Does Your Canadian Company Have A Serious Asset Finance Loan Or Leasing Strategy ? You Need One!

Canadian Lease and Loan Options For Equipment Make Sense!


Information on the importance of an asset finance and leasing strategy for Canadian business . Considerations for equipment loans and leases in Canada




An Asset Finance Leasing and Loan Strategy ? Most Canadian business owners and financial managers realize they can either purchase fixed assets out of equity, or finance those same assets on a long term lease.


Business owners need to focus heavily on the use of the asset. Any company that acquires assets has either a long term view of the asset or a short term view. Lease financing is an excellent method of financing long term assets.

From the company perspective a long term lease on the asset - typically 3-5 years, and sometimes longer, is simply a method of purchasing the equipment via a ' loan '. The company simply decides on which asset or assets they wish to acquire, and then negotiates a price with the vendor or manufacturer. Typically the company is either dealing with the vendor/mfr. or the captive finance firm related to that manufacturer.

Business owners are barraged with claims that ' leasing provides 100% financing ' or that it ' conserves capital '. More sophisticated business owners and financial executives know that long term leasing is in fact a solid mechanism for tax avoidance. Some people maintain that if corporate taxes disappeared long term leasing would disappear!
When a firm arranges leasing it of course uses the equipment, and makes fixed payments on that equipment. Business owners focus more often than not on ' using equipment ', not owning equipment. The user can though structure leases allowing them to purchase the equipment at end of term.

If a customer does not wish to acquire assets over a long length of time, and if those assets have a shorter useful economic life than a firm should consider an ' operating lease '. The company has the right to cancel the lease at the end of term, return the asset, etc. In long term asset financing the transaction cannot be cancelled.

If a firm utilized a purchase strategy for long term assets then the funds for those purchases come from equity shareholders. The company uses the asset, and it owns the asset. Many customers have a philosophy of ' pride of ownership ' and have long term histories of acquiring assets under a purchase strategy. If the company is properly funded this is of course an entirely viable option.

We would point out further that if the financial markets were ' perfect ' ( they are not!) the advantages of leasing would diminish. In that case the company would not have to consider legal costs, brokerage costs, and other miscellaneous fees. Leasing matters because there are no perfect markets - advantages gained by the lessee are at the expense of the lessor, and each company has a unique credit and risk profile.

In summary, each company has a unique financial structure and acquisition philosophy around financing and asset acquisition. Owners and managers must consider the optimal financing strategy for long term assets that best suits overall corporate needs.

Speak to a trusted, credible and experienced Canadian business financing advisor on your asset finance and lease strategy .




Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

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

Is Your Company Properly Exploiting Equipment Lease Financing In Canada ?

Equipment Finance In Canada is NOT an ultra secret project!


Information on equipment lease financing in Canada . Use these tips to exploit asset finance.




We previously wrote on some of the challenges that Canadian business owners and financial managers face in getting successful lease equipment financing in place for their assets and capital expenditures. The current difficult economic environment makes it more challenging than every for Canadian business owners to get the proper rate, terms, and structure that they deserve.
Success lease equipment financing requires a working knowledge of what the lessor is looking for in a transaction.

Owners can safely assume that the lender is doing significant work on financial statement analysis to satisfy them they are making a proper financing decision with you firm. Included in this analysis is strong emphasis on cash flow history and projections, operating efficiencies of your firm as measure by industry accepted ratios, and balance sheet analysis with respect to the amount of debt your firm is carrying, etc.


In our previous article we suggested that business owners should be aware of some key 'structuring options 'that lenders use when they are contemplating an approval that they are not 100% comfortable with. These options, previously discussed were:

- Utilizing higher rates to compensate for risk

- Use of Security Deposits

- Use of advance payments

- Structuring higher payments in the earlier years of the lease

- Shortening the lease term to offset long term risk

Business owners should be aware of some additional enhancements that can further a financing approval when your firm might not fully qualify for your desired amount of financing and overall structure.

Let's looks at some of those additional enhancements that compliment the 5 areas we have noted above.
Business owners who are not familiar with some of these financial nuances should employ the use of a trusted leasing advisor with credible experience, thereby significantly increasing their chances of getting a lease financing approved.

Business owners might not always be comfortable with providing a Personal Guarantee on the transaction; however personal guarantees are a clear fact of life in the Canadian business financing environment. The logic of the lender, in this case your equipment lessor, is that you are more motivated to make those payments if you are personally obligated in the matter also. Naturally companies incorporate to avoid personal liability but business owners are often called upon by lenders, lessor, etc to provide a guarantee. It goes without saying that the lender will also want to validate the quality of your personal guarantee.

In many cases you as a borrower, or the lender might request, additional collateral on the transaction. This would be collateral that is currently unencumbered, but in effect shores up the lessors overall position, allowing your transaction to be approved. In many cases you will be required to provide some form of documentation (usually an appraisal) of the additional asst.
In some circumstances an effective additional collateral might be credit life insurance on the transaction - in a smaller of mediums sized Canadian firm the lender / lessor may rely on that insurance in the event something happens to the owner, that something being ' death ' of course!

Not all Canadian business owners know that in some cases the manufacturer that you may be purchasing and financing the equipment through is in some cases agreeable to providing a limited or partial guarantee on your transaction. They are making a sale, generate profits from the sale to your firm, and may be able to remarket the asset if the lessor requests assistance in this area.

Finally, in some cases your lessor may request a letter of credit or Certificate of Cash deposit as additional collateral. In the authors experience this is rare, as your firm traditionally would note want to encumber cash in such a manner.
So what's our bottom line? It is simply that lease financing can be a challenge, but if you work with a lessor to offer up and co operate on some manner of structuring, as outlined above, then your chances of successfully getting a lease financing approval increase immensely!







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/lease_equipment_financing_canada.html

You Need More Than A Franchisee Business Plan When Financing a Franchise In Canada !

Canadian Franchising Loans And Finance


Information on financing a franchise in Canada . The Franchisee Business Plan is important, but there is more you need to know!




Purchasing and financing a franchise in Canada. Of course you do in fact need a franchisee business plan to support that transaction, but it's safe to say you need to cover off a lot of the other basics also. Let's examine how your business plan works within your overall finance strategy to successfully complete a franchise purchase in Canada. Oh, and by the way, that covers both a new purchase as well as buying an existing franchise from a current owner, in effect a ' resale '.

It is safe to say that many ' non financial' oriented people find the basic request for a business plan somewhat of a challenge. How much time do they need to spend on such a document, and is there a perfect format that might guarantee a greater chance of purchase and financing success?

While we're quite confident that almost everyone these days can prepare some sort of business plan (it could almost even be a strong executive summary) the reality is that if you omit some of the basics the lender is looking for your overall purchase might in fact be temporarily at risk. That's not a good thing.

A good way to look at a franchisee business plan is to simply view it as a sort of ' blueprint' or ' road map ' to franchising success. We remind clients that down the road you can go back to the document and use it as a benchmark for how you are in fact doing financially, as opposed to what you expected to do!

The other aspect of a business plan is a pretty fundamental one - it makes you think! By working your way through a plan it forces you to address certain issues you may not have considered. Things like profits, cash flow, debt repayment ability, etc.

There is no one perfect document that makes a franchise business plan. The basics are fairly common sense - it describes yourself, your proposed new franchise, it outlines management and staff, and provides a basic description of the industry and business model you have chosen to be a franchisee in.

Typically you are preparing your business plan for a franchise lender, although we have seen in some cases that the franchisor itself asks you to present your plan in the context of purchasing their franchise. We would suspect they want to see if you know what you are doing!!

The franchisee business plan is certainly key in respect to assessment of the document by your lender. A good advisor, banker, lender etc will typically work with you to point out any deficiencies in the plan.

Typically the financial portion of your plan comes from specific or general information you have received from your franchisor on revenue, profits, and potential challenges.

Canada's CSBF/BIL program is one of the largest, if not the largest facilitator of franchise loans in Canada. That loan, in combination with your own equity or investment can successful complete any franchise financing within the 350k cap of the program. It can benefit you because in effect the government becomes your co-signer on the loan, guaranteeing to your financial institution a large part of the loan.

We would point out that you can have the perfect franchise picked, complete a solid business plan, and still encounter financing challenges simply because you are working with the wrong people. You want to ensure that you are working with a franchise funding or banking expert that will significantly fast track your success.

So, you do in fact need a solid business plan for your franchise, but working with the right team, and using your plan as a road map for success is a great working strategy. Speak to a trusted, credible and experienced Canadian business financing advisor to round out your chances of finance success.





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/financing_a_franchise_franchisee_business_plan.html

ABL Asset based lending just might be the solution you are looking for in Canadian Business Financing



Information on an abl asset finance company business line of credit for your firms revolving credit facility needs . Leverage business assets for liquidity



Can an ABL asset based finance company, via a new business line of credit make your transition from financing pain to financing power? We think there is a strong case for that, and here's why.

Thousands of companies in Canada find themselves constantly challenge when it comes to ensuring their company has the right financing in place to both survive and grow .

For the small and medium sized business owners and financial managers in Canada there are some serious issues on the table: the jobs of employees, the value of the asset base in your company, and the ability to at a certain point in time to transition that business to a family member or third party.

Management therefore needs to realize that any turnaround in the business often will revolve around their own commitment to explore new types of financing that will in effect turn that ' pain’ into ' power'.

Financial challenges and problems require that they be identified early. There are a number of tell tale signs of trouble in your firm that often might be clear, or not so obvious. They include pressure from your bank on your operating line, financial losses that will ultimately link back to cash flow problems, pressure from other competitors in your sales environment, and sometimes issues you could never control such as new market forces.

The business line of credit, whether it's via a bank or an ABL asset finance company is often a key driver in your transition from pain to power. If your firm currently has a Canadian chartered bank line of credit you are subject to certain restrictions.

This facility is ultra dependent on a large number of key factors such as profit, operating performance which is measure via ratios and covenants, and your availability to provide collateral inside and outside the business. And personal guarantees as most Canadian businesses know are key to a long term bank relationship in many instances,

Canadian businesses are often in the position of having their business lines of credit are somewhat of a scapegoat for short term losses and a trend to unprofitability.

So if your firm finds itself in a downward or negative spiral what’s the solution? As we said a solid one might just well be a non bank business line of credit from a commercial ABL asset finance company.

But why can such a facility save your company, turn it around, and ensure that pain to power transition. We would offer up that it’s simply a case of the ABL firm taking a sign cant amount of more risk with your business. That risk though is somewhat measured from their point of view, as they focus predominantly on your overall asset base.

So you new ABL term sheet takes all your receivable, inventory, equipment, and in some cases real estate and rolls it up into one new large revolving credit facility It goes without saying that your firm must have good records and controls, and reporting capability, but at the end of the day the ' power ‘as opposed to the ' pain’ is now in sight.

When the business owner considers that ABL typically provides 85-90% lending against A/R, 30-70% on inventory, and then throws in an equipment component also... well... you get the drill - your firm has just reached a higher level of liquidity.

This new facility will, as time goes on, repair your company. Pressure from trade creditors will subside, you can take advantage of new growth opportunities, and sales can be back on track to grow.

You achieve this new higher level of borrowing by being able to supply regular on going info on your assets, and in most cases you'll be subject to a quarterly, semi annual or annual visit from your ABL lender.

If a turnaround in your financing fortunes is required you just may have discovered it. Consider speaking to a credible, experienced and trusted Canadian business financing advisor on you can successfully reverse your business challenges.






Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

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

Exploit Your Business Cash Flow Problem ! Financing Your Balance Sheet

Do You Know How To Mine Your Financials For Cash?


Information on solving a business cash flow problem and implementing financing for the Canadian balance sheet



Your business cash flow problem. A lot of times it can be avoided and or fixed by examining your balance sheet and implementing solutions either traditional or alternative that address that problem and challenge.

Canadian business owners and financial managers have a tendency to always look at their income statement, not the balance sheet. We suppose it’s the entrepreneur in them that drives that focus - the idea of generating more sales and lowering or maintaining their costs. That sales number in effect becomes their ' business scorecard, one that seems easily measured and one that facilitates compensation, and egos!

But when you business is all of a sudden facing a business cash flow problem all of a sudden those assets on the balance sheet will often be your only savior , if managed and financed properly . When you understand how to manage and scorecard those balance sheet assets you're going to win at the cash flow game.

Getting converted! That's what balance sheet finance is about - turning those assets in a manner that generates cash flow and managing and arranging your liabilities so that they don't consume that cash.

In reality those assets on the left hand side of the balance have already arranged themselves in the proper order. By that we mean they are listed in the same order always that reflects their ability to be liquidated for working capital. Of course that order is cash, inventory, receivables and equipment. That's the pecking order of cash we could say.

Cash is cash on your balance sheet - not exactly a prolific statement and most businesses in the Canadian small and mid sectors don't typically show a lot of cash on the balance sheet. It's therefore time to move on to the A/R - here where your credit extension to clients becomes critical in the entire process.

Inventory and equipment make up the balance of the balance sheet, with inventory varying in nature - it might be raw materials, work your firm has in process, or goods ready to ship.

If you are fortunate enough to have the balance sheet and income statement that meets a Canadian chartered bank approval your savior in a business cash flow problem is a bank line of credit. The bank secures your assets and you borrow against them, based on agreed upon borrowing margins.

But what if your firm doesnt not have the ability for financing balance sheet assets. That’s when the overall financial health of your company becomes critical - in effect: The patient is at risk!

When sales are growing and receivable and inventory is building cash flow challenges become readily apparent. And as your company gets older some of that A/R and inventory is, respectively, uncollectable or unsellable.

The business owner has a tool, or tools to measure cash flow and operating performance. We have always called them ' relationships' - the text book calls them ' ratios '. It’s the relationship between certain balance sheet items that allow you to keep score in business. Simple tools such as days sales outstanding, inventory turnover and debt to equity are great scorecards for your business.

In Canada you have a solid handful of solutions in financing your balance sheet and preventing those cash flow problems that can bring the patient to near death mode if not managed properly.

Those solutions include bank facilities, and when they can't be attained other solutions include receivable financing, inventory finance, asset based non-bank lines of credit, tax credit monetization, and supply chain finance, aka purchase order financing.

Don't focus solely on the income statement - properly exploit and manage that balance sheet! Speak to a trusted, credible and experienced Canadian business financing advisor on cash flow problem solutions.






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_problem_financing_balance_sheet.html

Dealing With An Equipment Lease Company Seem Like The Occult Of Capital To You? Financial Leasing Is Common Sense. Here’s Why.

Take The Mystery Out Of Canadian Equipment Finance


Information on financial leasing in Canada . Searching for the right equipment lease company for your capital needs isn’t as tough as you think !



Not fully up to speed on how, when and why to deal with an equipment lease company in Canada. Financial leasing doesnt for capital assets your business needs doesn't have to seem like the occult to your company. Let’s establish some common sense ground rules on equipment leasing in Canada. Enter clarity!

It tends to start at the ‘leasing versus buying ' decision. Whether you are a start up, in the SME sector, or a major corporation financial leasing of an asset will often work far better than an outlay of your firm’s cash in the form of a purchase.

An oft touted but oh so true advantage of an equipment lease is simply that it allows you to maintain up to date assets, thereby allowing your company to stay both productive and competitive . In many cases it’s quite costly as it can be costly to maintain obsolete assets that are deteriorating in value.

In the case of computing or telecom power for your firm the increased power, capacity, and all those bells and whistles of a new technology makes lease financing a perfectly logical financial decision.

In Canada businesses spend billions of dollars each year on new capital asses - Again, that can be rolling stock, plant equipment, telecom and computer assets, office equipment... basically anything! And in North America 80% of all firms utilize the concept of financial leasing to acquire that asset.

How much you pay in your lease contract is determine by two things, of course it’s the rate inherent in the lease, and secondly, the type of lease you enter into and its structure.

In Canada you pretty well have two choices - the capital lease and the operating lease. When you choose an operating lease one of the key benefits is simply that your monthly payment will be smaller. At the end of the lease term the asset isn’t quite fully paid for. Why is that? Simply because the lessor, or another third party who you need to know about, right about now! has made a residual investment in your transaction . In essence they made up the difference at the time your asset was paid for by the financial leasing company.

So now what then? You're at the end of the term of the lease and you don't own the equipment! Don't despair, because if you have a properly crafted operating lease you are the ' fork in the road '. Your options now are to purchase the asset for its current fair market value, return the asset, or thirdly enter into an extension or upgrade on your transaction.

Capital leases seem to a more straightforward kettle of fish. Your payments are traditionally more than an operating lease, if only because you are paying in full, with interest, for ownership at the end of the term.

When you are at the start of your transaction, our previously referred to lease vs. buy decision what must you consider to make one of the two choices above.

Those issues for consideration are monthly payments and cash flow, down payments, the obsolescence issue on your asset, your firm’s current cash flow situation, and your credit arrangements with existing lenders.

Canadian firms who want to grow their business and manage their assets properly should consider dealing with a solid equipment lease company or advisor as a partner for the future. Speak to a trusted, credible and experienced Canadian business financing advisor for help in making the right decisions in this critical aspect of your company's business.





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_lease_company_financial_leasing_capital.html

The 3 Commandments Of The FMV Fair Market Value Operating Lease - Myth VS. Reality In Canadian Finance Leases

Why We Love Canadian FMV lease finance options!


Information on the fmv fair market value operating lease in Canada . What are the benefits and issues around this type of financing versus standard finance leases.



The FMV fair market value operating lease. It's not a bad example of, in our case, the 3 commandments of what this type of leasing finance affords Canadian business owners and finance managers. More about those 3 three later.

Leasing is hardly the ' cutting edge ' in Canadian business financing. It's been around almost... well... since the Dead Sea was sick! Business has always benefitted from this type of finance; pretty well every industry in Canada utilizes it.


We have always maintained that lease finance removes something from your business. It removes what we long ago termed as the ' obstacle to innovation ' that your company might be facing. That obstacle is known to you by another term - COST!

Businesses in Canada choose to invest in new assets, whether they are on the shop floor or in the Computer room for a variety of reasons .Quite often the access to new technology does a number of things for your firm. It can reduce your labor costs, allow you to work more efficiently and faster, and generally stay more ahead the of the next guy... i.e. the competition.

We have rarely found a naysayer when it comes to equipment financing in Canada. That's not hard to understand, because in fact over 80% of businesses in Canada utilize either one of the two types of lease finance available in Canada. The simply reality is that the lease decision is most often driven by the cost of the asset and the amount of internal or external capital you must raise to acquire those assets.

Back to our three commandments. They revolve around the focus of one of those two types of equipment lease options accessible to yourself. That is what is known as the FMV operating lease. And those commandments are in fact better termed as ' choices’. The 3 commandments are : Thou shalt return ; Thou shalt purchase ; Thou shalt upgrade/extend .Let's explain.

Entering into an FMV fair market value lease gives you the option of returning, purchasing, or extending/upgrading the lease asset. Exercising any one of those three options puts you in the driver’s seat when it comes to maximum flexibility.

Naturally there are always some challenges - a good example being if your lessor is a great distance away. Our advice then? Ensure you know the cost of returning that asset, and... who bears that cost! You don't want to lock yourself into a provision that makes poor economic sense, diluting one of the key benefits that are a part of the lease.

Another key point for you to consider is simply the expected value of the asset at the end of the lease term. In the case of computers and telecom equipment it might be nominal; in the case of larger costly ' yellow iron' type of assets it might be significant. Utilize some business experience and product intelligence at the start of your transaction to determine what in fact those values might actually turn out to be.

Also, define with your lessor how FMV is determined. An unscrupulous lessor might in fact try and take advantage of the definition of FMV. Simple advice: Watch out for the actual language in the FMV verbiage in your lease. Some lessors might even be flexible enough to define that value of that asset based on their own or industry experience. In technology financing Gartner Group think tank type data estimates useful life of tech assets. And in other asset categories the internet has played a great role in determining auction and residual values of all types of assets.

Operating leases can significantly lower your overall cost, the proverbial ' monthly payment. Even more flexibility comes when you can bundle in other costs to acquire the asset - example: installation, etc.

Trading in or returning the equipment and entering into a new lease can often be a win / win for yourself and the lessor. Your get newer technology, the lessor gets the value of the returned asset, and the Canadian leasing firm retains you as a good, paying client!

The decision to enter into an operating lease should be part of your overall decision to finance assets. In technology it’s a huge driver of equipment and software sales. Your other options is of course to either purchase the asset for cash , or enter into a capital lease to own the equipment at end of term .

Always remember though to consider responsibly the 3 commandments of the FMV operating lease - purchase, return, or upgrade /extend. Maximum benefit for minimum cost.

Speak to a trusted credible and experienced Canadian business financing advisor who can assist you in Canadian lease financing.






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/fmv_fair_market_value_operating_lease_finance.html