Looking For Asset Financing ? Does Your Firm Have What It Takes For A ABL Facility With An Asset Based Lender

You're on the hunt, and the prey is business financing under an asset financing scenario you have heard so much about. Let’s examine what an ABL facility is, who is the asset based lender that offers this financing, and, oh yes, do you qualify?

To say that business credit financing is top of mind these days with Canadian business owners and financial managers is clearly an understatement. With the economic clouds clearing on the horizon after the 2008-2009 business credit meltdown business owners are looking for growth financing.

And the reality is that the type of operating facilities that you are looking for are getting tougher to secure from Canada's major chartered banks. We are of course referring in general to firms that have some sort of challenge, because medium sized and large Canadian firms with great balance sheets, profits, and solid cash flows can access great credit terms from the banks.

Unfortunately that isn’t the client profile we're talking to everyday - as owners we meet have challenges such as inability to secure the operating cash they need, the requirement to acquire additional assets, or even a full acquisition of a competitor. And that economic turbulence we mentioned earlier usually means that many firms are coming out of a turnaround type environment and are slowly getting their financials back in order. Therefore the ability to secure an ABL facility (abl = asset based lending) for inventory and receivables becomes the goal in asset financing.

So what is the real difference in asset financing under and abl facility compared to a bank line of credit, commonly called a ' revolver ' in business finance. The best way we explain it to clients is that the bank focus is on cash flow, the asset based lender focuses on assets. Big difference!

So, does your firm qualify for abl financing? In general, as we stated, any firm with assets of receivables, inventory, equipment and real estate qualifies. Where the challenge comes in is deterring the overall quality of those assets as well as the size of the facility. An ABL facility is generally available for any firm with over 250k in a combination of receivables, inventory, and equipment. In certain cases even tax credit receivables can be financed.

Where you as a business owner have to focus is the choice of a partner in this type of financing. If your facility requirements are in the millions of dollars and you have high quality business assets (i.e. collectible receivables, inventory that turns) you can access significantly more credit than under a normal bank facility - at rates commensurate with bank financing.

Small firms pay a premium for this type of facility, but when you consider you can access almost all the business credit you need under such a line of credit, coupled with the ability to grow profits and revenues and take on additional orders... well , we'll let you decide if that’s worth a premium .

If you want to comfortably walk the business financing minefield in ABL and feel you aren't 100% conversant with the players, requirements, and pricing then consider seeking a trusted, credible and experienced Canadian business financing advisor in this area .

P.S. If you found your access to business credit has just doubled, don’t say we didn’t tell you!

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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/abl_facility_asset_based_lender_asset_financing.html

How To Review And Save Money on Commercial Equipment Financing and Business Leasing End Of Term Options

Billions of dollars of assets are financed via leases every year in Canada. Via the equipment financing and leasing industry. Lease financing is an absolute true method of commercial financing of your asset acquisitions.

What happens to these assets at the end of the lease, and how are some of the asset disposition and sales issues handled by your firm or the lessor? Let's examine some of the facts relative to the Canadian marketplace for equipment financing with a focus on saving you money.

Naturally a significant amount of time is spending at the inception of a leasing transaction in determining the new or used value of equipment to be leased. In cases where used equipment is being financed there is a need for appraisals and inspections, which are usually performed by independent third parties who have a strong sense and professional experience in valuing these assets.

In certain cases where a lessor has repossessed equipment and the asset is for sale then an appraisal is also a very valuable tool. It protects both the buyer and the seller. Many Canadian firms use business leasing to acquire used equipment when they feel the economic useful life of the asset will be valuable to their firm.

At the end of the lease, depending upon the structure and type of the lease, the business owner or financial manager must enter into negotiations to address the final disposition of the equipment.

We must remember that if your firm entered into what is known as an 'operating lease 'you have in fact opted to 'use' equipment, rather than 'own 'it. That of course infers equipment being returned to the lessor, or, per the terms of your contract, it can be purchased. Purchasing equipment at the end of a lease has significant implications for you around the value and use of that equipment. Naturally if you intend to simply return the equipment the lessor is chartered with disposing of that equipment.

We also note that it is a prudent business decision for Canadian business owners using commercial equipment financing to monitor the value of leased assets through the term of their lease, especially important as the lease approaches termination. As the lease approaches its end of term the lessor may also invoke its right to inspect the equipment, suggest return provisions, and, most importantly to the Canadian business owner, start to suggest the purchase price of the asset if in fact your firm wishes to keep the asset.

From the lessors perspective it wants of course to ensure a reasonable and proper value of the equipment. A major term in Canadian equipment financing and business leasing is a term called 'fair market value '. That term suggests that the asset under lease has a value to someone in the marketplace assuming there are a willing buyer and a willing seller.
The business owner or financial manager will want to look back at the asset and understand any upgrades or maintenance that was performed on the asset. Business owners are encouraged to look out into the marketplace and determine what current values are - the internet has become a fabulous asset to lenders and borrowers in assessing the true market value and availability of many asset types.

There are hundreds, perhaps thousands of used equipment dealers, brokers, and remarketers who can provide solid input into the value of the asset. Naturally contact several sources rather than one is a prudent action for both the lessor and the Canadian business owner.

As information is gathered the true value of the asset will emerge.

In summary, as a general rule it is incumbent on the lessor or finance firm to ensure proper diligence and procedures around assets coming off lease. The lender want to ensure they are made whole on the transaction, as leases are a combination of interest charged and asset realization at tend of term.

For the Canadian business owner proper care, maintenance, and on going valuation of the leased assets is a valuable investment in time and cost. This investment becomes more important as the business owner evaluates disposition options at the end of term. Speak to a trusted, credible and experienced Canadian business financing advisor in leasing to ensure you understand the mechanics of end of lease options - it could save you thousands of dollars.

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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/equipment_financing_leasing_commercial_business.html

Working Capital Finance Loan Advice – What Business Credit Is Available For Your Firm

Have you checked the patient recently for oxygen and blood status? We're talking of course about your business, i.e. working capital finance which is a true key measure of business credit health. Does a working capital loan need seem like a necessity as your business grows? Let's examine the why and more importantly the ' how ' of cash flow financing in Canada.

It is not hard to determine why there is such a focus on working capital finance in Canadian business - its simply because your ability to both manage, and access cash flow alternatives become the ultimate measure of short term financial health . We say short term because your overall capital structure and debt / equity relationship are of course the other piece of the business finance puzzle. Today we're focusing on short term health!

You know you are in good shape from a business cash flow perspective when you are in a position to meet your short term obligations - typically those are payables and any loan payments becoming due on a monthly basis within the year. If your cash on hand, receivables and inventory turnover are unable to meet those obligations consistently ... well ... its clear you need a working capital solution.

The reality of course is that cash flow fluctuates, and there are times when you have what is known to bankers as a bulge requirement - it is those times you need that access to working capital we spoke of.

So how do you determine what type of business credit financing you need, and, as importantly, how much. Sophisticated larger firms use the capital budgeting process to determine asset needs and why type of investment is required. It’s essentially the mix in the financing of your company - i.e. owner equity, debt, and financing of current assets, which is our focus - ' working capital'!

The good news about working capital finance is that if it is done properly it doesn’t incur debt, or reduce your owner equity - it just increases cash flow and business credit access. To some extent the term ' loan ' in working capital actually reflects a line of credit scenario, not taking more debt on to your balance sheet.

It is possible though in Canada to get a working capital term loan, for larger and medium size companies this is known as sub debt. Payments are fixed and in general the loan is unsecured and based on your cash flow ability to repay, both historically and projected.

If that is not the solution for your firm, what is then? The other solutions are a true bank operating facility, if, and sometimes that’s a big if, you meet bank criteria for lending. Other real world and more probable solutions for working capital finance business credit are asset based lines of credit, working capital facilities of a non bank nature around your inventory and receivables, or simple receivable financing via an invoice discounting facility.

In summary, working capital cash flow financing is not necessarily a ' loan ' per se, but there are options available for business credit financing in Canada. As we have shown you need to determine when you need that capital and why it’s important to have stand by facilities available. Speak to a trusted, credible and experienced Canadian business financing advisor on sourcing your proper working capital and cash flow needs.
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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/working_capital_finance_business_credit_loan.html

Where to Turn To For Equipment Leasing And Commercial Lease Finance In Canada

The leasing industry in Canada has historically been dominated by a number of different types of entities that provide equipment leasing and commercial lease finance to Canadian business.

The types of firms that are the key players in lease financing in Canada can be broken down into the following categories:

Life Insurance Companies

Credit Union leasing firms

Third party Independent Finance Companies - Canadian owner

Third party Independent Finance Companies - Subsidiaries of American firms

Captive Leasing Companies

Bank Leasing entities - Subsidiaries of divisions of Canadian banks

We would venture to say that probably 90% of Canadian business owners and financing managers think of ' Third Party Independent Finance Companies ' when they are looking to source lease financing for their equipment and capital expenditure needs.

Canadian chartered banks have moved in an out of the Canadian lease financing industry over the years. Currently only two the Big 6 Canadian banks have full fledged separate lease entities that actively market lease financing to their customers. In our opinion the reasons customers choose a bank lease financing entity are as follows;

Pricing

Existence of a Current Banking Relationship

Dollar size of transaction

Let's elaborate a bit on those points. Because banks are in the position of having the lowest cost of capital in Canada for business financing rates on bank leasing deals tend to be excellent. On average we would observe that rates on larger deals tend to be 3-4% over the Canadian prime rate. This is excellent pricing, as independent firms tend to price at 4 to 5 to 6% over the Canadian prime rate. That is on average of course because every customer's credit quality and situation is unique.

Business customers have bank lines and term loan arrangements with their bank. So it is a natural logical extension that they would discuss their needs with their banker, who may, or may not be able to offer a lease financing solution. We indicated that only two of Canada's chartered banks have full fledged lease entities. Some of the other banks have leasing division, which are much smaller and more specialized in size, and some banks choose to ' partner ' with third party independent finance firms that are both Canadian and U.S.owned.

We also referenced dollar size as a key factor in a customer choosing a banking lease arrangement. Banks in Canada have virtually unlimited capital, so they certainly can choose to finance any amount they choose. We say unlimited capital, that is a bit of an exaggeration but Canadian banks are currently viewed as some of the strongest in the world re their own credit ratings and capital ratios.

Banks are traditionally a bit slower to enter into the lease financing area, and banks use the function in some respects to develop new corporate banking relationships. In fact we have observed that in the 2009 and 2010 banking environment in Canada the bank lessor in fact attempt to develop a full corporate banking relationship with customers who approach them for lease financing needs.

Leasing is a good source of profit for the banks - the banks tend to make solid credit decisions on assets and corporate credit quality, and lease pricing provides some nice yields compare to some other parts of their business.

Some banks in Canada have, in the past, purchased some of the private independent Canadian lease companies that were getting large and successful or had a specialized market or geographical niche... Banks are often quick to sell portfolios and eliminate leasing divisions when they feel that market conditions suggest that.

In summary, the Canadian equipment leasing and commercial lease finance landscape is made up of a number of market participants. Banks play a key role, but not a dominant role in the industry. Lease financing via a bank is often a relationship driven arrangement with the business customer's current incumbent bank. Banks who participate in equipment leasing finance f have excellent rates but higher credit and asset requirements.

Business owners looking for the best rates, terms and structures are cautioned to source the assistance of an experienced, trusted, and credible Canadian business financing advisor to determine which leasing arrangement (bank or non-bank) is best for their needs.

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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/equipment_leasing_commercial_finance_lease.html

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