We Stand Corrected - Re the CYBF

We recently published two articles which referenced 15 Sources of Financing in Canadian Business Magazine . One of these sources of financing was pointed to the CYBF – The Canadian Youth Business Foundation .

To my great pleasure ( because it actually proves someone reads my ‘stuff’ ) ! I was contacted by the CEO of the Foundation .

My article glossed over the CYBF and potentially did not allow the reader to understand one or two key elements , namely that the foundation is not government related or funded ( other than its relationship with BDC ) and that ‘ youth’ as defined by the foundations is actually up to 35 years of age . So that means of course that 25 years ago I was technically still a youth which is encouraging for myself .

Anyone looking for info on the organization should check out their website of course . Please check out ours also though!

http://www.7parkavenuefinancial.com !

Stan Prokop

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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

Reality Check ! Financing your Restaurant Business via a Franchise Business Loan is Possible

Congratulations! We think. So you actually really do want to open or purchase a restaurant? We always admire clients who have decided on this business decision given the amount or risk and work that is often involved. Our comments and info on financing your restaurant business pertain specifically to a franchise business loan, but to be honest being think they are 100% applicable to financing any non franchise restaurant.

First the key good news, there are a number of options available to finance a restaurant. Although it's a non financial reason, the reality is that you will be more successful in your financing if you can demonstrate previous experience in owning, managing, or working in the industry - that’s only common sense. The type of passion and your enthusiasm about your business usually transcends into one of the key positives in your lender or lenders assessing your application.

You will noticed we used the term lender or lenders... that is because in the current economic environment of 2010, where we have just come through a global recession that affected every industry it has been necessary in many cases to cobble together your financing through a number of sources .

The next question always comes very quickly from our clients - What are those sources, who is financing restaurants. Well the goods news is that the government is! What do we mean by that? Simply that one of the most popular programs out there is the federal government BIL/CSBF program which finances the majority of franchise restaurants in Canada. Who knew! The program is very attractive, and in our opinion quite frankly is the best program for financing a restaurant, franchise or non franchise, in Canada. Basic terms of the program are a lending cap of $ 350,000.00 and rates and terms in the 5-6% range currently with 5 to 7 year amortizations.

What most prospective restaurant entrepreneurs don’t realize is that the government sponsors and guarantees the program, but your friendly banker runs it. In our experience many bankers are ill equipped to process this loan, so the golden jewel in restaurant financing in Canada , in our humble opinion, is the ability to source a business financing advisor who can successfully, ( and quickly ) get you approved . Naturally as with any business financing there are some basic criteria that need to be met, but it you have got the fundamentals you are well on your way to financing your restaurant business.

The fundamentals we referred to include a responsible down payment by yourself - we call this your owner equity. You know the next question our clients ask already - 'how much down? The reality is that it depends, but we can say safely that your down payment should be commensurate with your financing loan total amount request.

Many restaurants in Canada are financed by the seller, i.e. the franchisor, or the current franchisee who is selling. What do we mean by that? Simply that if a creative structure is required the franchisor or the current owner can offer to hold a vendor take back, allowing you to replay that amount later at some agreed upon interest rate. This simply minimizes the amount you have to borrow and qualify for.

Other methods of financing your restaurant include lease equipment financing for all or a portion of the hard assets. This type of financing is easier to get approved, as it primarily focuses on the hard assets being financing. Again, this also has the ability to lower the amount you need to finance from bank perspective.

Restaurant owners love the ' bottom line' which hopefully is profit. Our bottom line in our information is simply that franchise business loans and financing your restaurant business are achievable, and you do have options. Search out an expert and get ready to open those doors to your customers after you have successfully completing the financing of your restaurant venture.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/franchise_business_loan_financing_restaurant.html

Straight Talk On Why Asset Based Lines Of Credit Are Alternatives To Debt Financing

Canadian business owners and financial managers continue to hear about newer forms of business financing in Canada, particularly asset based finance, and even more particularly an asset based line of credit facility.

Clients always ask us the same thing, is this a form of debt financing, and exactly what is the difference between this and a Canadian chartered bank facility . Let’s examine those questions more closely.

In general asset based finance is a broad term which in fact could refer to a number of things, We have the same problem with other terms such as working capital and cash flow, they seem to be 'catch all 'phrases for a number of types of business financing, and to make things more complicated they infer different things to different people.

So let’s be clear, using asset based lines of credit jargon we are talking about a business line of credit that a Canadian chartered bank offers, and comparing it to the new kid in town, as asset based line of credit via an independent commercial finance company.

When you firm originates an asset based credit facility you are in effect using the liquidity in your current assets ( typically those are receivables and inventory ) and in some cases pulling some liquidity out of fixed assets such as equipment and real estate . Yes, you can access cash flow on a revolving basis out of your equipment and land if in fact they are unencumbered.

We still probably have most business owners confused a bit, because they are asking themselves right now that this seems exactly what my bank does (or that you would like them to do).

So here’s the difference, asset based lenders are high specialized, they, unlike many bankers who are generalists are high focused on the actual true underlying value of your assets on an ongoing basis. By ongoing we mean daily, weekly, monthly, not long term. In the old days ( and boy do we wish the old days were here in business financing ) you met with your banker quarterly or yearly, reviewed your financials , re set the credit line, and off you went to grow, prosper and succeed.

However business banking has changed in Canada and it has become more challenging to access the cash flow and working capital you need on a daily basis. Banks are regulated by provincial and federal governments around their capital bases, what they can lend on, and are subject to concentration issues. By that we mean that a bank could not choose to lend all its capital to one industry such as autos, etc.

So the key differentiator in asset based lines of credit is simply that you are working with a company that is most often not regulated, and is staffed by specialist who has a strong handle on your asset base. That's where the good news kicks in, because you can access sometimes up to 50 -100% more in revolving credit facilities because the advances against receivables, inventory (yes inventory!) and other assets are maximized to the hilt. In essence you are working with an asset based finance lender that can provide you with maximum cash flow and work with you to give you strong insights into asset turnover and help you through special situations. And remember, this is not debt financing via term loans or additional debt on your balance sheet, you are simply monetizing your liquid assets to the maximum .

So there’s the main difference , and if this type of financing for your business seems to make sense speak to a trusted , credible and experienced business financing advisor to guide you through the next evolution in Canadian 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_based_lines_of_credit_debt_financing.html

What Mom Didn’t Teach You About Working Capital Business Financing

If you're like most of us Mom never really gave us a lot of advice on working capital! That's why for such an important business financing subject we recently wrote on an older article in Canadian Business magazine that covered a total of 15 - yes that’s 15 ways) to finance your business . Perhaps these were the secrets of the Holy Grail that Mom never taught us, we thought?

The reality was that we had some strong comments and additional information on those 15 items, and we commented on 7 of them in the last article. Let's cover off those final items and hopefully get some real value on what Mom never told us about these things!

Under the category of ' government programs' the article talked about various federal and provincial programs or initiatives for business financing. Mentioned was the Community Futures program as well as the Canadian Youth Business Foundation. These are very narrow and segmented programs, in the case of the Youth Foundation, guess what, you have to be a youth, which hardly suits most business owner’s .Community Futures programs have tended to be rural in nature, have ad minimal funding allocated to them, and seem to have focused primarily on start ups that might generate employment.

Secondly, Mezzanine debt was referenced. This is of course essentially an unsecured cash f low loan provided by private finance firms. In many cases it focuses solely on cash flow as the repayment vehicle. The bad news on mezzanine debt is that it typically is available for transactions in excess of 5 Million dollars, which certainly doesn’t work for most small and medium business owner’s .For the record mezzanine financing rates are in the low to mid teens.

Private equity was out third source of capital. Typically these funds are provided by niche Canadian and U.S. private firms who focus on equity and convertible financing instruments that force the business owner to give up partial ownership .This isn't necessarily a bad thing if you get the working capital and business financing that you need, but you should absolutely be prepared to give up some ownership on these transactions, which are often quite substantial and take several months, if not longer, to complete.

Hey, let’s go public and have access to unlimited sources of capital. That’s the typical pitch made to Canadian corporations who consider this type of financing. The reality is that a true IPO listing on the TSX or Venture exchange in Canada requires a significant capitalization and track record. Ownership becomes diluted, and companies are forced into very strong levels of reporting and disclosure. Many of our clients have ' gone public' via reverse take overs of shell companies that had a listing, we have never seen this work satisfactorily, at least from a viewpoint of giving them unlimited working capital.

The Canadian Business article focused on the federal SRED program. Finally! A good one! An absolutely great program that provides billions of Dollars of capital for any firm in Canada that qualifies for research spending and adheres to the program guidelines. Sred claims can also be financed, similar to a receivable, as soon as they are filed, that supercharges the program even more from a working capital perspective.

VC money is often bandied about and sought by many corporations. Venture capital in Canada is struggling in the 2010 environment, any fundings seem to be going to firms that have been previously funded, and are getting additional capital (to stay alive?). Any Venture capital firm expects a high rate of return relative to the risk they are taking in financing your firm on an equity basis - in fact traditionally , as the article stated, the venture capitalists are looking for a 5 times return . Unfortunately for many Canadian business owners these types of fundings go to the sexier industry segments such as biotechnology, high tech, etc.

Well, that’s it. Hopefully we haven’t sounded too negative, but the general trend clearly are that the ‘ 15 ‘ options outlined in the original C B article clearly need to be grounded in a bit more reality for the average Canadian business owner and financial manager seeking capital . Speak to a trusted, credible and experienced business financing advisor who can provide you with an up to date realistic alternative on business funding.
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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_2.html

What You Must Know About A Lease Vs Buy Business Finance Decision For An Equipment Lease

Business owners and financial managers in business finance are always faced with the same decision in acquiring an equipment lease, namely should we buy or lease. Technically this is referred to in the finance books as the infamous ' lease vs. buy 'decision.


Let's examine some of the key points and facts you need to consider in that decision. Naturally the good news is that an equipment lease can be used to acquire almost any type of equipment or asset - that includes equipment, machinery, buildings, etc. More often than not it pays to seek a business financing advisor who is well versed in the benefits and nuances of equipment finance.

Working capital and cash flow tend to be the main drivers of the lease vs. buy decision when we talk to clients. It goes without saying that most Canadian leasing companies probably have a lower cost of capital then your firm based on their borrowing capacity and the way they are funded. Therefore that lower cost of capital becomes a positive advantage in the lease vs. buy decision.

In many cases the lease vs. buy decision will be very close and the actual non financial benefits of an equipment lease will drive your final decision. For example, although you might be in a position to construct a favorable buy versus leasing model you might not want to use business lines of credit to access the cash needed to acquire the asset.

Also one of the key tenets of finance is that you should use long term funds to fund long term assets - that just makes common sense. Simply speaking you don’t want to purchase an asset as opposed to l easing it and find out you might not be able to make payroll on Friday because your line of credit is maxed out!

As we said, some of the pure mechanical decisions around the lease vs. buy tool (there are numerous on line calculators which are references as lease vs. purchase analysis tool) can often be over ridden in your analysis by non financial considerations. For example, let’s say you clearly don’t want to keep the asset at the end of the term of its useful economic life. That’s where an equipment lease makes total sense, as it gives you the ability to return, extend, or even purchase the asset if in fact you end up deciding to purchase and keep it if your circumstances change.

Business owners might want to consider talking to their accountant or a business financing advisor on larger capital asset acquisitions. Some of the inputs required in the lease versus buy model include items such as the actual interest rate the lease company is charging you, your tax rate, the projected increase in profit via use of the asset, the depreciation expense you can take on the asset and your overall cost of capital which is calculated by analyzing your debt and equity in the business. Whew!! That’s some fancy accounting and it can best be left to your accountant or advisor on larger asset financing acquisitions. However the good news is that a simple computer spreadsheet handles all this for us nicely!

In summary the leasing versus buy tool in business finance can be a great asset in your financing decisions for new assets. Adopt Warren Buffets key approach, which is simply to determine if the asset financing opportunity delivers a solid return on equity for your business.

Yes our tool we outlined is important, but at the end of the day use business common sense to analyze the equipment lease opportunity and blend it into your overall business 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_finance_lease_vs_buy_equipment_lease.html

Has Your Company Overlooked the business financing of receivables or Factoring as a Working Capital strategy?

Have you forgotten something? Perhaps it is just a case of overlooking or not knowing all your alternatives in business financing for working capital. Factoring receivables for cash flow is just one of those strategies that you may have missed, not heard about, or not fully understood or investigated.

Let's do a basic ' primer' on this somewhat unknown or mis-understood form of business financing. Many Canadian business owners or financial managers mistake factoring or the selling of your receivables as a ' loan '. That is not the case, it’s simply the case of monetizing or cash flowing your probably largest current asset, your receivables, and paying a financing charge, or discount fee for the service

In general approximately 90% of the value of an invoice is advance to you pretty well the same day that you issue your invoice. Your normal obligation is to provide some sort of proof of delivery or acceptance of that invoice related to your goods and services.

We're of the opinion that factoring receivables seems to be viewed as a small business financing tactic , but we can assure readers that some of the largest corporations in Canada utilize the tactic also - in some cases its simply jazzed up with a fancier name such as ' securitization' or financing via 'asset backed commercial paper ' , etc. So the big boys are doing it also! Don't forget that.

When clients talk about moving forward on this type of business financing the largest challenges seems to simply be their ability to understand pricing, pick the right firm to work with, and finally, to ensure that the daily flow of paperwork around this type of business financing makes sense . If the wrong factor partner is selected there are countless stories out there of firms who have experience a negative level of customer intrusion around the whole factoring receivables process. So choose your partner well, and probably the best info or advice we share in this regard is to seek the services of a trusted, experienced and credible business financing advisor who can steer you towards financing and cash flow success.

A common question related to our 'primer' on factoring (also called invoice discounting or receivable financing) is: ' Do we qualify '. The short and positive answer is absolutely, if you have receivables you qualify, that's what this form of business financing is about.

Many business owners or their financial manager’s struggle with the cost of this type of financing which typically is in the 1- 2.5% range in Canada. The bottom line on the costs is simply that they will vary relative to the size of your receivables, the perceived credit quality, and the type of firm you contract with in this regard. That’s where the help of a Canadian business financing expert can help you immensely. In fact more often than not that expert can demonstrate how you can significantly reduce the cost of financing receivables to almost zero in some cases, but certainly a reasonable amount in most situations.
So whats our primer summary on receivables and business financing via factoring. It’s simply that if you’re reading this you probably have a business financing challenge. A/R financing is a method to eliminate that challenge. Working hard on your financing is commendable; working smart on your financing with an expert is a must. Investigate the solution that will bring cash to your firm’s door tomorrow.

How Film Financiers Can Monetize and Cash Flow Your Film tax incentive

Everyone else seems to know about them and are taking advantage of them, so why aren’t you? We are of course referring to the film tax incentive for film financiers in Canada.

There isn’t a day when we don’t read about film tax credits in the U.S. being under consideration for downsizing, or in some cases total elimination. That seems to be the trend in the U.K. also. So whats the good news? Welcome to Canada! The Canadian government has not only stepped up to the bar to maintain the credits and decry their benefits, they in fact have enhanced the credits for additional significant increases, primarily in the production credit area as well as digital animation.


We strongly feel that without the film tax credit incentive many productions info fact would not get made or completed, certainly those that are independent in nature, and non studio affiliated come to mind . Hollywood North is of course the generic industry term for the film, televison and digital animation industry. This typically seems to refer to projects being filmed or produced in Vancouver, Toronto and Montreal. But to show you how powerful the tax credits area, producers, owners and director can actually enhance their budgets by filming and production projects outside of these major centres - and, guess what, at that point the tax credits actually increase.

Film financiers and the industry in general seem to strong recognize the film tax incentives. It’s not hard to see the popularity of these tax credits, given that budgets seem to be increasing, and access to capital was somewhat demolished in the 2008-2009 global recessions which hit every industry, not just entertainment of course.

Project owners always have the same challenge; we are referring primarily to independent productions, not major studios which have much more access to capital. The challenge is always the same, raise some equity , work hard to ' sell' or ' pitch' your projects to distribution and pre sale entities, and then wrestle down that final gap via bank and tax credit financing .

The monetizing or cash flowing of your film tax incentive credit can be a key part in the successful financing and completion of your project. In Canada the production tax credits in the past primarily focused on the labour component, but now all sorts of other eligible expenses can be claimed. This only means one thing, a larger tax credit, and more working capital if you monetize of cash flow your credit.

In Canada your film tax incentive credit can be financed either on final certification or completion. However, if you have a credible project with a solid finance plan and a track record you can actually obtain accrual financing to significantly cash flow your project during production. Most conservative finance people would suggest your use the cash on your tax credit to successfully complete your production, more aggressive owners of projects often use the funds to start the next great project t - that’s your call .

Successfully cash flowing and monetizing your tax credit enhances the overall potential return on investment in your project. Speak to a trusted , credible and experienced film tax credit financing advisor to help recoup and enhance the investment and ultimate 's 'saleability ' of your project .