The New Shape of Business Financing and Commercial Lending Options in Canada

A Mini White Paper On Canadian Business Financing

Information on the state of Canadian Business Financing and commercial lending . Who is offering and competing with who and what types of options are available to Canadian companies seeking asset and working capital financing .




Turmoil in economic times presents all sorts of challenges for Canadian business owners and financial managers. As challenging as business financing has become so called ' tougher times' a new breed of financing services and players in Canadian business financing offer new and different types of financing for business needs.

Most people would agree that the Canadian chartered banks had what we could call the protective turf in Canadian business financing for many decades. Our observation? Boy has that changed, and new dynamic and innovative offerings are available for every type of business, from start up to large corporation.

A good way to thing of business financing in Canada is simply by thinking of the offering as either from a regulated player, or a non regulated player. Banks are a good example of regulated players, while firms such as equipment finance companies or asset based lenders tend to be unregulated.

Types of financing that might have been unimaginable in older times are now viewed as new and extraordinary relative to business financing needs.

Many larger industrial corporations - i.e. G.E, G.M., etc. have in fact become major players in Global and certainly Canadian financing. Commercial lending and financing is no longer of course just offered by Canadian chartered banks. In Canada it is some major insurance companies and pension funds that are the ones funding the Canadian equipment financing industry.

Different financing firms have different niches, but in many cases competition has become fierce and it’s quite often a challenge for the companies seeking Canadian business financing to differentiate from who is offering what.

When we think of the financing needs of larger companies in Canada we can be forgiven for thinking that this is the real bread and butter of bank commercial lending in Canada.

Captive finance companies also provide a significant amount of financing in Canada. They play a significant role in many transactions that otherwise might not be able to meet more stringent bank criteria. The good news is that many captive finance firms have branched out in Canada to offer inventory financing, purchase order financing, asset based lending, and equipment finance - not just for their parent companies, but for a large measure of Canadian business. And that’s a good thing!

When Canadian business has a strong knowledge of both the finance offering and the competition for that offering that leads to better rates, terms and structures for your firm, the borrower.

Canadian banks , viewed as the strongest and best run in pretty well the whole world haven’t necessarily stood around watching their business financing and commercial lending decline . They have expanded into the U.S., purchased independent commercial lease financing and auto financing firms, and rebranded these firms into their own offering.

Many smaller companies in Canada, those ranging under 5 Million dollars in revenue utilize independent commercial receivable financing firms, known as ' factors' to finance their working capital needs. The need for this and other types of creative financing is huge because of the general strict credit criteria of the Canadian chartered banking system.

Other non bank financing services in Canada generate premium pricing for the companies offering these services. We think they do this by paying more attention to the real needs of Canadian firms seeking commercial lending. When asset based lenders or receivable and P.O. factoring firms have the right discipline they have proved themselves to be very successful and strong competitors of the Canadian banks.

Canadian non bank finance firms have a number of nonproprietary finance offerings that allow premium pricing, and servicing the SME (small to medium enterprise) sector provides strong growth opportunities.

So how does the ever changing Canadian business financing landscape affect you, the potential borrower? The bottom line is that a variety of finance offerings allow you to maintain an open door to get the maximum amount of financing your firm needs. Smaller firms have the ability to use lease asset financing, receivable financing, tax credit financing, purchase order financing from a variety of competitors.

Take hands on approach to your finance needs by speaking to a trusted, credible and experienced Canadian business financing advisor who can help you manage the relationships you need to have in place to access business financing options that make sense for your firm.



ABOUT THE AUTHOR -

Stan Prokop
7 Park Avenue Financial
www.7parkavenuefinancial.com

What Every Entrepreneur Should Know About How To Finance A Franchise In Canada – Financing Your Investment

Canadian Franchising Finance Explained

Information on how to finance a franchise in Canada . Best methods for financing your entrepreneurial decision in this business investment.



It tends to start with the franchisee fee itself, but there are a number of other financing challenges that come into play when the Canadian entrepreneur is faced with the basic question - ' hot to finance a franchise ' in the Canadian marketplace. Financing one of the most important business investments you'll make can be a challenge - so let’s identify some key issues, tips, and strategies on being successful in this challenge.

A solid way to look at finance success in your franchising ' adventure' is to break down your estimated costs into several key areas. Most potential franchisees don’t realize that each key aspect of your franchise purchase is financed in a different manner.

Lets breakdown the key elements of a franchise investment. They include the franchise fee itself, which we have already referred to. Other components usually equipment you may need, leasehold improvements to any new facility, potentially real estate , as well as the often forgotten but as important on going working capital .

Our experience is that the franchisee typically in Canada has to cover the franchisee fee him or her self. That then leaves our other components to address. So is financing a franchise in Canada a challenge ?In some respects it has the same challenges as if you were opening any new business from scratch - however, the good news is that the financing industry as a whole tends to view franchises positively because franchisors, when successful, have proven brands, track records, etc .. in general they are considered, we think, a lower risk that many other ' start ups'

We sometimes forget to mention to clients the possibility that they may be in fact purchasing an existing unit from the franchisor - that typically involves buying a company or corporate location that the franchisor wants to sell, or, in some cases purchasing a franchise from an existing franchisee who is motivated to sell for whatever reason. Bottom line, both new and existing franchises and be financed.

We are quite sure that when most franchisees consider how to finance a franchise investment they think that financing might in fact come from a Canadian chartered bank. Well, here’s the facts on that one... it does... and it doesnt. While it is somewhat rare that your bank would directly finance 100% of you franchisee needs under a normal term loan scenario the banks do play a key role in franchising in Canada.

How? They do it under the auspices of the Canadian BIL/CSBF program which offers a competitive term loan for Canadian franchisees under the umbrella of this program. The benefits of that program are significant - they include financing up to $, 350,000.00 as well as a low personal guarantee. Rates are excellent, and terms are flexible. Criteria for the program essentially are a decent personal credit history of the prospective franchisee, as well as a respectable owner investment into the business.

Whats respectable?! We knew that question was coming next. Typically to be successfully anywhere from 10-40% investment is required by you as the franchisee. While one commercial finance firm in Canada dominates franchise financing individual franchisees can compliment financing needs with equpment financing, business lines of credit , business credit cards, and the increasingly popular merchant advance loans for retail oriented businesses.


Both having a finance plan and knowing how to execute on your plan are what will make you successful when you are faced with today’s questions ' how to finance a franchise ' ... Speak to a trusted , credible and experienced Canadian business financing advisor for help and tips you need to be successful as a franchisee entrepreneur 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 . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :


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

ABL Financing & Lending Is The New Version Of An Old Product – Asset Based Lenders Are The New Teachers Pet Of Business Finance In Canada

Why Asset Based Lines of Credit Are Starting To Dominate The Canadian Financing Landscape


Information on ABL financing in Canada . Why Asset Based Lenders offer business lending and loan facilities that makes sense in 2011.



The proverbial ' teachers pet ' - aka the new favorite. That's a pretty good term for abl financing, which is pretty well the newest form of business line of credit financing in Canada in many years. Let’s take a look at why asset based lenders and their lending facility, the asset based loan are starting to dominate the Canadian business landscape.

ABL financing has been around for awhile, in the past it was considered a very ' alternative' method of financing business lines of credit in Canada. It, as well as its subset, ' receivables financing facilities ‘ have not become a very popular choice for Canadian firms who cant qualify for traditional financing .

An additional comment we might make is that many clients we talk to do in fact qualify for some form of traditional financing, i.e. the Canadian chartered banks, but they typically can’t get all the financing they need. That goes for everything to start up to Major Corporation, as more and more large corporations are also gravitating to this type of financing.

Part of the misconception around an ABL financing loan is that this lending means different things to different people. In our context today we're talking about the monetization, for maximum leverage, of receivables, inventory and in certain cases equipment and real estate, which can neatly be packaged into a revolving business credit facility.

Another old saying we like is the 'mother in law pitch’. Whats that? It’s your ability to explain in a sentence or two, to your mother in law, why asset based lending is radically different from Canadian chartered bank facilities. Hers our version of the mother in law pitch in that regard - ‘Asset based lending relies almost solely on the amount and quality of your collateral, not your overall financial statements and general financial health ‘.

It’s as simple as that! Banks are required, by their charter and nature to focus on overall credit quality when granting business line of credit facilities. Therefore the main discussion point very quickly becomes debt to equity ratios, cash flow covenants and coverage, external collateral, personal guarantee emphasis, etc. That is somewhat thrown out the door in an abl financing and lending environment. Therefore it is very common, we repeat, very common for a Canadian firm to receive financial leverage on 90% of receivables, 50-75% of inventory, as well as appraised values of equipment and real estate, all into one convenient business line of credit.

Clients are great at coming up with simple questions. Hers a typical one - if this is a non bank facility how does my day to day banking work. Great question. The answer is that asset
based lenders use a dual account or lock box type system - your funds, as you need them, go into a regular business operating account.

Funds you collect on a daily basis from receivable and customer deposits go into another blocked account, at the same time reducing the amount you own on your business line of credit .Naturally this balance fluctuates everyday based on your firms business cycle, and the good news, similar to a bank facility, is that you are only paying for what you are borrowing.

So , in summary, while human nature often has us somewhat ' jealous' of the ' teachers pet ' the reality is that Canadian business owners and financial managers owe it to themselves to check out this dynamic form of business financing , under which almost all companies qualify . Speak to a trusted, credible and experienced Canadian business financing advisor for more information on the benefits of this type of lending.




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 . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :


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

Is Your Company In A Constant Whirligig On Business Cash Flow & Working Capital Funding Challenges ?

Canadian Cash Flow and Working Capital Solutions


Information on business cash flow and funding working capital in Canada. Measuring the problem and address it via real world solutions .



Boy do we love a good term when we see one. Whirligig. It’s the definition for a ‘ whirling or circling course of events ‘. Don’t business owners often feel they are in a constant whirligig of business cash flow challenges – always looking for funding for working capital as their business grows? They certainly are always telling us that.

Let’s examine some ways to both measure and address working capital and cash flow shortages. Our primary focus is on the SME (small to medium enterprise) sector of business in Canada. We should note that larger corporations have access to more sophisticated working capital solutions that include unsecured cash flow loans and mezzanine debt provide by Chartered banks, private equity firms, and specialized commercial financing companies in Canada .There are even some hedge funds in Canada offering this type of working capital solution.

The cash flow lending offered by these firms to larger companies is based on multiples of cash flow and profits, not utilizing the actual assets of the firm as first position secured collateral. Suffice to say that interest rates on these types of loans are very attractive but at the same time come with rigorous credit and size criteria that of course SME sector firms simply can’t meet.

SME firms are focused on more mundane issues, reducing their payables, purchasing more inventories, and meeting employee obligations. When actual working capital runs low of course our whirligig kicks in! It’s the constant battle to replenish working capital.

Working capital for your business consists of your cash on hand, your borrowing ability, and of course receivables and inventory.

The rudimentary way that those textbook guys and accountants calculate working capital is to divide current assets by current liabilities on your balance sheet .We’ve never really like this calculation because it doesn’t truly reflect the flow of funds in an out of your business . (A calculation called the operating cash flow calc does this much better). For instance if your sales are flat or slowing down and your receivables and inventory are building up your working capital current ratio calc is higher, but the reality is that your real cash flow is getting worse . And that’s a problem.

Working capital solutions in Canada are available but they are somewhat more limited in nature than many Canadian business owners and financial managers think. Business lines of credit to cover business cash flow for start ups or small businesses rely heavily on the business owners personal assets. Canada’s crown bank corporation offers working capital term loans, but significant emphasis is placed on owner equity and cash flow ratios.

The real world solutions available in Canada in 2011 for funding business cash flow are as follows; sale leaseback of some of your assets, Chartered bank lines of credit, accounts receivable financing facilities, non bank asset based lending facilities (they combine your A/R and inventory and equipment into one business line of credit). Many Canadian firms utilize various tax credits which can also be monetized into cash flow and working capital liquidity.

Speak to a trusted, experienced, and credible Canadian business financing advisor on how you can avoid the whirligig of Canadian business cash flow. In today’s competitive environment you ability to survive is based strongly on ensuring your working capital life blood is healthy.



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 . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :


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

Having Difficulty Choosing The Right Equipment Loan For Asset Financing Needs in Canada ? 4 Leasing Company Choices

Business Lease Finance Options That Work

Information On 4 equipment loan Sources in Canadian Asset Financing . Do you know which leasing companies You Should Be Dealing With



Canadian business owners and financial managers are often faced with the decision of who to turn to when making decisions on equipment loan and asset financing. You have essentially 3 difficult decisions and one easy one which we'll share with you.

The reality is that if you're not a business equipment financing expert there are a large number of equipment lessors out there - the challenge is pretty simple - ‘which one is right for your firm?'. For those that aren’t fully aware of how the equipment financing market is structured in Canada it’s a case of really determining which lessor business model, and credit box (credit box?) fits your needs.

Let's examine the things you need to know to get a ‘perfect fit' in equipment loan and asset financing needs.

Potential partner # 1 -not who you might think it is. Canadian chartered banks. In recent years banks have invigorated their interest in equipment financing, and they compete strongly with independent commercial financing companies through leasing subsidiaries or divisions. Banks themselves can only write loans, so they use their lease subsidiaries to write real leases. The challenge to obtaining some of the best rates in equipment finance via a bank is your ability to meet credit criteria. In addition to the asset collateral banks will demand strong balance sheets and positive and sustainable cash flows. Note also that typically banks only write capital l eases, or lease to own transactions - operating leases generally not available.

Potential partner # 2- The main competition to the banks in Canada are independent commercial leasing companies. These may be small, large, Canadian, or U.S. owned. This is most likely where you will get the most creative structures and market pricing that fits your overall credit quality. Almost any asset can be leased in Canada, including technology and software. Unlike the banks operating leases are potentially available also.

Because these firms borrow from insurance companies or banks to fund your transaction the overall cost of financing is pretty well always going to be a bit higher. In Canada the equipment financing market is broken down into small ticket, mid ticket and large ticket transactions. We speak to a lot of clients who have wasted time by either choosing the wrong type of leasing companies, or who don’t understand the approval criteria of any given firm.

Potential partner # 3 - You're being held captive here. Captive? Captive finance firms are divisions or entities of large vendors who sell to you. They have formed their own leasing division and asset financing vehicles to offer capital leases, operating leases, and in some case even rentals. Rates are generally quite competitive and the added advantage here is that they are incented to sell you their product also, not only finance it, so credit criteria is often relaxed a bit. These firms make acquiring their products simple, which is a benefit to the Canadian business owner.

Knowing which potential partner to utilize for your equpment financing needs is critical. But how do you not waste time in talking to, investigating, and sharing your firms confidential financial information with tens or hundreds of firms. That’s solution # 4- utilizing as a partner an independent Canadian business financing advisor who knows the entire market and can save you time and significant dollars in sourcing the right funding that matches y our needs.

Their services tend to be no charge to your firm and solid equpment financing advisors are well known and respected by the industry itself - therefore your transaction is a valued one. In searching for a great advisor spend time testing their market knowledge, contacts, and references.




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 . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :


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

Would Your Firm Pay 20$ to Get $1,000? Why An Accounts Receivable Credit Financing Factor Strategy Makes Sense In Canada

Are Your Financing Costs Too Low? Yes, We Said low!


Information on the cost and benefits of accounts receivable credit financing in Canada and why a Cash Flow Factor Strategy Works .



It's an intriguing proposition and our segue today into a logical (we think) financial decision involving accounts receivable credit financing facilities, commonly known as factor finance in Canada. And who wouldn’t pay 20 to get 1000, but more about that a bit later.

Accounts receivable financing facilities are the sale of one, all, or part of your receivables on a one time or ongoing basis. The industry itself in Canada and the U.S. views the pricing around this sale somewhat differently than our clients. How? Simply because the industry thinks of the sale we have just referenced as a discounted price on the object of the transaction, your receivables.

Customers view it the other way of course, symbolized by the 3 most popular words in finance globally ' whats my rate'! The Canadian accounts receivable credit factor industry has evolved over time as a direct offshoot of the U.S. and European industry. It's clearly evolved a lot more slowly here, but in recent years gained significant traction due to pullbacks in traditional lending by Canadian chartered banks and other institutions.

So how does an accounts receivable factor line of credit differ from bank facilities which margin your receivables? In 2 ways really. First the general focus of any financing of this type revolves around the size, quality and geographical nature of your receivable investment you are looking to finance. Unlike banks that bore down into your financials a factor firm 99% of the time focuses only on the general quality and credit worthiness of your A/R base.

And what about that other 1%. That brings us to our recommended manner of accounts receivable finance in Canada, confidential invoice finance. In that type of facility you are allowed to bill and collect your own receivables without any notice or notification to your customer base. So it’s like bank financing from a facility point of view, except the mechanics are a bit different. Main point - your firm is in control, billing and collecting your A/R.

The second reason A/R finance from an independent non bank finance firm is different from bank business lines of credit bring us to our subject headline today. In Canada the general rate on financing your receivables is in the 2% range. (Sometimes higher, sometimes lower, but it’s a good average). Remember also we spoke of accounts receivable factor finance as a sale of your A/R. So if we take out headline example, a 1000.00 dollar receivable costs you 20.00$. (This assumes your customer pays in 30 days).

So the challenge for Canadian business owners and financial mangers then simply becomes as follows: If you had that 980.00 dollars immediately after you generated a sale and invoice (no waiting) what would you do with the funds?

If you are growing quickly it becomes a very easy decision, pay suppliers, buy more products, negotiate better pricing with new found cash, invest in sales and marketing efforts, etc. We think you get the point.

So, bottom line, 20 will get you 980. Does that make sense for every firm in Canada? The reality is that some of the largest corporations in Canada use this financing mechanism. (Their rate is a bit better as you can imagine!) But if your firm is growing, has challenges, or simply cant access bank credit then this financing concept should be very appealing.

Speak to a trusted, credible, and experienced Canadian business financing advisor who can assist you in evaluating costs and benefits in factor financing in Canada.



AUTHOR: Stan Prokop - www.7parkavenuefinancial



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

Capital For Your Business ? What You Need To Know About Business Loan Financing In Canada

Business Financing In Canada Success Tips

Information on what Canadian business owners should know and expect when looking for capital for business loan financing . Use this knowledge to be successful in business finance challenges .


Many first time clients we meet are struggling with how to get capital for their business. Whether it is a loan financing or an asset monetization type strategy it’s really an age old question that Canadian business owners and financial managers struggle with on an ongoing basis.

Let’s uncover some keys to success for business financing that makes sense for your firm.

Trying to get proper business financing without a crisp business plan, executive summary, and financial history or projection is somewhat of a doomed strategy. Many clients we meet though are more ' entrepreneurial' than financial, so they face challenges in the ability to properly present their needs in a realistic and credible fashion. That also might be why they seem to be more focused on growing and running their business, as opposed to financing it!

We meet many business owners who feel that their lender , be it the bank or a commercial financing company simply doesn’t understand their business .While we agree some bankers and finance lenders might be pre disposed to dislike certain industries you cant assume that’s always the case . They do have an emotional attachment to seeing that your loan or financing is repaid though - that’s where your job becomes much easier.

Canadian financing needs are often for different purposes. In some cases you might be focusing on the government small business loan, in other cases it could be equipment financing via a lease finance strategy. Or you could be considering monetizing certain assets such as receivables, inventory and equipment in asset based lines of credit. The bottom line - position your request directly to the type of lender you are working with.

We see many summaries or business plans that are focused on one of two areas - lenders, or investors. If you are focusing on lenders doesn’t it make sense that your focus should be collateral and cash flow - simply speaking, how you’re financing will be repaid. Clients looking for equity capital or strategic partnerships need to address a myriad of other issues - i.e. revenue growth targets, market success and penetration, etc.

In the case of bankers and commercial finance lenders you can expect some solid discussion around ' number relationships' in your financials or projections. Others call them ratios or covenants; we prefer ' relationships.

So while every plan or summary with respect to financing you require has some common characteristics - i.e. owner bios, history of company, market info, etc you should expect that a banker or commercial financing proposal should include key aspects of debt financing .Those include: collateral issues, cash flow and relationship (ratio) analysis, and personal info on owners of the firm.

Is there one solid way to make a ' connection' with the type of lender you are focusing on? In Canada the types of financing available to entrepreneurs can generally be categorized under the following - traditional bank financing, asset based lending, lease financing, working capital financing, and tax credit financing , government loan financing .

Again, its different financial solutions for different financial challenges. So consider this... that the way to ' connect ' with the financing you need might possibly be to connect with a Canadian business financing advisor who has strong credible and proven experience in the type of financing you need.

Bankers and commercial lenders are clearly going to be a bit more receptive to review a transaction with someone who they have worked with already. So find an advisor who has credibility in the area of financing that you need. A referral by a trusted financing advisor is invaluable.

Remember that banks and commercial finance firms are in business to lend you funds- so knowledgeable and prepared Canadian firms will always get access to the financing they needs. And you our suggested ' people link' via a respected advisor to guarantee successful borrowing.



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 . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/capital_for_business_loan_financing.html