Does Your Firm Need Bank Lines Of Credit ? Ready For Canadian Business To Business Financing ?

For every complaint you hear about Canadian business to business financing and our chartered banks (Trust us, we hear a few!) there are still some great things happening in commercial business banking in Canada . Let's examine bank lines of credit, and your need for such a facility to grow your sales and profits.

Canadian businesses use operating lines of credit to finance current assets. Typically those asset categories are predominantly accounts receivable and inventory.

So how do banks facilitate this borrowing arrangement? The typical manner in which this is done is to simply have a document executed that provides the bank with a conditional assignment of accounts receivable, your inventories, and any other current assets.

Canadian bank operating facilities are also called demand loans, because they are typically secured by another document called a GSA, which stands for Genera Security Agreement. This document, as you can imagine, allows the bank to ' call ' your firms loan at any time .It's just common sense that Canadian banks do never with to ' call ' those loans, its simply their protection if and when things go awry.

Clients are sometimes under the mistaken impression that bank lines of credit are good for an indefinite amount of time. Typically however they are renewed annually - which requires a review by your account manager.

If there is one other very common question asked by clients it revolves around how exactly the banks calculate lines of credit. The formula is not as complicated as you think! A typical business to business financing on a Canadian chartered bank line of credit margins your accounts receivable at 75% or their value. Its critical here to note that the bank uses 90 days as a measurement tool - no receivables over 90d days can be margined, or in effect ' borrowed against ‘. Why is that? Again, common sense prevails, in that the bank, (and us too by the way!) makes an assumption that the receivables over 90 days are uncollectible to a certain extent. Your firm might think differently, but that’s how it’s done.

Inventory. Wow! What a different kettle of fish this is! If we had to generalize, but be as specific as we can be for info purposes we can say that in general banks really wrestle with inventory financing. Margining and inventory percentages are very different based on your industry, as well as the composition of your inventory. (Inventory typically comes in three categories: raw materials, work in process, and finished goods)

Typical bank financing of inventory usually never exceeds 50% and at the same time usually has a cap on the facility, meaning that even if your inventory is growing it still might be subject to a maximum of financeability.

The take away here is that banks aren’t in the inventory business, these assets are much harder to liquidate than receivables, and rarely does a lender ' win ' in an inventory liquidation!

So let’s get back to the security the bank takes on bank lines of credit. Do your clients find out about this? In Canada they would normally never be notified unless there is a default by your firm on the line of credit facility. In that case you clients would receive a notification of assignment, in which the bank would direct your clients to pay them directly, reducing the loan of course.

Banks register their security with the appropriate provincial and federal authorities, further protecting their position.

There is a great tendency in Canada to ' blame ' our conservative banks for limiting lending possibilities for commercial business to business financing. (We love our banks by the way).

Consider the reality though, that we entrust them to protect our savings and deposits, and its Canadian business owners and financial mangers that run their businesses into problems.

Clients are encouraged to maintain solid relations and seek out great commercial business bankers. (Not all are great unfortunately). If you're looking for a banking facility that works, for both you and the bank seek to speak to a trusted, credible and experienced Canadian business financing advisor who will assist you in managing your bank as a partner, not an adversary, thereby maximizing your bank line of credit for your firms sales and profit 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/bank_lines_of_credit_business_to_financing.html

Delve Into Canadian Sale and Lease Back Financing – Benefits Of This Type Of Leasing Of Equipment

Is a sale and lease back leasing of equipment you own already a good financial strategy? We get that question from a lot of clients so let’s clarify some key issues around this type of equipment finance.

Equipment leasing in Canada seems to be on a tremendous upswing again, having been hit fairly severely in recent years. As a result the sale leaseback strategy we can say was somewhat out of favor in the last couple years, but the good news is, as we said, that times are changing and this finance strategy is back.

In a sales lease back scenario it’s all about the asset and various issues come into play.

Exactly what is the strategy itself though - it’s important for Canadian business owners and financial managers to ensure they understand the benefits of the transaction, how it works, and most importantly, how to get it done effectively.

The sale and lease back strategy is just a twist on normal leasing of equipment. That should be no surprise. Typically either you or the leasing company would purchase or order equipment, which is paid for by the lease finance firm and then leased back to yourself. That’s business equipment financing 101 right? and there's a lot of benefits to doing that .

However in our sale and lease back strategy you are already of course the owner of the equipment. So you are in a dual role of the seller of the asset, as well as the new potential lessee.

Let's utilize a short example. Let’s say you are a manufacturer and you have an unencumbered asset, typically perhaps production equipment valued at $ 300,000.00. You may have purchased the asset for significantly more, but the current value for our example discussion is 300k. You then enter into a lease back situation - you ' sell ' the equipment to your lessor and then lease it back.

So what just happened here? Let’s see. First of all, the equipment you already own never leaves your production floor. You also just got a cheque for $ 300,000.00 to be used for whatever corporate purpose you wish. The monthly payments on the lease would typically be in the 7000/mo range, using a 48 month term as an example.

Let's examine why a business would use this strategy. The right reasons are typically for additional working capital and the ability to grow the business further. In effect you have monetized valuable assets and are using them to grow sales and profits.

Are rates higher on sale and leaseback transactions? They might be a bit higher, but at the end of the day quite frankly its our experience that they will be commensurate with your overall credit quality of your company , as well as of course the intrinsic or appraised asset value of what is being re financed.

Lessees and business owners opting for a sale lease back strategy should ensure lease terms are kept realistic. If possible we try to ensure that clients aren’t required to also commit further collateral to the transaction if it isn’t required. Lease companies have a habit of trying to over collateralize on occasion!

In summary, as a source of working capital and cash flow for the right reasons the sale and lease back leasing of equipment is a solid financial strategy. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing the benefits and avoiding the pitfalls of this strategy.




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/sale_and_lease_back_leasing_of_equipment.html

Expert Advice – Info On How To Finance A Franchise Business In Canada – Franchisee Loan Financing

Just a thought here, but why not do it right the first time? We're talking about how to finance a franchise business and obtain the right financing loan for your new life as a franchisee.

Let's share some tips on how things are done, with a focus on ' getting it right the first time '. We're also hoping that by this time you have a strong sense of what franchise you are looking to purchase and that you are comfortable you can run the business from a financial and operational perspective.

So where does one begin? It's often not where you might think. While there are hundreds of quality franchisors out there it’s a bit of mis - information if you think that the franchisors responsibility or talent will help you actually get the business financing you need to start the franchise. Of course they want you to get approved, and often can assist in some manner, but at the end of the day the responsibility to get this financing completed lies with yourself!

Banks are interested in financing your franchise, but in somewhat of a specialized manner which we'll address shortly.

Job one simply is determining the amount of capital you need. Thing you need to consider also is the breakdown of that capital. Why? Simply because different types of financing are more suited and applicable to different types of assets.

Items you typically need to consider are the franchise fee itself, i.e. your gateway to the business! As well as equipment, leaseholds and working capital. Those key categories are a pretty good way of categorizing and summarizing your financing needs. Naturally your premises lease is a separate issue and operating cost.

We often point to clients who ask us how to finance a franchise business that it’s as important to consider the ongoing financing needs of the business as it is to focus on getting the original financing in place. You want to be able to get a sense of what your overall financial plan looks like when it comes to sales, costs, and profits - its those profits of course that repay the loans you will enter into !

We can't remember a time when a client has not asked us the proverbial question - ' so how much do I have to put in ‘... referrring of course to their owner equity of beginning capital in the business. We're never one to sounds like our good lawyer friends, but the reality is that it depends. (That’s not always the answer our clients were looking for). However, in broad terms we can say that you can be expected to put up anywhere from 10- 40% based on the nature of your business and the amount of capital you are going to need.

Franchises in Canada are financed by only a handful of means. Let’s recap them for you, and then you can hopefully determine which method is best.

We certainly don’t recommend paying all cash or collapsing savings to pay for 100% of your franchise. A mixture of debt and equity is always the better way to go. Naturally you don’t want too much debt, and at the same time you want to obtain some proper... what the financial folks call ' leverage ' to ensure you get a good long term return on the money you have put in and borrowed.

Franchises in Canada a financing loan that will complete your franchise tends to come from 3 sources - the BIL/CSBF loan that is sponsored by Industry Canada, as well as financing from specialized independent finance firms that focus solely on franchise finance. These firms typically only deal with very established franchisors, so they are not going to be able to suit the majority of Canadian potential franchisees. Specialized finance firms such as lease companies also can provide a key financing component to your finance success.

For the right match of debt financing and the best finance solution for your particular needs consider spending some time with an experienced, credible and trusted Canadian business financing advisor who can assist you in your franchise business goals.


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/how_to_finance_a_franchise_business_financing_loan.html

Understanding ABL Backed Loans & Asset Based Financing In Canada – Not What You Think!

Challenge yourself to invest some time in understanding asset based financing. Once you understand ' ABL ' loans we're quite confident you'll give them strong consideration for your Canadian business financing needs.

ABL (Asset backed lending) loans are asset based lines of credit that provide you with a business operating line of credit similar to a Canadian chartered bank facility. Big deal, we can hear you say, whats the big difference.

All we'll say for the present is ' lots ‘! and we'll leave it up for you to decide whats the best solution for your firm . We can categorically tell clients that we have seen numerous examples where firms who couldn’t access bank facilities for operating credit could now have all the operating funds they need for working capital and cash flow purposes.

Secondly, many firms see their credit facilities double if not more on occasion, once they understand and embrace asset based lines of credit .So I guess now it’s up to us prove it to you. so here we go !

You’ll find very quickly that the asset based financing places a huge emphasis on what we call your operating cycle - simply speaking your credit facility is structured to match your operating cycle. And what exactly is that cycle ?Its really just the tracking of how cash flow goes through your business, from the time you purchase inventory ( unless you're a service company of course ) to the time you generate sales and of course receivables .. and finally your collection of that a/r. Simple as that . That’s your operating cycle.

We agree with many clients that their business is unique, rarely does a Canadian business owner or financial manager feel they aren’t special! But the reality is that many industries have the same operating dynamics and cycles and challenges - and you will find asset based lenders tend to be a bit more experienced than our friends at Canadian chartered banks on industry issues .

It’s actually possible to calculate your operating cycle in days and compute some very accurate working capital and cash flow needs just out of 3 or 4 basic calculations.

So you can see where we are heading here, its just simply that understanding asset based financing is about ensuring you have enough cash flow and working capital to work through your own firms entire operating cycle . Naturally large more well heeled corporations can finance daily needs via their own profits and existing capital structure. They are usually more eligible for bank and traditional type borrowing.

But thousands of smaller and medium sized corporations, who are growing, have challenges, or who have really unique situations can't often access traditional bank financing.

That’s where ABL loans come into play - you simply have the ability to convert assets such as A/R, inventory and other fixed or hard assets into a business line of credit - outside of the chartered banks!

ABL lenders work extra hard to understand your business. Why? It's pretty simple. They have to! Simply because they place little or no emphasis on the borrowing criteria of banks, which typically include ratio maintenance, covenants, outside collateral, personal guarantees, well... ytou get the drill!

By spending a significant amount of time eon your business, industry, and operating cycle an
ABL lender can better put together a facility that works uniquely, for you. Bottom line, this is not cookie cutter financing.

Factors such as your management or ownership team, the quality of your assets, and their marketability quickly become job #1 for an ABL lender, but all of that translates into higher borrowing facilities for you - just what you needed and couldn’t get previously.

So, have we convinced you? At a minimum we hope understanding asset based financing has just become a bit easier. And hopefully we've shattered some of the mis information around why this type of facility differs from a bank offering.

More info. Questions? Costs of this type of financing? Seek a trusted, credible and experienced Canadian business financing advisor who can ensure this type of non bank operating business line of credit is for your firm.




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/understanding_asset_based_financing_abl_loans.html

Relieve The Challenge Of Canadian Business Cash Flow Loans & Financing – Working Capital Solutions

A call to battle! Overly dramatic? Maybe ... maybe not. But its a great definition of challenges , and very applicable to what Canadian business owners and financial managers face when confronting business cash flow loans financing, or just in general assessing working capital problems .

Success business owners are solution oriented. You have to be.

It seems like a common sense statement that you have to understand the problem before you can fix it. When it comes to cash flow a number of areas can be pinpointed as the problem, its quite rare that it’s just one single item.

Some of those other problems might be a slowdown, (or increase ... by the way!) of sales, external issues that you have no control over - in general market challenges.

Certain financing arrangements you might enter into could actually be dangerous for your firm. It might be as simple as having taken on too much debt , or having an operating facility or working capital arrangement that has too many restrictions on what you can borrow, and what you can borrow against .

Another common mistake we often see is that many credit facilities are set in stone, in effect they are ' capped' so even though you have growing sales, good receivable and inventory .. Well you know the story, you are unable to access a higher limit and tap into the working capital you need.

The optimal solution for any business is the ability of your firm to access higher operating lines when your business is growing or expanding.

A good way to understand this is to imagine that when sales are growing your current cash outflows or payments are being made on items and expenses that were incurred weeks or months previous. So you are in effect accessing business cash flow from your current larger asset based to reduce the obligations of your older debt.

We always spent time with clients ensuring they understand the differences of profitability and cash flow. We find it ironic that many times their success in being able to access business cash flow loans financing and working capital can end up being their downfall. How? It's simple. When business owners and managers are in a position to pay their bills all the time... they, guess what? assume profitability!.

But when things turn around and sales slow and inventories and A/R shrink then there is the danger of being trapped in a downward spiral.

So how can you watch out for some of these key factors ? When you think of it , they are really just basics - if your business cash flow is trending down and your sales are stable there is a problem . If you are in a cyclical business then understand then ensure you understand your cycles. Is it possible to grow to fast or over expand? It sure is. So yes, it’s great to grow, but at what cost.

In today’s environment that are both traditional and newer alternatives to working capital. Many of them don’t involve taking on extra debt. They includes asset based lines of credit, combo receivable and inventory facilities, tax credit financing, purchase order financing , confidential invoice discounting, etc .

Want some help in both recognizing potential problems, and more importantly seeking viable solutions? Seek and speak to a trusted, credible and experienced Canadian business financing advisor who can set you on the road to elimination those working capital and cash flow challenges.





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_cash_flow_loans_financing_working_capital.html

Business Computer Laptop Leasing & PC Financing In Canada - Smart Tools & Smart Choices

Put yourself to the test, and ask yourself this simple question: Are you 100% comfortable with what you understand about business computer leasing and PC financing. From laptop to desktop to notebook to tablet, let's ensure you have some of the basics under your belt... so to speak!

When you are purchasing, and then financing technology assets such as those that we have described thee are certain economics that come into play. Financing those economics can be the make and break between a good decision and a bad decision... and trust us we're not talking about your choice of hardware or software manufacturer.


Let's explain. The reality is that there are some special decisions you need to make when financing a tech asset. Naturally you want to receive the benefits of the technology, keep your firm competitive, etc, but at the same time smart financing and acquisition strategies wouldn’t be bad either, right?

So let’s dig in. One major difference we can cover off quite quickly is simply that software, as well as hardware can be financed. We're talking about application software though, not development software, which is a different kettle of fish and a more complex discussion for a later date. A significant amount of Canadian businesses don’t seem to realize that software can be financed.

Traditionally software you finance along with business computer leasing is done on a 2-5 year term - we would never recommend a longer term for tech assets - quite frankly with changing technologies 2 years makes sense.

One great trick we have picked up over the years ( can we call it a trick ? !) is to structure a combination hardware and software business computer leasing and PC financing transaction on a 3 year operating lease, with the software being priced on a capital lease to own basis within that same transaction .

Whether you are financing a business computer laptop or a huge server farm you essentially have two choices of lease types in Canada - Capital and operating. Operating leases, you should know, play a huge part in the tech industry in Canada. If you have owned any computing in your home you quickly have probably become and expert in operating lease financing and didn’t know it.

How is that, ask our clients. Simply that you quickly realize technology changes, and anticipating that a laptop, PC, notebook, etc will last you a number of years is an incorrect assumption. It still might work; it’s just that it will be slower and not being able to handle new apps, programs, features, etc!

That’s why we tell clients they can adopt the same tech financing strategies as the largest corporations in Canada - utilizing operating leases. Why? Simply because an operating lease, which is a ' lease to use ' gives you triple flexibility during the usage of your product. Why triple? Simply because you can upgrade, return, or purchase the asset at any time during the term of the lease! That's true flexibility.

Smart choices can also be made around all the soft costs associated with a business computer laptop and pc financing strategy. Why? Simply because items such as delivery, installation, warranty, etc can be financed. Remember simply that your deal is with the hardware of software maker re terms of use, etc, - Your tech leasing partner simply facilitates that with some complimentary financing to lower your cash outflows.


So whats our bottom line, simply that tech financing is a little different, requires some specialized info on best structures and optimal advantages that accrue to you the user. Just the choice of lease type alone can save you thousands of dollars on any one transaction.

Want some extra help. Speak to a trusted, credible and experienced Canadian business financing advisor on business computer leasing - from laptop to PC. Make those smart choices in technology 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/laptop_business_computer_leasing_pc_financing.html

Imagine! Canadian Accounts Receivable Loans That Work – Financing Receivables The Right Way

Anyone who knows about the challenges of business financing in Canada knows that capital is harder to obtain these days, recession over notwithstanding! So when clients hear about accounts receivable loans and financing receivables strategies that seem to work for others, including their competitors, well... naturally they want to know more.

Let's share some basics around A/R loans (they are not really loans per se) and what the best method of financing receivables is in Canada.


Cash flow shortages. Sounds like a common challenge you face almost all the time these days. But when solutions to those shortages seem limited then a financing receivables strategy just might be your optimal solution.

In order to embrace a new finance strategy you have to know what it is, and what it costs, and even as important, how does it work. At its most simplest this type of business financing can best be explained as the selling of your A/R as you generate sales, getting cash in return. Naturally there has to be a focus on the quality of the receivable, and its age. (Generally receivables are sold when they are current).

Many clients always ask if they need to sell receivables as soon as they generate them, as in some cases they just might not need the cash flow and additional working capital at that moment. The answer is that you can sell your A/R anytime you want, typically as long as the receivable is less than 90 days. (If your A/R is older than 90 days there is somewhat of an assumption that it is uncollectible, unless you have given special terms to your clients.

So why do firms in Canada embrace this new form of financing more and more every day. Simply because it frees up the capital that you have tied up in inventory and A/R, your current assets. Financing receivables can be implemented more much quickly than any other type of loan or financing.

And, oh yes, getting back to that word ' loan ' - we mentioned that many clients refer to this strategy as ' accounts receivables loans '.

The last thing you want to do when you are short of working capital is to take on debt, so its very important to understand that this type of financing, also called ' invoice discounting ‘.. or ' factoring’ does not, we repeat ' does not ‘! bring any debt to your balance sheet. The world loan is a misnomer here, as all you are doing is monetizing or cash flowing your assets, making them immediately liquid.

Any Canadian business owner or financial manager would prefer to take on a new solution to their business in the right way. That means from a viewpoint of both cost and methodology.

Many clients view the cost of financing receivables as a setback. In Canada depending on the size of your A/R and some other factors the costs run between 1-3% per month. What business owners forget is that they can offset those costs in a number of different ways... they could increase their prices nominally, they can take discounts with their suppliers with their new found cash, and, if applicable, they can ' purchase ' smarter and harder. further reducing their cost of financing .

Our favorite and most recommended accounts receivable loans is a strategy called C I D. It stands for confidential invoice discounting, whereby you bill and collect your own receivables during the entire financing receivables process. Unlike your competitors, who are forced into rigorous notification of their financing with their clients or suppliers?

In summary, not all business financing strategies work for all firms. But firms of all size in Canada, even large corporations are looking at A/R strategies. Make sure you get a facility that works for your firm, both from a cost and daily procedural basis. When in doubt, or if you need more info, seek a trusted Canadian business financing advisor who can make sure the ' right way ' is your way!



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/financing_receivables_account_receivable_loans.html