Back By Popular Demand ! Canadian Working Capital Cash Flow Financing And Loan Alternatives

‘Focus On Growth ‘- That was the heading in a June 2011 business article in one of Canada's two leading business newspapers. We try as often as we can to translate their interpretations of whats happening back to where we work every day, which is the real world!

So, working capital and cash flow financing, whether through a loan or other facilities. That’s our focus today. A key point made in the article focused on the fact that so many firms had cut costs or held back that they missed, or are missing major growth opportunities to grow both sales and profits . The focus of the Canadian business owner and financial manager was ' cash shortages ‘, said the article, thereby impacting growth.

‘Make better use of your cash ‘said the article, and encouraged you to maximize supplier credit, and at the same time work the other end of the spectrum, which is your own receivables policy.

A constant comment we hear from clients is that they not only don’t know ' the fix ' to a working capital and cash flow problem, they often actually don’t understand what the problem is or how to measure it. Let's look at some of those measurement tools, and more importantly, ' the fixes'!

As business owners ourselves we can relate to the fact that every time a business feels some sort of cash shortage you might feel your business is ' in trouble '.

Businesses finance working capital through the current asset accounts, namely receivables and inventory. In Canada those assets are financed either through a bank line of credit, or various types of working capital facilities that are more alternative in nature. They include asset based lines of credit, receivables financing facilities, and purchase order financing.

The latter three solutions tend to be more expensive for Canadian business, but in our experience provide you with much more cash flow and working capital. Important also to remember this type of solution is not a loan alternative, you are simply monetizing or cash flowing your assets, and that’s a good thing.

We spoke of ways to measure the strain you have on working capital. Business owners need to realize that only efficiently moving receivables and inventory can be financed. If you are financing through a bank then not only is your margining limited but you more often than not have a borrowing limit. That can really impact growth ability.

It’s also important for Canadian businesses to understand that access to more working capital shouldn’t make them lose their focus on losses and unprofitability.

Let's look at a quick example - let’s say a business has an operating line of credit of 1.2 Million as an example. The firm borrows to the maximum but then sales drop off significantly. Your bank reduces the credit line because your borrowing and margining power just is not there due to those slow sales. This then puts tremendous pressures on those supplier payables resulting in both loss of credibility with suppliers and operating losses due to those lower sales. It's a vicious circle.

The bottom line is of course that lack of working capital and cash flow financing can kill your business - short term losses aren’t great, but they are manageable. But insolvency due to real cash flow challenges is very real and deadly

And back to our article that we mentioned on growth. Small and medium sized business in Canada has the ability to access traditional credit, as well as numerous other ' growth' working capital alternatives. A loan or debt is typically not the answer to growth.

So investigate cash flow financing alternatives such as tax credit financing, working capital facilities that are non bank in nature and margin A/R and inventory, as well as more esoteric financing such as purchase order finance and specialized inventory finance. Want more info... seek a trusted, credible and experienced Canadian business financing advisor who can put you on track to ' growth ‘!


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/working_capital_cash_flow_loan_financing.html

Technology Leasing Companies -Canada – Inside Info On Computer & Software Finance

If cash Flow and capital were no object the acquiring of technology assets wouldn’t be as much of a challenge as one would think. Canadian business owners and financial managers like to be on ' the inside ' when it comes to knowledge and competitive information - it’s just natural.

So we want you to be on the ' inside ' when it comes to technology leasing and financing. What companies should you be working with when it comes to financing of telecom, computer and software assets. We want you to know some of the tricks (can we call them that) that the big boys use.

Technology leasing has some different economics when it comes to financing. Some very powerful trends are in play. Is the trend your friend ? We will let you decide!

Your financial commitment to acquiring these types of assets is generally large relative to your overall capital budget; these assets tend to depreciate rapidly, and prices seem to be going down all the time... so when should you purchase? Boy, those are some interesting dynamics!

At the same time the benefits you receive from the use of tech assets are huge, not the least of which is your competitive position in your industry. So let's talk about overcoming some of those tech challenges

Many business owners are not aware that you can finance ' software ', either on a stand alone basis, or in conjunction with a hardware solution. But there is a key differentiator here, which is that it is much easier to lease application software as opposed to software you have developed. But larger, credit worthy companies can in fact get financing for software development on a project by project basis.

One of the interesting ways that the lessor protects himself in these situations is to ensure they have access to and rights to the source code you are developing. How is that handled, usually via an escrow agent who maintains updated access to the source code , with the provision that should the lease default the lessor has access and rights to that source code .


Term. It's all about ' term ' when it comes to technology leasing of computer and software. Leasing companies in general prefer a 3 year term for tech assets. Does that make sense? We think it does... if only for the fact that the dramatic changes in hardware and applications render anything older than three years as somewhat obsolete when it comes to technological change. So the bottom line is to be prepared to defend your need for a 4 or 5 year lease term when it comes to a depreciating asset such as tech.

It should be no secret to Canadian business that technology leasing is secured by the lessor in the same manner as any other assets , a PPSA ( Personal Property Security ACT) registration is made against those leased assets; registering the lessor collateral in the hardware and software described in your equipment list and configuration .

If there is one ultra important thing you should consider when looking at companies that will assist you in technology leasing of computer, software, and telecom assets it’s probably the type of lease that you enter into. Broadly speaking in Canada
you need to only focus on two types of leases - capital and operating. Is there an easy way to immediately pick which one is the most applicable to your need? It's not as challenging as you think, think simply in terms of lease to own (that’s capital) and ' lease to use ' (that’s operating). Those two leases, capital and operating, dominate the Canadian marketplace.

Those big boys we referred to, major corporations tend to use operating leases for some sophisticated reasons such as balance sheet ratios, cash flow coverage covenants, return on equity goals, etc. If you are a small or medium sized business these same operating leases simply could provide you with two things, a lower monthly payment, and some great flexibility at the end of the lease term.

In summary, there are some major differences in dealing with technology leasing as opposed to other types of assets that might be in your budget. Many of the ' tricks' those larger corporations use are available to the small and medium size business owner. Understanding how these assets can be financed is important for any sized business. For extra expert help consider talking to a trusted, credible and experienced Canadian business financing and leasing advisor who can assist you in ensuring maximum benefits and flexibility.



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/technology_leasing_companies_computer_software.html

Paying Too Much For Canadian Accounts Receivables Factoring ? A/R Financing Pricing Revealed !

Over paying is never a good thing, so our clients who have adopted a business financing accounts receivables factoring strategy can , we think, be forgiven for trying to understand, and rationalize how pricing works in this type of financing .

Let's examine some key fundamentals on how factoring pricing is achieved in Canada, and how you can ensure you have received the best pricing. You have made the decision to accelerate your working capital and growth needs by embracing an A/R financing strategy.

Congratulations, as you've made the savvy decision to avoid taking on more debt, or necessitate the need to bring in extra equity or even, worst case, dilute your current ownership by having to bring in a partner or investor, etc.

When clients ask us the most basic questions, such as ' why should we consider business accounts receivables factoring financing we use a simple example that simply illustrates what the potential here is for this type of financing , ( Once you have rationalized the cost ). That example is that you have in effect turned your company into an automatic teller machine, creating unlimited working capital as your sales grow... Even the big boys wrestle with that one, so congrats!

And speaking of those big boys, clients are always surprised to hear that some of the largest corporations in Canada utilize this method of financing.

So back to our core subject of course, which is both understanding, controlling, and feeling you have been able to choose the most effective pricing for A/R financing.

Several issues come into play. In general when you utilize this type of financing your own firms general credit worthiness does not come into play, because it is your assets - i.e. the receivables! that are being financed. So our first point is simply size, in that you can do a factoring (aka invoice discounting facility) for 15k a month, or 15 Million a month. However, speaking in general terms small and medium sized firms in Canada have been paying between 1-3% on a 30 day basis for financing receivables in a ' traditional' type of facility. If you are paying anything more than that you in general do not have a competitive offer - so try and change that!

What do we mean by traditional? Simply that Canada was for many years slow to catch on to A/R financing strategies, so the industry is somewhat dominated by U.S. and British firms, even on our own soil. Their facilities are structured similarly all over the world, which is one of the reasons we have never favored them as ' optimal ' for Canadian firms. Our own preference on financing A/R is a system known as C I D, confidential invoice discounting, which allows you to bill and collect our own receivables, without any notification to your customers or your suppliers.

And when it comes to pricing mis information exists out there that this type of facility (C I D) costs more. It does not. We repeat, it does not.

Is it possible for the Canadian business owner and financial manager to wrestle down the basics of how accounts receivable factoring business financing is priced? It sure is. You only have to know three things, the advance rate, the actual discount or purchase fee, and the time in which the invoice will be paid.

We hasten to point out that you in effect have control over one of the three critical factors that affects A/R financing pricing. That’s the time to collect, since the less time the invoice is outstanding means your pricing just got better. Simple as that.

Percentage advance is a different story, its one of the factors you can't control, and it’s simply the amount the finance firm advances you on each invoice. In general 90% is a typical advance rate, meaning simply that you get on day one 90% of the invoice amount as instant cash flow - the other 10% is remitted to you when your customer pays.

Other ways you can both understand and affect pricing are by watching miscellaneous items that can add up. They include nominal amounts such as set up costs, wire transfer costs, admin charges, etc. Make sure to calculate them in your overall pricing, and negotiate hard, when you can to reduce these charges.

So whats the bottom line. Simply that the factoring firm, i.e. the lender, has only one goal, make larger returns on your receivables. By understanding how this pricing is achieved, negotiating on items that you can, and then monitoring your A/R aggressively... well we think you get the picture, you are in a postion to ensure you are not paying too much for this valuable financing.

Want some expert advice on this subject, that’s easy also, seek a trusted, credible and experienced Canadian business financing advisor who can assist you to ensure you have achieved best pricing available.

P.S. Congrats on your new ATM machine!





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_receivables_factoring_financing_business.html

Still Not Leasing For Business ? Commercial Equipment Financing In Canada (Small or Large ) Will Change Your Mind

We want to know. What would make you change your mind about a Canadian business financing strategy or policy that works for 80% of all companies in Canada? We’re talking about leasing for business... commercial equipment financing for small business or large corporations.

Lets explore some reasons and advantages by the way, that would allow you to discover or re discover equipment finance in the Canadian marketplace.

Traditionally it comes down to your money, or theirs. Your money is of course the equity or operating funds that you have in the company already. ‘Theirs ' is of course funds you borrow. When it comes to acquiring a commercial asset of any type, from photocopier, computers, plant equipment, or corporate jets it's going to always come down to that proverbial lease or buy situation.

However, like and business owner or financial manager you have criteria to fulfill when it comes down to that finance decision. And boy has commercial equipment financing in Canada changed over the years. It has become a viable finance tool providing competitive rates and structures to every size of firm in Canada, from a 1 person start up to firms the size of General Motors.

There are a number of fundamental reasons why leasing for business makes sense - one good one is simply that it becomes in effect a partnership with your lessor lease firm, who typically have a lot of expertise in asset acquisition and disposition. (Don’t forget that all leases have an end of term, and that’s where some sophisticated help on purchasing, refinancing, or disposing of the asset can really help.

But do the key tools that equipment financing provide you with always make sense for your firm. We are fairly sure they more often than not will, but let’s examine some of those key features and benefits.

Not the lease of which is of course the concept of 100% financing .Oh yes, on occasion this might mean a down payment or a security deposit, etc but in general you are being offered a commercial equipment financing mechanism that will take care of 100% of your asset acquisition. But that’s not it... many of what the industry calls soft costs can also be bundled into this same financing solution. Typically some of these costs are installation, shipment, consulting or training, etc.

We spoke of all types of assets that can be financed. Technological type assets are the ones that make the most sense to finance - we're talking items such as computers or telecom equipment, which tend to be larger in size, and also subject to technological obsolescence.

By budgeting your cash flow today at a fixed rate, and estimating the useful life of your asset you are creating a perfect hedge against the risk of assets depreciating, becoming obsolescent, etc. In effect you've created a transaction whereby you have effectively transferred the risk of asset deprecation to your lease firm.

Other key benefits of leasing for business include management of cash flow and working capital, and if you utilize an off balance sheet operating lease both payments can be lowered and flexibility enhanced.

So... have we changed your mind? We hope so; at least we're sure we have given you some ' food for thought ' on a commercial equipment financing philosophy that should make sense for your firm.
Want to know more in what can sometimes be a complex business asset financing acquisition? Seek and speak to a trusted, credible, and experienced Canadian business financing advisor who can give you peace of mind in business asset acquisition.

Business Line Of Credit & Commercial Loan Called ? Important Info On Special Loans Financing In Canada

It's not pretty. It’s actually a bit stressful also. We're talking about finding yourself in the position of requiring Special loans financing in Canada when your commercial loan or business line of credit has been called... typically by the bank.

Options .Yes! Strategies and solutions - a double yes! Let's examine some real world solutions around the difficult situation of both being in and emerging from a special loans environment.

Typically the assets that have been used to finance and qualify your for your business operating loan of credit and/ or commercial loan are receivables, inventory, misc working capital accounts, and equipment . These assets have of course been collateralized by the bank under both a demand loan and general security agreement.

When we meet with clients who are facing a special loans financing requirement they typically have been up for review and renewal of their credit facility and have been advised that the facility will not be renewed under the favorable terms they have been receiving. Moreover other severe ramifications emerge, most notably a demand letter to exit the bank by a certain date.

It's critical at this time to assess in a very realistic manner the quality of your assets, as they are the accounts that will allow you to emerge under a satisfactory refinance strategy.

So let’s get back to that asset discussion, because that is what is going to take you successfully out when you are in a position of a commercial loan called scenario.

Canadian chartered banks have typical margining and borrowing for certain asset classes. In the case of receivables its typically 75% while inventory, no matter in what state, rarely reaches a 50% margin eligibility, whether its raw materials, work in process, or even saleable finished goods .

As challenging as it may be to finance inventory in the current Canadian business financing climate it just might be that inventory line on your balance sheet that allows you emerge from a special loans facility. Why, one word - ABL! Well it’s actually an acronym for ' asset based lending ' because it is typically an asset based lending arrangement that will be your exit strategy from a commercial loan that's been called.

In our opinion and experience one Canadian chartered bank will typically only in rare occasions re finance a customer who is in special loans financing need? Why? We think there are many reasons, but the main one being that in general credit analysis and posturing with commercial clients all banks have the same general criteria of commercial loan credit extension.

Therefore if you are out of covenant or off ratio based on your current loan agreement doesn’t it make sense that another similar institution would not waive those covenants and ratio arrangements that your firm has broker. Its just common sense we think.

So, it is the asst based lender that will typically be your solution, and yes savior in some circumstances when you require an exist strategy in special loans financing. Banks will rarely margin receivables and inventory to the extent that an ABL lender will, therefore increasing your borrowing base and in many cases not only providing you with an exit from the bank, but in fact more working capital that you had before.

In summary, it is often only an ABL... asset based lending arrangement that will be your solution to a called commercial loan in Canada . Facility structure and size and pricing vary great, so a great suggestion is to consult an expert, an experienced, trusted and credible Canadian business financing advisor who can work with you to relive the stress and financial ramifications of special loans financing 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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Financing ? Eligible For An SBL ? – Why You Should Investigate the Canadian Small Business Government Loan

Is your firm eligible for the Canadian Small Business Government Loan... commonly called the ‘SBL’ ? We are pretty sure you are and we'll prove it to you. The benefit? You'll be taking advantage of (in our opinion) best loan for start up and small business companies in Canada. Want proof? We've got it.


So what type of proof are we talking about? Well, how about 957 Million dollars - that's the amount of loans granted to businesses just like yours in 2010, in Canada. Unfortunately, and here’s the bad news, your competitors took advantage of the loan program, and you seemed to have missed the boat! Let's get you back on the program.

A good starter would be of course to ensure you understand what the program does, and does not do. At it's essence it's a term loan, payable in equal monthly installments at competitive rates that even many larger businesses might not be able to achieve.

How much can you borrow - here is where the good news gets even better - the cap on the loan was increased to $350,000.00 during the last major recession in 2008 and 2009 timeframe. We have no reason to believe the current limit will not be staying the same.

So where does misinformation exist around the program, we have always felt it’s important to outlines the pros and cons of any financing arrangement... (We feel strongly you'll agree the pros outweigh the cons on this one!) .

A major criticism of the program is simply that it’s cumbersome and a bit bureaucratic re the forms, application, etc. Our opinion is that if you invest a bit of time in getting a solid action plan in place for the Canadian small business government loan financing program that you can be approved in a matter of days.

Clients who have experienced otherwise are either poorly informed, or are not working with a respected and credible business advisor who in many cases can finalize the transaction with minimal involvement from yourself and your firm.

We spoke of some mis information around the program. If we had to isolate constant piece of mis information on the program it's simply that many clients don’t know what the program finances. So let’s be clear on that. it finances only equipment, leasehold improvements , and real estate .

Many firms either believe, or have been told, (or perhaps wish?!) that the loan can be a cash loan or that it can be used to purchase inventory or finance receivables. It does not do that, so lets be clear on that. A good example of what some people don’t know the program can cover is software, as that can easily be financed under the program. We're talking about application software of course.

Let's get back to eligibility. Why so we think you are eligible? Simply that if you are a privately owned for profit Canadian company, with actual or projected sales under 5,000,000.00$ you qualify. Can you imagine how many companies there are in Canada that qualifies under those two simple guidelines? (In actuality approx 7400 companies in Canada entered into an SBL Canadian Small Business Government Loan financing arrangement.

Could you afford not to confirm your firm’s eligibility for the program? We certainly don’t think so, therefore consider seeking and talking to a trusted, credible, and experienced Canadian business financing advisor who can help you maximize the advantages of this financing program .





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/canadian_small_business_government_loan_financing.html

How To Get A Canadian Business Loan For Franchise Funding – Solid Franchising Lending Tips

They usually always start with only one question. Who is ' they '? Its clients with that age old question ' How hard or difficult is it to get a business loan for a franchise in Canada these days? They of course have made one of the biggest decisions in their lives/ careers, vis a vis becoming a franchisee in this booming industry - now the only problem is ...' What type of franchise lending and funding is available ?'

Well, we'll share with you some tested and proven strategies around franchise financing in Canada, focusing on completing a successful transaction in a minimum amount of time, with a finance plan that works for you, not just the lender!

On its own franchising has somehow become an industry with a strong and viable reputation. It, like all industries was hammered hard during the 2008-2009 recession; bus has bounced back strongly, even moreso than many other industries.

So, it becomes a simply two part question then, can you get a franchise loan these days, and more importantly, how?

There are some key factors to consider, one of which is simply aligning you, hopefully with a strong franchisor. So once you have made the decision to partner with a franchisor (we use partner because we think they need you as much as you need them!) you only need one thing. Whats that one thing?

It's a ' package '. By that we of course mean that you need a solid little package that convinces both the franchisor, and of course moreso the lender that you are equipped, from a financial and planning perspective to be a winner as a franchisee.

So what are the key elements of a successful winning plan? It's really pretty basic stuff, and in our experience many good franchisors have already done a good job of helping you prepare for this. Those key elements are as follows - an overview of your own background and experience, an overview of the franchisors business ( its your new business too, by the way!) and a solid financial plan that demonstrates two things: how you will make money , and of interest to the lender, what type of cash flow you will have to repay the loan!

It’s a bit of mis information when franchisees come to us having assumed the franchisor helps them get the financing. Some do assist in a mild sort of way, but we can assure you that you're on your own when it comes to achieving final success.

So the question then becomes how do you get prepared and qualified? Answers as follows! Get working on that business and financial plan we talked about. Identify the amount that you can contribute to the business, essentially your ' owner equity ', with the rest coming from your loan or loans. Typically a minimum of 10% and up to 30-40% is required.

It's always helpful to know how the last guy succeeded, don’t you think. In reality the largest per cent of franchise financing in Canada is done via a government sponsored loan that’s formally called the BIL/CSBF program. Why that loan , and why you should investigate it ?Some great reasons are 5-7 year payback terms, great market interest rates, no pre payment penalties , and you don’t even have to personally guarantee the full loan . Is there a better deal in town? Maybe, it just that we haven’t found it.

We also hasten to add that for any type of business loan, and certainly in franchise lending, the funding and approval of your loan assumes you have a reasonable personal credit history.

So, want to get with the program? Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you to meet your franchise funding and lending needs, 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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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