The Truth About Business Factoring And The Real Factor Cost Of AR Finance In Canada

You can't handle the truth! Or can you ? We think you will be able to once we review the basics around business factoring in Canada, what is the true factor cost of AR finance (ar = accounts receivable).

Your firms ability get financing around the most liquid and accessible business asset you have, your receivables, is what can make or break many small and medium sized businesses . The big corporations seems to have this down quite well already , as they have large sophisticated infrastructures for credit and collections, as well as access to corporate borrowing and securitization facilities that smaller companies just don’t have .

But you still have access to business factoring - all we can warn you about is that it’s important to understand your true cost - (it’s not what you think it is!) and, even as critical - picking your partner in this method of Canadian business financing.

Is your firm eligible for a business factor facility? If you can answer yes to one single question - ' Do you have accounts receivable?' then, you guessed it, you’re eligible! In many cases if you are working with the right firm you can blend in receivable and purchase order financing into the same facility - the names tend to change then, as we refer to that as asset based lines of credit and working capital facilities.

So, it’s always about cost, right? We don’t think so, but our client’s sure do, so let’s invest some time to discuss the real factor cost of ar financing in Canada. Part of the problem in addressing the cost issue is the perception by clients, totally understood of course, that factoring costs are viewed as interest rates by the borrowers.

That’s not how the industry views it; they are buying something you are selling, at a discount. That discount rate is often (99% of the time!) interpreted as an annual interest rate. So while the factor firm buys your receivables at a rate of between 1-3% (on a monthly basis) our clients gasp and view that as 12 - 36% annual percentage rates.

So, how do you assess the factor cost then? Here are the elements you should consider in assessing business factoring in Canada. First of all, if you don’t have some decent gross margins on your products or services then even bank financing or carrying your own receivables is expensive. So a solid gross margin is important.

To calculate your margins of course simply take your gross income and divide that number by your sales revenue and express it as a percentage. The number of course shows you how much you are making considering the costs you incur in actually producing that product. Naturally service companies have usually great margins, because there is no direct cost of sales.

Other issues to consider in understanding the true cost of factoring is how long it takes to collect your receivables, as well as the actual cost it is taking you to carry that investment . And don't forget the concept of lost opportunity - you can take you factoring cash and turn that into additional sales and profits, as opposed to waiting for a cheque to come in 60- 90 days later.

Our final point is that the cost of factoring can be significantly offset by your ability to take discounts and purchase in a smarter fashion, in quantity, etc.

In summary, the true factor cost of AR finance is probably not what you think it is. Thousands of firms that use and offer this service can’t be wrong. Speak to a trusted, credible and experienced Canadian business financing advisor for assistance in understand the real cost of business factoring in Canada. You might just be surprised, and find you can handle the truth!


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

2 Things You Need to Know About Business To Business Merchant Cash Advance Loans

Merchant cash advance loans fast becoming a mainstream financing strategy for Canadian business to business loan transactions.
However, in talking to clients they are concerned about two key issues around this innovative financing method.
Those two key issues are:
How do they work?
What are the Costs?
We firmly believe that if you understand those two critical points then your firm is in a position to benefit from merchant cash loans and Canadian B to B loan solutions. And those benefits are significant and quite clear. They include your peace of mind as it relates to business financing, since cash flow loans grow with your business and are unlike pre-set bank credit lines, etc . Also, many business owners confuse a business cash advance with other types of debt financing.

Time is money as the Canadian business owner well knows. Merchant cash advance loans in Canada work quickly and efficiently (When you have chosen the right partner and the right type of facility). Once the initial set up process is completed, usually in a week or two the facility runs itself at your discretion. You in effect have taken complete control of your cash flow. Future sales are turned into valuable cash flow today.
Our final key benefit that we should focus on before getting back to our two critical points is simply that this financing tool, if used properly, allows you to generate more sales and increase profits via key turnover of receivables, inventory, etc. Not to get too technical but there is a great tool for analyzing your business called the DUPONT MODEL. It simply allows you to calculate how the actual turnover of receivables and inventory leads to greater profits and returns on assets and equity. We encourage you to investigate that tool for some real analysis of how a business to business cash flow solution might be the solution to your business financing problems.
O.K. You now know many of the key benefits of this type of financing. Is it right for your firm? Critical point #1 how does it work? Cash flow loans against future sales or credit card sales is simply best described as the short term sale, or ‘discounting ‘of your future sales or credit sales .

You generate cash, at your option, on the same day that you generate an invoice for a sale and delivery of product and services to your client base.

Critical Point # 2- What does this type of financing cost? Actually it’s zero per cent financing. Don’t believe us? We are being a bit facetious, but the reality is that the business to business cash flow financing industry in Canada does not express or calculates financing costs via an annual per cent age rate. The problem lies in the fact that customers do in fact look at it that way .We have actually demonstrated too many customers that the true cost of merchant cash advance financing is actually zero or less than bank financing in many cases. Why is that? We hate to do it, but let’s go back to our DuPont Model Financial analysis. If you factor your receivables, get cash the same day, buy more inventory with that cash, negotiate a better price with suppliers with that cash, and then repeat the process over and over we can almost guarantee you, depending on your industry and A/R turnover that receivable financing can become a profit mechanism for your firm. That’s certainly clears up a lot of the ‘negative ‘things you have heard about cash flow loans.
Speak to a trusted, credible and experienced business financing advisor on the benefits of merchant cash advance loans and how they work and how financing costs can be controlled and reduced. That’s true cash flow and working capital financing for Canadian business.

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

How To Get Best Lease Rate On Equipment Financing And How Approvals With Leasing Rates Are Calculated In Canada

‘What’s my lease rate? ‘is a question I am often asked by customers when they work with us with respect to equipment financing approvals

They are surprised when I tell them that they get to pick their own rate! (All customers want the lowest rate!)
I am not trying to be facetious when we make that statement. What we are saying is that the over all credit quality of a customer, as perceived by the lender (that’s important!) is in fact set by the customer, thereby driving a final approval on rate, term and structure of the proposed financing request.

The role of the customer or their trusted advisor acquiring lease rates for asset acquisition is to understand the basic credit information requirements and how the overall risk to the customer and their industry will be perceived by the lender. The irony of a lot of leasing rates in the business of leasing is that the industry for the most part used historical analysis to project future ability to pay. That is a difficult concept for the customer to handle more often than not - as an example the customer may have lost some money last year, driving a negative cash flow figure. Prospects have improved, new orders are coming in, and yet the business has a problem in getting new financing.

The customer needs to ensure that the information and ' story ' make the equipment financing transaction become more ' approvable'.

Critical categories in the information submission by the company are as follows:

Length of time in business
Personal credit history of the owners
Relationships with other financial institutions
Quality of the financials (Some customers submit balance sheets that don’t balance!)
Additional collateral available if necessary
Summary of key financial info such as depreciation, cash flows
Positive focus on management and its background and experience

It's these factors that affect lease rates in Canada.

If the customer is qualified to make such a submission a solid package as per our list noted above should lend itself towards an approval at current market rates and structures . If the customer feels they are not properly qualified to make such a submission they are strongly encouraged to use a qualified intermediary who knows the industry and, more importantly, knows the specific weighting given by a lender to the above noted submission requirements.

The amount of information required around each component is more often than not determined by the size of the transaction or the lenders total exposure to that customer. In many cases small ticket transactions (those under $ 25,000.00) are adjudicated via a credit application and public reporting sources such as Equifax or Dun and Bradstreet. Typically 60-70% of all small ticket transactions are approved.

In summary, customers who want to get a prompt and of course positive lease approval should focus on providing a clean package of required information that will ensure a prompt approval based on specific industry requirements around the transaction size and asset type.

Knowing that the lender will focus on future potential of the firm, the management experience, and the collateral asset are the valuable data points regarding lease rate approvals for any business seeking a business equipment financing lease. Speak to a trusted, credible an experienced Canadian business financing advisor for the help you need for great lease finance rates and prompt approvals .


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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 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Computer Leasing and Financing in Canada

Many companies are not aware of the significant benefits related to Computer Leasing and Financing in Canada .

Let's discuss acquisition financing in computers and technology segments . The proper term for this type of financing is ' Technology lifecycle management '. Most business owners simply consider the following question : ' Should I buy or lease my firms new computers and software and related products and services ? '

Two old adages related to leasing still ring true when it comes to the technological aspect. That is that one should finance something and depreciates, and one should buy something that appreciates in value. Most business owners and consumers as well know very well that computers depreciate in value. Systems we paid thousands of dollars for years ago are now hundreds of dollars. Walk into any ' big box ' retailer and see the dramatic moves in technology.

Business owners who finance technology demonstrate a higher level of cost effectiveness. The company wants to reap the benefits of the technology over the useful life of the asset, and, importantly, more evenly match the cash outflows with the benefits. Leasing and financing your technology allows you to stay ahead of the technology curve; that is to say you are always using the latest technology as it relates to your firms needs.

Businesses that lease and finance their technology needs are often working better within their capital budgets. Simply speaking they can buy more and buy smarter.

Many companies that are larger in size have balance sheet issues and ROA (‘return on assets ' ) issues that are compelling. They must stay within bank credit covenants and are measure often on their ability to generate income on the total level of assets being deployed in the company. Lease financing allows those firms to address both of those issues. Companies can choose to employ an ' operating lease ' structure for their technology financing. This is more prevalent in larger firms, but works almost equally as well in small organizations. Operating leases are ' off balance sheet ‘. The firm adopts the stance of using technology, not owning technology. The lessor/lender owns the equipment, and has a stake in the residual value of the technology. The main benefit for the company is that the debt associated with the technology acquisition is not directly held on the balance sheet. This optimizes debt levels and profitability ratios.

At the end of those operating leases, which are usually 36 months long, the customer has the option of:

1. Returning the equipment
2. Buying the equipment (not likely though)
3. Negotiating an extension of the financing for continued use of the computers, technology, etc.

Companies that have recently acquired computers and technology can in fact negotiate a' sale leaseback ' on those same assets. This financing strategy brings cash back into the company , as the firm has employed a leasing and financing strategy building on our above noted them - using technology, not owning technology .

In summary, the key benefits of computer and technology lease financing are:

* The company can stay ahead of the technology curve
* Computer leasing and financing has significant balance sheet and income statement benefits
* The firm has flexibility with respect to buying new product, returning existing technology, and generating cash flow for purchases already made

Many of the benefits we have discussed relate to leasing in general. However, technology and lease financing are very perfectly suited to the business financing strategy of leasing

Working capital saved on computer leasing and equipment leasing in general allows a company to use that capital to grow revenues. Depending on which types of leases are utilized there are also tax benefits associated to leasing.

With the current focus on the environment customers can work with their vendor to return unused equipment at the end of the lease for proper ' green' disposition. Speak to a trusted, credible and experienced Canadian business financing advisor who can provide you with the best strategies on computer leasing and 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 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Let Canadian Film Tax Credit Financing In Ontario And BC Finance Your Productions!

It's no mystery to us, that’s for sure. Canadian and U.S. content owners and producers are taking the 'flight to safety' , using Canadian film tax credit financing for Ontario , BC, and quite frankly all Canadian geographies for their financing needs .

Why that flight to safety? Why is Canada so under consideration these days when it comes to the film tax credit? (Film, television and digital animation) Well, just this week we caught three separate headlines out of U.S. states such as Michigan hinting strongly that tax credits will be pulled back, repealed, diminished, etc. Bottom line, less!

That certainly isn't the case in Canada, where a proper filing and certification of your claim (that is key) can net you anywhere for 30- 45% of your total production budget expenses. Help us understand, but isn’t that amount of assistance very valuable in allowing you to obtain the balance of your financing, through debt, equity, pre sales, product exposure, distribution, etc,.

The tax credit, furthermore, can be cash flowed to help monetize your project for working capital and cash flow as you go through your production spend.

Canada, similar to other geographies such as Australia, firmly seems to believe the payback in revenues, taxes, and general economic activity justifies the investments being made in your project.

Co - productions, when they qualify are eligible for the same sort of financing and assist you in attracting and finalizing the additional finance you need to complete your project.

When you finance the tax credit naturally the credit itself is the collateral for the loan - it’s in effect a bridge loan to get you the funding you need now or at the completion of your project. You do have the choice to simply wait for your non repayable cheque, but most independent producers prefer the pay me now to pay me later approach!

From a structuring viewpoint the tax credits sit kind of in the middle of your equity and senior financing, although if you borrow against the credit the credit it must be collateralized properly.

So how does payment work on a Canadian film tax credit financing for your Ontario and BC productions? Payments are great, generally there are none! That is to say that your advance on the tax credit - typically anywhere from 50-70% (sometimes more) is simply netted against your final cheque from the government, less the financing costs. Almost always no additional collateral is required, although the promise to pay of your Special Purpose Vehicle for the project is of course required.

Use Canadian film tax credit financing to enhance your overall profit potential on your project - don't give up additional equity or future profits you don't need to. Speak to a trusted, credible and experienced Canadian business financing adviser who can steer you through the film tax credit funding process, quickly, efficiently, adding profit potential to your venture.

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Stan Prokop is founder 7 Park Avenue Financial ; see

http://www.7parkavenuefinancial.com

Originating financing for Canadian companies,specializing: working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies . For info / free consultation on Canadian business financing / contact details see:

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

Pitfalls And Solutions When You Finance A Franchise With Franchise Financing Companies In Canada

When you want to finance a franchise in Canada the type of financing companies you work with and how you address your new business acquisition as an entrepreneur is as important we think as the time and research you spent on choosing your new business.

Let’s examine how you can make it much easier process from a viewpoint of time, cost, and ultimate success.

Is franchise financing in Canada viewed as an excepted and positive method of acquiring a business. The facts certainly point to that. The Canadian franchise association has hundreds of franchisor members, and most financial institutions that participate in franchise finance advertise aggressively on their support of this type of Canadian business financing.

Once you have made that decision and chosen your franchise type you want to be in a position to spend the minimum amount of time in securing financing for your business, while at the same time doing it right. That’s when you need to understand the basics of a complete package that will virtually guarantee you success and full approval for the funding you need.

Are there some pitfalls along the way? There sure can be. Time and time again we meet with clients who either have little or no experience in the business they are getting into, and coupled with that, don’t have any financial support or cushion that allows them to properly finance a franchise without full depleting their personal financial resources.

We all read about companies that fail because they have too much debt and are unable to meet loan obligations - that’s the pitfall you want to avoid in franchise finance. The reality is, and this is a surprise to many clients... that you dont want to borrow 100% of the funds you need, but at the same time you dont want to cash in your RRSP savings or fully mortgage your house either. The optimal blend of debt and equity in your franchise tends to be 2 or 3: 1. By that we simply mean that for every dollar you put into your new business you should plan to have only 2 or 3 dollars of debt. And quite frankly that applies to most businesses in corporate life.

You absolutely need a business plan for your franchise, as franchise financing companies and banks want to ensure that you have properly thought out how the business will generate sales, and hopefully profits.

The pitfall we see many times in client plans is that their plan is very marketing oriented, and in reality all the lender wants to see is some financial logic that will demonstrate how the franchise loan will be repaid .

Lenders call that debt service, and you want to be able to demonstrate that you will have cash flow coverage that allows you to both run the business and repay your franchise loan.

If you want a one stop solution for the majority of franchises in Canada, from a finance perspective it’s a customized loan called the BIL/CSBF program. It's underwritten by the government, has fabulous rates, terms and structures, and provides you in most cases with the majority of financing you need. Reasonable personal credit history is a requisite for this type of financing. Some private independent firms also offer franchise solutions when it comes to financing, including leasing of equipment.

Speak to a trusted, credible and experienced Canadian business financing advisor on what solutions you can effectively and properly implement to achieve financing success.

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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 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Benefit of IT Technology Financing From a Laptop To Your Server Farm !

The greatest obstacle you have in realizing IT technology financing benefits its balancing your largest obstacles to innovation - cost and obsolescence.

From one laptop to your server farm and cloud computing its a constant risk and challenge to balance the investments you make in technology and computer against your cash outflows and the need to constantly upgrade to stay completive .

Many traditional financing options are available to meet your tech finance needs, but where we think you really attain maximum benefits with lowest risk is in highly specialized areas such as off balance sheet financing and residual risk partnering and sharing.

Should you be financing your technology or buying it. The age old adage in equipment financing, whether it be technology IT financing or plant equipment leases is that if it appreciates, buy it, if it depreciates, lease it!

We can categorically assure you that the largest, smartest, most cash rich, and successful companies utilize the benefits of lease finance, whether it’s one laptop, a fleet of laptops, or a server farm upgrade. (A server farm is simply a group of computers in a data center that run your business data - for reasons of balance usage, scale and security).

The most sophisticated approach to technology IT financing in the past has been the use of off balance sheet leases - these still are a very cost effective way of running your tech finance programs. The challenge is working with the right partner that allows you fairly, and seamlessly, to invoke your three rights as a lessee under this lease. Those rights are the ability to purchase when you want, upgrade, or return. Extending also plays into those rights - for example - you enter into a 36 mo fmv lease with the option of returning, but you need to use the equipment 5 more months, perhaps for a special project, or to run a new system in parallel, etc .

Fortunately, or unfortunately, depending on what side of the fence you are on a lot of the pure tax and accounting treatment historically recognized by FMV type finance are going away with new internationally accepted accountant standards changes . However, let’s be clear on this - your ability to secure lower payments, plus invoke your 3 rights under the benefits of IT operating lease financing still favor you, the lessee.

Speak to a trusted, credible, and experienced Canadian business financing advisor in the area of IT financing - whether it’s your server farm, 1 laptop, or 2000 laptops your financial decisions make save or impact you by thousands of dollars.



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Stan Prokop is founder 7 Park Avenue Financial ; Originating financing for Canadian companies,specializing: working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies . For info / free consultation on Canadian business financing / contact details see:

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