What’s The Difference Between A Bank Or ABL Revolving Credit Line And Factoring ? What’s My Limit?

Here’s Your Reality Check On Cash Flow Financing In Canada



Here’s Your Reality Check On Cash Flow Financing In Canada



When Canadian business owners and financial managers are up to their necks in running their companies, growing sales, and managing operations to effectively use assets ... the last thing they think they have time for is to understand some key differences in terminology when it comes to financing their current assets . We're talking about receivables, inventories, and tax credits they might have, etc.

So why is the terminology so important? Simply because we have found different terms have different meanings depending on who you are talking to. Let's explain why you need to know this when it comes to considering either a bank revolving credit line limit, or an ABL factoring type of arrangement.

Bank lines are typically put in place for a one time set amount. It’s pretty safe to say that they are, in general, reviewed on an annual basis. Here's where the terminology gets important. Under this type of facility your assets, primarily A/R and inventory are in effect ' collateral ' for your borrowing. You have given the bank this ongoing collateral - and in the majority of bank deals you are also required to provide personal guarantees or outside collateral.

Your current assets are then margined, again, typically on a monthly basis and you can borrow within the previously mentioned limit. Banks manage this process by a simple document called a ' borrowing base certificate ‘, essentially highlighting the aging and turnover of your current assets.

So how does this differ from an asset based line of credit through a non bank ABL firm? (A = Asset B=Based L= Lending)

Factoring, or receivable financing is the most common, let’s call it a ' sub set ' of asset based lending. So although this could include fixed assets and real estate, to keep things simple we'll focus today on just receivables and inventory.

In the case of factoring receivables the documentation somewhat differs when you set up your facility, because it specifies that any receivables you wish to finance are in effect ' sold ' at the time of financing. The finance firm manages this quite effectively, and a common way they do this is to set up what is known as a ' lockbox ' or ' blocked account '. Here is then what happens. As you generate sales on a daily or ongoing basis you immediately receive funds. As these funds are collected by yourself, or your finance firm the monies are deposited into an account controlled by the finance firm. That makes sense given you have already received the funds when you generated sales.

We hasten to add that the recommended solution for this type of ABL factoring is in fact a confidential facility, allowing you to bill and collect your own receivables and maintain effective customer relationships.

Final point today - and it’s about your limit. As we noted bank arrangements typically are focused on one pre set limit. This sometimes does not address seasonality or bulges in the business of the Canadian business owner and financial manager. ABL factoring on the other hand in essence grows automatically with your sales. In effect its unlimited financing with your qualified assets; i.e. receivables and inventory.

So, our point today? Understand the terminology and nuances and what they can and can't deliver for your firm. Need help? Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in managing the reality check of cash flow and working capital financing in Canada.

7 PARK AVENUE FINANCIAL
CANADIAN ASSET BASED LENDING & WORKING CAPITAL 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_revolving_credit_line_limit_abl.html

Why Consider SBL Loans In Canada . The Government Business Loan Program Might Be The Financing You Need

Assessing the BIL/CSBF Loan Program In Canada


OVERVIEW – Information on the government business loan in Canada. How SBL loans provide the financing your business just might need.



SBL Loans in Canada. It's the government guaranteed business loan program in Canada; so why should you or your firm be interested?

The Canadian government, via Industry Canada has provided this loan program for years in an effort to help businesses in the SME sector (in this case those with sales or projected sales under 5 Million $) get the financing they need through the loan guarantee.

Each year thousands , and we mean in the 8000 range , of companies receive access to Billions of dollars of funding for the purchase of assets, technology, software, and yes, even leasehold improvements - paint and drywall and HVAC included!

But does this loan make sense for your company, and, if it does, how do you access the program? Is there the proverbial ' red tape ' that most of us associate with ' I'm from the government and we're here to help'!

Nothing against our good friends in the government, but clients are surprised to know they have no, repeat ' no ' direct ' interaction with the government for this type of business loan.

That's because the gov't has designated Canadian chartered banks, and a few other miscellaneous institutions with providing this loan. It' somewhat ironic that even the governments quasi bank, the ' BDC ' is in fact no even able to provide these loans.

So the bottom line is that your transaction is directly done with a ' hopefully ' knowledgeable banker that understands your business needs, and the program. The gov't guarantees a large portion of the loan to the bank once your transaction is approved, and repays the bank in a worst case scenario.

But we're talking about getting the loan, not defaulting on it!

To recap, SBL loans can be used to expand or modernize any facility as long as your business is in that facility. This is not a real estate flip financing program, trust us on that one!

Additional assets under the program that can be financed include machinery, equipment, furniture, and leasehold improvements.

What cannot be financed under the program? Unfortunately many clients think it’s a cash loan, a working capital loan, or an inventory and receivables financing loan. It is none of the above.

So how does one qualify for the program? As we said, it’s a lot easier than you think, and if you are successful rates, terms and structures are excellent, including a limited personal guarantee.
Speak to a trusted, credible and experienced Canadian business financing advisor on how you can benefit from this solid financing alternative for either your start up business, or an existing one in which sales are under 5 Million dollars.

P.S. You'll be please to know that you can even purchase an existing business, or franchise, under the program!

7 PARK AVENUE FINANCIAL
CANADIAN SBL LOAN 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/sbl_loans_business_loan_government.html

What’s The Deal With The ‘ Operating Lease’ Anyway? You Need To Understand FMV Leasing Vs. Finance Leases . Here’s Why!

Which Lease Finance Method Is Best For Your Company?



Information on the operating lease in Canada, aka FMV leasing. Here Are The Differences Compared With Finance Leases .





An ' operating lease '. Canadian business owners and financial managers have access to what is known also as ' FMV LEASING ‘... they just sometimes don't know what that is and when to use it . Let's cover off what you need to know.

When you enter into an operating lease there is generally intent by your company to return the asset to the lease company, as opposed to finance leases where you have a very clear intent to keep and own the asset at the end of the lease.

Oh, by the way though, just because you enter into FMV leasing (FMV = Fair Market Value ' it does not necessarily mean you absolutely have to return the asset. That is one of the beauties of operating leases; you have several different choices at the end of the lease term. We can see why the operating lease is called a ' true lease ' ... you're leasing... not owning... as simple as that.

One of the main challenges in what you need to know about an FMV lease is simply that the true monetary value of the asset in your transaction is not known at the beginning of the lease term. Take computer assets for example... with all their changing technology who could possibly predict with absolute certainty what a computer in today’s world will be worth 3 or 4 years from now?! Not us... that’s for sure and we toiled in that industry for 20 years!

In operating leases the actual accounting of the lease plays a huge role in your overall transaction. That’s because how the transaction is treated has a significant impact on your balance sheet and income statement. Also, accounting rules do not allow the lease company to specify the value of the asset at end of lease term. That often tends to be both good and bad for your company, the lessee as we will explain.

Many lease companies in Canada, and lessees try and arrange a side agreement between themselves. That certainly can be done, but it is somewhat dangerous as it is often viewed as circumventing the lease accounting rules around the operating lease. In a worse case scenario your auditors, or CRA - Revenue Canada might in fact impose penalties around interest, taxes, etc, as these are in fact impacted by the real structure of an operating lease.

The ultimate challenge of the operating lease is the value of the asset at end of lease term. You have to be able to be in a position to understand what the asset is worth from a monetization perspective. The good news is that with the internet and other sources business owners these days have a huge amount of information available to them with respect to the true value of any asset.

The lease company is of course entitled to a ' reasonable profit '. We would never fault them for that. But you as the business owner/manager and lessee have the total ability to ensure that profit is... reasonable. That’s because FMV leasing gives you the option of purchasing, returning, and even upgrading the asset when you are dealing with the right lease company.

If you're focused on understanding both finance leases and Operating Lease options for assets financed in Canada speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in achieving your financial goals in asset acquisition.

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/operating_lease_fmv_leasing_finance_leases.html

Receivable Finance Is Actually The Premium You Pay To Have The Business Cash Flow You Need To Grow Your Company

Why You Should.. Or Shouldn’t Finance Receivables Independent Of Other Business Financing


OVERVIEW – Information on receivable finance in Canada . Why do Canadian business consider using , or not using a/r financing for business cash flow .



Liquidity in Canada for many Canadian businesses is often ' fixed ' by Receivable Finance... commonly known as factoring... for business cash flow.

It's not financing per se, in the way that a bank finances receivables, its a form of finance that allows you to sell, individually, or in bulk, on a regular basis your a/r... for immediate , and by that we mean ' same day ' cash flow. That’s the key perceived benefit by many business owners and financial managers.

In explaining the process to clients it has become clear over time that a good way to describe this method of working capital finance is simply to view the cost of the financing as a ' premium ' you pay in order to achieve constant cash flow .

That ' premium' is viewed as expensive by many, however we maintain that its important to understand the terms , mechanics and benefits before we rush to judgment on what we have called the ' ouch factor ' ... a/r receivable finance pricing.

There are just so many little in's and outs of this method of financing that its important to separate what is important vs. what is not.

So what are some of the misperceptions around this method of cash flow finance? One is that it is an all or nothing scenario and that can't be farther from the truth. If you are working with the right firm ( key word ' right'!) you should be in a position to finance what you want and when . You should not be dealing with a firm that insists that you finance all your receivables all the time, as some players are want to request.

One of the biggest challenges we see in A/R Finance is the fact that many Canadian businesses don't view A/R financing as an interim solution. So they feel locked in and unable to address other financing at some future point in time.

The reality that we see day in and day out is that firms often progress to the point that they are now eligible for what they consider more traditional types of financing. If you are dealing with the ' right ' firm, (there is that key word ' right ' again!) you should not have any sort of penalties to exit a facility.

If your firm is not interested in a confidential financing facility, allowing you to bill and collect your own receivables you might find one very significant advantage to that ' PREMIUM ' we have talked about . That is simply that many firms can choose to have the factor finance firm administer their entire credit and collection policy. This alone can save many thousands of dollars and offset a lot of the ' premium ' paid to factor invoices in Canada.

Remember also that if you have one, or many larger ' blue chip ' type firms as clients you have just hit cash flow nirvana, as receivable financing is unlimited when it comes to credit worthy customers. If you clients aren't credit worthy it’s a case of really assessing whether you should be doing business with them anyway.

So, we can debate with clients all day the actual true cost of the premium they pay to finance receivables, but it should be clear that a strong business case can be made for the benefits of this method of cash flow financing in Canada.

Speak to a trusted, credible and experienced Canadian business financing advisor on whether you should, or should not finance your company in this manner.

P.S. You just might be surprised!

7 PARK AVENUE FINANCIAL
CANADIAN RECEIVABLE 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/receivable_finance_business_cash_flow.html

Scared Of Business Loan Finance? Eliminate Fear Of The Unknown In Your Financing And Loans.. .. And Oh Yes.. About Those Personal Guarantees

Accelerating Business Loan Approvals In Canada


OVERVIEW – Information on business loan finance in Canada. Financing Loans from traditional and alternative sources should not create uncertainty for the business owner.



We've all heard of the expression ' fear of the unknown ‘... and when it comes to talking to clients about business loan finance, commercial banking, and the financing of the right loans and financial vehicles for their business that phrase seems somehow ... quite appropriate .

So why does the Canadian business manager, if not fear, have a healthy amount of trepidation around what's required in a financing request ... scratch that... a SUCCESSFUL financing request . Let's examine some basics, including the ever feared and despised personal guarantee!

The majority of businesses in Canada in the small and medium enterprise sector generally are required to have all significant owners of the business personally guarantee financing. Larger more established corporations and public companies in general are omitted from that requirement.

Naturally the putting up of personal assets as a guarantee for a business loan or other type of financing weighs heavily on the business owner. And hey ... didn't we incorporate our company just to avoid this and other liabilities?!

Is there any consolation we can provide the business owner on this somewhat testy issue? One is of course that, not known to all, personal guarantees are somewhat negotiable. In certain cases where the lender wants your business bad enough, from a credit quality perspective the PG can be waived in its entirety.

Oh, and by the way, you could also spend the time seeking out (or speak to a trusted, credible and experienced Canadian business financing advisor) finance firms that place little or no emphasis on the guarantee of the owners from a personal perspective. Furthermore, and we don't mean to sound flip, but what in fact are you worried about if you have the business assets and confidence in your business around this issue of default and personal liability .

A final point on the guarantees of owners - they can be modified by negotiation in many creative manners, i.e. limited guarantees, guarantees subject to certain valuations, etc.

Are there other key elements of any financing proposal or business loan request that can make or break your success in Canadian business financing. Other key areas you should carefully address are the ability to demonstrate and provide:

Background of your company and management experience

Up to date financials - by the way that includes balance sheets that balance

Aged lists of receivables and payables

Business bank statements - (lenders like to see the in's and outs!)

Business plan - if applicable

Can we forgive the Canadian business owner/finance manager for viewing the Canadian business financing landscape as a minefield?

Yes we can, for all of the reasons we've talked about and more.

But with the right financing advice and information you can eliminate a huge amount of the ' fear ' that comes with access to the proper financing of your business. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist your with your business loan finance concerns.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS LOAN 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/business_loan_finance_financing_loans.html

Looking For Some Business Financing Oxygen? Try Asset Finance Via An Equipment Finance Company. Here’s Why!

Looking For The Best Resource In Asset Acquisitions for Canadian Business


Information on asset finance solutions for business financing in Canada . Why the equipment finance company is solution #1 .



Looking for some breathing room , aka some business financing ‘oxygen’

for the finance of assets in Canada ? You just found it .

The challenge of matching capital outlays for the assets / equipment you need for your business can be a significant one... a bit more so if you industry is capital intensive .

Does asset finance have to always be difficult? We know it's never easy, but utilizing lease finance is certainly one way to remove a lot of the challenge.

In many ways it's a perfect world when you consider the lease finance option. Why? Because you're benefiting from the combo of tax and accounting benefits which accrue to the lease decision, coupled with the concept of being able to upgrade, return, buy new or used again, etc . (Yes used assets can in general be easily financed, as long as there is a mutual agreement of value between yourself and the equipment finance company you are dealing with).

The equipment lease option is at the other end of the spectrum of purchasing / buying assets outright. The methodology a business owner or financial manager uses to make that decision is commonly called the ' lease vs. buy ' choice.

Part of the appeal of equipment finance is simply that your lessor is the one that's of course paying directly for the assets, and by the way that can very typically include costs associated with delivery, installation, etc. Even software and other intangibles such as warranty can be financed.

It goes without saying that the buyer of the assets retains title to the asset. Your firm uses it during the term of the lease, and then, based on the type of lease you have entered into (there are two - capital and operating) title / ownership revert to your company, or stay with the lessor.

The operating lease strategy we refer to above typically has title and return of the equipment staying with the lessor. However your firm has of course derived the benefits of usage.

Many assets you require for your business should not necessarily ever be owned. Best example - Computer and telecom asset classes. They depreciate quickly, technology changes, and more often than not the new product line is. you guessed it.. newer. faster, and even cheaper !

We can never over emphasize to clients how critical it is to spend a bit more time on your lease documentation with respect to your firm’s rights and obligations. Unfortunately we see our clients often over focused on rates, monthly payments. Etc. They can't believe it when we tell them they get to pick their own rate. Unbelievable?! Not really, because the industry is very competitive and your overall credit quality is easily determined by the lessor, and you, the (hopefully astute) borrower.

We further note to clients that the entire operating lease industry is in some minor upheaval since international accounting standards have changed dramatically relative to what counts and doesn't count in a ' True ‘ operating lease . Key point - the manufacturer finance facility, aka the industry ' captive ‘companies that finance the parent company products are often the best place to achieve true operating lease nirvana.

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

7 PARK AVENUE FINANCIAL
CANADIAN LEASE 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/asset_finance_business_financing_equipment_company.html

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