Your Antidote On How To Finance A Franchise Loan In Canada - Secrets of Franchise Financing Companies / Banks

Canadian Franchise Financing Tips and Info


Information on how to finance a franchise in Canada . What do you need to know about franchising companies and banks to successfully complete a loan / financing.




Entrepreneurs searching for their ' antidote ' to the question ' how to finance a franchise ' in Canada seek to unlock the secrets of banks and franchising companies in Canada. We think we have earned the right (via experience) to have learned and now share some of those tips, secrets, and strategies on successful franchise financing in Canada.

You're somewhat close to being successful already when you have chosen to purchase a franchise in Canada, simply because you're buying what is hopefully a proven business model that has a higher probability of success oftentimes than starting your own firm. And it’s a two way deal; because your franchisor needs you to be successful that is how they succeed themselves!

Canada also has solid franchise disclosure rules and regulations, which help protect the investment you are about to finance - and that’s a good thing!

Naturally the goal of your business is to be profitable, so significant care should be done around your investigation into the overall profitability model - remember also that those profits pay back your franchise loan / loans.

To finance a franchise in Canada, successfully, revolves around two key concepts: knowing your start up costs, and being able to assess ongoing working capital needs. The latter is sometimes forgotten or receives less attention, and that’s not good!

Assessing your start up costs and ongoing working capital and cash flow needs involves the financial portion of your business plan. It's not as hard as you think, it’s just a simple case of taking a basic spreadsheet and focusing on the inn’s (your projected sales)... and the outs... your expenses in each category. Those include rent, royalty payments, and a salary draw for yourself, your cost of goods ... etc. At the end of the day it’s highly desirable to have money left, aka ' profit'!

In Canada franchise loans are usually 5-7 year term long; occasionally they might be longer but certainly in our experience 5-7 is the norm.

There is a limited, in fact, only one full service franchising company in Canada that provides financing. They tend to be involved in larger national programs, and can assist with acquisition financing, refinancing of a current location, new builds, and in some cases real state if in fact that’s required. A very heavy focus is placed on traditional cash flow coverage. To non financial people we can simply explain that if your debt is 1 dollar in your business you have to be able to prove or demonstrate cash flow of around 1.25 ( a buffer is created ) to pay back the financing . Transactions from this firm tend to be larger in size.

But what about the hundreds of other firms out there who may not be aligned under such a program? Where do their franchisees go for help? Here is where it’s prudent to talk to two folks; one is a trusted, credible and experienced Canadian business financing advisor who has experience in franchise finance. The other is a guy name ' BILL ‘. Actually, that’s B I L, and it stands for a specialized loan program that perfectly suits what many franchisees are attempting to achieve in a solid franchising loan. It also have very attractive rates, terms an structures that even larger more established firms cant achieve, i.e. lower personal guarantees, no penalty to repay, etc.

So, bottom line. As usual its focus on a franchise model that makes sense and suits your experience. Be prepared for a reasonable equity investment on your part, and seek the services of either a very specialized franchising companies that focus on finance, or, even better, the help of an expert who can package a solution that suits your individual situation. Those are solid antidotes to the ' how to finance a franchise ' question!




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_franchising_companies.html

Forget About A Traditional Finance Loan - Discover Why Canadian ABL Lending & Financing Loans Work.

Change Can Be Good In Canadian Business Financing !


Information on ABL Lending in Canada . Why asset based loan financing is a solid lending solution for a business line of credit finance facility . Asset based loans leverage assets for working capital .




We’re the first to admit ' change ' is one of the most difficult things to cope with sometime, both in our personal lives and in business. Hindsight becomes a great friend, and that’s why we use this analogy in talking today about ABL financing in Canada. When business owners and financial managers discover the true power of asset based lines of credit finance and lending in Canada their first reaction is ' where has this been all my ( business ) life!’

Let's examine some of the key differences, and benefits of asset-based loan financing in Canada, specifically the asset based line of credit revolving working capital facility. It seems simple... and also difficult to realize why this is different than traditional Canadian chartered bank financing. Because it’s simply a business line of credit financing facility secured by inventory and receivables. In many cases both equipment and real estate are added into our ' mix ', leveraging even more assets for working capital purposes.

So why do thousands of business owners utilize ABL loans (they are not loans per se ...more about that later)? The basic answer is that they cannot access this amount and type of credit elsewhere, predominantly at their bank.

So service firms, distribution companies, and companies that manufacture gravitate to this type of cash flow financing for the obvious reason - they can’t get financing elsewhere. In some cases clients have been asked to exit the bank and find themselves in ' Special Loan’ facilities - essentially a holding tank or purgatory for firms that have violated or cant meet bank ratios and covenants.

What size of facilities is available for asset based lines of credit in Canada? Small facilities start in the 250k range based on the overall size of your current assets, predominantly, as we said A/R and inventory. And from there? ABL financing loan facilities go up to the tens of millions of dollars, and some of the largest corporations in Canada have ' forgotten' about traditional bank lending and financing for credit lines, adopting the ABL model instead.

Oh yes... we had mentioned the term ' loans ‘. A true ABL facility is not new debt on our balance sheet; it’s not a term loan, its simply monetizing the current assets in to a revolving line of credit facility, that’s important to understand!

Start up firms in Canada can be financed by ABL lending, as can firms that have significant current operating and financial challenges... the one thing they do have, and need, is ' Assets ' to facilitate the type of lending we are talking about . That’s our other key take away point for clients, that the actual approval of such facilities is not, we repeat ' not ' dependent on balance sheet strength, profitability, or ratios and covenants. Even personal guarantees play a very small part in the approval of ABL facilities, or some of the subsets of this type of finance.

Naturally it helps when you are moving back to profitability via a plan that will work!

Our final point today on ABL loans is simply that it’s all about liquidity. Receivables are typically margined at 90% of your portfolio, and inventory is assessed on an individual basis, often ranging up to 70% in financing leverage.

So should you forgot everything you know about traditional finance business credit lines... maybe not a great idea, but we can assure you that you are missing out if you don’t consider the alternative ! Speak to a trusted, credible and experienced Canadian business financing advisor on the benefits of such a business financing in Canada.



Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com


Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . 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_loans_lending_finance_financing_loan.html

Practical and Surprising Methods for Working Capital And Cash Flow Financing For Operating Funds For Canadian Business Owners

Canadian Business Cash Flow Alternatives


Information on working capital and cash flow solutions for operating funds for Canadian business owners and financial managers.


It should be no secret that SME firms that make up the majority of the Canadian economy face the same challenges as some of our larger corporations. Their ability to manage and successfully solve working capital and operating cash flow issues for business probably seems more daunting due to perceived lack of options and the resources to put those solutions in place.

Let’s examine how to address some of those challenges, and where help might lie.

The flow of funds into and out of your business ultimately determines the cash flow needs. That need is driven out of the requirement for you to run your business, pay your bills, produce products and services, and then wait... and hope?! .. to get paid on time.

One of the dangers of cash flow management and use is that it is tempting to use your working capital for fixed asset purchases. That’s not recommended of course, and it’s more viable to look at other methods of asset finance such as equipment finance or term loans for assets required to run your business. In many cases existing assets can also be refinanced for working capital.

The logical solution for additional cash flow needs is of course a bank line of credit, which you can successfully negotiate if your financial statements and personal finances support that type of facility. In higher growth situations more alternative methods of capital rising can be considered - they include purchase order financing, inventory only finance facilities, or the monetization of your tax credits. These are clear options when banks or other lenders require you to put in additional funds into your firm that may not be available from your personal resources. We definitely are always urging clients to try and separate their personal finances from their business assets as that just seems common sense to us... isnt it one of the reasons incorporation exists in the first place?

We encourage business owners and financial mangers to obtain asset financing for their business. As noted, this can come from the alternative sources we mentioned, which also might include receivable financing outside the bank, a true asset based lending facility that monetizes A/R, inventory and equipment into a revolving line of credit, etc. These sort of facilities work perfectly if your firm can’t meet the stringent requirements of traditional cash flow covenants. Banks and institutional cash flow lenders thoroughly investigate your firm’s ability to make payments via ratios and covenants that identify cash flow coverage and debt to equity ratios. If you can meet them... great... if you can’t... consider our alternatives .

Always focus on breaking down short term and long term needs. Short term really focuses solely around your A/R and inventory build up while long term debt is repaid via regular term payments over a long period of time

Our asset based line of credit solution that we referred to above is the optimal solution for asset based working capital and cash flow finance. Receivables are finance dup to 90% of your total A/R, and if your inventory can be fairly easily solid it can also be margined.

If your company is a bit larger towards the high end of the SME sector there are some great hybrid solutions such as mezzanine and subordinated debt solutions. You pay a higher rate for this type of financing, typically in the teens, from a rate point of view, but it is ultimately cheaper than selling permanent equity, particularly if you are bullish on your long term prospects.

Oh, and by the way, the most common sense solution to working capital and cash flow is simply prudent management of those current assets. Keep your profits in your firm, negotiate better terms with suppliers, and strive on a daily basis to reduce A/R and inventory levels. You've just become the savior of your own firm!

Speak to a trusted, credible and experienced Canadian business financing advisor on operating working capital and cash flow solutions for your business - there are more alternatives than you might be aware of!




ABOUT THE AUTHOR - STAN PROKOP

7 PARK AVENUE FINANCIAL

CANADIAN BUSINESS FINANCING !


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

Understanding And Getting Good Equipment Financing Rates In Canada – Don’t Get Fooled By The Lease Interest Rate Game!

The Real Deal On Canadian Lease Finance Rates and Calculations !



Information on equipment financing rates in the Canadian lease finance industry . What you need to know about your lease interest rate when financing equipment and other assets in Canada .



‘Won’t get fooled Again” ... wasn't that a great classic rock song by ' The Who '. It also might be a different sort of battle cry by Canadian business owners and financial managers who want to better understand equipment financing rates when financing assets in Canada. The ever elusive ' whats my lease interest rate ' will now be examined!

The actual rate in an equpment lease in Canada is determined by several factors. Knowing how it’s presented into your deal structure is critical. The actual cash flows that you pay out in the lease, and their timing also plays a key factor in who wins and who loses when it comes to yourself and your equipment lender . Oh, and by the way, we're on your side if you're a Canadian borrower in lease financing - although we recognize the need of course to for the lessor to make a reasonable profit.

In some cases it is of course important to assess the final rate impact of on some miscellaneous charges that you might incur to get a transaction completed. Things such as miscellaneous admin fees, legal fees, and even an appraisal if that is required can of course add up and impact that all important final lease rate .

In Canada we tend to keep things simple. Unlike the U.S. our two basic lease offerings are the full payout lease to own capital lease, as well as the lease to use, or operating lease, also called the Fair Market Value lease. Equipment financing rates differ significantly on those two transactions.

The easiest to understand transaction when it comes to equipment financing rates is the capital lease transaction. It has only 5 elements, term of the lease, interest rate, dollar size of your deal, monthly payment, and end of lease obligation or payment. If you can determine the other 4 you can very quickly and properly assess what your lessors requested final interest rate is. That’s done most efficiently with a financial calculator of course.

The operating lease is a little bit of a different beast when it comes to rate. We can actually make a case that you might never be able to figure out the lease interest rate on a fair market value lease. Why is that? Didn’t we say the interest rate calc was quite simple? Well, the reality is that in an operating lease transaction the lessor makes a decision to invest some of their own funds into your transaction. You won’t necessarily be told what that amount is, so it affects the amount being financing - in effect they have made a down payment for you on the deal.

The good news is that the operating lease transaction will always be a lower payment, and if you run the numbers sometime you might find that the interest rate might even be negative! Again, that’s simply because the down payment has been made for you.

But, as in all things in life, its pay me now or pay me later, because in FMV transaction your obligation is to return or purchase the asset at the end of the lease term.

Another nuance, often missed by Canadian borrowers, is to enquire if your payments are being calculated in arrears or in advance. You can understand that by using the analogy about how people pay their rents and mortgages - both are calculated differently.

Timing of cash flows is also critical in lease interest rate calculations. Adjusting payments to reflect perhaps quarterly or annual payments by your firm dramatically changes the lessors yield, or profit on the transaction.

Naturally all lease interest rates are driven by your over all credit quality. The better shape your firm is in financially allows you to negotiate a much better rate. The lessor borrows funds and marks them up depending on your firms credit quality and the size and nature of the asset.

So, our bottom line today? A lot of different factors go into equipment financing rates. They can dramatically affect the final outcome of your lease from a cost perspective. Consider talking to a trusted, credible and experienced Canadian business financing advisor on achieving the best equipment financing rates in Canada. Or as the song says... 'Won’t get fooled again'!




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_financing_rates_lease_interest_rate.html

Who Is Providing Sale Of Receivables Financing In Canada? Why Factoring Financial Funding Works !

Choosing the Best A/R Finance Partner ?



Information on who is offering sale of receivables funding in Canada and why factoring is a financial funding strategy that can work for your firm to enhance working capital and cash flow .





Hundreds, probably thousands of Canadian businesses are gravitating everyday to newer types of business financing in Canada. One of those is the sale of receivables as a financial funding tool. Otherwise known as receivable finance, or factoring, or invoice discounting ... the bottom line is that you want to know more about this form of business finance, and who is offering it. Similar to many situations we encounter in our personal and business lives it’s important to ensure you have assessed the proper information when making a major financial decision.


Cash flow shortages, fortunately or unfortunately, are an everyday fact of Canadian business. The typical first reaction of the Canadian business owner and financial manager is to turn thoughts to ' loans ‘... or ' the bank '. While those two ' alternatives', if we can call them that might be achievable the reality is that in many cases these solutions are limited, non existent, or not available to you based on your firms current financial position.

Enter sale of receivables financing! By utilizing an invoice discounting strategy you generate immediate cash for your firm. Yes, there are some technical nuances to this type of financing, but one you have those under your belt you have achieved a major business milestone - the freeing up of working capital! That new capital allows you to in most cases to invest in additional inventory and finance ongoing sales without the pressures of a cash flow shortage.

Let's get one key point out in the open right away - and that’s simply that we're keenly aware that the cost of this type of financing often is, rightly or wrongly foremost in our clients minds. The actual cost of factoring and financial funding in this manner is definitely higher than bank or term loan financing of a traditional sense.

First of all, the factoring industry is not regulated per se, that's what it's necessary to pick the right partner firm. Ensuring you get a competitive rate is critical, and even more critical is to ensure you are embarking on this type of business financing for the right reasons. And those reasons? They are growth, survival, expansion, etc. It’s important to also remember that this type of financing is viewed more often than not as a ' bridge' back to traditional financing.

So, the right partner. It's critical. The key factors that will allow you to get the best rate and day to day functionality of this type of financing are the size of your monthly a/r portfolio, its general quality, the actual size of the invoices themselves, as well as the amount of customers - i.e. a few large customers with large balances, or many customers with smaller balances. Those are driving factors in who you deal with and final approval. The best A/R financing rates in Canada tend to be in the 1.5 - 2% range per month - and proper utilization of these funds can reduce that cost significantly, almost getting you close to bank rates in select cases.

In Canada a variety of firms offer this type of service. Our recommendation to clients is to work with firms who offer confidential receivable financing, this sets you immediately apart from firms who offer such financing but impose the condition of notice to your clients on a one of or on going basis.

Common sense business fundamentals apply to this or any other business finance decision you make. Work with a trusted, credible and experienced Canadian business financing advisor who can assist you in partnering with the right firm, at competitive pricing, and under a facility which allows you achieve benefits with control of billing and collections still maintained by yourself.


ABOUT THE AUTHOR - STAN PROKOP - 7 PARK AVENUE FINANCIAL

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

Financing Equipment For Your Business? Canadian Leasing Options Demystified !

It’s Not Always About The Monthly Payment !


Information on financing equipment in Canada. Which leasing option is best for your business. Examining Finance alternatives for Canadian business owners who are acquiring assets.



Acquiring assets for your business, from plant equipment to the latest computing technology provides Canadian business owners and financial managers with growth and profit potential. But how much time do you spend on assessing the right business leasing options when financing equipment.

Let's examine the strengths, benefits, and yes, sometime drawbacks on your lease financing options.

We're of course assuming that you conquered the lease vs. buy decision and focused on leasing business assets for the obvious reasons we've discussed in the past: monthly payment flexibility, accessing business credit outside your established bank and other facilities, and using tax and accounting scenarios to your business advantage.

So that puts you there, at the fork in the road so to speak. Namely which type of business financing equipment lease works best, for you. It's actually not a large choice... it comes down to a capital lease or an operating lease. Understanding the make up of those two transactions makes you a winner when it comes to choosing which option works best for your firm.

Let's examine Capital Lease structures... and benefits. Prior to choosing a capital lease option you have a general sense that you wish to own the asset at the end of the lease term. The capital lease, aka ' lease to own ‘effectively transfers ownership to you at the end of the lease term. Hopefully you have picked the right term on your lease, matching use of the asset to a proper amortization. In Canada that typically is 2-5 years, sometimes longer depending on the asset type.

From an accounting perspective, since you have elected the lease to own strategy via a capital lease you are no win a position to both depreciate the asset as well as record it as an asset on your balance sheet. The equipment financing industry in Canada considers full payment of the rentals, i.e. the monthly payment as the full recovery of their cost plus profit, i.e. the interest rate on your lease.

As an aside clients are always asking us about rates on business equipment leasing. Rates vary widely in Canada. How widely? Anywhere from 5 - 25% per annum and boy is that a range. Clients are astounded when we advise them they get to pick their own rate! How can that be possible? Simply because your over all credit quality and the dollar size and type of asset dictates lease pricing. You have got to simply demonstrate that credit quality or address any concerns of the lessor.

But wait... didn’t we say there were two options for financing equipment. The other option is the FMV option, known as the operating lease. Payments will always be lower than a capital lease option, simply for one reason. That’s because the operating lease scenario assumes the opposite of ownership, and that’s ' use '. You want to use an asset, not acquire the responsibility, and risk, of ownership. The good news is that if it turns out you wish to purchase the asset that a properly constructed FMV lease will allow you to still exercise that right, at a fair price.

Confused about the right business leasing options available in Canada? Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in freeing up working capital and maximizing tax and accounting treatments for business asset finance in Canada.



ABOUT THE AUTHOR : STAN PROKOP - 7 Park Avenue Financial


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

Which Equipment Leasing And Lease Finance Options Suits Your Firm For Canadian Asset Financing? Does a Loan Make Sense?

Make The Right Asset Acquisition Decision

Information on equipment leasing in Canada . Canadian business owners have two lease finance choices when utilizing asset financing lease and loan strategies .




Did you hear the one about the Canadian business owner and financial manager who couldn't make a decision when it came to equipment leasing and lease finance options. Actually, we're quite sure that same conundrum faces hundreds, perhaps thousands of business owners in Canada when it comes to selecting an asset financing strategy that works... especially for their needs.

Let's examine some of those options and help you out in two clear phases of business financing decisions - the lease or buy decision, and of course picking the right lease finance option if in fact you have made that decision to move forward with one of Canada's most popular financing strategies.

So, lease..? Buy? Which one works for you? A good rule of thumb is to first consider what we can call the useful life of the asset when facing that decision. An even better rule of thumb is to think of purchasing outright if you have a strong level of confidence that the asset will last beyond a typical financing term. In Canada equipment leasing terms, (aka amortizations) are typically 2 to 5 years. (Make that 20 years if you are purchasing a corporate jet, but that isn’t really an everyday purchase!)

So that’s the ' buy ' decision. What factors can impact your decision to purse a lease finance strategy. Here our rule again is somewhat common sense oriented (we love common sense). If you think you wont use the equipment for the after a typical financing term, or if you think it might needed to have an upgrade or an add on then certainly consider an asset financing option via equipment finance leases.

Naturally there are advantages to each of our two lease and buy options. Let’s examine buying first. Purchase decisions, if done via a loan option, typically have blended payments of principal and interest and are simply spread over the life of a loan.

Although loan financing can in some cases be on a 100% basis you typically might be expected to make a down payment, in certain cases sizeable. That down payment of course lowers your monthly loan payment amount. Purchasing an asset outright, or using a term loan keeps the asset on your balance sheet, enhancing your overall fixed asset based. In many cases you can take advantage of depreciation and tax scenarios to enhance the ownership of an asset.

Lease financing. The benefits are somewhat ' classic ' in nature. In the majority of cases the asset is 100% financeable, with down payments being minimal. You have just completed a great obsolescence hedge, especially when acquiring tech type assets - think computers, servers, cloud financing, etc.
Don’t let the lease or buy decision confuse your asset acquisition strategies. Speak to a trusted credible and experience Canadian business financing advisor who can assist you with your business finance needs.




About the Author: Stan Prokop - 7 Park Avenue Financial


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