Starved For Cash ? Dying For Business Loan Debt Financing Or Working Capital Solutions ?

Is Your Business Growing – Need Funding ? What’s The Best Solution


Information on working capital and debt financing for Canadian business owners . What type of business loan or asset monetization makes sense for your firm, and why.





At one point or another all business owners and financials managers find they have to focus on either working capital or debt financing business loan type solutions for the growth or perhaps even the survival of their firm.

The ' go to ' solution seems intuitively always to consider additional debt for the company - part of the reason is that the leverage that business loans via debt provide and pay off in higher returns on equity . Larger firms consider this as a potential means to obtain a higher valuation.

But is debt always the way to go ... not necessarily as there can be some troubling side effects for the starving patient! Working capital and debt financing are of course, when considered as a whole, the alternative to raising additional equity, bringing in a partner, having to consider the sale of your firm, etc.

So is there ways to consider ' sensible' business financing that actually make sense to the business owner of financial managers of a firm? We think there are.

Certainly there is nothing wrong with debt per se... It’s just that we hope in business that its ' good debt '. Business people recognize that as debt grows on your balance sheet (and assuming you can make the payments) your return on equity increases considerably. That’s a good thing! Higher sales will increase profits under that strategy. But again, at the end of the day it’s all about not pushing your firm to the brink with that increased debt.

The challenge also is that when firms use debt in an aggressive fashion they often have challenges in raising funding quickly, at rates that make sense and they are deserving of. At the extreme end of the curve debt will of course force a company to miss out on lost opportunities, competitors also seem to have a keen knack of sensing your weaknesses!... and in general day to day operating is often affected by the focus on debt repayments .

So are there some key management points and techniques to asses whether you should be taking on more debt. Here are some issues to consider.

Look at your financing needs from a longer term perspective; that’s often difficult to do and disregarded by many. Look at it from the viewpoint of can you defer financing additional debt without missing out on opportunities for growth.

At the same time, are you aware of the types of debt financing that might work for your firm. In Canada that consists of term loans, asset financing, cash flow loans, and other subordinated debt scenarios. Ensure you are comfortable with the rates and structures of each type of financing - more importantly from a time wasting point of view ensure you are aware of the requirements that each type of lender has for all those different debt scenarios.

This is of course the time to do some keen financial planning around your ability to meet any debt payments - and it’s a good time to consider worst case scenarios of not being able to make payments.

When debt financing isn’t the answer a working capital solution often can work. That could involve monetization of current assets via an asset based line of credit, receivable financing, securitization, or financing of tax credits or an asset sale leaseback for working capital purposes.

The best time to address finance needs is often when things are going well for your firm; consider speaking to a trusted credible and experienced Canadian business financing advisor who can assist you in business loan or working capital 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 . 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/working_capital_business_loan_debt_financing.html

How to Successfully Avoid 6 Risks in Business Equipment Leasing in Canada – Make Lease Financing Work!

Managing Risk in Equipment Financing For Canadian Business Owners and Managers


Information on how to successfully work through and manage 6 potentially overlooked risks in business equipment leasing and lease financing in Canada .




It's not always just about the benefits of adopting a business strategy such as business equipment leasing and lease financing... sometimes it is about ensuring no undue risks are also taken.

So let’s examine 6 risks that Canadian business owners and financial managers can manage if properly understood at the outset of any lease transaction.

First of all it’s always great to understand that leasing equpment is all about two things, your rights and your obligations. Your ability to assess those at the start of your transaction is critical.

Our first risk management issue is the concept of addressing the end value of your asset at the end of the term. While most business equipment leasing in Canada is done on 3 -5 years terms shorter terms are possible (generally 2 years is the shortest) and assets that have long economic lives are often lease for in excess of the 5 year norm. If you are entering into an operating lease you must clearly understand that you have the obligation to return, buy, or re - lease the asset at the end of term.

That’s when knowing the potential value of the asset is important. If in fact you feel it has value why pass that value on to your finance partner without some sort of participation or negotiated benefit to your firm. In fact many leasing companies make a tremendous amount of profit by placing bets on the value to you, of the asset, at the end of the lease term. So make sure it’s an equal fight, so to speak. Discuss things such as early buyout or fixing a price at the end of the lease term that is mutually acceptable to both parties.

Our second issue on risk avoidance is the concept of maintaining your asset. While some assets, perhaps such as computers for example require little maintenance many other assets (think plant machinery or rolling stock) require some level of care. Lessors recognize this and often, if not always, write this into the lease. So understand your maintenance obligations.

It’s a ' taxing ' matter. Taxes! That’s our third risk element. Ensure that you and your management or financial team understands all the correct depreciation and tax issues surrounding your lease transaction. This is clearly a time, especially on larger transactions to invest a bit of time in speaking to your accountant or tax expert .The many benefits of equipment financing can sometimes be swept away by your inability to properly address tax, deprecation, how you account for the lease, etc.

Our fourth issue is the concept of upgrading during or at the end of term. Understand here that lessors are incented to keep leasing you assets in Canadian lease financing. Understand your upgrade options at the start of your transaction, and ensure they are properly document in your lease, whether it’s a capital or an operating lease transaction.

Our 5th risk avoidance tip is to properly reflect on indemnification. If any sort of indemnification is required in your lease ensure it is within reasonable risk and control. Issues such as title, transfer, operation of the asset should all be properly documented to your satisfaction

Our final item is in fact the insurance issues revolving around your lease. Ensure you insure am I guessing what we are trying to say, allowing for your insurance firm to cover the risk of any loss, damage or theft to your assets. In fact most lessors, who are in effect purchasing the asset for you and ‘renting’ it back to you, actually require you to provide a certificate of insurance on your transaction.

So, is there a bottom line? As always there is in business, and in this case it’s simply to view each business equipment leasing and lease financing transaction you undertake not only from a benefits point of view but from a risk avoidance perspective. Speak to a trusted, credible and experienced Canadian business financing advisor for additional assistance.



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_equipment_leasing_lease_financing.html

# 2 And Trying Harder ! Why Canadian Business Accounts Receivable Financing Is Your Cash Flow Solution

Why Canada’s 2nd Alternative To Cash Flow Financing Just Got Better

Information on Canadian business accounts receivable financing . Why a confidential A/R finance strategy is a solution to cash flow and growth challenges .




We probably all remember the car rental company commercial... they were ‘ # 2 and trying harder ' ... that certainly could describe business accounts receivable financing in Canada - your company's 2nd alternative to cash flow financing after the bank.

So why is # 2 and trying harder gaining so much momentum from Canadian business owners and financial managers? Its pretty simple, it becomes the de facto alternative for businesses that can't achieve the financing they need from what the industry terms ' traditional sources '.

So let’s examine some key basics around how the financing works, and also let’s differentiate it from bank working capital financing... the proverbial business line of credit.

What drives an approval and the ongoing operation of a bank line of credit that is collateralized by your receivables? Of course it’s the size of your A/R base, but at the same time other key factors must come into play. The onus is on your firm to show profitability, debt and equity ratios that work for the bank, as well as more often than not emphasis on personal guarantees and even outside collateral.

However, business accounts receivable financing (aka ' invoice discounting ' ' factoring’) focuses solely on one thing - your receivables. The size of your A/R as well as its general quality essentially determines the size of your new accounts receivable financing facility.

The second key difference in comparing the two is that the bank in effect collateralizes your receivables by registering a security agreement against them. They are in effect ' assigned ' to the bank in the event of a default by your firm.

Business receivable financing however works differently, and that’s quite often mis understood by many Canadian business owners and financial mangers. Under this process you derive cash flow, on a daily basis if you choose, by selling your receivables to the finance firm, in whole, or in part, on an ongoing basis.

That A/R is sold at a discounted price, which in effect becomes your financing fee. (Many customers view this as the interest rate - the industry views it as a discounted purchase from you at a pre determine rate, usually 2-3% per month. So we can also make the statement that the a/r financing process, non bank in nature is a three way agreement, its between yourself, your customer, and your a/r finance partner firm .

Because Canadian banks are highly regulated and generally risk averse they cannot provide the amount of financing that thousands of small to medium sized firms need for working capital. But since the business A/R financing firm is focusing solely on the assets, i.e. your A/R, they can generally advance up to 90% of all your A/R at any given time. So, bottom line, your company doesn’t have to have the capital structure that is required for traditional Canadian chartered bank financing.

In many cases clients are please to hear that their inventory can also be combined into a one stop revolving credit facility by your non bank partner firm. This provides a revolving line of credit with much more liquidity than your firm may have experienced in the past - bottom line - more access to cash flow and day to day working capital for operations and growth.

Clients are generally mystified by the number of firms out there that offer this financing, what they charge, how they work on a daily basis, etc. We recommend they consider a confidential invoice financing facility, one that allows them to bill and collect their own receivables without any third party knowledge, including your customers! Speak to a trusted, credible and experienced Canadian business financing advisor on how business A/R financing can enhance your company’s cash flow 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 . 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_accounts_receivable_financing_cash_flow.html

The Ten Advantages Of Using Canadian Business Equipment Leasing Companies For Commercial Asset Financing

What Are The Key Benefits Of Lease Financing & Funding For Canadian Business ?


Information on Canadian business equipment leasing companies and the advantages and benefits of commercial equipment funding and financing strategies.



One of favorite U.S. Business equipment leasing publications recently published a ' TOP TEN ‘advantages of leasing finance. But hey, isn’t this Canada? So we thought we'd address those top ten advantages in terms of the Canadian perspective of commercial leasing companies that provide Canadian owners and business financial managers with hundreds of millions of dollars in asset finance.

So let’s try and ' Canadianize ' those advantages in terms of business leasing in Canada. Here we go.

#1 - Cash - You'd prefer to keep it, but unfortunately you need to spend in on new or upgraded assets to your business. And that includes everything from plant assets to new computing power. Utilizing lease financing lowers your cash outflow and often lowers the requirement that other lenders such a as a bank might demand for you with respect to additional equity in the transaction.

# 2- Cash flow management - Many Canadian business owners and managers don’t often realize the flexibility they have in structuring a transaction with respect to the tax aspects of the lease, as well as your ability to structure seasonal, quarterly, or some other form of payment structure that makes sense for... you guessed it, your firm.

# 3 Your ability to decrease financing costs with commercial equipment leasing allows you to utilize those savings for other things - a good example is your potential new found ability to take discounts on vendor payments to your valued suppliers . Using cash to take 2%10 type discounts could save you thousands of dollars every year, depending on the size of course of your company .

4. Our U.S. example that we are referring to listed ‘bank hassles’ as another great reason to consider lease asset financing. We're certainly not sure that going to a Canadian bank is really a ' hassle ' but we are the first to admit that many of our clients can meet stricter bank credit covenants and criteria - As a result Canadian business owners and their financial managers find that there are hundreds of aggressive lease finance firms who actively solicit their asset financing business - And that’s a good thing!

#5 - Leasing productive assets improves productivity and can assist in lowering general overhead costs. Although technology investments in plant, rolling stock, software (yes, software can be fully financed!) and computing can be huge competitive drivers in your business.

# 6 - Leasing epitomizes your ability to upgrade and be flexible and acquiring assets. Using such strategies as an operating lease allows you the benefit to return, upgrade, and purchase or extend key assets in your business.

#7 - Debt may be expensive, but anyone will tell you equity is even more expensive. Leasing assets can often help you avoid equity dilution in considerations such as bring in other ownership capital or partners in the business?

#8 We’ve observed that many small and medium sized businesses finance their businesses in part by business credit cards and small lines of credit. Utilizing asset lease finance allows you to keep those arrangements intact and current.

#9 There are a number of significant depreciation and tax benefits that Canadian accounting allows when you consider business equipment leasing companies for your commercial asset needs.

# 10 - It works - most of our clients have determined that their bank won’t lease the assets they need to run and grow their business. It’s easier to apply for and in many cases vendors and distributors offer preferred financing for customer choosing to utilize commercial lease strategies.

So there you have it, our Canadian TOP TEN ADVANTAGES of equipment leasing in Canada, with due respect to our U.S. counterparts. Want to maximize on any or all of these advantages? Speak to a trusted, credible an experienced Canadian business financing advisor who can help you with commercial lease financing.



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

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