Looking For A Business Bank Credit Facility ? Loans And Biz Credit Lines 101 !

Which type of Credit Facilities Does Your Firm Need?



Information on a business bank credit facility for Canadian firms . Loans and Credit Lines are … different!




A Canadian business bank credit facility. For the majority of Canadian firms chartered bank loans and credit lines are the optimal solution for operating and growth needs. Not every firm qualifies or has access to these ' preferred ' facilities, and for those that don't other financing alternatives, traditional and alternative are certainly available.

But let's focus in on the two types of typical credit facilities that are most sought after by firms needing credit. They are essential term loans and operating lines, also commonly known as ' revolvers '. There are different characteristics and qualities to each one.

Let's explore that ' revolver ' first, aka the ‘operating line of credit '. A bank credit line will almost always have a capped limit. But while they have a defined limit they actually fluctuate, sometimes wildly depending upon the asset levels of your firm. The two most common asset categories within the revolvers ' borrowing base' are accounts receivable and inventory. That of course is why there are those fluctuations - typically your A/R and inventories change, pretty well everyday. You purchase product, you move out product, you invoice clients, clients pay... and on it goes.

So how is that overall credit limit set for the operating line? Two general guidelines for Canadian chartered banks are 75% of receivables up to 90 days old, and a defined percentage of inventories. Here is where things get a bit tricky with the bank as they typically prefer A/R to inventory as collateral.

So far things seem simply, but what you need to address prior to discussing and applying for such a facility are the make up of your a/r. ... by that we mean credit quality of your clients, are they out of country companies or are you a victim of account concentration . If the majority of all or your A/R is focused around one or two major clients this typically becomes a concern to the bank. Even government accounts, as solid as they are from a credit worthy respective (we can only hope!) might actually pose a problem when it comes to borrowing against them, as the government typically doesn't acknowledge receivable assignments. More so they have the right of set off if you have government arrears, known in finance as ' priority payables’


Lets recap the other type of bank facility you might be looking for - it’s the ' TERM LOAN '. It's a fixed loan with typically a fixed rate, and it’s typically a bit higher than a revolver rate. Amortizations tend to be 3-5 years and of course banks prefer that the assets covered in the term loan are typically assets that generate cash or are critical to your business. Banks love cash flow! Memorize that!

Alternatives to term loans for fixed assets come from the Canadian lease financing industry. They are often sought after as the alternative because they don’t usually interfere with your bank borrowings - it’s a common fact that borrowers like to spread the risk around and not have all borrowings with one institution. It's critical to remember that if you borrow for assets within your bank facility that those dollars become a part of your overall credit line and might limit your access to more operating lines of credit.

If you're looking for loans or credit lines in Canada ensure you understand terms, conditions, and ramifications, it’s as simple as that. Speak to a trusted, credible and experienced Canadian business financing advisor for your business credit and borrowing needs.

7 PARK AVENUE FINANCIAL
BUSINESS CREDIT BANKING EXPERTISE


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_bank_credit_facility_loans_credit_lines.html

Looking For Bank Financing In Canada ? Commercial & Corporate Banking Success Strategies

How To Approach Your Need For Bank Financing


Information on accessing commercial corporate banking facilities in Canada . Banking financing success tips for the Canadian borrower.



Bank financing in Canada. Should it be a mystery to the Canadian business borrower seeking a commercial corporate banking facility? We don't think so, and here's why.

It's no secret that the Canadian chartered banks are typically the first ' go to ‘solution for both debt and operating financing. Because of our strong centralized banking system the product and service availability in Canada for commercial borrowers covers a broad spectrum - business lines of credit, term loans, etc.

So what are some of the reasons that your firm’s ability to seemingly tap these great sources of capital seem unattainable? It comes down to understanding where the other side is coming from, and we can guarantee you that the ' other side' is focusing on first: CASH FLOW... and second ' Collateral. And those two items by the way are pretty well in order of priority!

Another point that needs to be mentioned and addressed in either your discussions or presentation (verbal or otherwise) is the concept that those cash flows must have some sort of level of predictability.

Many of the products and services offered by banks in Canada are also offered by what we term ' non bank ' commercial lenders. They are not regulated. Banks of course are strongly regulated in Canada (we hope!). The reason they take a bit more of a conservative approach is that they are constantly balance their own capital, profits, and general liquidity. It would seem they have the same challenges as your firm!!

The emphasis on those points we have mentioned above relates to how they address lending criteria, when it comes to types of assets financed, cash flow coverage, and personal guarantees. The Canadian business borrower needs to understand that its bank criterion that determine your loan pricing, rates, and where you stand in the banks credit scoring model. (Investment grade is good ... if you're in special loans that’s bad).

Many Canadian firms that accessed bank financing might in fact find themselves being placed in the ' special loan ' category we mentioned above. Your bank facilities are recorded as none performing, and in general the bank wants you to leave. Not all the time... most of the time. Business borrowers who find themselves in special loans are very salvageable when it comes to exiting a bank relationship. Often they might simply be ' out of covenant ' and that can be addressed by altering criteria of a non bank lender. We often speak to clients that are in Special Loans that are in fact courting other banks .It’s our experience that banks don’t purchase their competitors problems; it’s as simple as that. So non bank solutions are the best for the exiting of a Special loan scenario.

Another key premise to get under you belt is the fact that bank pricing is pretty well the best and lowest priced financing in Canada. Banks don’t have upside on your deal - they just want to get paid. So address your presentation, (again verbal or written) with a focus on repayment and stability and management experience. If you look at the financial statements of most banks we think you'd find that commercial borrowing isn’t the real profit center.

How do you find the best corporate bankers in Canada? Please not we said bankers, not banks. You do that by developing a relationship with sources that know who these specific bankers are.

As a final note, because you're getting the lower rates in Canada we don’t recommend posturing for the last basis point in rate reduction. Instead focus on covenants, guarantees, and relationships.

Bank financing and commercial corporate banking is great financing. It's available to many, but not all. If you do qualify speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in forging a facility that makes sense for your firm.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS BANKING FINANCE EXPERTISE



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/bank_financing_commercial_corporate_banking_canada.html

AR Finance … 6 Things Mom Never Told You About Factoring & Receivables Financing In Canada

You Asked For It ! A Clear Explanation of The Invoice Financing Industry In Canada

Information on receivables financing in Canada . You Need To Know 6 Key take aways for factoring and AR Finance .



AR finance, aka ' factoring ' in Canada. You have to admit, of all the great advice you got from Mom on life and perhaps business she never really covered off critical aspects of receivables financing in Canada! So we suppose that’s our job...

Some of both the terminology, as well as the methodology of invoice finance in Canada is potentially very confusing to the Canadian business owner. Let's cut through some of that confusion and explain 6 things you need to know.

First of all, all receivable finance in Canada is done on either a ' recourse ' or ' non recourse ' basis. Two very legal sounding terms that simply mean one thing - if your client goes under you're either ' on the hook ‘, or ' off the hook ' respectively. There are in fact facilities that you can obtain that are non recourse - just imagine, a perfect world, you sell your A/R as you generate sales, and your finance partner takes all the risk. Naturally this type of financing is a bit more expensive... a better solution might be in fact to take on some credit insurance , which you probably want to do anyway if you have high risk , concentrated, or foreign receivables . 7 Insurance companies in Canada offer credit risk insurance.

Point 2 - This is probably our greatest area of discussion with clients. The majority of AR finance, aka ' factoring ' in Canada requires that your clients be notified about your sale of receivables to them. We don't like this practice; it can easily be avoided if you’re working with the right party. That way you can CONFIDENTIALLY finance your firm and be successful without others, aka suppliers and clients, knowing your business. Point importantly taken! Hopefully!
POINT 3- Advance amounts. When you finance receivables via a factoring process you get immediately, same day, cash for sales you choose to finance. Typically you should receive 90% of the invoice amount; the balance is a hold back, which is remitted to you as soon as your client pays... less financing costs. That’s the ABC of receivables financing!

POINT 4 - Remember Mom talking about marriage and picking the right partner. She probably wasn’t referring to a corporate marriage of sorts, but you need to pick a partner finance firm that meets your goals, provides you with a rate and structure that is clear and understandable, and that fits your day to day method of doing business. Nothing could be more important... after we talk to clients that have been misinformed, overcharged, etc its clear that they missed the boat on Point 4!

Point 5 - Rates .This is not important when it comes to AR finance in Canada. HELLO???? Yes it is, as this seems to be the only issue clients want to discuss when it comes to financing their firm. In Canada rates in general are in the 2% range for a 30 day receivable .That means you receive a total of 49,000.00 for your 50,000.00 invoice - as an example. Don't forget to take that reserve into account, that we mentioned in Point # 3. Oh and by the way, take that 49,000.00 and pay some supplier invoices utilizing the 2% prompt pay discount your vendors offer.

Congratulations, as you have just cut your financing costs by 50% or more!!

Final Point: Spend some time on the basics of receivables financing as it would pertain to your firm - focus on the process flow. It's as follows: You sell your products or services, you invoice your client who accepts the invoice - you get your cash immediately from your AR finance partner firm; your client then pays you and you receive the balance of the holdback - less financing costs. See point 3 above.

Business owners searching for valuable financing methods can keep it complicated, or simple. Use our 6 points Mom never told us to understand how this financing works and then fit it into your business model, with a suitable party that meets your needs. Speak to a trusted, credible and experienced Canadian business financing advisor for assistance on proper structuring of AR finance for your Canadian company.

7 PARK AVENUE FINANCIAL
CANADIAN A/R FINANCE EXPERTISE

Why Is ABL Asset Based Financing The Rising Star For A Business Credit Facility In Canada?

A New Strategy For Business Credit Lines

Information on the business credit facility known as ‘ abl ‘. Why the asset based financing revolving line is the new choice for businesses looking for more liquidity .




An ABL asset financing business credit facility. Is it really the ' rising star’in Canadian business financing? We let clients be the judge, but let's look at some key facts around Canada's newest business credit revolver.

As a general rule we can say that ABL facilities compete with Canada's chartered banks when it comes to business credit. (There's more than a bit of irony there, because many of the Canadian banks have recognized that and set up small boutique divisions within their bank to offer the same service that ' regular ‘ banking does !) But we digress...

Canadian business owners and financial managers are famous for criticizing the Canadian banking system when it comes to access to capital. We're reminded of a U.S. comedians line ' before you criticize someone, walk a mile in their shoes, that way you're a mile away and at least you have their shoes ' ! From our part no one admires the Canadian banking system more than us... one simply has to accept the limitations that have made them the strongest banks in the world.

So why then does a non bank asset based line of credit work when a Canadian firm can't access the amount and type of financing it needs. The answer to that is quite powerful. It’s that asset based lenders provide receivable financing, high risk financing, debtor in possession/bankruptcy financing, acquisition financing, turnaround finance, and, dare we say it, growth finance. Wow and double wow!

The benefit to consider such financing is that it pretty well covers all Canadian industries, and, as importantly, no matter what stage they are in, i.e. start up, growth, or dire straits! By the way, out of those three growth is our favorite!!

There are a number of different, can we call them ' flavors’ of ABL asset financing business credit lines. We could call these facilities a 'hybrid ' in effect.

There are some other ' not ' so obvious benefits to this type of business credit facility. Financing costs under an ABL are of course covered by pre tax dollars. This is not an equity play! Different rate structures are available to the Canadian business owner. In some cases ABL rates are ' lower ' thank banks - we've seen that often. In general rates are higher though, and based on the overall credit profile. Facilities are generally open, although some asset based lenders might insist, or request a minimum term of 1 year or more. Finally, asset based business credit lines simply monetize your assets for more liquidity than a Canadian chartered bank would. This is not term financing - its business liquidity based on your current assets on the balance sheet.

Intrigued? Want to investigate the new ' rising star ' in Canadian business finance? Speak to a trusted, credible and experienced Canadian business financing advisor on why this unique mechanism might just be the solution you're looking for.

7 PARK AVENUE FINANCIAL
CANADIAN ASSET BASED LINE OF CREDIT EXPERTISE



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_financing_business_credit_facility.html

So How Much Working Capital And Business Finance Funding Do You Really Need ? Here’s How Much And Why!

So Exactly Where Is The Money ?


Information on working capital and business finance in Canada. How does the business owner determine how much funding he or she really needs?



Working Capital needs come out of your firm’s requirement to meet cash needs. This is of course not the type of business finance and funding that you need when you acquire assets such as equipment.

How then can the Canadian owner and business manager determine the amount of cash flow needs, as well as the best way to solve the problem... i.e. a solution!

The way to do that is to spend some time on whats known as your ' trading cycle ‘... aka ' cash flow cycle '.

It's all about understanding how your payables arise and how the products and services you purchase translate into either inventory or direct to sales. And here’s the secret - the speed, or total time it takes for all that to happen in effect determines your cash flow and working capital funding needs.

To make the actual calculation work you need to look at turnover in your receivables, inventories (if applicable) and payables. Payables are of course ' cash outflow ‘but still very important in our calculation.

Most business owners or financial managers probably intuitively know how long it takes them to collect their sales receivables . The days of sales you have tied up in receivables is calculated by taking your average A/R balance and dividing it by your average daily sales. Hopefully every business owner has quick access to that data... if he or she doesnt we suggest... there's a problem!

Not every company has inventory, but if your firm does the amount of additional product you have to carry translates into extra cash need.

Remember also that those two asset categories, receivables and inventory are your main borrowing collateral in working capital funding. Also note that typically with a standard bank arrangement you can typically borrow 75% of your total receivables and (hopefully) some type of percentage against your inventory.

One of the alternatives to traditional bank financing in Canada is asset based lending - here it's important to note that typical a/r advances are 90% of total a/r, and a healthy borrowing base against inventory . (Every company and industry is a bit different when it comes to inventories).

It's a truth in Canadian business that if your business is growing it needs money. And don't forget that a lot of businesses also have to juggle seasonality of sales and buildups in A/R and inventory. Think of it this way - Receivables Eat Cash! Thats one reason why high growth companies that seemingly are making money are in huge negative cash flow problems that need to be addressed.

How does the Canadian business owner address these challenges? The solutions are readily available:

Receivable Finance

Inventory Financing

Supply chain finance

Asset based lending

Tax Credit Monetization


Speak to a trusted , credible and experienced Canadian business financing advisor when it comes to determining both what your working capital and business finance funding need is, and .. where to get that problem solved!

7 PARK AVENUE FINANCIAL
CANADIAN WORKING CAPITAL BUSINESS FUNDING EXPERTISE








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_finance_funding.html

Here’s Your Leasing Equipment Checklist . Use This Info For Great Lease Finance Rates, Terms, And Approvals In Canada

When Is The Right Time To Utilize Leasing ?


Information on lease finance in Canada. A checklist for leasing equipment for the business owner contemplating an asset transaction.




Leasing equipment in Canada. When it comes to lease finance of assets how though does the Canadian business owner and financial manager know when this method of financing assets is both the right time ... and let's not forget ' how to '!

Interest rates are always a key factor in borrowing of any funds for business. If your alternatives for borrowing for business are limited then lease finance becomes a desirable form of finance - it has now become a working alternative!

Don't forget though that interest rates in leasing equipment in Canada are dictated by overall credit quality - so although you may be approved for leasing not withstanding your firm’s credit, you may also have a higher rate within the lease. But its all about access to capital, not cost of capital for the majority of business borrowers.

Don't forget to speak to your accountant about the tax benefits of leasing assets in Canada. Also, in many cases you might find that your bank might want additional collateral, commitment fees, or compensating balances, or outside collateral. Many of these are requests are not within general lease finance offers in Canada.


Is there a checklist the business owner of finance manager can utilize to finance assets via leasing? There definitely is, and here are some solid pointers:

- Always consider the obsolescence factor when it comes to acquiring an asset - and definitely consider lease finance if your asset has a somewhat defined useful life

- If you need the asset for a project or a shorter period of time asset finance is a solid strategy. We would point out though that, in general, the shorter term you can acquire in Canada tends to be 24 months. Typical amortizations by the way tend to be 3-5 years , but larger assets or assets that hold their value can in fact often be leased for terms up to 7 years , or longer .

- In business it's all about capital preservation, so always consider your access to operating funds when acquiring an asset - that’s when leasing equipment becomes the optimal solution

- Don't forget to review the type of lease you want to enter into - In Canada we keep it pretty simple, it boils down to lease to own, or lease to use . The terms for those two leases are capital and operating, respectively.

Who can you lease from in Canada? In Canada it boils down to private lenders, non bank independent finance firms, captive firms, and bank leasing subsidiaries.

So how do you go about making that choice? A good option is to use the service of a Canadian business financing advisor who can add solid value to the choice of term and overall rate, term, and structure.

There are many factors that are involved in the choice of financing an asset. Use this checklist to better understand your options.

7 PARK AVENUE FINANCIAL
CANADIAN LEASE FINANCING EXPERTISE



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/leasing_equipment_lease_finance_canada.html







Stan Prokop

Critical Aspects of AR Finance In Canada . Factoring Of Accounts Receivables - The Right Way!

Factoring In Canada - ‘ Doin’ It Right ‘!


Information on AR finance in Canada . 6 Critical things to consider in the factoring of accounts receivables .


AR Finance is a very valuable method of financing a company in Canada. The process goes under various names, and there are some subtle and not so subtle differences in the terminology - aka the ' factoring of accounts receivables '. Other terms are receivable finance, invoice discounting, etc.

The arrangement is pretty basic, and in fact has been around hundreds of years. In Canada we appear to be ' catching up '! The arrangement is as follows - the finance firm enters into an agreement to purchase accounts receivable from your firm. That right there is an immediate well publicized benefit - even if your firm can’t access bank financing, or is a start up, etc you immediately have found the ability to finance your firm, based solely on your sales.

Although the actual ' cost ' of AR Finance seems to be subject # 1 when it comes to discussing factoring but this cost is balanced against some pretty major benefits - your firm now has pretty well all the cash it needs, supplier discounts can be taken to reduce up to half of your financing costs, and your competitors who seemed to be taking business away from you ( perhaps they are factoring also ?!) are now in your firms rear view mirror .

Oh and by the way, all the lending covenants and restrictions that come with Canadian chartered banks simply don't exist in AR finance. Time is also critical to clients we talk to, and solid ar financing transaction can be completed in one or two weeks - if you're dealing with the right parties or advisor.

There are three drivers that pretty well secure the fact that your firm could significantly benefit from ar finance - they are your ability to demonstrate good gross margins, reasonable overheads, and the ability to potentially increase your prices a bit or take supplier discounts at the other end of the spectrum.

Perhaps your firm is having some serious financial challenges; and at the same time you just might be experiencing a solid growth period in revenues. Even more so you might be coming out of a turnaround phase in your firm and you're not quite ready for the bank yet. In those cases the cost of factoring of accounts receivables can easily be justified around the speed, flexibility, access to capital, etc.

Speak to a trusted, credible and experienced Canadian business financing advisor on how your firm can benefit from this accepted business financing strategy.

7 PARK AVENUE FINANCIAL
CANADIAN AR FINANCE EXPERTISE




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/ar_finance_factoring_of_accounts_receivables.html