Why Asset Based Lending is the Only Business Credit You Will Ever Need

It's possible, and we've seen it work all the time. How could one type of business financing, i.e. asset based lending, be the only business credit tool our firm will ever need?

Typically when we meet with clients to talk about non-bank alternatives to cash flow and working capital challenges we speak in terms of many type of financing being complimentary to each other - example : factoring and purchase order financing . In most cases one type of Canadian business financing is not necessarily going to do the entire job you need - Except..! Except when it’s an Asset based lending solution for business credit.

'ABL' is sort of the new kid on the block - it’s vastly popular in the U.S. and gradually taking off in Canada, some say in fits and starts, which is partially due to the entry and departure of various firms that dominate the market.

ABL, which is our acronym for the solution can be tailored very specifically to be the total one stop financing solution your firm needs. The two greatest dynamics of ABL is that it offers your business more credit availability (isn’t that what it’s all about) and at the same time can be customized to your industry and specifically, your company!

In its purest form is simply putting in a customize loan facility to allow you to draw daily against the value of your receivables, inventory, and in many cases fixed assets and real estate. It’s kind of the business version of a home equity line of credit we like to explain to clients!

But wait a minute, clients say, isn’t it exactly what a bank does. Well, yes, and absolutely no! Conceptually it is still the same, but the asset based lending business credit facility focuses solely on the assets, so you will rarely , if every hear terms such as rations, covenants, outside collateral, personal guarantees, etc in the context of an ABL solution .

So is it the right financing tool for your firm - we'll let you be the judge of that. But if your firm required a working capital and cash flow revolver in excess of 250k and you have some financial challenges you are immediately a candidate. Oh and by the way, you absolutely need to have receivables, inventory and fixed assets to get this type of facility, that’s really the main premise.
Typical candidates we work with all the time have margin pressures, they don’t have the business financing in place to support sales growth and new orders, , or they have some real business and balance sheet issues revolving around restructuring, turning around, coming off a bad year, receiving a mega contract, etc .. If that sounds like you we can assure you that you're a candidate for asset based lending business credit.

Key benefits of the facility are greater cash flow, no covenants or ratio maintenance, and the ability to take advantage of opportunities otherwise not available.

So is it the be all and end all financing solution. Only you as a Canadian business owner and financial manager can decide - so speak to a trusted credible and experienced business financing advisor to see if this type of business credit is 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/asset_based_lending_business_credit.html

Surviving A Working Capital Financing and Funding Challenge

Did we really even have to mention it, but a major CFO survey, just released, stated that ' Cash flow is Top Concern Priority for 2011 ‘. When has working capital financing and working capital funding in general ever been more important.

Let's take a look at the Canadian situation and how you can solve some of those working capital challenges that were re iterated as concerns in the survey, which was done, by the way by TD. And by the way, putting ' surveys' aside, we'll offer some ' real world' solutions to some of the issues highlighted in the bank survey!

Intensity? The survey actually used that word when Canadian business owners and financial managers described their necessary day to day attention to working capital management. As a business owner you have to look at your overall structure and ensure you can manage cash flow on a day to day basis.

The survey intimated that although you could cut costs to manage and conserve cash flow most Canadian business owners don’t feel that’s the optimal strategy, only 7% actually.

Access to working capital financing and working capital funding was a major concern by respondents. We are reminded of headlines that say things like ‘90% of all jobs aren’t advertised”. Well, do you know what, when we sit down with clients we strongly feel that they often don’t understand that 90%of financing options aren’t generally known to Canadian business. Did you know there are hundreds of non - bank finance entities, all very unique in nature, that finance receivables, inventory, purchase orders (yes, purchase orders! tax credits (you can finance a tax credit? - YES you can!).

The survey indicated that technology is by far the top area of planned capital investment, and you should be aware there are a number of solid capital and operating lease solutions that provide you with total flexibility in acquiring, and more importantly, using technology .

Alternately the Canadian lease financing industry is back on its feet and numerous solutions for equipment acquisition via leases, loans, bridge loans, etc are available.

Want those real world alternative financing solutions we talked about - consider non bank asset based lines of credit or receivables discounting. Your cash flow is at risk if you aren’t properly managing your A/R and financing it in a manner that suits your firm’s business model and cash conversion cycle.

You could of course stop your life and spend a lot of time investigating these solutions but we strong recommend to clients that they simply seek a trusted, credible, and experienced business financing advisor to sour the working capital financing and working capital funding they need for short term liquidity and long term survival .
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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_funding_working_capital_financing.html

Sasquatch ? UFO’s ? Great Asset finance and Equipment leasing Companies in Ontario ? – Myth or Reality ?

We'll go with reality with respect to great asset finance and equipment leasing options in Ontario. With the economy generally improving leasing continues to be a popular and successful method of acquiring the use of assets for your business. And the reality is that this method of asset financing has been in place for hundreds, some say thousands of years, so there is a lot to be said for a proven formula.

There are several key factors that drive the reality success of equipment financing in Canada - they revolve around tax benefits, conservation of capital, and quite simply a solid alternative to ownership. As a Canadian business owner or financial manager you want alternatives to ownership of assets that more often than not depreciate in value. That clearly is the chief advantage of the great asset finance and equipment leasing availability in Ontario.

At the end of the day it’s simply an alternative to ownership, while at the same time you are able to reap all the benefits of the assets without having had the need to put significant capital outlay at the outset. That’s a great option and business financing strategy. There is an age old saying in the lease financing industry which is that you benefit through use, not ownership.

And that additional cash flow allows you to invest in other resources and assets to make your business more profitable and competitive.

Obsolescence is always a concern for business owners who with to acquire new assets, whether they be for production in the plant or technology and computers in the back office. Leasing allows you to battle head on with the obscelescence factor given that you don’t want to outlay significant amounts of capital into assets that might have limited long term use. We continually advise clients to think of their computer needs and purchases in the past, and the constant need to upgrade technology while addressing your current and future needs. Can you even imagine in today’s times owning a computer for 3 to 5 years, it’s very doubtful!

Cash flow and buying power are often quoted in connection with great asset finance and equipment leasing strategies. The reality is that you can buy more if you have a financial strategy in place. Let's look at a simple example - and we will use our old friend computing technology as our poster boy for the example.

Lets say you need a new computer system for 250,000$ and the reality is that an alternate vendor has a better solution for 350,000$. If you were purchasing you have to wrestle down two key issues, laying out 250k , or alternatively coming up with an additional 100k of real cash to complete the second alternative purchase . The monthly lease payment on a 250k 3 year lease would be approx 7700 dollars, and on a 350k deal it would be approx 10 600 dollars . So as a business owner which solution do you want to wrestle with - paying either 250k or 350k out of working capital, or working an additional 3k into your operating budget?

Want to see some real magic? You could actually acquire the 350k system under an operating lease and bring that payment very close to the 250k system, but that’s a technical subject for discussion on another day.

So whats out bottom line, you are welcome to hop on the leasing industry train and take advantage of some great rates, terms, and structures via one of the most comprehensive and flexible asset finance strategies available to business.

So, Sasquatch, Ufo's? We're not sure, but Speak to a trusted, credible and experienced equipment leasing advisor who will help you maximize the benefits of this Canadian business financing proven 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/asset_finance_equipment_leasing_ontario.html

A Receivables Financing Counterpunch – Making Factoring Cost Work For Your Company

How much is it? No we aren’t in line at a department store, we're sitting with our clients who are always asking what the true cost of factoring receivables is and if a receivables financing facility is their real solution for working capital problems. They ask other questions also, such as how the facility works and what is the best type of facility for the Canadian business marketplace, so we we'll cover those off also .

We don’t think there is more of a mis understood business financing in Canada, notwithstanding the fact that receivables financing is growing in popularity traction everyday. The biggest stigma around the topic is really the true cost, and we use the word true cost because many Canadian business owners and financials managers simply don’t understand the components of that true cost, and moreso, how these costs can be significantly offset and reduced.

We'll point out that coming up the rear fast and furious behind true cost are the issues of how the facility works and what type of facility is the best one in Canada - as there are several types.

To properly address our issue lets quickly define our subject - factoring, ( also called receivable discounting and invoice financing ) is simply the sale of your receivables to a third party firm, that firm providing you with immediate ( and we mean same day!) cash to finance your business

One of the misconceptions clients have around pricing is related to the fact that you receive (depending on who you are dealing with) 80-90% of your invoice amount in a receivables financing scenario. This must be taken into account when you are looking at total factoring cost.

One thing that constantly disturbs us is that the terminology mumbo jumbo that many factor firms use when they are offering you pricing on your facility. That’s why it makes total sense to talk to a trusted, credible, and experienced Canadian business financing advisor that will work with you through the (industry created) maze of factoring, factoring cost, and day to day paper flow.

You can quickly and easily focus in on the true cost of factoring by simply keeping in mind three things that you need to know - they are:
1. The percentage that you are advanced on your invoice (refer to our previous comments)
2. The discount rate charged on the advance
3. The length of time that you typically collect your receivables in

Most business owners are not readily facility with their DSO, their ' day’s sales outstanding '. You have to be, because it’s an ongoing measure of the time it takes to collect your receivables in days. It’s calculated simply by taking your receivalble on an annual basis, multiplying them by 365 (days) and then dividing that number by your sales for that time period.

Therefore, if you know your collection period, and get an honest, clear answer on our three points you can easily determine the cost of factoring.

Let’s give you a clear example: Your factor firm advances you 80% of your invoice. Their discount rate is 3%. So if you are in the lenders shoes your annual return on the client (that’s you!) is simply: Discount rate % times 365 days Divided by number of days invoice is outstanding.

In Canada that rate is typically going to work out to be in the 1.5-3% per month range depending on the lenders perception of the size and quality of your accounts receivable portfolio.

Is that expensive financing? You tell us, because if you take into account the receivables financing facility provides you with unlimited cash flow to generate sales and profits, and that you can use the cash to offset financing costs, well... we dont think so .Costs can be offset by using the funds to take supplier payment discounts, and purchase in larger volumes and better prices re your inventory needs, etc.

Speak to that trusted, credible business financing advisor we spoke of, he or she will guide you through the receivable discounting maze and set you on course with the right facility at a price that makes sense to you.

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

Is Financing Inventory and Financing Purchase Orders Actually Possible In Canada ? Yes You Can!

It's not a myth or urban legend. Financing inventory and financing purchase orders in Canada is actually possible and in most circumstances the cost of this financing is significantly offset by your firms ability to increase sales, generate additional profits, and lower competitive pressure .The bottom line is of course more larger orders and contracts, in some cases from clients you were not able to satisfy in the past based on our financial strength or other challenges.

Let's step back a bit and define some of our key metrics. In its simple form the financing of inventory is simply your ability to finance, or rather, ' margin' inventory on an ongoing basis. The inventory is of course simply the collateral. Clients talking to us about seeking specialized inventory financing are often in the position of having inventory form a large part of their current assets, in conjunction with accounts receivable of course.

So in a perfect world you go to your Canadian chartered bank and ask they to finance you inventory and free up cash flow. It’s that simple right? We can hear you already in the background, and we'll be the first to admit it’s not a perfect world. Even seasoned Canadian business owners and financial managers realize the inventory is not high on the list of bank financing in Canada, especially if you are a small or medium sized firm that does not have the bench strength to satisfy typical bank criteria which focus around everything EXCEPT inventory, i.e. ratios, covenants, external collateral, personal guarantees, etc.

For inventory financing to make sense you should realize that your inventory has to be marketable, it can’t be old, stale and slow moving. You also have to be in a position to demonstrate that your inventory turns regularly, and that you have sufficient gross margin to carry the financing costs associated with financing inventory and financing purchase orders. P.o. Financing is of course the ' kid sister ' to inventory finance, and such a facility contemplates direct payment to your suppliers by the p.o. financier , allowing you to of course satisfy supplier payment amounts and terms, while at the same time fulfilling client orders and contracts .

So if the bank is not your best bet how actually are these two asset categories financed? The reality is they are financed by specialized firms, and in the case of inventory pure play financing we encourage clients to bundle their inventory financing with a full asset based lending line of credit via a non bank private finance firm. This type of facility margins both inventory and A/R to maximum leverage, giving you in essence unlimited working capital to grow.

To qualify for financing inventory and financing purchase orders you should generally have solid management and industry experience, good accounting and reporting around your inventory, as well as the aforementioned marketable product that can be resold by the financier if a problem arises.

Speak to a trusted credible and experienced Canadian business financing advisor on ensuring your understand the benefits and qualifications for this valuable financing tool and strategy.

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

How To Finance Your Film tax credits in Canada - Cash Flow your Incentive Grant Today

Many producers, directors and owners of Canadian projects in film, television and digital animation are not aware of their potential capability to finance film tax credits and monetize those tax incentives into real cash flow, working capital, while enhancing return on equity for their projects.

Let’s examine how these credits work, who they are available to, and why Canadians and foreign owners of projects should consider the monetization of these valuable non repayable film tax incentives. Although we traditionally talk to clients around ' film ' you should never forget that both television and animation in Canada is eligible for these same incentives.

In essence you are simply taking advantage of the Canadian federal and provincial governments desire to in effect ' subsidize’ the cost of your productions. If they're offering, why aren’t you taking?!

In essence its basically about geography and content -as the two levels of Canadian government are focused on attracting employment and foreign capital to Canada - it is their belief ( and why would we even question it ) that these productions advertise Canada, bring capital spending to Canada and, probably most importantly, stimulate employment - thereby generating tax revenue . But enough of our economics lecture - let’s get down to real world basics on film tax incentives and film tax credit financing in Canada.

Owners of productions are eligible for pure non repayable grants under approximately 6 different programs based on the four genres of film, tv, animation, and the sometimes forgotten ' music’ industry .

The grants, as we mentioned are non repayable, and very generous, often approximating 30 - 40% of your production budgets in various categories. We tell clients it is essential to tie yourself to a solid entertainment accountant who focus and expertise will allow you to craft a budget that maximizes the most eligibility of your expenses. Certain categories of expenses are known as ' qualifying ‘and the include labor and actual non labour expenses. The government issues guidelines on these budgets and what qualified - you can spend 1 , 5 or ten hours looking through government literature, or, alternatively, do as we recommend, speak to a trusted, credible and experiences film tax financing consultant who can guide you through the whole process of film tax credit financing in Canada .

Film tax incentive financing can be accomplished when you have received your final approval and certificates - for example, if you are shooting or filming in Ontario you would file under what is known as the OPSTC -- The Ontario Production Services Tax Credit.

So you have filed your claim, and completed your production. Next item on the agenda - waiting! Care not to wait - then finance you claim, which essentially is the financing and discounting of your claim with the claim as the key collateral. Want an even more supercharged solution - finance your claim while you are in production and receive cash flow and working capital to enhance the overall financing plan.

Film tax credit financing in Canada - its available, its generous, use it, and, if you need to, finance your claims!

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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/film_tax_credits_canada_film_tax_incentives.html

How The Right Franchise Financing Will Successfully Solve Your Franchise Cost Challenge !

You have selected, or are selecting a Canadian franchise. You're down to those two last seemingly minor questions - how much does the franchise cost, and what franchise financing is available! Pardon our questions, but those are hardly minor points.

Franchise opportunities in Canada seem unlimited these days as the industry continues to grow and grow. A huge portion of the Canadian economy is services by franchisors and their franchisees in Canada.

There is no one method that serves all you’re financing needs for your new proposed business. However several tried and true methods of financing are utilized successfully everyday in Canada; let’s explore some of those methods and hopefully provide you with tips, strategies and tactics to successfully complete you business acquisition. In most cases you will be buying, or building a franchise with your franchisor partner, in some instances you are negotiating with an existing franchisee to purchase their business. Both of these scenarios are financed differently.

In the case of purchasing an existing franchise a more formulaic approach is available to you. The basic process involves negotiating a fair price around the business, validating the financial statements of the owner, and, more often than not, obtaining an appraisal of any of the hard assets and leaseholds of the business. The appraisal value is a key point in your overall financing strategy. We also caution business clients to take some time to ' normalize' the financial statements of the existing business. This is what even sophisticated financial analysts do when they are looking at a merger or acquisition type scenario. The process simply involves taking a look at all the costs and expenses and eliminating those that might not be relevant as you move the new business forward.

Quick example on the above: Previous owner is taking 80,000.00 out in salary; you feel you can continue with a 50k salary - that obviously allows you to put 30k of profit and cash flow back into your business assumptions. You might well want to utilize the services of a trusted, credible and experienced financial advisor who can assist you in this area if you are a non- financial type!

The most common method of financing a franchise in Canada, existing or new, is a BIL .Great says our clients, now what is that?! It’s the technical name for the Canadian governments Small Business Financing program, and it provides up to 350k in financing for your business. Sounds great, right?

The challenge our clients face is typically understanding the criteria of the program , how it works, what information and back up is required to process a financing, and what other types of financing might compliment this proven and popular strategy. (We have found equipment financing or leasing to be a great add on complement to the government loan strategy)

Franchise financing around the franchise cost should not be viewed as coming from your franchisor, they are in the business of building their empire, not financing yours! That is a common misconception among clients.

However, in the case of purchasing an existing franchise you may well want to negotiate at least a nominal (or greater if you can!) vendor take back to compliment the overall financing. It’s a great strategy that motivates you and the current franchisee to work together to continue the success of the business.

Our final point and tip around franchise cost is clearly to assess what your own investment will be in the business. Typically franchise lenders are looking to get a very reasonable owner equity or down payment on the transaction, which is of course relative to the size of the business you are buying or starting.

Speak to a trusted Canadian business financing advisor to ensure you have a clear strategy and a solid plan to finance your entrepreneurial vision.

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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_financing_franchise_cost.html