How To Decide if Financing Receivables Is a Solution for Your Working Capital Funding

We call it the R R factor. And we are not talking about rest and recuperation! The R R factor will give you a sense it its time to consider whether a newer, more popular method of financing receivables is your working capital funding solution .

We're going to provide you with a quick but easy and powerful tool to determine if your cash flow challenges need to be addressed in a more positive fashion. It's the receivables to revenue ration - hence the term R R . First, take you year end balance of A/R, which is of course your uncollected sales revenue at that point in time. Then determine how many weeks of sales that represents. Calculate this ratio historically and you have a method of determining whether your cash flow and working capital requirements are changing.

So how does business address the challenge of working capital funding when it’s as challenging as ever to borrow. Many companies are assessing factoring, or financing receivables. It’s a simple process that is only made complex and difficult when you don’t understand the pricing, how it works on a daily basis, or the important need to align yourself with a partner that offers and matches your business financing needs.

The process is actually quite simple --- On a daily, weekly, or monthly basis - it’s your choice, you sell your receivables. So what happens next? Simply that the day you generate that sale you have the same day cash for those receivables. Therefore the Canadian business owner and financial manager have created a true ATM machine out of the investment the company has in accounts receivable. Readers will also begin to immediately appreciate that they have just stumbled upon the ultimate cash flow solution, because every time they sale they have instant cash. So whats the catch?

We believe there are 2 catches, and when the business owner understands and addresses them the receivable financing solution becomes much more clear and common sense.

The first ' catch ' is the cost. The typical Canadian cost of financing a receivable is 1.5- 2% / month. The firms offering the service do not call that an interest rate, they call it a discount fee. You sold something, for cash, i.e. you’re receivable, and it was discounted by 1 or 2% for that privilege. Is that expensive. Absolutely ... maybe! That is because most business owners don’t pick up on the fact that they are in effect carrying those receivables already, which is a cost that is often not intuitively calculated by the business owner. Secondly, the term ' opportunity cost ' comes in to play, because the reality is that if your firm can generate a good return on investment you can use the cash flow from your receivable financing to generate higher profits .

So why isn’t factoring or receivable financing the choice of every Canadian business for working capital funding? The reality is, and this is a surprise to many, that the largest firms in Canada utilize this financing. They simply have a stronger ability, due to their financial strength, to determine how the facility works on a daily basis, the best type of facility we recommend to customers is one in which your firm is able to bill and collect its own receivables, which is not offered by 99% of firms in the Canadian marketplace. Search out that 1% solution is what we tell our clients - at that point you will have a competitive financing vehicle for working capital and virtually unlimited cash flow growth.

Speak to a trusted and credible business financing advisor who can assist you to put together a solid working capital funding solution.

The Myth Of Inventory Finance Companies

Your company carries it. You need to finance it. We're of course talking about inventory. Discussions with clients reveal a lot of misconceptions around inventory financing in Canada. Let's try and resolve some of those myths around the financing of your inventory, who the players are , who they are not ( that’s the most common myth ) and we'll also try and provide some straight forward direction on next steps in your inventory financing challenge .

The overall quality of your inventory management will play a large part in your ability to finance your products, which are a part of the current assets component of your balance sheet. You cannot overlook the importance that an inventory lender will place on your ability to report and count your products. The reality is that most firms are either carrying a ' continuous' or ' 'periodic' system of inventory control.

So here is solid tip # 1 - be aware that inventory lenders prefer a continuous type of inventory accounting, for all the obvious reasons. Essentially you are counting and monitoring inventory (with the use of software of course!) at all times. That’s a good thing when it comes to a lenders valuation on an ongoing basis and their ability to lend.

You're company is growing. Unfortunately so is your inventory! And that places a huge drain on your cash flow. The working capital cycle dictates that cash turns into inventory which turns into receivables and then we start all over... that lag can be anywhere from 60 - 120 days, sometimes longer . Never underestimate the problem that higher sales will bring to your inventory financing needs.

Clients typically are looking for inventory financing because the level of investment that you have in product and receivables drains your cash flow. As sales volumes increase your cash flow decreases based on your overall collection period of A/R and of course those inventory turns.

Your sales staff of course never wants to be in a position to tell a customer you don’t have the product they have worked so hard to sell.

Does your company have an inventory financing strategy? The majority of firms we talk to in Canada, certainly in the small and medium business sector do not have access to the inventory financing they need. Do true inventory financing companies exist in Canada? We feel that the answer is generally ' no ‘, they do not. However if your firm would consider an asset based lending scenario that in effect takes the place of inventory finance companies in Canada .

Under an asset based lending strategy your inventory is margined for what its worth, by experts who categorically know what its worth. You will enhance your ability to finance your product if you have the controls, reporting, and inventory accounting system in places that makes the inventory and asset based lender ' comfortable ‘.

Speak to a trusted, credible, and experienced business financing advisor with regards to inventory financing companies and asset based lenders who will give your product the financing it deserves!
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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/inventory_finance_companies.html

The Future Is Now ! Financing Your Film Tax Credit Incentives In Canada Today

As a producer, director or owner of a project for Canadian film, televison or the increasing popular area of digital animation you already know the score. Costs are up and the ability to finance your projects to full completion is as challenging as ever. Financing your film tax credit incentives under the 5 or 6 different tax credits that are available may be the solution to your problem!

We continually meet with clients who are in the same conundrum, which is namely that they are in search of that final ' gap ' that will fully complete their financing. Equity investments have been committed, some sort of debt has been arranged for a part of the project, and pre sales and distribution is being finalized. Maybe, just maybe creative financing of the tax credits available to you in Canada (these are non repayable grants of very generous dollars) will be your final piece of the puzzle.

We don’t necessarily believe that film tax credit incentives could claim they are the total solution to the entertainment industries problems, but at a time when we are just seeming to come out of the global 2008 implosion that hit every industry including yours the reality is that the Canadian tax credits are the freshest breath of air in probably the entire industry. (Many U.S. and international tax credit schemes for film are under attack).

Jeff Steele, a U.S. pundit and expert on film and film financing recently said that part of the problem is that production owners use the tax credit and the financing thereof for the cash flow to start the next project, while the current one is not yet completed - we'll leave that one for you to decide re right and wrong way to do things. We do agree with him though that the planets align in a very challenging way when you consider the global credit crunch, the only minor participation of banks in the industry, as well as the general perception of people that many players enter the financing of productions based solely around the perceived' sexiness' of the industry . Anyway...!

Not considering a film tax credit incentive financing is clearly not helping the cash flowing of your project. Tax credits in all ten Canadian provinces can be financed on a ' when completed' basis, although more and more entrepreneurs, particularly independent producers utilize accrual financing ‘, which creates a ‘cash flow as you go ' scenario, providing instant working capital to your project.

The proper financing of your production , utilizing a tax credit finance strategy should no doubt enhance your overall R O E, namely return on equity - and we can assure you those equity and mezzanine investors will feel a lot better knowing that film tax incentive finance props up your project just nicely .

Speak to a trusted, credible and experienced advisor in film tax credit finance and get on the cash flow bandwagon, which we believe is where you want to be!
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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_film_tax_credit_incentives.html

How To Decide If Sred Financing For Your CRA SRED Is Right For Your Firm

We won’t bore you with the 4 Billion details. We are of course talking about the CRA Sred program and the billions ( around 3-4 Billion dollars annually ! ) of sred grant funds that are of course non repayable and distributed to Canadian privately owned firms on a yearly basis .

If you know the program and you know what we are talking about as a Canadian business owner or financial manager then you're ahead of the game already. The real basics are of course that the program is technically called the Scientific Research and Experimental Development Program - aka SR&ED, providing those billions of dollars we talked about back to firms such as yours in the form of non-repayable grants to literally all sectors of Canadian business.

So we are focusing on your decision as a claimant to wait for your refund on your expenditures, or consider the option of financing the claim to accelerate your working capital and cash flow. We're all familiar with the cliché that size isn’t important - but in the case of your CRA Sred claim it plays a bit of a role in the overall ability to finance your claim.

We have to backtrack a bit and first of all answer one of our clients typical first questions, which is simply - is a sred financing achievable and who actually finances these claims. In Canada we are aware of one of the chartered banks that finances sred claims, we have a strong opinion that the overall financing of your claim with a bank is subject to many other bank criteria. We think you know what we are getting at, so the reality is that sred claims are financed 99% of the time by the private sector via boutique firms. Therefore we encourage readers to seek the services of a trusted and credible and experienced sred financing expert who can guide them thru the process.

So once you have found your sred partner firm in this area we again circle back to size. In general Canadian claims in excess of 250k tend to be financed more efficiently and economically for both the lender and yourself. Claims are financed as a general rule at 70% of the LTV relationship, referring of course to loan to value. So on a 250 claim you would net 70% of your combined federal and provincial claim.

You would consider financing your sr&Ed under the following conditions - as a first time or previous filer you have confidence your claim was prepared by an experienced party. You also should be in need of the cash flow (who isn’t) as sred rates are typically higher than traditional financing rates. Timing is everything and typically a sred financing can be achieved in 2-3 weeks, with the usual due diligence around your claim, the collateralizing of the claim, and any related paperwork and applications.

If your company can put the cash flow to use to retire term debt or payables, increase sales, or, dare we say, to start the R&D re investment process all over you are a strong candidate to finance your sr&Ed.
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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/sred_financing_cra_sred.html

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