How You Can Address Franchise Cost and Franchise Financing In Canada

It is of course, understandable that franchise cost and franchise financing can be two major challenges, or worries, that you face when you make the decision to be an entrepreneur in the franchise environment. Let’s look at how you can address some of those issues and concerns with information that will assist you in making an overall solid franchise investment decision.

Franchise financing and franchise cost should never be put near the end of your decision making process. You should address those key areas up front and be armed with the right information on how the industry finances a franchise.Many clients, somewhat mistakenly, think they will receive franchise financing assistance, or even the financing itself from their franchisor. Nothing could be further from the truth – you should simply focus on the fact that the franchisor is in business to sell units and grow their business, not put capital into your venture. That being said we hasten to say that almost all franchisors can be a valuable tool in the franchise finance arena in a number of ways.

So how can you use the franchisor itself as a tool for your financial planning around your venture? Follow a couple basic rules – review the franchise disclosure documents carefully for any financial data that will help you make a better financial decision. Also, ask for franchisee testimonial and contact info – if possible talk to some franchisees in the chain and ask them about their finance strategy hen they acquired the business. Also cover off if the financial expectations they had around the business in fact materialized.In some cases your franchise lender may wish to obtain info on the franchisor and their overall financial status. This generally is not required with well known brands.

In the challenging economic environment we are currently in it is important to deal with an expert to ensure you have the right financial strategy in place – your lawyer or accountant might be familiar with a franchise financing expert in Canada who can more quickly assist you.

In order to finance a franchise successfully in Canada we recommend to all clients that you have an appropriate mix of debt and equity – equity is of course the funds you put into the business yourself, and debt is the franchise financing itself . Typically we see clients putting anywhere from 10-50% of the franchise cost in as owner equity. This varies per type of business, and whether the business is somewhat asset based or service based.

You need a business plan and financial projection! We can’t be clearer than that. This valuable tool serves a number of purposes – it shows the lender you have thought out the ‘ financial ‘ aspects of your business – and quite frankly it should solidify in your own mind that you have a solid business opportunity . Carefull attention to revenue projections, costs, and debt servicing should all be a part of that plan. Typically you should have the plan prepared by a professional and we don’t think you should pay more than 750-1000$ for a decent plan.Don’t spend thousands on a business plan – that’s a waste of money in our opinion.

So how is the franchise cost financed in Canada? As we said the key component is your own personal investment .After that a huge majority of franchises in Canada are financed under a special government program that is technically called the BIL or CSBF program .Most clients typically refer to the program as the Government Small Business Loan. Ensure you are aware of the requirements and that you can meet the requirements. It is recommended you speak to a trusted, credible and experienced advisor in this area who often can help you put together your package, guarantee that you meet the requirement and at the same time work with you, the lender, and the franchisor to accomplish every ones goal – which is of course – getting you approved for franchise financing !

It is rare that one financing will cover all your total financing. Many of our clients that require some form of asset financing with their franchise investment utilize an equipment leasing or equipment financing option. This makes sense from a variety of reasons – it spreads out your credit so you aren’t concentrated with one lender, it is easier to get approved, and you can use the government loan to cover a lot of the leasehold costs that otherwise might not be able to be financed .

In franchise financing you should categorize your financing needs in three areas – soft costs, hard asset costs, leaseholds. Soft costs might be things such as the franchise fee, hard costs might be signage or POS computers and software, and leaseholds might be painting, pluming, air conditioning, etc.It is absolutely critical to segregate these into separate categories and ensure you have a financing strategy in place for each one. You do not want to finance all your hard assets via the government loan and then find out you can’t get leasehold financing from anyone else.

So whats our bottom line in franchise cost and franchise financing. Its simply do your homework, solicit the help of a franchise finance expert, prepare a solid business plan and segregate your costs so that you can finance them in the right manner. Completing all that should put you in a perfect position to execute on your franchise ownership dream.

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

What Asset Based Finance Could Do For Your Company

Your company is facing a variety of challenges – many of them tend to be business financing related. The challenges can be positive in nature, and some might pose serious threats to your business growth or even existence. How asset can based finance aid your firm in allowing you to generate the working capital and cash flow you need to prosper and grow, let alone survive?

Asset based financed helps your firm in both good time and challenging times. The reality is that most business owners and financial managers in Canada currently don’t think we are in ‘good times ‘and business financing continues to be a huge challenge.

Asset based finance comes in a variety of forms – it is commonly in the industry itself referred to as ‘ ABL ‘ financing, and typically your firm would negotiate what is simply or commonly known as an asset based line of credit . The facility provides you with a revolving line of credit very similar to a chartered bank facility – it might also include a significant inventory financing component, and usually address what we could best call special needs or special situations re: turnarounds, growth, distress, etc.

The best candidate for an asset based finance line of credit is a firm that is experiencing strong growth but can’t attract the traditional capital that is used to finance receivables, inventory, plant and equipment, and even in some cases real estate.
An asset based line of credit can best be described as a ‘creative’ financing solution – that is because it takes your balance sheet and finances it to the desired ‘max’ based upon your different asset components. In some cases even intellectual property or patents might be included in the overall financing, although that clearly is not the norm.

Pricing in Canada on asset based lines of credit is all over the map – We tell clients they can expect to pay anywhere near a point or two over prime up to an including 1.5-2% per month . What defines that huge difference in pricing is what our clients are always asking. The answer is that that there are different what we will call ‘ tiers ‘ in ABL lending in Canada, and the overall size and deal quality of your firm will ultimately drive you to an asset based finance partner that more closely matches your needs and your overall ‘ risk profile ‘.

The reality is that asset based finance has somewhat changed the overall face of business financing in Canada and more and more firms , both large and small are gravitating to this form of finance . Deal sizes in Canada vary greatly – we do not encourage clients who have an under 250k/mo need to explore asset based finance because at a certain point the reporting, costs, etc done make sense for neither your firm or the ABL lender .

Asset based lending margins your assets to the extend of their current market value. Inventory financing is a major component of your facility if you require that, and inventory financing in Canada, from traditional sources, is difficult to arrange.

Is there any downside in asset based lending and an ABL working capital facility? Our clients ask. With relative certainty we can say any downside is significantly offset by upside. The facility gives you almost unlimited working capital, and margins assets that might otherwise not be finance able. And dont forget, this type of facility does not add debt to your balance sheet, you are simply monetizing your hard and in some cases soft assets.

Speak to a trusted, credible and experience advisor in asset based lending who can highlight financing options that make sense for your firm’s survival and growth.

IT Equipment Leasing – Why Computer Equipment Leasing Makes Sense in Canada!

Let’s get the acronyms out of the way – IT is of course Information technology, and hundreds of millions on dollars of computers, software, and related technologies are acquired by Canadian business every year.

So why is ‘it equipment leasing ‘the chosen method of financing form firms who lease business equipment. The reality is that these assets make your firm more productive and competitive – and equipment financing and equipment leasing simply remove one of the major obstacles to your innovation – that obstacle is the cost of the equipment. Although the cost of technologies seems from a distance to be always going down (thinks PC’s and servers, etc) the overall sticker shock of your total investment is still a huge potential outlay of valuable cash and working capital.

Lets examine why the main advantages of leasing make total sense in the context of it equipment leasing. We’ll also discuss how you can actually get this type of financing in place.

First of all, and we hate clichés, but cash is (still) king! And most firms simply don’t have the cash available to pay for all their technology needs. You also don’t want to be in a position to match long term capital acquisitions with short term working capital availability. So your ability to match the anticipated useful life of the equipment with cash outlays is a considerable advantage. That’s what lease financing does of course.

Canadian rates are very volatile and although they are low they are expected to go up – leasing will often give you the option of fixing or locking in rates.

Whether your firm is large or small you need and have access to bank facility or working capital lines – maybe you are even self financing? A lease for business equipment leaves those credit facilities untouched. Also, and put your hand up if you have any input on this one, but lease financing is usually achieved with a basic business credit application and applicable information such as your financials, projections, etc . It is arguably the easiest way to get business financing approved in Canada.
In general any investment in technology makes you competitive and in many manners allow you to cut costs, simplify processes, etc. Put a financing solution to that technology and business improvement seems like a very solid decision.

The reality is that if you firm requires it computer leasing you quite frankly don’t have a lot of financing options. Bank term loans in general don’t make sense for technology that in general depreciates in value but still have a direct benefit to your firm.
Many computer leases are constructed around the concept of an operating lease. There are essentially only two types of equipment leases in Canada, capital and operating. Capital leases are leases to own, operating leases are leases to use. When financing technology, it, computers, etc you should probably consider the benefits of an operating lease – they have a lower cost, a lower monthly payment, and you have a triple option at the end of the lease term – you can return, purchase, or upgrade. That’s true flexibility!

So if you are focused on technology acquisition consider lease financing – we have show it is a better and more appropriate use of cash flow, it is generally easier to obtain, it hedges you against obsolescence of your acquisition, and may even have some solid tax and balance sheet advantages .

The Canadian lease financing business is both specialized and competitive. We strongly recommend you seeks the assistance and resources of a lease financing and business financing advisor who is knowledgeable, credible and experienced in it computer leasing. Advice you receive on the right lease partner, the best lease structure, and what competitive interest rate you might be a candidate for could save you thousands and tens of thousands of dollars.

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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/it_equipment_leasing_computer_equipment_leasing.html

Working Capital Business Financing Sources

Working Capital business financing is never a question of why – it’s just simply a matter of when! Working capital and cash flow are of course the heart of every business. The challenges of obtaining that financing become a question of time.

Perhaps you need working capital for your regular ongoing business cycle – that’s the simple one – you buy inventory, your produce things, you sell, bill and collect. In a perfect world your suppliers give you unlimited time to pay, and unlimited credit limits. And of course your customers pay you in exactly 30 days. Guess what? It’s not a perfect world!

If you are a traditionally financed firm you have access to bank capital for revolving credit lines based on your business needs. But for a growing number of Canadian firms that access to traditional bank capital is not available. Those scenarios require a special expertise in identifying sources of business financing that work for you. The solutions actually are quite numerous – its becomes a questions of which solution works for your firm, what are the costs involved, and does the solution fit within your business model .

The working capital business financing we are talking about can take many different forms – it might include an asset based line of credit, inventory financing or purchase order financing , a sale leaseback on unencumbered assets, , working capital term loans, or accounts receivable financing , otherwise known as factoring .

One of the most important things you can do for working capital business financing is to ensure that the type of financing you source matches your needs. What we mean by that is that you should match short term needs with short term financing. Factoring might be a good example. If your receivables aren’t financed, and you need cash to meet inventory and supplier commitments that type of financing is immediate and addresses your needs. Why would you enter into a five year term loan at fixed payments for a short term capital need or requirement?

The best way to think of short term financing is to focus on the current assets part of your balance sheet – those items include inventory and accounts receivable typically. Those assets can quickly be monetized into a working capital facility that comes in a variety methods. The reality is that your inventory and accounts receivable grow lock step to your sales and your ability to finance them on an ongoing basis will give you access to , in essence, unlimited working capital .

There are some solid technical rules of them around how you can generate positive pricing for working capital facilities. By calculating and analyzing some basic financial ratios (we call them relationships) in your financial statements you can get a strong sense of whats available in working capital business financing and what pricing might be involved. Those ratios are your current ratio, your inventory turns, your receivables turns or days sales outstanding, a, and your overall debt to worth ratio. Depending on where those final ratio calculations come in will ultimately allow your working capital financier to put your firm in a low risk, medium risk, or high risk band of pricing?

In Canada working capital rates range from 8-9% per annum to 1-2% per month, depending on what assets are financed and how they are financed.

So whats our bottom line in working capital business financing? It is simply there are alternatives available and you as a business owner of financial manager can assess those alternatives in terms of short term needs or long term needs. Pricing and solutions vary, and your ability to convey the positive aspects of your business to the working capital lender will ultimately lead to a final pricing and solution. Speak to a credible, experienced and trusted working capital business financing advisor to determine what solutions are the best for your firm.

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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_business_financing.html

Equipment Financing and Leasing – How Do You Know Your Firm is Getting The Best Deal?

Equipment financing and leasing is offered by a number of equipment lease companies in Canada. The only problem is knowing which company to work with, and moreover, how to ensure you receive the best rates, terms and structures available to your firm - based on your overall credit quality and the assets being financing .

Let’s get right to the point - let’s assume you have been approved for a lease financing, or that you have received what appears to be a competitive lease offer.

The information we share with clients focuses around how the lease company makes money - if you know that then clearly it becomes much easier to determine if you have a competitive structure - one that involves both rate, term of the lease, and conditions.

First of all, ensure you know what type of lease you are getting into - there are only two basic types in Canada, operating leases and capital leases. And we will keep it even simpler than that - if you wish to keep the equipment at end of the term of your desired lease get a capital lease, if you intend to use and return the asset negotiate an operating lease.

As we said, you can save or even make money if you know how a lease company makes money - and for the record we are totally in favor of any lease company in Canada making a reasonable profit relative to risk and reward, as well as a reasonable return on their own cost of funds. (Leasing companies borrow money just as your firm does!)

So what areas of concern and diligence should you have around a lease financing? We can summarize all of the main methods a lease company makes money on your transaction in three categories : interest rate charged on the lease , any tax benefits that might come from the financing, and finally, the re-leasing or sale of any equipment that comes off lease or is returned .
Those are pretty key basics, but there are probably 20 other methods in which your lease is ultimately recorded as a profitable deal. Let’s look at some of those areas in which you can have a direct negotiation or input on.

If your supplier is getting paid in advance your lessor will want to confirm they are ok with that – what you need to do at this point is ensure that the agreed upon financing in this interim period is clear and acceptable to yourself . Additionally many lease companies offer, or have alliances with firms that provide asset insurance. We totally agree that insurance is a requirement, after all the lease company has to ensure the collateral they are financing is there of course. But you should ensure that the insurance is fairly priced. Quite frankly we recommend to clients that they contact their own insurance broker and provide the lease firm with a certificate of insurance with the lease company named as loss payee. That’s a cost effect method of addressing this issue, with you as the lessee still being in control.

Documentation and filing fees have continued to be standard in the Canadian equipment financing and leasing industry. Typical charges for this tend, in our experience to be in the 250-300$ range. Anything more excessive than this should be questioned. These charges cover the preparation and registration of lease documents under the governments Personal Property and Security Act regulations.

In general we are not if favor of clients paying commitment fees to get a lease transaction done – however we temper that by saying that if your transaction is very large and requires a significant amount of due diligence, credit investigation and analysis, then these fees we feel are sometimes justified . Ensure they seem reasonable Vis a Vis the size of your transaction.

In summary, the profits made by your lessor should be legitimate – profits vary based on your firms overall credit quality, the size of the transaction, and the amount of time needed to consummate the transaction by both parties. The difference may not always be in the interest rate you are receiving, and we tell clients they actually get to pick their own interest rate – simply because your firms overall credit quality has determine your general price structure as the leasing industry in Canada is very competitive.

Confused about how you can control your lease transaction and the profit made by your lessor? Speak to a trusted, credible and experienced leasing advisor who can guide you through key aspects of a successful lease negotiation.

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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_and_leasing.html

What You Need To Know About Equipment Leasing Companies in Canada

If you have made the decision to contact equipment leasing companies in Canada you probably already have some sense of the advantages of commercial equipment leasing . How do you ensure you can get approved and also successfully negotiate the leasing benefits that are most important to your firm . Lets explore some money saving and time saving tips on equipment finance in Canada .

Just knowing which type of lease you need or that makes sense should be strategy number one – its not a complicated minefield of lease types – there are only two types of leases you should be looking at . The technical term for these two leasing types is capital lease, or operation lease . Which one makes sense for your firm? To make that decision simply focus on the end means – ask yourself this question – ‘ Does my business ultimately want to own this equipment, or are we more focused just for using it to generate revenue and profits for a specific period of time ?” That specific period of time might also have to do with the technology you are acquiring that down the road might be outdated or require enhancement or replacement .

So the simple rule is as follows – Negotiate a capital lease for equipment you want to keep and own, and negotiate an operating lease for commercial equipment you want to use and return . Equipment leasing companies may or may not offer your type of lease, so understand the overall market for your type of transaction .

What many Canadian business owners and financial managers don’t understand is how the pricing of a lease if reflected in both the type of lease you acquire, as well as the overall lease structure .

Example : If you firm is leasing a smaller ticket item leasing companies sense that you are more aware of the monthly cash flow and payments you are required to make . As a result the lease company can significantly adjust their rates based on your negotiations around which payment you feel you could make on the lease . A monthly payment of $ 515.00 is required for a 5 year capital lease of 25,000.00 of equipment . If the lessor tells you the monthly payment is 575.00$ per month they have just raised the rate to 14%. So focus on a combination of rate and monthly payment in your negotiations and understand how those fluctuations work .

Clients are always telling us they choose leasing financing as an options because of the focus on cash outflow . However , you should understand that often a down payment or a first and last payment might be required, so factor this type of negotiation into your lease negotiations .

It is important to get a commitment letter that spells out the overall lease payments and structure, and identifies both yours and the lessors obligations for a commercial equipment lease .

It is of course ok to get a competitive quote from another party, the challenge we find is simply that many clients aren’t capable of making an apples to apples comparison to the different rates and options provided . Ultimately as Canadian business owners we prefer to rely on an expert when we deal with any part of our business, including the crucial area of financing . As a result seek out a trusted, credible and successful business financing advisor who can assist you in a success commercial equipment lease financing transaction . This makes even more sense when a larger amount of capital expenditure is required .

If you do choose to work with an expert you will find that you might be saving many thousands of dollars on issues that might involve prepayment obligations, insurance coverage required, upgrade options, equipment registrations fees for collateralization of the lease, and assignment priveliges of both parties . So the bottom line again appears to be that consulting an expert in this area of business finance is highly recommended .

Make equipment financing a successful part of your overall capital expenditure strategy – focus on benefits that make sense for your firm, pick the right lease type, and ensure that the overall terms and pricing match your firms needs . That’s successful commercial equipment leasing in Canada.

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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_equipment_leasing_companies.html

Receivable Financing – Factoring is the 4th Way To Finance Your Company

Canadian business owners and financial managers often ask about assessing the different alternatives to their overall business financing strategy – Receivable financing – factoring can be one of the cornerstones of a creative alternative financial solution for their business. We sometimes hesitate to use the word ‘alternative ‘because quite frankly this method of financing is becoming as mainstream as things can get!

Canadian business can be financed in one of four different ways – You need to be able to asses the methods utilized in those four categories and which one, or ones, makes sense for your firm.

Business is financed of course by your own shareholder equity – Equity is expensive because when you give it up, or sell ownership in your business your overall position becomes diluted and your return on investment diminishes.

The three other methods of financing, in lieu of equity of ownership relinquishing are:

Debt
Grants
Asset Financing

Debt of course comes in the form of good debt and bad debt – we would, as an example categorize a commercial mortgage as good debt – a cash flow working capital loan might be another example. However, the reality is that most business owners recognize the dangers of debt and how that increased leverage can be a double edged sword.

Clients are always asking us about ‘governments grants and loans ‘. In our opinion there are only two respectable grant/loan programs in Canada – the SR&ED program, and the CSBF program – the former is a non repayable grant, the latter is simply a great government loan for financing equipment and leaseholds.

So that brings us to # 4- Asset financing. Depending on the type of business and industry you are in your asses include inventory, land, equipment, and receivables.

A very strong case can be made that #4 should in fact be #1 when it comes to working capital and cash flow financing – Simply speaking your assets need to be monetized in the best manner in which to bring you liquidity.
Receivable financing – factoring is in fact the quickest and most efficient manner to bring immediate cash flow to your business. Why is that the case – simply because it involves no debt coming on our balance sheet, no payments are made as in a loan type scenario, cash flow is immediate, and the reality is, that if you have negotiated the right factor facility then you are in control of your overall cash flow requirements?

The benefits of a receivable financing factor facility are very clear once you understand the process. Generally a factor facility, aka an invoice discounting or receivable financing facility can be negotiated in a couple of weeks from start to finish. To the extent that your business is growing you essentially have successfully completed a financing that gives you unlimited cash flow. We say unlimited, because if your sales and receivables grow your cash flow and working capital grow in lock step to that growth!

Cash flow and working capital from a factor facility can be used to increase inventory, take on more purchase orders and contracts, and, in general meet working capital guidelines.

The overall process for a receivable financing –factoring facility is simple. You sell some or all of your invoices to your factor partner firm – You receive generally 90% of that invoice amount that same day as cash in your bank account. When your customer pays the factor firm keeps a ‘discount fee ‘based on the total time it took your customer to pay.

Discount fees, or as clients prefer to call them, ‘factoring rates ‘vary in Canada. Factors (excuse the pun) that affect your fee are the size of facility, who you deal with, the method in which your facility operates, and the overall quality of your customer base.
Speak to a credible, trusted, an experienced business financing advisor – Find out today why the 4th method of financing your business might just be the best!

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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/receivable_financing_factoring_working_capital.html