimentary to your existing bank facility, but more often than not if replaces it totally.

While there are a number of key advantages to an asset based line of credit they do normally cost more than bank facilities – Depending on the size of the facility and the overall nature of your firm, its industry, and other challenges you might be facing the final pricing will reflect a realization of those issues. But let’s keep in mind that you have in effect just negotiated unlimited working capital, and have the ability to turn assets more quickly and generate increased cash flow, revenues and profits. That’s a true business financing triple threat if we have every seen one relative to your competition in your own particular industry.

The bottom line is to ensure you understand that you have a non bank alternative when considering a business line of credit via an asset based facility. Yes, it will cost more, but those costs can be significantly offset by increased cash flows via inventory turns, ability to purchase smarter with that cash, and to convert receivables immediately into cash for additional sales efforts. Speak to a trusted, credible and experienced advisor in this area to ensure that you determine if you can benefit from such a business financing arrangement.

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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_line_of_credit_abl.html

Asset Leasing – What You Need to Know for Leasing Financing In Canada

Canadian business owners and financial managers rely on asset finance and leasing as a key part of their overall business financing strategy. But what do you need to know properly access this type of financing and where do you source the financing? Those are the key questions we’ll discuss.

Canadian independent leasing companies provide hundreds of millions of dollars of business, asset, and equipment financing for business in Canada. They are a strong alternative to bank financing because they are very focused on their product and service delivery, and in many cases will always go the extra mile to ensure you have received a transaction that has the proper rate, term and structure. Because of the perceived, or real?

Complexity in asset financing us strong recommend to clients that you work with a trusted, credible and experienced advisor in this area. Your ability to even generate one major benefit on the transaction could save you thousands of dollars depending on your overall deal size. It is important to understand that these firms only finance the assets, they do not service them, and unless they are a captive finance firm , ( i.e. owned by a manufacturer) it is of course up to you to negotiate the sources and pricing of your acquisitions .

The key benefit of leasing finance is that the equipment you are looking for will be paid by the lessor – you receive the equipment, confirm it’s in working order, running, etc, and then you use that asst to generate hopefully profits and revenues.

One of the biggest decisions you need to make around an asset leasing scenario is simply the type of lease that you want to enter into – they are two types of leases, one is called capital lease, the other is an operating lease, and your decision should be driven around really one key question – do you want to own the asset ultimately, or do you want to simply use it and have the ability to return it at the end of the term. That latter type of lease is an operating lease – not all our clients are familiar with this type of leasing finance strategy – but it can bring significant benefits to your firm.

Other critical factors you have to focus on are the term of the lease, and special options you might be able to negotiate around payments. We spoke of the two types of leases, capital (lease to own) and operating (lease to use).
In Canada the major banks have a limited focus on lease financing. They certainly are also not able to offer operating leases, as their interest is certainly not to own assets at the end of term. Leasing finance through a bank is usually a much better overall rate to your firm, however you have to be in a position to meet the more stringent credit criteria that they require – Also it is our observation that banks that do lease financing in Canada will want to solicit all of your business financing – which may prejudice any other relationship you have in place.

So whats our bottom line – simply that asset leasing and lease financing in Canada is the proven alternative for your asset finance strategy. Speak to an expert, focus on your options, and know which type of lease makes the most sense for your firm. There is not panacea of perfect financing decisions in Canada, in fact it might make sense on occasion not to choose lease financing, but weight the advantages and disadvantages and you will be in a solid position to ensure that the proper evaluation of benefits will lead you to the right business financing decision.

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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_leasing_and_leasing_financing.html

Working Capital Financing – Methods of Financing A Business

We hate to use an old cliché when we talk to clients, but ‘cash flow is the lifeblood of your business ‘is not the worst cliché you have every heard, especially when financing a business has become one of your biggest challenges. The downside of not having, or being able to arrange cash flow and working capital financing is simply that you have a lesser ability to grow sales, maximize profits and take advantage of new opportunities .

So sitting down with business owners is a great method of ensuring they know what their working capital challenges are, and what the real impact of that phrase ‘ cash flow ‘ means to their business . There is a bottom line here, which is a simple one, you have to know what working capital is, and you then have to know how to get or achieve it. To most business owners and financial managers in Canada the term working capital or cash flow simply means - ‘what cash do I have in the bank?’ But that’s a very weak definition, and that wont get you business financing success – you need to understand how your receivables, inventory, and other assets come together to drive working capital and cash flow.

Your business financing or working capital requirements are driven in a number of manners, it could involve solely the growing of your sales, but it also could mean a major expansion of your business. Most clients we meet cannot hardly imagine having too much working capital or cash flow, but the reality is that if that ever was the case you then cross the line and you are in a position of not being able to use those funds to grow your business – so, bottom line – it’s a balance act, which is as with most other areas of your business.

One of the main things you should focus on is your ability to pay your current debt – On the balance sheet your accountant shows that as ‘ current portion of long term debt ‘ – You always want to be in a position to meet these obligations as failure to do that means you are bordering on insolvency . All of that snowballs into major issues with your bank, your suppliers, and other creditors such as leasing or finance firms.

So as we have said, you need to be able to calculate, or measure working capital, and then address how you will satisfy the need that comes out of those numbers. There are some easy calculations you can perform in measuring your overall cash flow – it’s really simply understanding your inventory and a/r turns, as well as having a handle on your accounts payable days outstanding.

If it was a perfect world you could raise all the working capital you need internally. How would that work?! Well, using an extreme example if you collected your receivables in 45 days, and turned your inventory in 45 days, and were able to pay your payables every 90 days you would be very self financing. Sounds great, except you can hear your suppliers and creditors now I bet... Also, the profits that you generate out of your business obviously become a new additional part of the working capital component and would even further benefit your overall position.

But let’s get back to the real world, which states that if you have more current assets than current liabilities you 99% of the time need external working capital.

Canadian business owners achieve that additional working capital in a number of ways – the most beneficial is bank lines of credit, or in some cases, if your firm meets the criteria, a cash flow working capital loan. If you are unable to meet bank criteria, and are still in a challenged or growing position then we advise clients to consider a non bank working capital or asset based lending facility. If receivables tend to be your main current asset than a factoring or invoice discounting facility makes the most sense.

Most Canadian business owners don’t fully understand how factoring in Canada works, and are often confused by the costs and process – so we strong recommend you speak to a credible, experienced and trusted advisor in this area of Canadian business financing . In some cases you Canadian business owners and financial managers are looking for an interim or intermediate timeframe solution, so a short term bridge loan with using unencumbered assets has helped many clients get over the hump.

So whats our bottom line recap – its simple – a three point scenario : understand what working capital is and isn’t, know how to measure it for your business, and finally understand which cash flow solutions make the most sense for your firm at this point in time .

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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/working_capital_financing_financing_a_business.html

Canadian Equipment Leasing - How To Get The Best Lease Deal!

As a Canadian business owner and financial manger you need a certain amount of skill and knowledge to successfully source and negotiate a Canadian equipment leasing strategy. Equipment financing in Canada can be simple or complicated – the business decisions you make around the financing and acquisition of your asset involves a number of factors which have to do with credit quality of your firm, the way in which you will account for the lease, as well as any business or legal considerations around the transaction.

From the viewpoint of your lessor we can probably safely say they are most interested in simply getting paid back, so the ability to present your firm as a reasonable credit risk will allow you to get the asset and amount you want approved, and, as what seems most important to many of our clients, you will get what we would like to call a ‘competitive rate and structure. You also want to know if you are making the right financing decision as opposed to considering an outright purchase or some type of term loan for your asset financing. So at the end of the day you want to know what type of lease and benefits are available to your firm, and who is the best ‘lessor partner’ for this particular transaction.

We meet with many clients who spend countless hours, if not longer sometimes in talking to a large number of lease companies on any given transaction. What they don’t understand ( other than wasting their time ) is that lease companies in Canada are organized by asset and credit quality, and many lease firms are funded in different manners, and in some cases offer only one type of lease , which is not necessarily the lease financing you might need for your asset finance decision. So how do you wade through all this clutter and noise? It might be proper to consider working with an expert who knows the Canadian lease industry, and is a trusted, credible and experienced advisor to your firm in this area.

When we meet with or get a call from clients who have been out in the market ‘ shopping ‘ for a lease it becomes very clear that they appear very un organized and have spent an inordinate amount of time . Also, they are looking for ‘ all ‘ the ‘ benefits’ of lease financing in Canada, when in reality only a certain number , or even a limited number of those benefits might apply to their transaction . Countless firms recount stories of having paid too much for a lease or having focused on an option that ultimately had limited benefit to their firm. Again, understand the market, or work with someone that does.

Your ultimate goal in a lease financing strategy in Canada is to ensure you have, at the start, outlined what makes sense for your firm regarding the lease structure and the appropriate partner.

When you are soliciting lease pricing you should do that selectively with firms who are interested in your overall credit quality, asset type, and dollar size of your transaction. We tell clients to get a ‘market sense ‘of the type of lease financing that is available as the industry has the ability to use jargon that can be considered confusing to say the least!

One strategy you can use is to outline a basic lease financing request and solicit a number of bids – by clearly showing who you firm is, the asset you wish to finance, and the dollar value of the transaction, and the type of lease you require (there are two types) you can quickly eliminate a lot of wheat from the chaff!

In summary, understand what key benefits you want to achieve from a Canadian Equipment Leasing transaction get a sense of who can deliver on those options, and ensure you have a level playing field for lease firms you might want to work with.

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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/canadian_equipment_leasing_equipment_financing.html

P O Financing and Inventory Financing – Benefits … and Risks!

In the old days Canadian business owners went to their bank for PO Financing and Inventory financing... no really, they did... yes really! Most companies now know that the financing of your inventory, purchase orders, contracts, etc is a formidable challenge in the Canadian business financing landscape.

Simply speaking, your purchase orders, or inventory were collateralized by the bank and you borrowed against them. Therefore cash flow and working capital that was in effect tied up, or rather invested in your inventory and contracts was monetized, and you had the ability to draw down against those dollars.

Well the business financing landscape changed – yet your firm still has inventory, you have growth needs, and you need the financing to drive that growth into sales and profits. If you can acquire inventory financing then the ability to borrow against that inventory and purchase order is a key benefit.

So if the banks aren’t really that into inventory and p.o. financing in Canada, then who is. Well the reality is that it’s done via a select and specialized group of private finance firms who have a total knowledge and focus on the value of your inventory, and furthermore usually carry significant knowledge about your industry and the overall business model you operate in.
You should approach inventory financing with a positive attitude – by that we mean that your presentation for the financing should focus around the positive aspects of your business – those should include inventory turns, marketability of your product, and, very importantly, the gross margins associated with your business. We can categorically say that businesses with very low thin margins are not the best candidates for inventory and PO financing, simply because the financing costs around this type of financing chip away significantly at those final remaining profits.

We mentioned in our title that you should be cognizant of the risks associated with inventory financing – by all means don’t consider the financing of out of date of very slow moving or unsaleable stock – this quite frankly will be viewed simply as a ‘ cash grab ‘ that doesn’t make sense .

You will obtain a better inventory financing and p.o financing deal if you have good controls on your products – that typically might include a perpetual inventory accounting

Clients always ask if there are any special tips or tricks around the financing proposals around p.o and inventory financing. We tend to focus on the basics, which always work - a listing, or preferably an appraisal of your inventory – updated financials, copies of pertinent purchase orders or contracts, and a business plan or cash flow forecast.

The bottom line is that 9 out of 10 financiers have never even heard of p.o financing or inventory financing, so seek the services of a trusted, credible and experienced advisor in this area to assist you in putting the right type of facility in place. An experienced advisor in this area will help you avoid some of the potential risk, pitfalls, and financial ‘damage’ associated with inventory and p.o financing gone awry. They might include higher than market rates, requests for additional hard collateral, locked in contracts you can’t get out of, or inordinate appraisal and inventory count costs.

If you are successful in avoiding those risk the benefits will clearly be obvious - the ability to grow sales with unlimited financing of new sales or contracts, quick turn around for approval, and cash flow benefits derived from your suppliers being paid directly by the finance firm. Additionally you may be in a position to negotiate better pricing on products, thereby improving those gross margins we talk about.

PO and inventory financing, its all about risk and reward – understand those risks, seek an expert to minimize them, and reap the benefits of increased 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/p_O_financing_inventory_financing.html