Canadian Business Capital – Bank Business Lines of Credit & Alternatives

Business Capital. Easier said than done, right? Let's examine how bank and other secured lenders offer business lines of credit - More importantly, we're going to bet a dollar ( we're conservative by nature!) that you might not be aware of some other options and alternatives for business line of credit financing !

Business operating lines are used to finance your investments. Your investments in receivables, inventory, and other current asset accounts of course. Canadian banks willingly offer these credit facilities (no seriously, they do) but the quality of the collateral they take is critical to that offering!

So how do the Canadian banks structure that facility in order to be made whole and feel comfortable in providing you with that business line of credit that is so badly needed for working capital and cash flow financing. For a starter, they take a first charge on the actual assets that are used to margin the facility - those current assets are accounts receivable, inventory ( raw materials, work in process and finished goods ) , all secured via a common security agreement which is typically referred to as a GSA ( General Security Agreement ) . You'll of course be surprised at how un - general and very specific this agreement is!

So once you have a bank operating line of credit how long does it last for. In our experience these facilities are renewed on an annual basis - with the two criteria for renewal being your business financials of course, as well as how the account has operated over the past year.

How are limits established for bank business lines of credit in Canada? Typical ' ratios '' or ' margining ' as we have called it are 75% of accounts receivable under 90 days, and some per cent age of inventory. It's only our opinion, but Canadian chartered banks really struggle with the inventory component of your business lines of credit - most typically because they can’t be expected to have experience on the value and disposal of all types of inventory. So typically you are very luck if you can get anywhere from 10-50% inventory financing on the value of your inventory.

Do your customers ever find out about how you are arranging business capital? Not really, the security is registered at a central registry, but clients and suppliers are never notified unless, of course, your loan is called.

Naturally many firms do also require long term financing commitments for business capital assets - i.e. those ' fixed assets' on our balance sheet . Typical bank term loans in Canada range from 3-5 years, sometimes longer, and have strict repayment and cash flow coverage requirements

As many Canadian business owners know, often personal assets are also charged as extra collateral for business lines of credit in Canada. These include cash savings, home equity, cash surrender value of life insurance policies, etc.

So why do the majority of Canadian business owners and financial managers always try to get bank financing in place. In might just be force of habit, but we think two other factors play a role. They are the cost of bank financing in Canada (its low!) and, as importantly, their lack of knowledge of other financial options.

There are other financial options for business capital in Canada other than the banks? Yes, there are! Prudent owners and managers should investigate ever growing alternatives including asset based lending, confidential invoice financing, tax credit financing, and purchase order financing, and unsecured cash flow loans. How's that for alternatives!

To more closely explore traditional or alternative options in business capital in Canada consider talking to a trusted, credible and experienced Canadian business financing advisor, who can put you on the path of business lines of credit that make sense.




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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Business Finance Options Canada – Start Up & Commercial Loan Corporate Credit Facilities

It's not as bad as you think. No really, we're serious. We're talking about business finance options in Canada - all the way thru from start up to corporate credit commercial loan facilities.

It's not uncommon for clients to know what or how much they need for their Canadian business financing needs. What their challenge usually concerns knows what their financing choices are, what the various benefits are, and most importantly, how to go about securing that financing. Let’s review!

When you think about it we are talking essentially about sources of funds - and that comes from either borrowing facilities of personal or corporate equity. We're not going to focus too much today on personal resources - typically those are collateral home mortgages, credit cards, and the proverbial friends and family. We'll let you address those yourselves - instead let’s focus on corporate borrowing, whether you are a start up or an established business.

So what are the key essentials in corporate credit facilities? They are supplier credit (most business owners don’t unfortunately consider that as a source of financing, but it is, working capital financing, and loans form banks and the government. (The Canadian SBL loan program goes to 350k and we firmly believe its one of the best facilities available to small and medium sizes business in Canada).

When you think about it no one financing solution will rarely cover off everything you need. In reality it’s a combination of borrowing structures that will allow you achieve all the working or long term corporate credit and capital you need. For example, the majority of equipment in Canada is finance via equipment leasing and financing - which in the 2011 environment enjoys a very robust popularity.

However, lease equipment financing is long term capital, matched against the useful life of the asset - in many cases you are instead looking for operating capital, the ever required ' cash flow ' that is the life blood of your company . That capital is sourced via a bank operating line of credit, a working capital facility via a non bank lender, or a major asset based lending facility that comprises receivables, inventory and fixed assets.

One of the most popular and growing methods of financing today is termed ' factoring ‘. Other names it goes by are receivable finance, invoice discounting, and our favorite C I D, which stands for confidential invoice discounting. This type of financing gives you all the working capital and cash flow you need, hence its popularity, but is more expensive than traditional corporate credit facilities via a bank. It's a very misunderstood form of finance; essentially it’s the sale of your receivables as you generate revenue.

Our afore mentioned C I D facility is a factoring or invoice discounting facility that doesn’t force you to tell your customers that you are financing your firm thru this type of arrangement .

In summary, the type of capital and the amount of business finance you require depends on which stage or cycle your business is in , either start up or advanced and mature .

You can best understand the type of financing you need by ensuring you have a solid handle of your operating expenses and capital costs requirements. Cash flow projections and a list of potential other collateral are always helpful... allowing you to feel confident that you can appro0ach external financing successful.

Consider speaking to a trusted, credible and experienced Canadian business financing advisor on funding you need today and for the future.




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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Revealed ! How Funding Of A Franchise Purchase Works In Canada – Franchise Financing Lenders & Your Loan

We're never ones to be negative, so all we can say is that you can look at it as a problem, or an opportunity. We're talking about how franchise financing lenders work in Canada. Unless we're missing something, you've just made the decision to purchase a franchise in Canada - so how exactly does the approval and funding of that loan work? We're going to clarify that for you, right about now..!

The positive aspect of our information is simply the fact that franchising is ' hot ' again. Of course it’s always been around, and the actual stats on how much of the industry plays an important part in the overall economy is surprising to most. But when world fell to its knees, financially speaking, in the 2008-2009 global recession (and boy did that include Canada) many industries felt the pain, as did franchises. Well, the good news is that's over.

Clients always seem a bit overwhelmed with all the different aspects of putting together their total plan for their new franchise business. That includes choosing the business that matches your skills and investment, picking a location, finding employees, etc. But the biggest challenge seems to be the financing of that purchase via a franchise loan.

So is traditional bank financing available for a pure franchise loan. We're not 100% sure we can give you a ' yes ' on that one, but don’t despair as you will soon see. We suppose if you have pristine credit, a high net worth, strong outside collateral and guarantors, etc you could facilitate a term loan to purchase your business. That unfortunately is not he profile of many of the clients we meet that are looking for loan funding.

So what are those options then? In reality the specialty finance firms that focus on providing only franchise finance are a very small number in Canada. There are more of them in the U.S., but that’s not our turf! The specialty firms that provide the financing for the industry in Canada focus on the large well know brands that have lots of franchise units, strong franchisor financials, etc. That is only of course a small percentage of the total industry.

So whats the solution then if you're in the other majority, the hundreds or thousands of entrepreneurs who still require some major financing assistance. The answer is the Canadian BIL/CSBF program. It’s a customized federal program for businesses in Canada, with a loan funding cap of $350,000.00.

This program allows a Canadian bank to be your new franchise funding partner - mostly because the loan is guaranteed by the government so there is only nominal risk to the bank. Would the bank lend you those funds outside the program? As we said, maybe... but we're sketpical.

So if you are a new entrepreneur with a reasonable record of business success and experience how exactly do you proceed to qualify for your franchise loan purchase financing?

We going to break that down into a few key areas - they are focusing on the size of your investment, determining your own equity or deposit into the transaction, and then focusing on key fundamentals required for a loan approval.

Key elements to focus on are ensuring you can prove you have a reasonable credit history. Prepare a business plan, or have a plan prepared for you , that focuses on you, the franchisor, the financial potential of your business , one that demonstrates you're ready to run a business, and , oh yes, repay that loan .

Typical investments by yourself in the new business range from 25-40%... and as far as that credit rating goes you should have a credit bureau score of 650+.

Is there one secret to getting a final approval? We think it’s a bit more complicated than that, but not as troubling as you might think. Focus on a business plan, presenting yourself properly during the proposal process. We point out to clients that every new business, small and large actually goes through these same processes.

We recently came across a statement that maintains the four ' P’’s of franchise success are people, purpose, payment and protection. In summary, a good business candidate, a good franchise pick, ability to show you will be successful, and a back up plan if things don’t work out - example: spouses outside income.

So can we summarize? Franchising is popular again today... the best franchise financing lenders are specialized firms as well as the ever popular BIL/CSBF loan. Be prepared, and if you need assistance, consider seeking a trusted, credible and experienced Canadian business financing advisor who can fast track you to loan funding success for your new business.




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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/franchise_financing_lenders_funding_loan_purchase.html

ABL Asset Based Financing - #2 But Trying Harder In Canadian Business Lending!

Is it really that bad to be #2 in anything? In business and in particular business lending it could actually be an advantage sometimes don't you think? With apologies to Vince Lombardi (... 'winning is the only thing ...’) we're talking specifically about ABL asset based financing.

While even we admit ABL lending might be # 2 today behind Canadian chartered bank commercial financing there is no doubt that asset based financing, or abl commercial lending facilities are fast becoming the financing mechanism of choice for thousands of Canadian businesses . Let's examine why ABL trys harder!

Revolving commercial credit lines via asset finance are essentially secured credit lines collateralized by your assets. Could it be any more simple? You use the ' value ' of your working capital assets to generate borrowing capability on a daily basis. By the way, in some cases your fixed assets can be part of that daily borrowing equation also!

Let's come back to that word ' value’ re those assets. That is the true power of asset finance and probably why ABL business lending is so fast growing in popularity. As compared to a bank facility which relies heavily on many other formulas and ratios to determine your borrowing base on a monthly basis ABL finance focuses solely on the maximum amount of real true liquidity in your receivables, inventory, etc .

The hard truth is that ABL lenders actually want you to borrow to the maximum of your facility, because as independent finance firms their only source of income is the finance charges on your facility. It is as simple as that. While Canadian chartered banks (we still love them by the way!) can be on occasion criticized for fluctuating on where they stand on commercial borrowing in a number of industries ABL business lending tends to always be there, in good times and bad.

And speaking of those good times , the risk profile that ABL lenders look at is clearly all over the map - by that we simply mean that your company can be doing great and in ' hyper growth' mode, or you can actually be seriously challenged financially and still be a prime candidate for ABL finance.

In business it's as much about the people, and in asset based lending the management of these firms are typically ultra experienced in asset valuation of your receivables, industry, and your industry as a whole .That is partially why we have seen numerous cases where a commercial credit facility has been tripled when it converted to an ABL facility from a bank facility.

And here’s a little secret about ABL finance in Canada , some of the chartered banks actually have small boutique ABL divisions within the bank that compete with regular commercial divisions within that same entity . How ironic!

So getting back to our # 2 and trying harder scenario, why does this form of business lending seem to work better. It's just that your assets are converted into a higher level of borrowing for liquidity and working capital. Typical rations for this type of facility are 90% of your A/R and 40-50%, or more of your inventory and fixed assets. Now that’s a true borrowing base!

We'll never know why, but the cost of asset based credit lines is always a top of mind priority for our clients understanding of this method of finance. To be honest, the range of cost in asset based financing is wide.

Facilities are available at even better rates than your chartered bank, but in many cases they are equal to or more costly. But don’t forget that it’s about access to capital, not borrowing cost, since you can take that capital and convert it to more sales and profits. It's all about leveraging your assets for growth!

For your higher borrowing power you attain with this type of business lending you must have the ability to report on your assets, so regular financials and constant updating of inventory and A/R is an essential requirement. The collateral for ABL lenders is those assets, not ratios and covenants!

So, in summary, ABL is clearly #2 today in asset finance. Will it be number one, we're not sure we know or care care !... but we are sure that if Canadian business owners and financial managers check out this form of commercial financing they will clearly see the financial benefits of more liquidity and working capital .



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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

How To Finance Working Capital – Imagine Your Canadian Company had the Credit & Financing It Needed

It almost seems like a pipe dream, does it not? Actually having the cash flow and financing you need. And yes, don’t take it personally; even the big guys have that same challenge. Let’s examine how your company can assess and address methods to finance working capital, accessing credit and financing in a manner that works.

A good way to look at things is both externally and internally. From the internal perspective it’s a question of knowing the amount of working capital you need - as well as managing your day to day current assets (primarily A/R and inventory) in a way which optimizes cash flow.

And from the external perspective it’s about assessing solutions, but more importantly, solutions that work. It's those inflows and outflows that count. Probably the simple way to look at it is simply knowing your operating costs, while at the same time collecting sales, i.e. your A/R, efficiently as possible.

When clients tell us they have made mistakes in their decision to finance working capital we can almost guess what happened. They have mis-matched funds, meaning that cash flow and working capital from operations may in fact have been used to pay for fixed assets.

It's easier said than done, but the ' normal ' way to finance your business is short term lines of credit, typically through your bank. But credit and financing is difficult for small and medium sized firms that can’t meet all the criteria required by a chartered bank.

One solid option is injecting what we can call permanent working capital into the business. In effect it’s a cash flow loan, payable in fixed monthly installments. This type of transaction is typically available through Canada's government owned business bank, and you have to have a solid proof of historical cash flow to show you can repay the term loan, which is typically unsecured!

We spoke of matching funds, properly. That’s important. So if you are considering asset purchases utilize lease financing, minimizing your cash outflow of course, and allowing your company to structure a long term lease payment that matches the useful life of the asset you're purchasing.

Smaller and medium sized business, mostly smaller, tend to mix the personal finances of the owner with the business. That has positive and negative effects. In the last few years the merchant cash advance loan has become popular for many smaller businesses, retail in particular. It allows you to monetize, or ' cash flow ' today, future sales.

When address the need to finance working capital it’s recommended you have a handle on the assessment tools. It's not as complicated as you might think. Calculate your days sales outstanding, as well as a similar calculation for inventory. Those two calcs will show the total time it takes for a dollar to flow through your company. You have to bridge that gap now with cash flow financing.

General rules of thumb indicated that you need to have 2 dollars of receivables and inventory for one dollar of payables. That’s never been our favorite calculation because it simply reflects the build up of those current assets. We're more concerned about turnover,

So how do Canadian firms assess working capital solutions? In many cases it all comes down to two issues, the size of your cash flow need, and your firms overall credit quality. Simply speaking larger firms with solid financials can access bank credit.

Smaller and medium size firms have numerous options, some are short term in nature, and many times they come with a higher cost, but, and its a big but , it allows you generate all the cash flow you need to grow your business .

So what are those solutions? They are receivable financing, inventory financing, purchase order financing, tax credit financing, and asset based lending. Some, or a combination of these solutions will allow you to finance working capital properly and access credit you need to grow and profit.

Speak to a trusted, credible and experienced Canadian business financing advisor on how these solutions work, what they cost, and how they can, either singularly, or grouped, solved the Canadian working capital and credit enigma.



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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/finance_working_capital_company_credit_financing.html

Canadian Business Financing Challenges ? Let The Expert Lease Of Equpment Lending Be Your Guide!

No one said it was easy, that’s for sure. We're talking about the challenges Canadian business owners and financial managers face in business financing, specifically asset acquisition. So why does 80% of Canadian business utilize the lease of equipment as the solution to that challenge? Let’s look at equipment financing and lending as your stop gap to acquiring those new (or used) assets.

When you make the investment decision to purchase any asset for your business the ability to put together a lease agreement to match the useful life of that asset becomes puzzling sometimes. What type of lease and term is best?

Probably the best advice we can give clients is simply to make a reasonable assumption on the useful life of the asset and match the lease term to that same assumption. The quick example is of course not to use a 7 year lease to own scenario if you are financing a computer system. (Unless you're buying your computers at a better place than ours, we don’t seem to have generated 7 years from our last system!).

The other part of that equation is simply two worlds, ownership, or use. By focusing on those two elements you now have the ability to choose either a capital lease (ownership at end), or an operating lease (return or upgrade at end of term).
And those same two lease decisions can yield cash flow benefits, as well as accounting and tax implications that will work best for your firm.

It's probably just us, but we sometime intuitively feel that 99% of client looking to lease make that decision to conserve working capital. The lease of equipment is simply the answer to the lending question you've been facing - ‘How can we acquire the most amount of asset for the smallest amount of cash?".

The variety of assets in asset lending and leasing finance is endless. From a small photocopier of lap top to a major piece of production equipment on your shop floor, they all can be financed.

It's not unusual to view client thoughts on the lease of equipment as simply short term or temporary. But what is the shortest term you can lease an asset for? In the Canadian environment that term tends to be 2 years. Why 24 months. The honest answer is simply that it’s not really economical or profitable in the lending environment to lease an asset for a period less than two years. So now you know!

Many clients further enhance a shorter lease term by choosing an operating lease - recall that it is our lease to ' use ' strategy, which works best with assets not ultimately required by your firm, or those that have a lot of technological obsolescence attached to them. There are some accounting rules that need to be met when you are trying to achieve a pure operating lease, so it’s often best to talk to your accountant when structuring such a transaction.

At the end of the day the lease of equipment as your business financing strategy has to make sense from an overall viewpoint of rate, term and structure. Your firms own credit worthiness already determines your rate- you just have to ensure the lessor has the same opinion on credit worthiness as do you! And we’ve given you the ammunition on how to focus on term and type of lease already, so you're set.

So is equipment leasing the ' holy grail ' of business financing in Canada. We're not saying that. but, remember, 80% of all business is doing it, so that has to mean something. For expert advice, guidance and solutions on business financing via equipment lending consider speaking to a trusted, credible and experienced Canadian business financing advisor who can provide you with guidance for a proper asset finance solution.





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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/lease_of_equipment_business_financing_lending.html

Canadian AR (A/R) Finance Exposed – How Receivables Factoring Companies Invoice Finance

Laid open to view. That's a solid definition for ' exposed '. It almost sounds like a steamy spy novel..! Well... perhaps not as exciting as that... but lets take the covers off A/R finance in Canada. How does receivables factoring and invoice finance work and another thing... didn't we hear it was expensive..?????

It's our observations that usually after Canadian business owners and financial managers understand how ar ( a/r ) finance works that they immediately focus in on trying to understand how they can achieve the benefits of receivables factoring , while at the same time reducing the cost . In years gone by the perception of factoring was that it was akin to the same negative perception we give to unscrupulous car dealers.

Bottom line? Things have changed, and invoice financing is powering, yes we say powering! thousands of companies all across Canada.

So, back to pricing - we're going to expose some of the key fundamentals around this type of business financing. In the case of how you are charged its actually more simply than you think, the pricing of your transactions revolves around the total time it takes to collect your invoices, the actual size of your approved facility, and thirdly, an d in our opinion as important, who you choose as an invoice finance partner !

So what actually is the best pricing you can achieve in Canada from an ar finance strategy point of view? Well, let’s just say the spectrum is broad, with costs ranging from 5-6% per annum to 1-3% per month. Wow! Let's repeat that wow! That is clearly a huge range. So clients tend to ask where they fit into the pricing of their receivables factoring equation.

In Canada there are 2-3 tiers of firms which dominate invoice finance. They are a select group of U.S. and Canadian banks, some major independently owned Canadian and U.S. firms, and finally, hundreds of what ca be only termed as small ' mom and pop ' shops, providing facilities that might range in the 15-25k/month range .

Where does your firm fit. The truth around pricing is that once your firm has a volume of approx 250k per month you can start to achieve some significant invoice finance savings. Want to know another secret of the industry. It's simply that if lock into a facility for a year then you can actually achieve a price reduction, while open facilities tend to charge a bit more.

Our favorite and recommended type of facility is called C I D - It stands for confidential invoice discounting. What is it? It's simply a receivables factoring facility that allows you to bill and collect your own receivables. Your competitors might be using invoice finance but they are under the stringent control of their factor partner, who is intensely involved in the invoicing and notification to your customers of the financing you have arranged.

And, guess what, C I D financing, contrary to popular Rumour, is the same or less expensive that traditional U.S. and U.K. type factoring which have dominated the Canadian landscape for years,

AR Finance is at the end of the day a business financing facility that involves yourself and your partner firm. We recommend you deal with Canadian firms who understand the business landscape here and who ensure you have a facility that makes sense from a cost point of view. The right partner will also not ' nickel and dime ' you with respect to hidden fees, surcharges, etc. There isn’t a day when we don’t meet a client who ' thinks' he knows what they are paying for invoice financing, until, unfortunately, we expose the true pricing around his or her facility.

Want the real straight talk and goods on receivables factoring in Canada. Perhaps, just perhaps you might want to talk to an unbiased expert. Seek a trusted, credible and experienced Canadian business financing advisor, and get on the inside of the true benefits of receivables finance!





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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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