The ‘ 411 ‘ On Working Capital Finance In Canada - Cash Financing Loans And Solutions

You're a Canadian business owner or financial manager... you've just dialed ' 411' for info on working capital financing! What alternatives, types of loans and cash flow financing are available for your firm?

Let's discuss your question, with a focus on ' solutions ‘! Before getting to our answer let’s all agree it’s important to understand the question and subject. Our terms of reference are simple today - operating liquidity - it's the other half of working capital, balanced also by your fixed assets as part of your total equity structure.

But enough finance and accounting lingo... as a business owner you well know that you have have lots of sales, assets, and still be struggling everyday to meet your current obligations of payables, salaries and wages, lease and loan payments, etc. I

If you weren’t struggling you've solved your working capital and cash flow challenges, but we're assuming you haven’t, that’s why you're here.

If you have access to bank credit ( many small and medium size firms either don't , or don't have enough ) you r banker defines positive working capital finance as the difference between your cash , receivables, and inventory subtracted from your payables and other short term obligations .

But can a firm or business have negative working capital... actually yes. If you are a retail oriented business, or have very short credit terms and turn inventory and sales quickly you actually are winning, not losing. You have negative working capital but have won the cash flow game... essentially you collect quicker than you owe, so to speak.

We encounter many clients that have retail or service oriented businesses but still have cash flow challenges, mostly around growth. A unique new working capital loan solution called the Merchant Cash Advance small business loan is a great way to solve that cash flow financing challenge - so check it out.

What are the solutions to the management though of positive working capital - its a bit of a misnomer because when you think about it the more positive working capital you have ( i.e. inventory and receivables are growing ) the more cash strapped you are

The more common solution clients consider is simply ' bank credit ' - i.e. traditional financing. If you want to know if you qualify for bank financing for operating lines of credit financing you should ensure your firm is profitable, is perceived as stable and growing .. and your balance sheet ratios should be in order . Thousands of firms cant meet those fairly simply tests. Whats the solution?

If your cash conversion cycle (the time it takes a dollar to flow through your company) is high you need a working capital facility that finances both your inventory and A/R. For large firms an asset based line of credit is a working capital operating loan that makes total sense. The majority of these types of facilities are non bank in nature, and offered by specialized finance firms that specialize in cash flow solutions. Oh, and by the way, a lot of those ' bank requirements' we spoke of don’t apply when you consider an asset based line of credit - Why... simply because the focus is on your assets - inventory, receivables, and in some cases your ability to borrow against fixed assets.

The main offerings of Canadian working capital financing are asset based lines of credit, inventory and A/R working capital facilities, as well as receivable financing, augmented in some cases by purchase order or inventory financing. These solutions typically are outside of bank financing, come with a higher cost, but provide thousands of Canadian firms with all the financing they need to grow sales and profits . If utilized properly you have the ability to significantly reduce the costs associated with these types of financing.

So whats our bottom line advice on the information you asked for on working capital and solutions available in the Canadian marketplace. Simply that you need to understand your firms unique operating and cash flow requirements, you have to be able to have some sort of measurement on whether you are winning or losing (the cash conversion cycle formula works best - check it out) and finally you need to be able to seek out and work with a trusted, experienced and credible Canadian business financing advisor to keep you falling off the slippery slope of working capital financial pressures.


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_loans_cash_financing_finance.html

Commercial Mortgage Financing Canada

Commercial mortgage financing in Canada was exceedingly difficult to obtain based on the rates, terms, and structures that were sought for by Canadian business owners and financial managers. The 2008 and 2008 worldwide liquidity crisis clearly dampened commercial real estate lending in Canada.


Let’s focus on the commercial mortgage financing for Canadian firms who wish to either purchase property for new locations or expansion, or in some cases re financing current property based on existing company needs for working capital, etc.

Commercial mortgage financing in Canada is somewhat fragmented based on financing done in this sector of Canadian business. In our opinion current the best financing available for commercial first and second mortgages lies with a handful of select institutions who offer competitive rates and higher L T V. LTV is of course the acronym for loan to value, which specifies that per centage of financing your firm can obtain based on the value of the building / property .

When we meet with business owners to discuss why they are looking to either finance or re finance a facility the basic needs are as follows:

- Purchase a property that is currently leased
- Make significant improvements to a currently owned facility
- Re- finance a first mortgage that is coming due
- Acquire a commercial 2nd mortgage for additional working capital purposes


The general rule of thumb for Canadian commercial mortgages has been 65% Loan to value. As we discussed above that implies that if your are purchasing or re financing a one million dollar building you should be able to obtain financing in the amount of $650.000.00.

That obviously puts the onus on the borrower, your firm, to come up with a combination of equity and down payment that allows you to finalize the financing.

So is that the best deal that a Canadian firm can currently achieve in the 2010 financial environment? Absolutely not – there are a number of situations that allow your firm to get in some cases up to 90% and 100% financing on a building.

This is achieved primarily through government related programs that are generally not known to the average Canadian business owner or financial manager.

Our clients often ask us ‘how long will it take to put a commercial mortgage financing in place, and what is involved ‘. In our experience, with the full co operation of our customer it generally takes 30 -45 days. That of course necessitates planning in advance, especially if you are under some sort of deadline such as a renewal notice, etc.

We encourage Canadian business owners who are looking for commercial mortgage financing for a variety of purposes to ensure they have a clear and positive story in place. Our practice has been to sit down with a client, clearly reference the need and best solution, and we then put a clear package in place demonstrating the viability of the financing. That includes a combination of business and financial documents such as a summary of the business, the financials, and most importantly a cash flow analysis. We want to be able to clearly demonstrate that either the first, second, or both mortgages (if that is the solution required) can be repaid over time.

Commercial Mortgage Financing in Canada – challenging? Yes! Achievable ? Absolutely ! Work with a trusted , experienced and credible advisor who will allow you to achieve your goals and needs in this area of Canadian business financing .



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 - tel 905 829 2653

How To Work With The Best Canadian Leasing Companies In Business Financing and Financial Services ?

As a business owner you love informed choices. When you are looking for asset acquisition via equipment financing you need leasing companies and business financial services advice on the best way to achieve finance success - and that requires being informed on equipment leasing.

So whats the scoop on the current equipment finance situation in Canada? Most business owners know that the ability to achieve the business financing you need became extremely difficult over the last couple years. Leasing companies were affected just like others - in fact many companies disappeared, were bought up, and most importantly, lost critical sources of their own funding - the bottom line..? They were looking for financing just like you!

The good news. You may have even seen the commercials ' Leasing is back!’. Those commercial refer to auto leasing, we're talking today about fixed asset financing for your Canadian company - and that includes everything from machinery to technology to heavy equipment, software, office equipment, you name it .. Our last transaction was for school buses..!

So, if leasing companies are back, let's just ensure you have a solid understanding of the benefits of lease business financing and, more importantly, who you should be working with.

Asset Financial services via leasing is simple - its a ' loan ' in which your leasing company purchases the equipment for you ( or from you.. via n equipment lease back ) and then of course leases it back to you at a monthly rate for a specific period .

Is it appropriate for your firm? Thousands of companies utilize this form of business financing everyday, in fact stats show over 80%! Another great thing about the best leasing companies in Canada is simply their ability to finance any asset for firms of any size, including start up.

The best Canadian leasing companies tend to differentiate themselves by the customer market they tend to specialize in - In Canada the industry is dominated by captive finance companies ( firms which lease only their parent company products and services ) as well as segments devoted to small ticket, mid ticket and large ticket asset financing.

We have always felt that the best firms provide quick turnaround on approval that seems to be a key focus for many clients looking for quick approvals for their asset finance needs. So ensure you understand the approval process, which typically is just an application, and, if the size of the transaction requires, your firm’s financial statements which are revived for only purpose - ensuring you have the ability to pay back the lease!

Your best leasing companies in Canada will ensure you understand the cost of financing. That cost is a mystery to many business owners and a frustration to even more. Buts it's really quite simple, it’s the interest rate inherent in the lease, as well as any purchase options or obligations at the end of the lease, and finally, any misc costs or admin costs identified in your transaction.

So how do you find the best leasing companies in financial services in Canada? We recommend that you seek the help of at trusted, credible and experience Canadian business financing advisor in business financial services. That will allow you to get a competitive quote, as well as achieving the best structure to your deal . He or she has solid intimate knowledge of the equipment lease industry in Canada and therefore has the ability to generate savings based on overall rate, term and structure of your transaction.



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/leasing_companies_business_financial_services.html

Pick The Best Canadian Receivables Factoring and Financing ! Cost and Rates Of Invoice Finance

We encountered a great term the other day when it comes to business financing - the term was ' expansionary finance ‘. Is it just us or does this term seem to perfectly cover off factoring and receivables financing.

Often though three key issues come up when Canadian business owners and financial managers consider this type of financing. What are those 3 issues ?They are the total cost of this type of financing, the rates associated with this facility, and probably most importantly what type of firm offers the best facility to match your company's own specific needs .

Let's learn and cover off those issues, which will allow you to get more comfortable we think with this type of Canadian business financing.

So, why should you even be considering receivables factoring? Simply because it has become a common way for Canadian business to cash flow their accounts receivable and generate working capital based on your own policy of extending credit terms to your customers.

And, as most business owners know, sales does not equal cash flow and when business financing of your A/R is not available from your bank a logical place to turn to is to an independent finance firm that offers invoice financing.

But, what does this type of financing cost, and who offers it, and an even better question... ‘How do you pick the best factoring partner?

In Canada the financing and factoring of A/R varies widely. As a general rule we can say the cost is between 1-3% per month based on the size of the facility, your overall financial condition, and most importantly, whether you have sought out and picked the finance firm that best suits your needs.

Let’s clarify our comment on your overall financial condition. Receivable financing places much less emphasis on your firms overall financial health - in fact a huge amount of Canadian firms that utilize this type of financing are in stages of turn around, high growth, experiencing temporary financial losses, etc . So don’t despair that your firm isn’t eligible. But, as we said, your client base, the size of your A/R portfolio on a monthly basis and some other factors will dictate your overall pricing.

Frankly the best costs in factoring finance in Canada start to be achieved when your monthly financing capability for A/R is greater than 250k. Is there a ceiling on the amount of facility? Absolutely not, and facilities that go into the several millions of dollars on a monthly basis happen everyday in Canada.

Clients often ask our favorite most recommended type of facility. That’s a simple one - its called C I D - which stands for confidential invoice discounting, allowing you to be in total control of billing and collecting your own a/r without any notification to clients that comes with the U.S. and U.K.versions of a/r finance .

Remember also that when you are addressing the always top of the list issue with firms such as yourself, ' Cost ' that you need to factor in things you might never have thought about. They include your ability to grow your business and generate more profits simply because you now have the capital to do so, albeit at a higher cost. And couldn’t you offset some of the cost of factoring by taking discounts with your own suppliers (and improving relations with them along the way!), as well as purchasing more effectively with your new found working capital?


So , in summary , if you need a financing partner when you are considering a receivable management and financing solution seek out and speak to a trusted, credible and experienced Canadian business financing advisor who will ensure your cost and partnership with your factoring firm is focused on a mutually beneficial relationship for financing success .




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/factoring_receivables_invoice_rates_cost_financing.html

Don’t Fail to Investigate Canada Government Grants and Loans – The Small Business Loan Program Works!

If you are either a start up (pre revenue) firm or an established small or medium (we’ll define medium a bit later) sized company in Canada you should be investigating, and using the Government of Canada small business loan program.

Why? We will give you 4 reasons - Great terms, rates, structures and qualification criteria. Could you ask for anything better in Canadian business financing - we don’t think so and we have been a fan of the program now for years.

Many clients or callers requesting information on the program (the formal name is BIL / CSBF) often utilize the terms ' grants ' when requesting info on the program. The BIL /CSBF program is not a grant. It is a special business financing program sponsored by Industry Canada (those good folks in Ottawa ....). The program was developed by the government to assist the thousands of firms who might not qualify for what the finance folks call ' traditional financing ' - aka ' the bank!”.

We also promised you we would qualify the term ' medium sized firm ' when it comes to qualifying for the program .In the case of the Small Business loan program any firm under 5 Million dollars in either actual or projected revenue still qualifies for the program . Naturally your firm has to be privately owned, and be considered a ' for profit ' business. (We’re all ' for profit ‘!)

As we said, many customers call looking for ' grants ' - we're all for free grant money also - we are sure it exists out there somewhere, we just have never found it. Actually, let’s clarify that, two great programs, S R ED, and film tax credits are non repayable credits you can easily apply for if you qualify for either of those credits .Those two programs are a discussion for another day though.

Typical client questions always include - how much can we get or apply for??... What are the rates and terms? and whats the process involved ? Get ready for a short, simply and basic primer in all those three areas!

The Canada government small business loan has a maximum cap of 350,000.00 dollars. However, if you chose to use this financing for real estate you can actually receive 500k. We note that for many years the program had a cap of 250k and during the global recession (2008-2009) the government raised the limit on the program.

Many firms who are either new or have challenges might think the rates and structures are onerous under the program. Exactly the opposite... financing is at only 3% over prime, and from a term perspective you can go from 5 - 7 years, we typically structure 5 years as a reasonable term.

Penalties to pay back if you're successful - There are none!!

There isn’t a day when we don’t spend time advising clients on what can be financed under the program... that’s where a lot of mis information exists. The program only covers equipment, leaseholds and real estate. We would add that software is included in the equipment category.

So who is using the program - Almost 8000 businesses did in 2010 - so you can be sure that the program works and is robust.

The greatest challenge around the program in our opinion has been the confusion on where and how to apply. We've completed transactions in a week and then heard from clients that they have spent months floundering on their processes in this type of financing. Speaking to a trusted, credible and experienced Canadian business financing advisor in the area of government small business loans will get you on the fast track to some of the best financing available in Canada today.




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/canada_government_grants_loans_small_business_loan.html

Not Getting The Best Canadian Equipment Lease Interest Rates in Commercial Leasing ?

Looking for the best deal in town on Equipment lease rates in commercial leasing asset acquisition ? Our clients ' interest ‘in getting those best rates is always somewhat amusing to us. Why? Simply because the ability to understand how lease pricing is derived is not always clear to Canadian business owners and financial managers.

Lets examine some of the key factors that drive your final pricing and how you can have a very direct effect on the assets you finance and the price you pay - as always it seems to always come down to that ' monthly payment ' - so lets demystify that process .

First of all many business owners never take the time to look at their alternatives when it comes to equipment leasing of their fixed assets. Two key issues come into play here, one is simply they type of lease they enter into (there are two types - do you know which is which) and the second is understanding what the 5 (yes five!) components are of a very simple lease calculation.
Back to point # 1: When you are making that lease versus buy decision make sure you evaluate your alternatives.

The key alternative to lease finance is one in which you might consider a bank term loan, or alternatively purchasing the asset out of your operating cash flow based on existing credit lines that are in place. But quite frankly the reason you are reading this in the first place is that you have already decided that commercial equipment lease financing is in fact the best method of asset acquisition - at this point you just want a good deal . So we're assuming you have done your lease vs. buy analysis and are focused on our core subject today - a great lease rate and structure!

Getting back to those 5 key elements in lease financing pricing - what are they? They are simply as follows - the term of your lease, the interest rate being charged by the lessor, the value of your transaction, the future value of the lease, ( i.e. what happens at the last payment ) and out of that falls nicely # 5 - your monthly payment .

Many business owners, and are we say, financial managers don’t use a financial calculator. If you have access to that type of calculator you can simply input either your data, or assumptions on any of those 4 critical data points and out will pop the last piece of data that completes the commercial leasing pricing and structure.

Quick example - lets say you are leasing an asset for $100,000 - you want a 5 year lease, you think your lease interest rate should be about 8%, and you want to own the equipment at the end of the lease. Congratulations, you have just quantified 4 out of the 5 data points - Enter those into your lease calculator and you will see that the monthly payment is 2014$.

But wait, let’s say you can only afford 1500$ a month and you have done your analysis on the payback of the asset. Enter 1500$ into your lease calculator and it will show you that to achieve that lease payment the term must be 88 monthly, not 60 months .
Getting the point - its a simple one - understand that if you know the key elements of your lease inputs you can manipulate that info to achieve either the best rate, the best monthly payment, the optimal term of the lease, etc .

The type of analysis we have just done relates to a capital lease transaction - remember we spoke of two types of leases. If you want an operating lease (i.e. use, but not ownership of the asset) our data elements are just the same but you'll find that your overall interest rate on the amount financed will be much lower, because the lessor and you have opted to have the lease company own the asset.

Do we even have to mention that the key driver in the actual interest rate charged is very simply the overall credit quality of your firm when it comes to borrowing.

So what have we covered - simply that you have the ability to manipulate key lease elements to drive a final pricing and structure that works best for your firm. Is there a quicker way to ensure you have all the points covered - there is! Speak to a trusted, credible and experienced Canadian lease financing advisor who can ensure you the final deal is the best deal in commercial equipment leasing in Canada.



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_lease_rates_interest_commercial_leasing.html

Going It Alone In Canadian Franchise Loan Financing ? Business Franchising Loans

Don’t listen to them. Many will of course tell you it might be dangerous to ' go it alone ' when you are looking for franchising financing loans.

Can you actually get a business franchise loan without any outside help? Its certainly , possible , and we'll share some advice, tips, strategies and info around your potential do it yourself strategy - but we'll also demonstrate why some professional assistance along the way will ensure the success you are looking for in your franchise business acquisition .

There are of course some real potential pitfalls along the way on your road to franchising success. You want to be sure of course, to the extent that you can be, that your business will be profitable. But all business is of course a risk, whether it’s General Motors or your vision of your own service or restaurant business as an example. It is critical to make the most of the opportunities you have to examine profit potential. Those profits by the way are of course what pay back those franchise finance loans!

Along the way on your franchise journey you have numerous methods of determining financial success. A good start is looking closely at your franchisors prospectus and information, - even though that info might be for ' average ‘ franchisees it gives you a good sense of profit potential versus risk .

Don’t forget of course that your risk is that you are no only borrowing funds for the franchise but that your own personal equity injection into the business is a key part of the overall franchise financing package you will eventually come up with . So work to minimize the risk of franchise business failure.

Get your costs in order and understood. That’s some of the best advice we can provide. We advise clients to look at the total picture, which includes soft costs and hard costs, some of which can be financed, not all. Typically we recommend your owner equity be used to cover those ' soft costs' such as the franchise fee, etc.

Try also to match revenues with expenses - it might make perfect sense to lease some of those ' hard assets ' in the franchise to match the economic benefits you will receive from those assets with the useful economic life of the asset. Want a simple explanation of that? Example: If you're starting a restaurant and a large fridge or cooler is, say 75,000.00 doesn’t it make sense to finance that at say 2k per month on a lease as opposed to using valuable equity and working capital and paying cash. We think so. Wouldn’t you?

So how are franchises actually financing in Canada. We focus on a total package that might include a franchise term loan, a working capital loan, and the appropriate amount of external financing through a financial vehicle such as an equipment lease. Here's the big surprise in Canadian franchise loan financing - simply that the majority of franchises are financed with the government loan program called the BIL / CSBF program. By the way, it has incredible rates, terms, structures, and a limited personal guarantee. What more could you ask for.

So, in summary, is it possible to go it alone in Canadian business franchising financing? It is, but a better solution might be to work with a trusted, credible and experienced Canadian business finance advisor who will craft your package according to financial available and your particular situation and needs. Going it alone, but with a suitable partner when needed is a good thing sometimes!



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/franchise_loan_financing_franchising_business.html