Looking for Small Business Financing ? – Consider An Account Receivable Financing Strategy

Could account receivable financing help your firm? The dramatic rise of small business financing in accounts receivable ( by the way, Canada’s largest corporations use this tool also!) Is simply a factor of companies such as yours wanting to capitalize on the working capital and cash flow that is, in effect, locked up in receivables

It doesn’t take rocket science for any business owner of financial manager to figure out that if his or her firm has investments in receivables and inventory then those assets, typically called ‘ current assets’ requires financing in some form. Of course you can ’ self finance ’ - meaning simply wait for your inventory to turn into receivables, and then wait probably even longer for A/R to turn into cash. But, doing that forces you to give up on sales opportunities and challenges the very core of your financial health, given that we all agree cash flow is king.

If you are fortunate enough to be financing via a Canadian chartered bank you are of course familiar with ’ collateral ’- our banks do a great job of explaining that to you! Why don’t you use your own firm’s collateral, its assets, mainly accounts receivable, and monetize that asset into cash.

Clients are often fairly clear on the benefits of account receivable financing, which is also called invoice discounting or factoring. What they don’t seem to have the best handle on is how it works.

One you have such a facility set up it quite frankly is one of the easiest and quickest ways to unlock cash flow and working capital on a daily, weekly, or monthly basis. The power to choose your timeframes remains with yourself. And by the way, you only pay for the financing you are using. Let’s get back though, to how it works.

In Canada there are two types of factoring, we’ll focus on the most common one, which, by the way, isn’t exactly our favorite (there is a better one) but let’s keep it simple for now.

After your firm generates an invoice you submit it to your factor firm partner. That could be once invoice, several, or many or all. Funds for those invoices are wired, or sent to you, that same day into your account. Didn’t you just feel your cash flow being totally unlocked and flowing?! Approximately 10% is held back as a buffer, but as soon as your client pays you get those funds back also, less what is known as a discount fee, typically between 1 and 3% - 2% is pretty well the norm.

2% you say! Isn’t that expensive for small business financing. Absolutely, positively maybe, but we actually don’t think it is. That is because all in rates from your bank when you total up all the fees, services, standby fees etc often total in the 11-12% range , not the 6% or 7% you think you are getting . And furthermore, if you take the huge amount of cash you just receive and use it to purchase more efficiently, or takes discounts on supplier invoice payments you make your total cost of capital goes down . And, another point, if you are in a competitive environment, (who isn’t) does your ability to have unlimited cash flow put you steps ahead of your competition? We think it does.

There are a number of ways to finance your business. If your firm has A/R assets and you are challenged by the timing in which money flows through your business then consider the benefits of account receivable financing. Speak to a trusted, credible, and experienced business advisor on this popular financing tool for small business financing 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/account_receivable_financing_small_business.html

Information on the Film tax credit for Canadian Independent Productions in Film and Television and Digital Animation

Canada’s film tax credit (by the way that includes productions in television and the rising category of digital animation) is becoming an intrinsically important method of financing independent productions in Canada.

When discussing these credits around Canadian film productions with clients it seems increasing evident that three key factors are driving the tax credit issue. Let’s quickly recap what we believe those three factors are, and then let’s discuss your ability to monetize those tax credits into valuable cash flow and working capital.

First of all Canada’s tax credits slowly seem to have risen to the top of the popularity pile – there isn’t a day these days when we don’t read about U.S. states either considering lowering the state film tax credits, or in some cases abolishing them altogether. A very Fox newsclip discuss the potential total abolition of film tax credits, which have long driven the industry to a certain degree. Secondly, he Canadian tax credit program on the other hand is considered more generous a better run. (We suspect that might be also because we only have 10 provinces as opposed to 50 different state laws around such credits!)

Another key factor is that after the 2008 world wide financial implosion debacle industries such as film, TV and animation are just slowly crawling back to normal, given the manner in which productions were financed previously.

As a general rule labour costs have traditionally been about 50% of a productions cost. By in essence having close to doubled the Canadian tax credits in provinces such as Ontario, Quebec and B.C. The current tax credits in effect were almost doubled when production tax credit per cent ages allowed was increased.

We don’t want to get into a Canadian geography lesson here, but the government also had the foresight to enhance the credits further for your production when you should outside of such major cities as Toronto, Vancouver and Montréal. As an example and case in point, we recently had a client develop a script around an Indian Bollywood type film – by shooting the project about 45 min west of Toronto in a suburban environment our clients tax credit situation was enhanced even further . More tax credit equals more cash flow and working capital for your production. The government appears to like the fact that about 250,000 people work in the industry in Ontario alone, and unlike the U.S. the Canadian government views the industry as an economic driver, not a cash drain.

Working with clients on various projects in film, TV and digital animation gives on an insight into how difficult and challenging it can be to put the financing of a film together. Pre production planning and financing is critical, as the current environment forces you to consider revenue solutions around theatrical release, DVD sales, cable and TV rights, etc.

Utilizing tax credit financing allows you to enhance the overall equity, return and financial risk and reward around your project. The film tax credit should be utilized to generate cash flow to assist in completing your project, or in many cases, allowing you to start work on the next one. We are also amazed at when talking to owners and producers as to how long they have been planning certain projects, and the overall financial undertaking they need to invest in vis a vis their time .

Monetizing (i.e. financing) your tax credit will take away a lot of the uncertainty around your productions success. If you have an upcoming project in Canadian film, TV and digital animation speak to a trusted, credible and experienced film tax credit advisor in the area of tax credit breaks. Consider financing your credit to enhance the cash flow and return on capital in your project. That’s a solid film finance strategy!

Is It Smart To Finance Your SR&ED TAX CREDIT via a Sred Loan ?

You decide. Does your firm want to consider the benefits of a SR&ED tax credit loan? If you participate in Canada's sr&Ed program you are immediately eligible to consider financing that claim. Lets looks at why that might make sense, what are some of the benefits of monetizing your sred grant, and, finally, how exactly do you do that?

Any firm that has filed a sred claim via their own preparation, the utilization of a sred consultant, or through the use of their accountant has probably quickly picked up that billions of dollars every year are allocated to this program.

By participating in the program your firm is eligible for the non repayable grant on which the entire program is based.

So you have filed a claim. You are now in the waiting game process, as your claim has to be acknowledged, audited, and then processed for a refund cheque. When we talk to clients about what they will use the funds for a number of scenarios emerge - some firms hire additional staff, others , not surprising re invest in the entire r&d process to maintain their competitive posture within their industry .

In sharing our information on our sred subject we are making the assumption your firm knows about and is maximizing the program. As a sr&Ed claimant your firm develops or improves existing products, develops new ones, or invested in various process improvements via a trial and error type scenario.

So where are we at - we've simply re enforced the fact that your firm is aware of the program, it participates, and, via your sred consultant or accountant you are maximizing your eligibility for the maximum refund possible.

Cash is king, and you have spent a lot of your cash on the actual R&D involved in the program. Your firm has the option of financing your credit, as soon as it is filed. Clients are often confused about the financing of their claim - basic questions always seem to be - how much does it cost, is my firm incurring debt that I do not necessarily want to take on, and how long the process takes to finance such a claim and whats involved.

Let’s cover off those key points, which should allow you determine if you should consider financing your claim. We'll also throw in a few tips around maximizing your financing should you choose to proceed.

SRED financing of your sr&Ed tax credit is somewhat of a boutique finance industry in Canada. It is very rare that your bank will finance the claim. We certainly don’t agree with that, because in effect it is an account receivable, and they do finance receivables, don’t they??! Anyway, your firm will have to have a strong borrowing relationship with a bank to finance your claim. The reality is that this type of financing is best and more quickly achieving via a sred financing specialist.

Rates for sred financing vary, and factors that affect the rate tend to be size of claim, your company's current financial position ( many sred claimants are early stage, pre revenue, etc ) , as well as the perceived quality of your claim .

A sred loan is not debt per se, that’s important to understand, you are simply monetizing, or ' cash flowing ' one of your receivables, in this case the sred . Sred loans are structured as no payment loans and the final financing charges are simply deducted from the final cheque you receive from our good friends in Ottawa.

Sred financings can be processed, and funded in as little as two weeks - very standard application paperwork is involved, and the main collateral is or courses the sred itself.

Here’s some final tips we promised - have your sred prepared by someone who knows what they are doing, sred consultants are the best in this area as they are specialized. Count on receiving at least a 70% advance on your claim. Also, did you know that under certain conditions your sred can be financed prior to filing?

We’ve e shared some tips and procedures that will allow you to consider financing your claim. If additional cash flow and working capital are important considerations speak to a trusted, credible, and experience business financing advisor to validate your sred loan options.

Secrets For Success When Financing a franchise In Canada – What Franchise Lenders Won’t Tell You

The dream is becoming a reality . You have selected a franchise in the Canadian marketplace. That franchise is either an existing unit, or a resale from a currently successful (hopefully!) franchisee.

When you are contemplating the purchase of a business the cost and financing of that business becomes a potential major obstacle . Let's examine how financing a franchise works and is done in Canada .Who are the franchise lenders and what do you need to do to get your business financing past the goal line .

We recently read an article entitled 'How to Buy a Franchise With No Money Down '. Lets be clear on that point, that franchise financing is not available on the 100% OPM plan! OPM of course stands for other peoples money, and you should fully expect to make an equity investment or contribution into the business . That is driven from the fact that in business no lender will take all the risk and allow yourself to take none, which seems fair to us!

In your personal finances hopefully you are living within your means, as the expression goes. When it comes to business , and financing a franchise you should have a general sense of the overall cost of the franchise acquisition and whether that number makes sense to you from a personal net worth and owner equity contribution . Bottom line; don’t expect to buy a 700k franchise with a 10k owner investment - that wont work.

So what is the magic number then? Fortunately, or unfortunately, that magic number of your equity contribution seems to have increased over the last several years. We advise clients realistically that they should be prepared to put in anywhere from 25-50% of the purchase of the business.

The bottom line is that a solid equity contribution from yourself equals less debt on your opening balance sheet, and that's a good thing.

We spend a lot of time with clients constructing the cash flow portion of the business plan re their franchise acquisition. That is because your revenues and expense must be accurately reflected, and out of those calculations flows your ability to service debt, i.e. make your loan payment!

By far the most tried and tested method for financing a franchise in Canada is a program that is underwritten by our good friends in Ottawa. That’s the government by the way. A program that is technically referred to as the BIL/CSBF program, (aka ' Small Business Loan ‘) is the most popular vehicle for financing a franchise.

Clients are always asking what qualifications are required for the program. We can broadly summarize them as follows - a solid well prepared business plan, some industry experience ( we don't recommend that computer programmers buy a restaurant!) , a decent personal credit history, and a , relatively speaking good personal net worth, i.e. home owner , etc.

One mistake many potential franchisees make is to think that their franchisor will become a franchise lender. That’s not the case - in case you haven’t figured it out now they are in the business of selling a franchise, not financing your dreams.



Financing is tough, whether you are General Motors or buying your first franchise in the entrepreneurship dream. Speak to a trusted, credible, and experience business financing advisor who can assist you in your franchise finance strategy for success.

Stop Me If You Have Heard This But Isn't Business Credit Still Challenging and what is Asset Based Finance?

It is always surprising to us that asset based lending is still probably less than 5% of Canadian business credit while in the U.S. it accounts for hundreds of billions of dollars of ongoing business financing.

However the trend is reversing and new transaction are being completed everyday in this asset financing category. Canadian businesses who need financing in excess of 250k (the upper limit is almost unlimited) can benefit from this relatively new Canadian business financing strategy.

Clients always have questions as to what the financing actually is and, more importantly, how it works and does their firm qualify.
ABL is simply A business loan secured by collateral (assets). The line of credit, is secured by inventory, accounts receivable and/or other balance-sheet assets, and is non bank in nature .

Lets address the qualification issue first - the reality is that if your firm has business assets in receivables , inventory, equipment , and even real estate those assets can be monetized into a business line of credit that focuses on the asset , not the overall quality or condition of your balance sheet.

We are of course referring to Canadian chartered bank lines of credit that provide a similar and more often than not less expensive form of financing via revolving lines of credit. However most business owners know those facilities focus on balance sheet and income statement strength, ratios that must be met, and heavy emphasis on personal covenants and outside collateral. That is not asset based lending relative to what we are talking about!

Your asset based lending financing facility is secured by business assets. These facilities are typically available through private finance firms that are non-bank in nature. One of two of Canada’s banks offer this type of financing outside their normal business banking, but qualifications and deal size are still somewhat challenging to meet in our opinion .

When you negotiate an A B L facility (that’s the acronym the industry uses) you and the lender agree up front on the market value of your ongoing receivables, inventory, and unencumbered equipment. That collateral becomes the essence of your financing and drawdown capability.

So why is this all different from a bank? The answer is simply - banks have regulated formulaic methods of financing business - in fact many would agree that bank business credit got increasingly difficult to get since the 2008 worldwide debacle.

Finance firms offering asset based lending are not regulated in the same manner, do business in almost every industry in Canada, even those that are deemed ’ out of favor ‘and the management of these firms typically have years of experience in lending against receivables, inventory (yes, inventory!), with the additional enhancement of allowing you to monetize your credit facility by including some borrowing against your equipment for ongoing working capital and cash flow.

Speak to a trusted, credible and experienced business financing advisor in this specialized area and find out how a new financing facility can put you head and shoulders above your competition in overall 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/business_credit_asset_based_finance.html

Business Credit For Working Capital

Business credit and working capital are consistently one of your firms largest obstacles to innovation and growth in sales and profits. What can be done via either a traditional or alternative method of ensuring your firm has all the financing you need to generate growth? Let’s examine some of those solutions.

You can’t find it if you don’t know what you are looking for. What do we mean by that? Simply that cash flow, working capital, business financing can be sometimes ’ overworked’ ’ catch all’ terms that mean various things to various people. Therefore you must focus on the need first, not the solution. Thankfully those needs can be nicely broken down into several categories as follows: day to day operating capital, immediate growth needs for new opportunities, equipment and asset acquisition, hard asset refinancing.

The easy ’ go to ’ solution is to solicit chartered bank financing in Canada. Companies with strong balance sheets, profits, established history and additional collateral etc can more often than not find all the financing they need with one of Canada’s chartered banks.

That’s easy for us to say, but the majority of clients we meet simply can qualify for all business credit and working capital they need to survive and grow. Typically they have some traditional financing but not enough, or, in a more severe case, do not qualify for traditional bank lending in the Canadian landscape.

When the going gets tough, the tough get going goes the expression, so it is a case of getting somewhat ’ creative’ in your search for working capital .

If your firm has assets and growth prospects we firmly believe you can get most, if not all the financing you need. This financing can be achieved in a number of ways. You can monetize your current assets via a working capital facility for receivables and inventory. If properly set up you should congratulate yourself as you have just negotiated unlimited working capital - because these facilities allow you to borrow on an ongoing basis relative to the size of your current asset investment in accounts receivable and inventory. We referred to generalization of terms such as cash flow, working capital, etc - the lending we have just described is best known as asset based lending, and in many cases can cover off purchase orders and new contracts also.

Equipment financing and sale leaseback financing for new and owned/unencumbered equipment are great solutions to acquire or refinance capital acquisitions. In Canada lease financing is available for all asset and credit qualities for any amount, from 1000.00 to millions of dollars.

Although the majority of clients we discuss working capital needs with are private firms your firm might be public, as a result you might be in a position to consider an equity line of credit, with the equity questions being your stock.

If your firm has revenues under 5 Million dollars and is privately owned you should consider the best financing available in Canada - it’s the government BIL/CSBF loan that is underwritten by our good friends in Ottawa. Loans up to 500,000.00$ are available for hard assets such as equipment, leaseholds, real estate, etc. You can even be a start up and qualify. The financing rate is incredible attractive, guarantees are limited, and terms and structure flexible.

Its always about the bottom line, so whats our bottom line today - simply that you need to focus on what type of financing you need , determine if you qualify for traditional financing, and if you don’t get creative with a multitude of solutions available .

Confused about the Canadian business financing landscape and what and who is waiting for you out there. Speak to a trusted, credible and experienced business financing advisor who will guide you through the maze to what we believe will be the right solution 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/business_credit_working_capital.html

What Computer Leasing Companies Don’t Tell you about Computer hardware Leasing

Because most Canadian business owners and financial managers are tech savvy they are often intimidated and confused by computer leasing companies and computer hardware leasing. We also are always amazed when clients don’t know that computer software can be financed also - not everyone knows or tells you that. If a certain computer leasing company does not by policy finance software, guess what, you have other financing options for that part of your purchase.

You have made the decision to lease of finance your technology, which might include hardware, software, telecom equipment, routers, etc!One of the key drivers in your decision is of course always the tremendous cost of capital equipment acquisition in technology. And it’s not as if that’s an appreciating asset on your books. Have you checked out computer and technology prices - performance goes up and new models come out every year, and price comes down. Other than absolute cost that is of course good news.

What most lease companies don’t tell you is that you have a number of key decisions to make when you lease technology, and their firm might not necessarily be the best one to finance your purchase. Why is that? Simply because financing companies are not technology companies, they are driven by pure return on invested capital. They make money via the actual interest rate on the transaction, as well as the sale of your computers at the end of the lease if you have entered into a fair market lease. (More about fair market leases later)

Other ways in which the lease company makes money off your firm is the ability to lock you into a relationship whereby you become a repeat annuity customer for additional technology financing. Other subtle and minor profit generators for lease firms that you might not know about are:

Interim rents

Pre-pay penalties

Admin fees

Excess use and refurb charges,

Etc!

Let’s move on to major secret # 2 that your computer lease company might not tell you about. That issue is based around the concept that you want to use technology, not own it (Why would you want to own a depreciating and obsolescing asset?). The solution that drives and solves that problem is the previously mentioned fair market lease, otherwise known as an operating lease. That more often than not, for a significant computer lease financing is the best solution for your leasing needs in technology. But guess what; we feel that probably 90% of firms don’t offer that solution, because it involves being a specialist in asset and residual values. Finance lease companies tend not to know too much about the bits and bytes.

Therefore you should ensure that you have options in your lease proposal that identify whether you can finance on an operating lease basis also. It might not necessarily make sense for a small purchase, but a larger acquisition should consider this strategy.

Another significant benefit of leasing in general applies to computer leasing, which is that miscellaneous add on’s can be financed - they include shipment, install, warranty, etc. Not every firm allows you to finance these, most will. And, as we mentioned, don’t forget, Software can be financed!

Investigate carefully the financing of technology - these assets are expensive, depreciate, and you do not want to make an improper financing decision for technology that is driving your accounting, sales and customer relationship data.

Speak to a trusted, credible, and experienced business financing advisor to make sure you know the ‘ secrets’ of computer lease 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/computer_leasing_companies_computer_hardware.html