Surgically Removing The ‘ Ouch ‘ Out Of AR Factoring in Canada . Financing Receivables Via A Factor Company Is Not Necessarily What You Think !

Should Your Firm Consider .. Or Avoid Factoring ?


OVERVIEW – Information on factoring in Canada . Financing AR Receivables via the ‘ right ‘ factor company is not what you think !





Our goal... simple... a surgical removal

of the word ' ouch ' from factoring receivables in Canada. Is such a delicate operation even possible? Is there a ( business ) doctor in the house …We think so... let's ' scrub down ' and get started!

There's a real inequality issue among many businesses in Canada... some of them have cash on hand, cash flow, and working capital, and some don't.

If your firm, large or small is in the latter category financing receivables in Canada is one of the most solid and effective solutions to your problem. But how does a factor company work, and where do you find one, and oh yes, what does it cost? That cost, quite frankly, is usually the 2nd or sometimes first reason that the ' ouch ' exists in the mind of the Canadian business owner and financial manager.

The actual tool itself is fundamentally easy to understand. Unlike borrowing against your receivables, which you do via a Canadian chartered bank or business credit union factoring works in the manner of having documentation in place with the factor company that specifies your ongoing actual sales of the receivables .

So the A/R isn’t collateral per se, the cash you receive for them is the proceeds of the sale. That’s the simple basic explanation most clients need to know when we point out the differences between a bank facility and a factor company that’s usually in the sole business of financing receivables.

We do add however that a number of other financing mechanisms can be ' bolted on ' to your factoring facility - typically they include inventory financing, PO finance, or allowing you to borrow against owned equipment. But that whole comprehensive solution we have just described is a conversation for another day - our focus here is just factoring AR.

So how much can a client finance their firm given they have opted to consider an A/R finance strategy. The answer is as much as you want, as long as you have the receivables to back up the solution.

The ultimate size and type of facility you enter into is driven by your firm’s general financial condition, the size of your annual sales revenue, and the quality of your customer base. We explain to clients that in general all your North American receivables can be financed, simply meaning that you can cover U.S. clients also under your factor facility . Foreign, non North American clients might require some sort of credit insurance - but you probably want that anyway.

The actual mechanism of the financing is worthwhile exploring for a moment. Your invoices are sold, via your original documentation agreement with the factor company at a discount of approximately 2% if you are selling on 30 day terms. That 2% reduction in the value of your sale is the factor company’s profit.

The absolute method in which we can assure clients that they can remove the ' OUCH ' factor in financing A/R in Canada revolves around a few basic issues:

Clear understanding of how pricing works

Getting a competitive rate

Dealing with the right firm - Hint - VERY IMPORTANT!

Ensuring you can get a confidential facility in place, allowing you to bill and collect your own receivables. (99% of the firms you might choose to deal with cannot do this for you)

So, operation successful? We hope so. Utilize the services of a trusted credible and experienced Canadian business financing advisor who can assist you with your factoring needs.

7 PARK AVENUE FINANCIAL
CANADIAN A/R FACTORING 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_ar_financing_receivables_factor_company.html

Essential Franchisee Finance . Here’s How To Master A Franchise Financing Loan In Canada

Canadian Franchise Loans – Uncovered!


OVERVIEW – Information on being successful with a franchise financing loan in Canada . Proper franchisee finance is critical to your new business success .




It's that time... you're looking for a franchise financing loan for your business purchase in the Canadian business environment. Need franchisee finance assistance? Let's look at what you need to know... and do!

Unlike our good friends in the U.S. the Canadian franchisee entrepreneur has, frankly, somewhat more limited options when it comes to financing their business purchase.

While in the states specialized franchise finance firms abound, along with a number of types of banks that could facilitate your purchase the Canadian borrower quickly finds that not only will his franchisor not provide direct financing .. no surprise there ... but equally as challenging is the fact that only about 4 solutions exist in Canada for your franchise loan.

What you need to do is really focus on your franchisee loan as if you were purchasing any other business, either existing, or new, i.e. your franchisee rights and a turnkey solution offered by your franchisor or master franchisor.

What does that mean?Simply that it is back to the basics , which includes a business plan, the ability to demonstrate some operational skills and mgmt. experience, as well as being able to clearly identify that you can contribute the required ' equity component ' or down payment to your deal.

In finance there is a term called Sources and Uses ... it couldn’t be more basic... identifying where you will get your funds from, and then clearly itemizing each individual use.

What are those uses? It's of course the franchise fee, equipment, leasehold improvements, inventory, working capital, and in some cases, depending on what franchise you are buying, real estate.

The new franchisee is often so caught up and focused on getting a franchise loan that the last thing they are thinking about is short or intermediate term working capital needs... ie the fuel that will finance the business on a daily basis. It's all those basics, wages and salaries, lease and loan payments, and products and supplies.

So who are the actual franchise lenders in Canada? It boils down essentially to our traditional banks, the government small business loan, commercial leasing and finance companies and in the Canadian environment, 1 or two very specialized franchise financiers that are independent commercial finance firms.

A couple of notes about the players we have just mentioned. The traditional Canadian chartered bank rarely finances a new franchise on its own merits. That is because whether you agree or not the business is viewed as a small business and a start up, with no proven revenues, cash flows, and profits to substantiate the loan. Again, you might think otherwise, but the bank respectfully differs!

By far the majority of franchises in Canada are financed by the specialized BIL loan that is a government guaranteed loan. One note is that this loan has a 350k limit, so not all franchises can be fully financed in this manner.

If the specialized franchise finance firm doesn't have a true program arrangement with your franchisor you may also find a lack of interest in completing a transaction successfully.

Speak to a trusted, credible and experienced Canadian business financing advisor on who can best assist you in your franchisee finance needs.

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/franchise_financing_loan_franchisee_finance.html

Crowd Funding Strategy Not Working? Next Best Thing? Working Capital Solutions To Cash Flow Problems In Canada

Mastering Cash Flow Solutions in Canadian Business



OVERVIEW – Information on accessing the right working capital solutions for companies with cash flow problems or growth strategies .




Crowd funding not working? We wish we had thought of the concept .... You contact people or advertise in some manner regarding your capital or project needs... a million people send you $1.00... and voila! You're apparently crowd funded!

But getting back to the real world, on the assumption no one is going to send you free capital in one dollar increments ... what then is the Canadian business owner and financial manager going to do regarding cash flow problems and working capital solutions?

Once again your company is at that fork in the road with respect to addressing your working capital and cash flow needs. You've got a profit and growth objective, now you just need to know how to get there.


We all recognize that cash flow is the ' fuel ' that will drive the combinations of growth and more profits. You can achieve that in one of two ways, more sales, and on the other side, better asset turnover. That asset turnover is often a bit of a surprise to business people that arent necessarily grounded in finance.

That issue of asset turnover opens up a wide variety of potential solutions, including monetizing or cash flowing those assets. By financing your assets and at the same time focusing on better turnover your overall profit/growth situation improves, almost immediately. It’s all about turning inventory, collecting receivables faster, and financing longer term assets in the right manner.

In Canada that is done through:

Working capital facilities
Receivable Financing
Asset Based Lending
Bank Credit lines
Leasing/Sale Leaseback
Tax Credit Monetization
PO Financing

The good news is that many of the above solutions can be combined to further increase working capital solutions. The bottom line... its all about monetizing that balance sheet.Your ultimate goal = more cash in less time!

So how do you actually figure out how much to borrow and when. And don't forget the over riding question, taking on more debt or adding equity to your business.

For companies that have inventory its all starts at some sort of production cycle... but even service industries in technology or other areas have their own flavor or a working capital cycle .

A very simple rule to address working capital problems is that whenever your receivables and inventory grow you are going to have to address more working capital solutions.

Speak to a trusted, credible and experienced Canadian business financing advisor on how you can address cash flow challenges... the right way. That’s of course if your crowd funding strategy doesnt work... and you can pretty well count on that one!

7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW 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/cash_flow_problems_working_capital_solutions_2.html

Are You A Slacker? Lease Financing Intelligence Can Increase Sales And Profits. Mastering Equipment Financing Companies Isn’t As Hard As You Think

Master A Few Lease Finance Basics For Business Success


OVERVIEW – Information on equipment finance companies in Canada. Understanding leasing and asset financing can make your firm a winner


Nobody likes being called a ' Slacker '.

And you don't need to be. ( We're the first to admit though that the working for a living thing is sometimes over rated ! ) When it comes to equipment financing in Canada a little bit of work and knowledge can take you a long way when it comes to utilizing new assets for profits and sales growth within your firm. Here's what you need to know!

Managing a relationship, either long term, or even once with equipment finance companies is all about understanding where the other party is coming from. You have a reason to require their services, and in the current Canadian asset finance environment we can assure you there’s lots of competition out there looking for your business.

It's about though, understanding where the lease firm is coming from. Their charter is pretty close to yours, making a profit... on your firm. It’s your job to make sure it’s a ' reasonable profit '!

The Canadian lease finance industry touts itself as a 100% full financing business. That is to say very little... if any , down payment is required for the financing of assets , and don't forget also that you have a lot of payment flexibility with respect to staggered payments, seasonal payments, quarterly payments, etc, etc and on it goes. So if you do have reasonable credit quality make sure you are bargaining hard for little to no up front payment and focus on cash flow monthly payments that make sense for your type of business.

Fortunately or unfortunately our clients are always pretty well just focusing on the implicit interest rates in a lease. When they feel they have won at that game they feel they have entered into the consummate leasing transaction... via the ' monthly payment '.

While your lessor does in fact make most of its profit on the rate it should never really be considered the be all and end all. Other factors include the quality of the documentation you are being asked to sign, the residual value of the equipment at end of term, and any tax and accounting benefits that you and the lessor split or share. So yes, equipment financing companies borrow money themselves to stay in business, and the more they can charge you equates to more profit, but remember those other issues also.

Oh and one final point on that whole ' rate ' issue. In the 2012 time frame the leasing financing industry is very competitive, so your sales, profits, cash flows and balance sheet have already pretty well determined what your interest rate is. Enough said on that subject.

We mentioned the value of the asset at the end of the term as another key component you need to think about. If you are returning the asset to the leasing company they have spent a bit of time already, unbeknownst to you it would appear! deciding what that asset will be worth a few years from now when your lease ends. Let's say that’s 10%. They then price their lease according to not only credit risk, but what is known as the residual value of that asset a few years out. By taking sometime to understand that value yourself you have some negotiating power on price and lease structure and term.

So, our advice? Don't be a slacker when it comes to dealing with equipment finance companies. A classic case of a bit of knowledge saving you a lot of time and money! Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your lease finance needs.

7 PARK AVENUE FINANCIAL
CANADIAN EQUIPMENT 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/equipment_finance_companies_leasing_financing.html

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