Canadian Business Financing Smackdown? ABL Asset Based Loan Financing vs. Commercial Bank?

It's probably just us, but we been enamored recently by the word ' Smackdown' which denotes a ' battle or severe beating between two parties '. Somehow it's just a neat word! Which got us to thinking... who would win a Smackdown between ABL asset based loan financing and a Canadian commercial bank line from one of our Chartered banks in Canada ? !

We secretly often root for the ABL facility, but we're going to let you decide, the Canadian business owner and financial manager.

ABL financing is one of the few areas that have grown significantly in popularity over the last several years. When the economic implosion of 2008-2009 happened thousands of Canadian businesses started to review their financing options with either their banks or on their own accord. It was ugly... lines of credit were being lowered or pulled in and it simply got a lot hard to write a cheque, make a payroll, etc.

We guess this is the day for ' sayings' because out of necessity came the mother of invention - enter ABL financing. But why does ABL asset based loan financing flourish when other forms of business financing don't?

It's because ABL financing looks at risk management in a whole different manner than a chartered bank. Banks base all of their borrowing on their own issues, such as capital ratios and capital bases, and adjust their risk accordingly. They do a great job of that, and quickly have become world acknowledged as leaders in risk and financial stability. But, at whose expense? We think you know the answer. Yours! Because when banks manager commercial bank loans their do it in a manner that addresses their own issues, ( not yours ) by imposing rations, covenants, the needs for outside collateral, and a strong emphasis on personal guarantees .

But what about our friend ' ABL ' sitting in the corner. It generally uses none of those, simply focusing on the assets you have in your business to allow you to generate maximum liquidity from a business operating line of credit.

So does ABL cost more... and whats involved, if in fact you accept our premise that it’s potentially a better type of financing for Canadian business.

ABL can cost more; sometimes significantly more, and sometimes it can cost less! So don’t forget that. Additionally, as the total focus of an ABL asset based line of credit is assets expect to be able to prove the value of the assets being financing, which include receivables, inventory, fixed assets such as equipment, and yes, even real estate. All of those assets are in effect thrown together to get you a business line of credit that makes sense, and focuses solely one item- your assets. Because you borrow against all those assets in a bulk facility, daily, as you need it, be prepared to show you can report properly and methodically, either weekly or monthly, on items such as aged receivables, inventory. Etc.

Trends rarely lie. Certainly not at the outset! So its no surprise that thousands of Canadian firms are gravitating to asset based loan financing for their lines of credit. Abl lenders take more risk (bad for them ... good for you ...) and that risk and return issue they face translates into more liquidity for you.

Is there a perfect answer to our question on who would win the Smackdown? We're not sure, but we do believe that if you seek and talk to a trusted, credible and experienced Canadian business financing advisor that you will be in a better position to determine which business financing solution works best for you when it comes to a business line of credit.





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_loan_financing_commercial_bank.html

The Working Capital Lifecycle - Canadian Business Cash Flow Loans and Financing

It's all about the lifecycle. We think that’s a great way to look at how Canadian business owners and financial managers can look at the different stages of life their business is in - all of which relates back to business cash flow and working capital needs. The bottom line - Different types of loans financing options are available at different stages of your firms lifecycle.

Let’s examine what that lifecycle is about and how knowing what stage your business is in reflects the kind of working capital you need.

Start up firms grows from great or aspiring ideas. This is when capital is most often a real challenge, and the combination of owner equity and debt becomes the total issue for the entrepreneur. As the company starts to gain traction and grow revenues in the early years financing comes from both traditional and non traditional sources.

It's important to spend time at this stage in the lifecycle to determine the amount of capital you need, on items such as operations, inventory, facilities, etc. Doing your homework at this stage in the lifecycle will prevent many future problems!

Inevitably many firms face a growth crisis. This is one of the key areas of the company lifecycle we'll address in looking at some solutions to this often challenging time in any business owners life.

As the growth challenges are solved (hopefully) businesses transition into maturity and inevitably look to a transition of some sort - i.e. sale, divestiture, merger, wind down, etc. The bottom line, we've just walked you through the business lifecycle.

Who can assist you in the challenges of solving various challenges at different points in the lifecycle? Typically people such as your lawyers, accountants, bankers, and consultants and advisors are the ones with solutions.

When clients ask us about working capital and ' the bank ' we always only say one thing - it's the banker, not the bank. The ability to find a great commercial banker is worth its weight in gold .Your ability to find a competent and confident commercial banker who can point out the sources of traditional bank financing and then execute on them for you is invaluable.

Having collateral and assets is critical in a working capital bank borrowing environment. No matter how you look at it, in Canada that borrowing is also going to require both personal guarantees and potentially collateral outside of the business. You can’t escape that requirement in Canadian business cash flow loan financing.

Many of the clients we deal with either cant access traditional bank capital, or choose not to go that route for reasons of the guarantees and collateral we mentioned. That’s when non bank financing becomes an alternative solution.

Solutions such as receivable financing, working capital facilities, asset based lending, and financing of your tax credits can all ensure you have access to business cash flow. While some of these solutions are more expensive than bank financing they are more readily obtained and still improve your balance sheet and allow you to build your business.

It’s often the balance sheet which can help you determine which stage of the business lifecycle you are in. Your ability to expand, pay your short term bills such as suppliers, loans, etc are keys to the business lifecycle. Naturally larger more established companies have more assets, and ' wiggle room ' we can say to address working capital issues.

Good business cash flow solutions will make your company more viable at any stage of the business lifecycle. Your ability to borrow during any stage of the business lifecycle allows you to move forward to the next stage of transition in your company.

Want to discuss any working capital solutions, allowing to you plan, and not react to cash flow challenges. Consider seeking and talking to a trusted, credible and experienced Canadian business financing advisor for help in obtaining alternatives to address your cash cycles.




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_business_cash_flow_loans_financing.html

The Magnificent 7 Reasons For Equipment Lease Finance - Make Canadian Asset Finance & Leasing Work !

Recently we wrote on the subject of providing 3 great reasons for Canadian companies to strongly consider equipment lease finance as their financing strategy in the acquisition of new equipment. Financing assets has never been more easy.

The essence of those three reasons we discussed were the concept of 100% financing of assets, utilizing leasing and financing as an inflation hedge, and finally the ability to get a better handle on the useful economic life of any asset you acquire. How? By matching the term of your lease with cash outflows of lease finance.

But... guess what. There's more. Let's discuss 7 other solid real world considerations for Canadian business owners and financial managers considering equipment lease finance.

Timing. Many lessees (that’s you) have important deadlines, vendor issues, competitive issues, etc. Unlike banks or other finance firms leasing companies in Canada are only focused on one thing - funding your transaction. So whether it’s a 900 $ micro ticket deal, or a 9 Million dollar piece of mining equipment you will always get it done faster (we believe) by working with an independent specialized lessor. This impacts time you may waste on legals, documentation, and credit approval, all of which are important to clients.

Additional add ons - that’s reason number 2 today. It makes sense in business to bundle (don’t our telcos and cable companies do a good job of that. In a leasing and financing transaction you can add in a lot of extras, for financial and convenience issues and benefits. I.E. maintenance, insurance, delivery, training, etc.

Reason # 3- The accountant in the corner... you know who we're talking about, the guy with the proverbial ' budget '. Leasing eliminates capital budget issues, operating versus capital issues, and cash flow challenges. Could leasing have made that guy any happier? We don’t think so!

Reason # 4- lender restrictions and covenants. Utilize creative financing providing by such vehicles as operating leasing and financing to eliminate covenant, off balance sheet, and ratio issues. It's a complex world in commercial lending, but a solid lease financing partner can help you work through a lot of issues that otherwise could restrict your ability to properly acquire the financial assets you need.

A lot of accounting rules are changing out there... some people predict the death of operating leases. We're not sure, but we are sure that lease accounting is one more thing in your finance toolkit that gives you something to work with.

Reason # 5- the proverbial monthly payment. Want it fixed, or perhaps variable. Want some cash flow seasonality in your lease structure..? No problem. Step up? Step Down? Step leases are payment structures that alternative according to seasonality, budgets, etc. If you need them, they are there!

Reason # 6- Working capital considerations. Your ability to achieve significant financing via leasing allows you to preserve credit lines and cash flow. You can spend all the time you want on lease versus buy analysis - but at the end of the day cash is king as Canadian business owners and financial mangers well know.

And finally, reason # 7 of our magnificent 7! Flexibility and asset obsolescence management. The right type of lease financing allows you all sorts of flexibility re rights of return, termination, upgrade, purchase of the asset, etc. Investigate them, use them.

Speak to a trusted, credible and experienced Canadian business financing advisor on how the reasons to utilize lease finance for asset finance can work 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/equipment_lease_finance_leasing_financing.html

Breakthrough In Financing Accounts Receivable ! New Fresh Approach To Best Invoice Factoring in Canada

Surpassing a restriction - that’s how a breakthrough is defined , and we're sharing info on how financing accounts receivable and achieving the best invoice factoring in Canada just got a whole lot better !

Thousands of small and medium sizes businesses in Canada (and by the way, a number of larger corporations also!) have moved towards an independent non - bank method of financing accounts receivable in the Canadian business landscape .

But is there a way in which you can achieve the breakthrough that we're referring to? First of all let’s make sure we are all singing from the same hymn book so to speak... covering off the essence of this type of financing.

Simply speaking accounts receivable financing, aka ' factoring ‘... ‘invoice discounting ' is the sale of your receivables , as you generate them , for instant cash flow and working capital . In the majority of cases of this type of financing you still assume the risk of the non collection of receivables, but you're simply monetizing or cash flowing that portfolio of A/R for quick access to cash.

Also of note is the fact that typically while you don't have to finance a receivable immediately as its generated, at the same time invoices over 90 days generally cant be financed as they are assumed as uncollectible . We are always encouraging clients to monitor their A/R agings and schedules to ensure they have a maximum handle on accounts receivable status.

Clients ask why businesses choose this type of financing over traditional A/R finance such as bank lines of credit, etc. That answer could not be simpler, it’s a case of getting capital and cash flow that you might otherwise not achieve through a bank, plus it’s quick, with the major benefit being that your facility grows as your sales grow. You do not have a pre -set limit per se. That’s a huge benefit.

But let’s focus on some potential drawbacks to this type of finance - we've always thought it’s important to present a balanced view. One of those drawbacks is the perceived cost of the financing. Back to that word perceived in a moment. The whole issue of cost and pricing of A/R financing is one of two issues we are always spending time with clients on. The industry as a whole views the transaction as a discounted sale price, while customers perceive that pricing as an annual per centage rate.

On a day to day basis, as you finance your receivables, they are in effect ' purchased’... at a ' discount ' to their face value. The discount rate on a 30 day receivable in Canada varies widely... that’s why its important to work with an expert to achieve maximum best financing. That rate tends to be in the 1-3% range more often than not.

However... back to our word ' perception '. Most clients don’t understand there are numerous methods to offset that financing cost, in some cases in its entirety. Its a case of using new found cash flow to take supplier discounts, purchase more effectively, and take on new business that otherwise might not have been possible .

So, is the suspense killing you? Let's not forget the ' breakthrough' we talked about - which is what we have come to call ' C I D '. Its confidential invoice discounting, and it goes against the grain of all the U.S. and U.K. companies in Canada that offer this type of financing. It puts you in control, and that’s a good thing, right? You bill and collect your own receivables, with no notification to your clients, suppliers, etc.

Most clients balk at the use of financing accounts receivable via factoring solely because of the issue of notification to your clients, and we're just removed that issue. So that, coupled with the best invoice factoring pricing you can achieve makes this financing very attractive to firms that can’t achieve bank or traditional financing of their working capital.

Check out C I D, confidential invoice discounting... speak to a trusted, credible and experienced Canadian business financing advisor on how you can achieve the best invoice factoring and financing from a viewpoint of cost and confidentiality.



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_accounts_receivable_best_factoring.html

Sound Acquisition Financing Ideas – Commercial Business Loans For Purchase & Merger

Your company has made the decision to either merge or acquire another business. What are some of the key issues in successfully completing acquisition financing and business loans for commercial entities in Canada?

A good place to start is simply to ensure you’ve got the right reasons or goals around a merger or acquisition. In some cases you wish to diversify your company, more often than not though it’s simply a case of growing, both sales and profits of course.

Is the term ‘opportunistic a negative one? We certainly don’t think so when it comes to legitimate business dealings, so in many cases you simply have come across a firm or competitor that in your opinion is undervalued. Bottom line, it’s a bargain and you're focused on exploiting either undervalued assets or companies that are not performing well in certain market conditions.

Don't forget also that acquisition financing is all about some even more common sense scenarios as identified above. Its often a classic opportunity to lower your operating costs as overheads in the dual firm can be cut and other efficiencies can be extracted from the combined mix .

What are the types of acquisitions? We can summarize those into three areas, and in some cases the type of acquisition you make will impact directly the type of financing and commercial business loans that you achieve.

Back to our three merger scenarios - they are as follows: friendly, hostile, and leveraged or management buyout. Many smaller companies are of course happy and content to be taken over; they fully realize the potential synergies. However in certain cases it gets somewhat ' ugly ' in that the management or owners of the firm you intend to buy or acquire simply are opposed to the idea.

Leveraged and management buyouts tend to be asset driven. The downside of a leveraged or management buyout is that if done improperly a large amount of debt can leverage your new firm negatively. There are numerous creative ways to finance acquisition financing in Canada.

Financing methods include asset based lending, subordinate or mezzanine debt (i.e. unsecured loans based on historical and future cash flows) as well as a private equity component.

Valuation is an important aspect in the area of acquisition financing. Your valuation will have a direct impact on the business loans you enter into to complete the purchase. In evaluating a final valuation or purchase price you will want to look at things like general financial operating activities - i.e. the financials. But don’t forget also that other factors such as new assets that might be required, working capital needs, etc also will drive that final valuation number.

In summary, when contemplating acquisition financing look at issues such as the proper mix of debt and equity, cash flow analysis, , and various areas of operational risk and reward . If you want financial alternatives in financing your acquisition consider talking to a trusted, credible and experienced Canadian business financing advisor who will assist you in this exciting area of Canadian business 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/acquisition_financing_business_loans_commercial.html

Interested In Business Acquisition Buyout Financing For A Canadian Purchase ?

Talk about a capital expenditure. We're discussing Canadian business acquisition buyout financing in Canada and purchase loans available for funding this type of transaction – primarily for the small to medium enterprise in Canada .

Naturally as a Canadian business owner or financial manager it’s critical that any acquisition and its financing challenges be handled in a manner which properly positions your firm for future success and profits. The simple reality is that typically transactions of this nature involve significant amounts of capital relative to the size of your current firm.

Naturally its all about cash - the simple financial model is of course your firms ability to ensure future cash flows receive exceed the purchase price. In reality the only way in which you should consider paying a significant premium is when there is a strong case for putting the two firms together for significant improvement in both.

Another consideration that business owners must also make prior to contemplating purchase loans is the issue of ' diversification ' and the dangers of taking your firm into an unrelated business . Diversification for its own sake clearly might not be an optimal strategy.

So just when is a business acquisition related to your industry, and when is it not? The experts are quite clear on that - if you have markets and clients that are similar, or utilize a technology or science that is also similar then clearly you're acquiring or buying into a related industry. When Canadian business owners and financial managers buy into a similar industry they clearly have a better idea of cash flows and the basic business model - that's a good thing.

In a perfect world you wish to acquire or retain a strong management team when contemplating an acquisition. This certainly makes business acquisition buyout financing less difficult. At the end of the day we can probably all agree with the fact that your skills as the acquirer are potentially more critical than those of the business you are acquiring. It's your challenge of course to make the synergies, profits and sales stay positive.

Do you really need an investment or merchant banker or professional deal maker to complete successful proper purchase loans in small and medium sized business acquisition? We'll go against the grain and say not always - we think that with the assistance of an advisor you're in a position to identify a financing objective and execute on a purchase loan and financing alternative that makes sense for all parties.

So, contemplating an acquisition in the small to medium sized marketplace in Canada? Want some assistance on pricing, areas of risk, and the best way to finance the acquisition. Speak to a trusted credible and experienced Canadian business financing advisor who will assist you with your objectives.




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.7

parkavenuefinancial.com/business_acquisition_buyout_financing_purchase.html

Notes From The Trenches – Canadian Financing For Franchises – Get Your Business Franchise Loan Right !

It's sometimes just the thought of wondering how financing for franchises works, and if in fact you will be approved for a business franchise loan that gives you discomfort. Let's examine whats happening in franchise finance today out there in the trenches, aka the real world!

It's pretty clear to yourself that when you're contemplating the purchase of a franchise you will need financial assistance via a franchise loan to complete your project. Those funds in effect compliment or complete your equity, i.e. your own investment into your new business. We point out to clients that the same challenges and issues pertain to whether you're purchasing a brand new ' turnkey ' operation or if you are purchasing from an existing franchisee who is selling.

P.S. Don't forget to ask why the franchisee is selling?!

So where is commercial lending at Vis a Vis Canadian franchise financing? Do you have to do a lot of homework to investigate how to successfully complete a franchise finance loan?

Naturally in a perfect world ( its not always perfect as you may have observed ) you're looking for financing that completes your transaction, has reasonable rates, and provides you with a term on the loan that is suitable for both cash flow and repayment .

In Canada franchises are financed successfully in a number of manners - but it’s certainly not a large choice, so it’s important to focus early on, on what you can achieve and with whom. There are one or two specialty franchise finance firms but these firms typically focus on the relationships they have with some of the largest an well know franchisors, many of whom have franchises for sale in the 1 Million dollar ++ range . That isn’t for everyone of course.

It's actually the Canadian government (that’s a surprise!? that has a huge role in financing for franchises in Canada, but in a somewhat indirect method. They sponsor a loan program called the BIL/CSBF loan that provides financing for a huge amount of franchisees in Canada. The program is clearly a champion of small business, on which franchising is of course based - independent owners and operators working with success franchisors in Canada.

The government in effect guarantees a very large percentage of the loan, allowing you to receive those rates, terms and structures that are absolutely some of the best financing terms in Canada, bar none.

What do you need to do then to get your franchise financing house in order then? It's not a cake walk, but quite frankly is not as hard as you think to accomplish your goal of a success business franchise loan.

You want to be able to ensure that you're prepared - naturally you would do that for any business financing you would ever contemplate. You need to be able demonstrate a reasonable personal credit history ,as well as some level of either general business knowledge or industry specific knowledge relative to the industry within which your franchise is located, i.e. restaurants, service business, etc.

It's important to have a clear cut business plan that demonstrates how your financial package looks, i.e. how the combination of your own equity and the loan will allow you to acquire the franchise, and, of great interest to the lender, repay the loan.

Will your franchisor help you in all this? Yes... and no. It's our observation that franchisors are focused on selling franchises, not financing them! So be prepared to carry the weight of most of the work in completing you’re financing for franchises.

Want some help? There’s lots out there. Consider talking to a trusted, credible and experienced Canadian business financing advisor who can assist you to achieve your goal as a successful franchisee in the booming Canadian franchise market.




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_for_franchises_business_franchise_loan.html