You Can’t Handle The Truth ! Here’s The Deal On Business Receivables Funding And The True Cost Of Factoring In Canada

Understanding Receivable Finance Cost In Canada



OVERVIEW – Information on the costs of business receivables funding , i.e. the cost of factoring funding in Canada . Here’s the right way to look at things.



Most of us recall that iconic ' You can't handle the truth ..' movie moment , and it seems appropriate to us that comment is pretty typical of explaining to clients the costs of business receivable funding in Canada . It can be confusing and complex ... but it should not be!

The cost of factoring in the Canadian marketplace revolves a lot around the terminology used by the industry to educate (or confuse) the Canadian business owner and financial manager.

Part of the confusion results simply, as usual, around misunderstanding the terminology. The receivable finance industry works on a ' discount ' basis, and that is often confused with an implicit interest rate.

In Canada typically the discount rate that your receivables are purchased/ financed typically is in the 2% range. Sometimes more, sometimes less, but for today’s purposes let's use a 2% example.

A number of different factors can influence that rate, some can be influenced by the customer, and others are simply as they are. They include:

Who you are dealing with

The type of receivables funding you are looking for - i.e. recourse/ non recourse, credit insured, confidential facility - We strongly recommend confidential invoice financing to clients, allowing them to bill and collect their own receivables.

The overall credit quality of your company and your receivables- Companies with a strong credit quality receivable base are more appealing than higher risk receivables

The type of industry your firm is in - as an example firms in the construction industry are difficult to finance or factor simply because their receivables are sometimes subject to disputes and even construction liens - In 2008 and 2009 the auto industry was extremely out of favor . Financing a General Motors receivable was actually... difficult. My how things have changed in a few years! but that is business, right?

The size and number of invoices your firm might have on a daily basis. Although its 100% achievable to finance a receivables portfolio made up of numerous small invoices this obviously requires more work and administration from your chosen finance partner

Set up and legal fees - A Business Receivables Funding arrangement is the same as any other business financing arrangement and has associated legal documentation and set up fees involved. These are typically quire nominal in the scheme of things though.

The majority of the confusion around the cost of factoring in Canada revolves around that fact that clients take the actual discount rate, in our example 2% and equate that to a financing rate. They quickly multiply that by 12 months a year and feel they are being charged a very high ' interest rate '.

That is somewhat of a poor way to look at it. Why? Let's illustrate by example. Your suppliers offer you, more often than not, a 2% discount rate to pay their invoice early. You could use the logic that your supplier is losing over 72% per annum for allowing you to pay promptly. Yes, your supplier has basically kind of self factored the invoice you have from them.

Bottom line, you have to view the cost of factoring as a price for using funding, not an implicit interest rate

There are many benefits to business receivables funding in Canada as a solid alternative to accelerate cash flow, grow your company, etc.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing needs and clarify the true cost of factoring in Canada.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS RECEIVABLES 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/cost_of_factoring_business_receivables_funding.html

Why Exactly Is Cash Flow King? Avoid Business Rehab With Business Finance Financing Options

Getting Financially Intelligent About Business Cash Flow


Information on cash flow financing options for Canadian business. Business Finance options almost always come back this key concept .



We're not 100% sure where the ' cash flow is king ' saying came from, but we sure hear it a lot. It always comes down to financing options for your company as it becomes very clearly , certainly to newer business owners and financial managers that running out of cash becomes .. a killer.

When we talk to clients we're always amazed that their focus tends to be the income statement. Truth be told they are not even calling it the income statement, their names for it tends to be ' sales '!

America's greatest business investor, arguably Warren Buffett seems to have a home town saying for everything, and he says ‘cash is hard to fudge ' ..! That cash flow, or lack of it, is exactly why you are experiencing challenges with suppliers and term lenders.

Another key point is that when you are addressing financing options for your company it's important to focus on a longer term solution in your business finance needs... or at a minimum an intermediate solution. Juggling a cash flow crisis on a daily basis is clearly... not optimal.

What are some of the cash flow financing options available to Canadian business? Here we are talking mostly about monetizing assets, i.e. ' cash flowing' your business. Those solutions include:

Asset based lines of credit

Chartered bank lines of credit

Receivable financing facilities

Supply Chain Financing

Monetization of Tax Credits

Inventory financing

Unsecured cash flow loans

We've always felt that it enhances the reputation of the business owner when it comes to their ability to talk cash flow with any prospective lender in the above noted financing solutions.

Simply said, if you are equating profit with cash flow when you're talking to one of your lenders you clearly will be deemed ' out of your league ', and we won't even comment on whether your financing will be approved. So remember that a lot of the actions that you take in your business relative to recognizing sales revenue, giving terms, spending on assets , always come back to that ' cash flow ' guy!

Remember also that when you become a bit better at understanding why cash flow is king you quickly will become a 'problem spotter'... Keep thinking about our main mantra for today - ' Turn those profits into Cash '.

Speak to a trusted, credible and experienced Canadian business financing advisor who can get you out of business financing rehab and into the cash flow pleasure zone - business success.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS FINANCE 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_finance_financing_options_cash_flow.html

Is A Spanner Screwing Up Your Corporate Financing Needs? Alternatives And Business Loans In Canada

Managing The Roadblocks to Canadian Business Financing


OVERVIEW – Information on access to business loans and corporate financing in Canada



A ' Spanner ' in your business loans and corporate financing strategy. What a great term. It comes from a British saying which indicates a ' source or impediment ‘, The popular use of the term is a ' Spanner in the works ‘... oh and by the way, Rod Stewart had an album by the same name... but we digress.

Companies of all size run into spanners along the way. Some are controllable, some are external, and not. What are some of those?

They might include how you manage your cash flow, your overall working capital policy, taking on debt, managing the balance between debt and equity, consideration of buying a competitor, and what amount of capital you need for new assets. Talk about the potential for a lot of spanners!

In a lot of cases you’re corporate financing and access to business loans is also influenced by the industry you are in... Fortunately or unfortunately. A good example might be finding yourself exactly in the middle of the auto industry in the 2008 and 2009 timeframe. Not your favorite place to be in hindsight.

Factors that affect your ability to access business loans of course include profits, sales and cash flow. The actual amount of receivables you hold and their relationship to your sales and borrowing decisions is key in corporate financing.

Companies in Canada have a lot of different methods under which to finance their business - we’re e often surprised at clients who don't know all their options, which include:

Receivable Financing/ Securitization

Inventory Finance

Equipment Leasing

Supply Chain/PO finance

Bridge Loans

Canadian Chartered Bank Facilities

ABL Asset Based Lending

Royalty Financing

Tax Credit Monetization

Cash flow loans

Subordinated Debt

and on it goes, there are even more!

The business owner and financial manager needs to know which tools work, when, and what they cost. It's important to ensure you are using the right corporate financing tool for your stated goals.

To ensure you can eliminate those ' Spanners' its critical to have a good handle on what stage of business your company is in , how you will use the funds, and how your company is leveraged, i.e. the debt and equity relationship .

What's interesting is that we hear everyday there is a huge amount of capital available for Canadian business, but doesn't it seem that the challenges to access that financing are larger than ever . To our clients it sure seems that way.

Don’t let a spanner get in the way of your business financing needs, or the knowledge of access to those financing alternatives.

If you are looking for tools or help in corporate financing, business loans and asset monetization consider speaking to a trusted, credible and experienced Canadian business financing advisor who can help you knock out those ' Spanners '.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS 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/corporate_financing_business_loans_canada.html

Critical Info On How To Finance A Franchise? Financing Franchising Costs In Canada

Financing The Canadian Franchise


Information on how to finance a franchise in Canada . Financing costs vary in Canada per program and the lender . Here’s why!


How to finance a franchise in Canada becomes an immediate and looming decision # 2 , right after your having made that choice to enter this industry as an entrepreneur / business owner .

But what about the financing costs for yourself, the new franchisee? What is financeable, what is not, and who can you turn to for help, guidance, etc.
Naturally it goes without saying that the actual financing of your new business can be the difference between making it... and the other less then favorable option... failing.

Let's examine some key franchise basics for the Canadian entrant into the industry. Where is that financing going to come from? It general it boils down to two parties, you with some type of equity / down payment component, and a financing partner. That financing partner can potentially be two finance firms, one specialized firm, or a bank. More about the bank later... and trust us, its good news!! Not what you might be thinking!

You will notice that we have eliminated one party that many new franchisees think they are going to get help from, and that’s your franchisor! The reality is that although some indirect help should be expected you should not expect a cheque from them to help finance the franchise. Why? They are in the selling business, not the finance business, as simple as that.

It's important to spend some time in your business plan (yes, correct, you heard right ... you need a business plan) to give some thought to and break down the actual components of the franchising costs. Those categories are typically assets, working capital, leaseholds and franchise costs. In some larger franchise purchases there might even be a real estate component to your deal, but that’s a bit rarer. Oh and don't forget that franchise fee!

One you have your breakdown in front of you it’s critical to start to determine what is financeable and what is not, and then focus on who is going to finance those components.

Typically the franchisee fee is not financeable in Canada... in essence we can call it the goodwill component of your balance sheet, just as it would be in the purchase of a business in a non franchise industry . That ties nicely into our next point, which is simply that your down payment or equity part of the deal typically also has to cover the franchisee fee. In a typical franchise in the 350k range in Canada we tend to see that fee in the 25k range.

Many business owners focus only the cost of the franchise and getting to the goal line on their purchase. They forget however that sales don't necessarily start strong on day 1, and your fixed costs and payroll can catch up with you pretty quickly.

So don't forget to take a hard look at the working capital component of you deal, which should be thought about, and addressed! in the business plan. Naturally working capital in the retail industry is a lot less of a requirement than in a non retail business ... it’s the difference between a cash business and waiting for someone to pay you.

In Canada there are only 1 or 2specialized franchise finance firms which entertain a full financing of your franchise. If you don't qualify for that scenario, or if your franchisor is not part of that program a solid solution is the BIL/CSBF loan program. It's a government guaranteed loan that allows you to finance equipment, leaseholds, etc up to 350k, which covers a large majority of costs in most franchises. And by the way, interest rates, terms and structures are excellent, and you don’t even have to personally guarantee the full amount.

Focus early on relative to you challenge of how to finance a franchise in Canada. Your business plan is key, as is your choice of financing partner or assistance. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your finance needs as a new entrepreneur in this major Canadian industry segment.

7 PARK AVENUE FINANCIAL
CANADIAN FRANCHISE 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/how_to_finance_a_franchise_financing_costs.html

Excuse Us For Getting Fresh .. About The ABL Business Credit Line Revolver Facility . Asset Based Lending … Works . Here’s Why!

The Asset Based Line Of Credit Is A Solid ‘ Day To Day ‘ Business Financing Option

Information on the ABL revolver, the business credit line that combines asset based lending with a working capital solution.






Fresh counts, whether we're at the grocery store or in today's example, the business credit line known as the ABL revolver, aka ' asset based lending '.


Canadian business owners and managers don't often realize that that they have more of a choice in business credit lines than they think. And when it comes to choice and flexible terms all of a sudden asset based lending facilities are getting... you guessed it... popular!

That's of course great news for companies in Canada who are looking for alternatives for day to day operating financing. The traditional small handful of firms who offer this type of financing is growing to the point where you might not realize it, but there are people willing to fight for the ability to provide you with business credit. That's the type of competition we like.

Cost is always a factor in business financing, and there is a broad spectrum of pricing in Canada that is primarily based on two factors you can pretty well guess - facility size and credit quality.

In case you haven’t heard of this method of business credit it’s simply a comprehensive credit line based on the asset of your business - those assets include inventory, receivables, fixed assets, and land and buildings if that fits into your overall capital structure.

The Canadian business owner / manger can use the ABL revolver facility for a number of reasons, and they include day to day operating capital, restructuring, acquiring another firm (yes, buying your competitor!) and our favorite reason - growth! That growth reason is one of the most important, because the asset lending line of credit allows you to grow your business without the constraints you face sometimes with chartered bank commercial facilities.


We're often asked about the ' size requirement ' in this type of business borrowing. In general we tall clients that they qualify from a low of 250k all the way up to facilities in the many millions of dollars.

Quite frankly there isn’t really an upper limit, as long as you have the total assets to back up the facility. The reality is that ABL credit is very close to becoming ' mainstream' in Canada, and that’s a good thing we think.

To be honest many firms in Canada tend to use asset based credit lines as a bridge to other financing. This often means that the facility is used for a year or two, sometimes longer, as the business owner’s work towards the more traditional financing that is recognized in Canada, i.e. our banks. Many simply s are very comfortable with asset based lending lines and choose to remain with ABL!

As we said, the bottom line is ' ASSETS ', so if your firm has them consider Canada's newest form of business financing, the ABL REVOLVER , whether you're looking for something new, or an alternative to your current situation.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your total financing needs when it comes to the business credit line.

7 PARK AVENUE FINANCIAL
CANADIAN ASSET BASED BUSINESS 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/business_credit_line_abl_revolver_asset_lending.html

That ‘ Positivity ‘ Feeling . Cash Flow Financing & The Secret To A Working Capital Formula For Canadian Business

Unlocking The Mystery Of Cash Flow Solutions For Companies In Canada !


Information on a solid working capital formula and solutions for cash flow financing in Canadian business.



We're not even sure ' Positivity ' is even a word... but... if it is... it seems like a great description for what Canadian business owners and financial mangers are looking for when it comes to cash flow financing and knowing the working capital formula they are searching for has finally arrived .

We pretty well never get tired of explaining to clients that sales and profit growth, unfortunately, does not equal cash flow in the same amounts! Over the long run, yes, but in the short run... never. And when there is a very serious lag in that gap it’s important to understand the activity in between, and, as importantly the solutions you can undertake to beat the cash flow gap.

When we talk to clients about the working capital formula and solutions we're the first to point out that those cash flows from profits are a key source of cash. At the same time cash flow financing solutions are:

Receivable financing

Inventory financing

Asset based lending

Sale leasebacks

Tax Credit Monetization

Purchase Order / Trade Finance



And, dare we say it, bank lines of credit and term loans.


As the business owner quickly finds out, it’s a two pronged challenge, knowing how to finance those working capital needs, and knowing you have the solutions in place when you need them. I.e. timing.

The good news here is that although revenues can often fluctuate widely the business person should be able to have a strong sense of expenses

So... back to those sources of financing. Again, we're talking about an evolution over the life of your business, and when you are a relatively new business or start up the challenge to finance cash flow is a lot more elusive. At the end of the day sources of financing at this point in your business history often tends to be your own funds. The proverbial ' friends and family ' and access to working capital via credit cards, personal collateral etc.

As the business matures a solid form of cash flow financing actually becomes your management of 2 key aspects of your business"

Receivables
Payables

As your accounts receivable ((and inventory by the way) grows these can be both managed, and financed. Hopefully both!

Very few term loan solutions are available for cash flow ' Positivity '. And given the fact that term loans bring debt to the balance sheet and require fixed repayments that's not necessarily a bad thing.

Many Canadian business people assume the Canada Small Business Loan program can bring working capital and cash flow ‘positivity’
It can't, as this program only finances assets, leaseholds, computer software, real estate, etc.

An action list or summary that we often provide to clients challenged for cash flow solutions includes the needs for a cash flow budget outlining the amount of financing you need and how it will be repaid,

And our final advice today... simply that when you are starting to be quoted as saying ' cash is tight ' it might be a little bit late sometimes. Speak to a trusted, credible and experienced Canadian business financing advisor on cash flow 'positivity ‘solutions.

7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW FINANCING 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/working_capital_formula_cash_flow_financing.html

Leasing Assets? Secrets To Effective Lease Financing And Equipment Loan Strategies For Canadian Business

Canadian Asset Financing


Information on leasing assets in Canada , Why lease financing and equipment loan strategies make sense for Canadian business . Here’s why!





Looking to get ' one up ‘when leasing assets in Canada. Whether it's lease financing or a bridge equipment loan of some sort there are some ultra solid strategies that give you the ' secret ' to financing assets properly and effectively .

If your firm is profitable and growing there is always the need to replace assets. Your firm might not be large enough to have a tax manager or an experienced financial accountant but even the regular business owner recognizes that the need to balance an accounting, tax and cash flow operational needs when it comes to new equipment , whether that be shop floor assets , computers, rolling stock, etc.

Given that business (at least to us) seems to move at warp speed these days it’s critical to stay on top of what we can call the ' tech curve '. We're reminded of one of our favorite old lines ‘this technology is so leading edge even we don’t quite know what it does ‘! That just brings home the point that lease financing is one great way to help you manage that curve.

Employing the right lease strategies allows you to buy the latest and pay for it over time and by employing techniques such as an operating lease, or structuring your transaction to defer payments until benefits from the asset occur... well... we think you get the point.

In many cases solid pricing and approvals can be arranged directly through manufacturer financing plans, In Canada one of the main groups of lessors are what the industry calls ' Captives '. These are internal finance organizations within your manufacturer who are incented to come up with creative and low cost strategies to move product. And with all due respect to credit personnel inside these firms they are very much pressured to provide approvals that make sense given the parent companies need to generate revenues. We can attest to that one as we sat in that chair for about 20 years!

Our above point on approval to your transaction is really another one of our ' Secrets ' to effective equipment loan strategies. That's because the general competitiveness of the leasing industry gives you a greater chance of approval, more so if you find that your Canadian chartered bank won't finance the transaction you need.

It's no hidden secret however that the most common reason for choosing leasing is in effect that whole issue of cash flow and making maximum use of your credit facilities and working capital given the need to balance those with your requirement for new assets .

The ultimate win when it comes to leasing assets is your new found ability to reduce costs and cash outflows while at the same time gaining the benefits from the asset you're acquiring . As the industry itself puts it, ' do you want to own the asset, or on the other hand, get the benefits of using it '? We'll take the latter any day.

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your lease financing needs.

7 PARK AVENUE FINANCIAL
CANADIAN ASSET AND 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_assets_lease_financing_equipment_loan.html