Why Canadian ABL Finance & Asset Backed Financing Loans & Lending Are An Important Development

‘A significant consequence ‘. That’s one definition of ' Development '. We think it’s a perfect one for describing how ABL finance and asset back loans and financing are becoming the ' go to ' for business financing in Canada. Let's examine why.

Two key elements make abl financing a step above a traditional bank line of credit with a Canadian chartered bank. Those two elements are ' collateral' and ‘liquidity '. Let’s focus on that for a bit. All asset based lines of credit for business revolve around your asset base. The amount and quality of these assets will drive the ultimate amount of the credit facility you achieve under an asset backed financing.

Canadian business owners and financial manager know only too well that the focus from a traditional bank perspective is not as much on the assets as it is your overall financial picture, which includes the income statement and your ability to meet ratio’s and covenants that are bank designed to protect their lending to your firm. We understand that, and we respect that... it’s just that sometimes it doesnt work for our clients.

Your firm could be in various key stages when you consider ABL loans. You could be a start up, you could be enjoying (and suffering) through hyper growth... and you could be fixing historical financial challenges or suffering thru some sort of business crisis or challenge now. That kind of covers the gamut, don’t you think. Which is exactly why we offer up ABL lending to clients looking for the 21'st century alternative to a business line of credit.

So how is your overall facility determined? It could not be much more straight forward - you borrow, on a daily basis, against the ' true ' value of your assets -hence the word ' asset' in ABL (asset based lending). Those assets typically are your A/R, your various stages of inventory (raw materials, work in process, finished goods) and fixed assets and real estate if that makes sense for your firm. (Those assets must be owned and unencumbered of course).

ABL lending distinguishes itself from traditional bank financing in that the firms offering this type of financing tend to view themselves as experts in ‘asset ' valuation and liquidation . What does that mean to you? Simply that you have just leveraged up your borrowing capacity significantly.

We remember one client who was a wholesale to the dollar store industry who leveraged a 200k bank line into a 2 Million dollar borrowing facility. How? The asset based lending facility had the expertise there to view the true liquidation value of the inventory. Simple as that. As a challenge call your banker up and ask what the margining base is for dollar store inventory and keep us posted on that answer.

A common question from clients involve the long term viability of this type of financing for your firm .First of all there is the cost issue, and here’s where it gets a bit complicated , because ABL loans can be cheaper, the same as, or more expensive than a bank facility . (We’re assuming you can get a bank facility!)

Secondly the ABL industry makes no bones about the fact that it is often a bridge solution for a year or two, allowing you to migrate back to what you consider a ' traditional' financing structure. We point out to clients though that ABL is more often than not the ' new traditional '! Historically it was viewed as distressed or alternative funding, that is absolutely not the case these days, with some of the largest corporations in the world utilizing this type of financing in Canada.

We can’t overstate the flexibility around ABL financing and lending. It covers special issues, seasonality, over advances on what you actually qualify for, and comes at a cost commensurate with any firms overall credit quality. Interested? We hope so. Intrigued? No problem! Consider speaking to a trusted, credible and experienced Canadian business financing advisor on the merits, benefits of the new age of business finance in Canada - ABL 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/abl_finance_loans_financing_lending_backed.html

A Practical Cash Flow Loan ? What Type Of Working Capital Company Can Help Your Canadian Business

Practical - it refers to good judgment in action. That type of common sense definition is what Canadian business owners and financial managers seek everyday when they are faced with locating a cash flow loan or facility.

And it becomes a bit more complicated when they don’t necessarily know what type of working capital company is the optimal solution for their business needs .Lets shed some light on that subject with real world experience backing it up.

Naturally just the creation of additional sales revenue creates profit for your firm, but it’s clear to every business owner that is simply not enough, given the investment you then have made in current asset accounts such as receivables and inventory.

One Canadian solution available is the conversion of short term debt into long term debt via a working capital term loan. This creates a long term working capital component to your financial structure. Small and medium sizes firms can source this type of solution via a government related bank - larger firms can utilize mezzanine or subordinated debt type financing to accomplish the same goal... only from a larger perspective.

Not often thought of as a cash flow loan, but in reality it is the creation of a sale leaseback for assets your already own. You in effect sell the assets to a lessor or working capital company and create a similar cash flow loan along the lines of the term loan we had reference above. All these solutions achieve the same goal.

Probably the most popular method today of generating cash flow is the sale of receivables via a factoring or securitization type facility. The good news for Canadian business is that this type of financing is available for a 10k solution as well as a 10 Million dollar solution.

We seem to be continually explaining this type of solution to clients, and it’s frankly quite simple to understand. It’s your selling of your receivables as you generate them for cash flow... today. What makes it complicated, and we're not to proud of it we can assure you, is how the working capital company sometimes complicates things around how this whole process works, what it costs, and how it affects your company on a day to day basis.


When you exactly face the decision to go out and look for more working capital. Really it fundamentally comes down to three areas, starting a business, growing your business rapidly, and then simply financing those day to day activities because for some reason cash flow is failing you.

You have clear options in the Canadian business financing environment .Its a questions of knowing those alternatives and determining what is achievable based on your unique needs. Very typical fundamentals you should have under your belt are up to date financials, a strong sense of your cash flow needs (via a cash flow budget) and some ' education' on what facilities are available for a firm of your size and credit quality.

The premier working capital and cash flow loan solutions in Canada are as follows - receivable financing, a working capital facility that combines A/R and inventory, or a true asset based lending arrangement which replaces a bank facility but gives you higher borrowing margins. We of course also touched on the cash flow term loan earlier.

Three more esoteric ( but totally viable ) financing solutions for your business are purchase order financing, inventory loans, and financing your tax credits if you have access to them.

Complicated? It doesn’t have to be. Seek a trusted, credible an experienced Canadian business financing advisor who can assist in clarifying individual solutions to your practical business financing needs.



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/cash_flow_loan_working_capital_company_business.html

Where Will You End Up Without Canadian Film / Movie Tax Credits & Financing?

‘The Movie and Film Business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There's also a negative side."

The above quote has been attributed to quite famous U.S. journalist Hunter Thomson... it's in dispute apparently whether he made these comments on the music industry or film. Quite frankly though, we have made our point.

We recently saw a movie called "Made in Romania starring Jennifer Tilley ". The film has classic elements of a film tax credit scam gone awry in the worst way, from co production to poor planning, etc.

So that’s our trivia for today, what we really wanted to address was that Canadian Film and Movie tax credits, and their unique financeable features can save you from ending up somewhere along the lines of our analogies above .

Canada has made it very clear that it supports the film, TV, and emerging and fast growing digital animation industry by providing a solid finance tax credit mechanism that works. And you're already familiar with the strength and reputation of Canada’s government and banking policies, which are world renowned.

If you have a Canadian controlled private company (most producers of course set up a special purpose legal entity for each of their productions) you are eligible for tax credits, and have the further ability to monetize those tax credits for cash flow and working capital purposes. We would point out that it also includes co productions and various treaty arrangements throughout the world. (We’ll have to check if that includes Romania!)

So what do these film and movie tax credits include. Essentially when we're talking film and Television were referencing labour expenses ,production costs, and some really unique what we will call ' regional ' credits , which might actually drive where you choose to shoot principal photography, scene locations, etc .

Let’s provide a quick example, because we receive many calls from U.S. producers always quizzing us on some of the nuances of the system.
Let us assume you have chosen British Columbia as a location. The majority of the industry is driven to Vancouver of course, a major metro centre. But by filming outside Vancouver and additional 6% of tax credit becomes available. We suspect it’s because of the ability of your production to drive employment and spending in non city areas... but who are we to judge? Ours it to utilize!

The reality is that this is Canadian financing of utilization of tax credits requires some expert help, so your ability to align yourself with a Canadian film tax credit financing expert is valuable from a viewpoint of maximizing your claim .

How the tides have turned, because the majority of interactive media and film and TV principals in the industry are currently quite bullish according to polls conducted by one of the major accounting firms that specializes in this area. The ability to reach your audience through a variety of media increases everyday.



Financing of your claims can be a tremendous boost to your overall production budget from a cash flow perspective. You can finance your claims on completion, or utilize accrual type financing, providing cash flow during your spend.

Want to avoid a huge part of film, TV, and digital media budget financing stress. Speak to a trusted, credible and experienced Canadian film tax credit financing advisor. Maximize your credits, and by the way, here’s one more great quote about your industry. Let Canadian film and movie tax credits get you to the final destination -->



“Shooting a film is like taking a stagecoach ride in the old west. At first, you look forward to a nice trip. Later, you just hope to reach your destination.”
- Francois Truffaut



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/film_movie_tax_credits_financing_canadian.html

Hard To Believe – Lease Finance Tips for Operational Financing of Assets – A Financial Win!

Isn't it all really about growing your business? That is why lease finance, utilized properly becomes a solid competitive strategy for your Canadian business financing needs.

Whether it’s operating leases (some owners call them ' operational ‘) or lease to own capital leases your ability to match the financial solution to your asset acquisition needs can create a viable option to complete your financial strategy.

But solid insights into how Canadian equipment and lease finance works sure can help, as the market is fragmented and has numerous players , all promising you different things, and all trying to fit you into their ' box ' - which you might find won't fit once you're inside!

A frequent term utilized in lease financing is ' lifecycle '. Let's look at that in a number of ways. In its most common use it refers to two things - matching the financing you utilize to your useful asset life, and at the same time choosing the type of lease that works best for that particular asset, and your balance sheet.

Utilizing the right type of lease will end us satisfying owners of the firm, and its creditors, relative to new debt being acquired. We talked about those ' operational ' leases, more commonly called off balance sheet operating leases. They have the ability to eliminate additional debt on the balance sheet ( trust us its still there, just not on the balance sheet !) as well as keep your ratios intact if you're operating within bank guidelines around debt to equity, cash flow, etc.

Those operating leases tend to work really well when you are in a technological environment, a good example being computing and telecom.

Quick example - let's say you are doing a major computer upgrade and total cost of all hardware and software is $1,000,000.00. Getting back to our lifecycle comment you typically would finance this over 3 years (given the fast changes in technology). A capital lease at today’s competitive rates would typically generate a monthly payment obligation of approx $30,000.00 - and at the end of the lease term your firm is the ‘proud owner ' of 1 Million dollars of computer hardware and related items. We'll come back to the word 'proud '.

However, that same transaction, utilizing a lease financing operating (operational) strategy would yield a payment obligation of only $24,000.00.
And oh yes, would you really feel that 'proud' about owning a 3 year old computer system - we think not, that’s why that same operating lease can provide you with lifecycle management flexibility, allowing you to return, extend, upgrade, or purchase if you choose . It’s a right though, not an obligation, and that’s important.

All clients, whether we like it or not, focus on rates. Of course they are important, but we caution you that you can have the best rate and monthly payment in town and pay dearly for being in the wrong type of lease financing strategy with the wrong options available to your firm.

And do you want to know the true reality of ' rates ‘. It’s that you get to pick you own. Surprised? You shouldn’t be, because in effect your own credit quality actually drives your final rate - as it’s a competitive world out there. We can usually tell within minutes what a competitive rate band you might find yourself if, if you'll share some key financial disclosure on your firm.

Finally, industry knowledge. Is there a way you can navigate Canadian equipment financing waters successfully, in a manner that makes sense from a time and cost perspective. There are hundreds of lease finance firms, all have different criteria, some do large complex deals, some only small ticket deals and all have varying levels of financial disclosure required by your firm.

The solution? Seek a trusted, credible and experienced Canadian business financing advisor who is independent and focuses on financing the type of transaction you need at rates, terms, and structures that you deserve. Expertise and service that will be guaranteed.




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_finance_financial_financing_operational.html

At Last ! Solid Info On Canadian Accounts Receivables Loans & Financing – A Business Credit Alternative

Nothing is more important to a Canadian business owner or financial manager than being well informed - in business living in the past generally leads to failure in today’s competitive environment

So when it comes to business financing and credit knowing the advantages and costs of accounts receivables loans becomes valuable.

Many Canadian businesses still feel they are somewhat of a captive prisoner in the difficult business credit environment. While interests are low in Canada and the stock markets seem to be doing fairly ok its clear that access to business credit and financing is still very difficult.

It’s kind of like a slow thawing out, with the freezer of course being Canadian chartered banks. Many surveys suggest that a good percentage of Canadian business that applies for working capital and cash flow facilities do not get all of the financing they need, if in fact they are approved at all.

This forces you, the business owner or manager, to take a second look at what is available out there to keep your operating capital adequate. We're definitely not putting blame on the banks (we love Canadian banks) but could there be a better way for small and medium sized businesses to access credit...well we think so .

Isn’t the saying that ' necessity is the mother of invention '? In our case independent finance firms, both U.S. owned and Canadian have stepped up to the bar, providing accounts receivable loans for your financing needs. We hasten to point out that the word ' loan ' is a misnomer here... our clients use the term also but we caution them that the good news is that these facilities arent loans, they are just the moneitzation of your largest current asset - your a/r.

Accounts receivables loans in Canada go by many different terms, some you have heard of, some you may not have. They include invoice discounting, factoring, receivable financing, and our favorite, confidential invoice discounting or factoring. In effect you are maximizing your cash flow from operations by monetizing your assets, i.e. the receivables.

Accounts receivable loans are your answer to being stuck in the middle - at one end of the spectrum is your investment in accounts receivables and providing terms to your own clients, while at the other end it’s a questions of not being able to access traditional business credit to finance that same investment.

So, do you know a good solution when you see one? Receivable financing would appear to be that solution. Turning your company into a cash flow machine via receivable finance is a solid strategy being adopted by thousands of Canadian firms.

The process is simple, as you generate sales invoices are immediately sold, i.e. converted into cash, at a discount. In Canada the rates of business factoring range widely - anywhere from 9% per annum to 1-3% per month.

Business owners accept this pricing when they realize they have decent gross margins to absorb this cost, while at the same time using the new found cash to take discounts with suppliers and sell more and generate more profits. In some cases 50-100%of the financing cost can be offset in the manner in which you use your new found cash flow.

Canadian business owners would prefer that their clients and suppliers didn’t know they were financing their A/R via accounts receivable loans. That’s whey they investigate C I D, confidential invoice discounting, allowing them to bill and collect their own receivables as they wish. (Traditional factoring via the U.S. and U.K. model requires your clients be notified.

In summary, thousands of firms in Canada are moving to this type of financing. Speak to a trusted, credible and experienced Canadian business financing advisor who can review costs, procedures and benefits, allowing you to win the cash flow and working capital battle!





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/accounts_receivable_loans_financing_credit.html

Don’t Hire A Business Advisor / Brokers For Your M And A And Capital Loan Needs In Canada

Never, we repeat, never hire or work with a Canadian business financing advisor for your loan or m&a needs , unless of course you know everything about business financing in Canada, have unlimited credible contacts, and have the time and resources to do it yourself .

Well, we think we have hopefully made our point that there will be many times when there will be significant value in not wasting internal resources and people time when you are looking for business financing. Who would ever want to be accused of making the mistake of trying to manage and execute on all your business financing needs without any professional help. No one we know, that’s for sure.

Over time, and trust us we don’t know why, we have come to dislike the word ' broker '. In reality we confess at the same time that we see everyone uses a mortgage, insurance or other type of broker to get a qualified, credible ' best deal '. So the middleman approach clearly has value to the consumer. Does it have value to a business? We think so, and here’s why.

Whether your business is in hyper growth mode, or at the opposite end of the spectrum, in financial distress surely you welcome the concept of an expert. You could be looking to complete an m&a transaction, or looking for loan and working capital facilities. Naturally there are many routine aspects of a business that do not require expert help, but when it comes to key issues around your businesses ultimate success are you 100% confident, on your own, all the time , that you have data , information, and possibilities covered. We doubt it, and we think you do also.

In effect you're looking for a ' business doctor' if we can call it that. And that’s probably not a bad analogy given the importance you might place on going to a good doctor for serious reasons.

There are always questions you have when you are considering Canadian business financing, and a good business advisor will answer those questions based on experience, at the same time pointing out alternative you may never have thought of.

But, and its a bit but , never assume that everyone out there who tells you they can assist in business financing, loan and working capital needs, or m&a help .. Knows of what they speak. The choice of a solid advisor can make or break your success in Canadian business financing for new or refinancing capital.

So what should you look for in a good advisor? We're pretty sure it’s intuitive, but we speak to so many clients who feel either burned or let down by past experience. So focus on some key areas such as the advisor number of years in practicing what they do. Do they have solid credible contacts?

References are of course also great, and with the internet you can Google anyone in business with a reputation and determine a lot about the quality and reputation and credibility of that firm or person. Remember, you're entrusting them with your financing in a very confidential way, and that's important.

Don't settle for generalists also, focus in on someone who can deliver on the specific financing you need, in areas such as m&a, working capital, asset based financing, franchising, or more esoteric new products such as confidential invoice discounting, purchase order financing, tax credit financing, etc.

You ultimately want to feel comfortable on sharing information with this person or firm, reviewing pitfalls, and most importantly, representing your firm in its business financing needs.

So, call them anything, but call them. A Canadian business financing advisor, a loan broker or intermediary, a capital broker, etc. Focus on trust, credibility and experience, not the name. And some free help from Mr. Google isn’t a bad thing also. Utilize special or expert help when you need it, that's our recommendation.




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_advisor_m_a_capital_brokers_loan.html

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