May The Force ( Of Business Cash Flow ) Be With You ! Focus On These 4 Working Capital Management Issues .

Understanding Business Cash Flow And Working Capital Dynamics

Information on business cash flow management issues and working capital challenges for Canadian business owners seeking financing success.



Business Cash flow management in Canada. That’s a very powerful force in the overall success of your business... as they said in the movie ' may the force be with you '.... and here's why and how!

Let's examine some of those forces and focus on what key areas ultimately are critical to your financing success when it comes to working capital, growth, and daily operational survival.

Every Canadian business owner or financial manager probably agrees on the fact that there is nothing more powerful in their businesses than ' cash on hand ', or access to cash via working capital solutions. Early on in business careers we mistakingly focus on the fact that profits = cash on hand / available. But it isn’t so, as we all quickly discover.

The reality is the cash generated from your business goes into purchasing fixed assets, paying suppliers, etc.

So what are those four key forces of business cash flow management? Simply speaking they are government liabilities, debt and repayment thereof, working capital access, and finally, last but not least, withdrawals of profits from your business.

It's critical that the business owner in manage those forces on an ongoing successful basis. Paying taxes promptly and ensuring debt is repaid in a timely manner are of course job #1 if we had to maintain a pecking order on these things.

A pretty reasonable rule of thumb is that your firm has a couple months of working capital to cover operating expenses outside your credit facility

Working capital, unfortunately, tends to be somewhat of an up and down business for the Canadian business. Is there a good way to get a handle on whether you're winning when it comes to the area working capital forces? There is, and it’s to focus on operating cash for your company, which is very easy to calculate.

How is that calc done? Using a month end calc as an example take your profit and add back the positive or negative changes in receivables , payables, and inventory . Example - if receivables went up in the current period that’s a negative number, if inventory went down that’s a positive number. All of this is in relation to sales of course.

When it comes to business cash flow management and working capital don't make the mistake of confusing term debt and lines of credit. Business credit lines are good things when they fluctuate - if you're always at the top of your bank or asset based credit line that’s basically not a good think and you're avoiding the issues of additional permanent equity in the business

Term debt is not a bad thing if it’s used for the right reasons. Equipment finance is a solid example of taking on term debt if you are profitable and can retire the lease as agreed, all the while using the asset to generate sales. Real estate debt, as large as it might be is actually good debt given you're building equity with repayment.


What then are our ‘take aways ‘? It’s simply that you need to understand your cash cycle, borrow in the right manner, and focus on taxes and equity take outs properly.


In Canada working capital and cash management solutions come from 6 key areas:

Receivable Financing

Inventory Financing

Asset based lines of credit that combine A/R and inventory

Tax Credit Monetization

Securitization facilities

Working Capital Term Loans

Speak to a trusted, credible and experienced Canadian business financing advisor on how your firm can ensure the force (of cash flow and working capital!) is with you!

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_management_working_capital.html

Capital Equipment Finance Choices In Canada. Should You Lease Or Buy ?

Your ‘ Taxing Questions ‘ Answered On Equipment Leasing In Canada


Information on capital equipment finance solutions in Canada . The lease or buy questions when it comes to business asset finance should be addressed in this manner.




Capital equipment finance choices in Canada. One of the basic issues often simply is ' Should the business owner lease or buy ' business assets, and if they choose ' finance ' why is equipment leasing a suitable and recommended options?

There are really 3 key concepts when it comes to deciding whether leasing or outright purchase is the way to go when it comes to financing your firms fixed assets. The 3 areas you should focus on are:

Managerial Issues

Accounting and Financial Issues

Financing and Tax Issues



When you have a handle on those three you’re poised for business asset acquisition success!


The financing and tax issues are quite often perceived as the most important buy the Canadian business owner and financial manager. They are concerned with things like the financing rate within the lease (we believe that is often the least important in most cases as your credit quality will always give you a ' competitive ' rate), and the way the lease is shown on their books for tax and accounting reasons.

You should always know, and consider what type of lease you actually need, or want to enter into. In Canada it comes down to operating versus capital leases, and not all business owners are aware of the nuances of each.

When we talk to clients the simple way we describe an operating lease is simply to suggest that the client view this finance as simply an asset that is on rent. The rental payments are of course expensed , and in the old days a significant amount of emphasis was placed on your firms ability to ' hide ' the transaction off your balance sheet, thereby improving a lot of the equity and operating rations that lenders and investors look at .

Unfortunately, with a lot of the new accounting rules that particular one benefit has diminished, but the reality is that operating leases for assets such as technology and heavy equipment are as popular as ever. Payment tend to be lower ,and the flexibility of having 3 choices at the end of the term of the lease is perceived as positive by companies that are capital intensive when it comes to both technology or heavy equipment, our two chosen examples .

Oh, and by the way, those 3 choices..? They are your ability to purchase the asset at the end of the lease, return it, or extend /upgrade the asset. Talk about financing flexibility!

Your firm might choose a capital lease when it comes to your firms desire to own, rather than ' rent ' the asset. These leases are non cancelable, might have a higher payment attached to it because of your ownership right, and this type of lease has to satisfy several accounting criteria around ownership, useful life, and financing charges.

The managerial issues around capital equipment finance tend to revolve around flexibility of financing, technology obsolescence protection, and your ability to access other sources of credit other than ' the bank '.

Not every finance solution in Canada is perfect for all situations. Some Canadian businesses associate leasing with a higher cost, and they don't necessarily want another firm or institution to benefit from the residual value of the asset in question. They want that profit for themselves!

We always encourage clients to talk to their tax person or accountant when it comes to tax avoidance via leasing ( that’s avoidance , not evasion by the way !) , accounting treatment, expensing payments, etc.

If you have properly addressed the ' lease or buy ' decision in Canadian asset acquisition consider speaking to a trusted, credible and experienced Canadian business financing advisor who can assist your with the proper financing of your transaction,

7 PARK AVENUE FINANCIAL
CANADIAN CAPITAL EQUIPMENT 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/capital_equipment_finance_lease_or_buy.html

Key Ingredients To Success Via Factoring Accounts Receivable . Financing Cash Flows Is Easier Than You Think!

Business Cash Flow Financing – Explained !

Information on financing cash flows via factoring accounts receivable in Canada . Key facts for Canadian business owners and managers .





Financing Cash flows in Canada. Are there some key ingredients to factoring accounts receivable that can help your firm achieve financial success? We think so, here why... and how.

It's important to understand what the finance folks call your ' cash flow drivers ' . A tool such as factoring receivables literally forces you to manage and maximize working capital success.

Most business owners and financial managers know that cash flow becomes somewhat of an ' up and down ' business. That’s the true fact that many find difficult to challenge.

Receivables finance in Canada isn't cheap (we also believe it’s not that expensive by the way ') and when your firm utilizes this financing mechanism you will do much better if you focus very daily attention to your use of this finance tool. We point out by the way that many senior executives in some of the largest corporations in the world have Days Sales Outstanding as a key metric on which they are both measured and compensated. Surely that says something about how shareholders view the importance of business working capital.

We find it very interesting that small and medium sized business owners are constantly challenged to receive payment from their larger, well known, can we call them ' blue chip ' clients. These same accounts provide a lot of businesses with the majority of their revenue, but at the same time they pose great challenges in collection. They are also the perfect accounts for factoring accounts receivable, as they are both larger in dollar size and credit worthy.

Inventory. Inventory? Why are we talking about inventory when our subject is financing cash flows? Simply because inventory management is a key ingredient in the cash flow cycle, and that inventory flows into accounts receivable, which are in turn financed by factoring.

We're always debating, with our peers or clients, whether we're in a credit crunch .Whether that’s the case or not every business typically runs into what can only be described as uncertain financial times. And financing cash flows via factoring allows you to pay vendors, grow your business, and meet daily obligations to your other lenders. It's different from bank financing if only for the simply fact that the bank is lending your firm money directly, while your factoring partner is simply financing your sales on a daily basis, with a focus on your A/R as the asset financed. They in fact purchase that asset by virtue of their agreement with you.

Yes, bank financing is in fact ' cheaper ' but in many ways it’s a poor comparison because you have more operating freedom when you're financing cash flows via factoring. A larger more financeable firm might search out more equity or working capital term debt to grow, but the SME business owner in Canada has the option to utilize factoring accounts receivable. Oh and by the way, financing cash flows is always cheaper than equity!!!!

A key ingredient in receivable finance success is good gross margins. Simply speaking, you need them and factoring works best when you're well above the ' BREAKEVEN' sales level where sales minus cost of sales plus the cost of factoring is in fact a positive number. That's a key ingredient to a successful working capital solution.

It's no secret that factoring accounts receivable is almost never a long term multi year solution. It can be... but usually isn’t. View it as your bridge to financial success.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in identifying your ' key ingredients ' to factoring success.

7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW 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/factoring_accounts_receivable_financing_cash_flows.html

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