Accounts Receivable Factoring Financing Costs In Canada

Don’t Let Factoring / AR Finance Become A True Life Horror Story



OVERVIEW – Information on accounts receivable factoring and financing costs in Canada . What can the business owner do to understand, manage and control finance costs to increase profits and cash flow .



Accounts receivable factoring financing costs in Canada. For some business owners and financial managers in the Canadian marketplace this issue either was or has the potential to become a true life horror story. Does it have to be... absolutely not! Let's explain.

To put it another way, wasn't it the Beatles who sang ' misunderstandings all you see ...' in their Strawberry Fields tune. That's probably a better assessment of the conundrum some face when addressing the costs, structure and mechanics of factoring in Canada.

So what we are searching for is actually the answer to the question: ' What is in fact the true cost of factoring? And how do we measure calculate and address those costs?

For the majority of businesses in Canada the actual discount rate (clients confuse that with an interest rate) is in the 1.5 - 2% range. That is based on a turnover of accounts receivable in a 30 day period, which in many cases is unrealistic in today’s business to business environment. This is actually one of the key points in financing receivables in Canada.

The majority, (not all) factor finance firms in Canada, by their nature in effect become your collection dept. when they insert themselves into your business process. If you were to retain control over your own accounts and collections (Yes, Virginia, you can!) and focused aggressively on collecting your accounts you in effect have negotiated one of the most aggressive A/R pricings in Canada.

Furthermore when you factor in all the costs of a bank line of credit including stand by fees, unused facility fees, misc bank charges etc you will find that your total cost to finance in a bank facility is probably quite a bit higher than you may have thought. Also, bank lines are under specified credit limits, and the one of many key benefits of factoring in Canada is that your facility grows in lock step as your company grows.

How do you achieve then the ability to collect your own receivables and finance only the A/R that you choose to finance, when you need to? The answer is a Confidential Invoice Finance facility - one that’s priced aggressively and allowing you the business owner/manager to be MASTER OF YOUR DOMAIN!

So if there is one key point today it's simply that your ability to turnover assets such as receivables effectively reduces your overall financing costs. And the funds you generate from accounts receivable factoring allow you to ship more, sell more, and grow more .. including adding more profits and equity to your business.

Looking for a quick snapshot of all issues affect A/R finance costs in Canada. Quite simply they include:

- The actual discount rate you negotiate

- The holdback on each invoice, which typically should be in the 10% range

- Misc audit, disbursement and wire fees

And, most importantly, a breakage fee should you choose to refinance with another party or financial institutions such as a bank.

Does the industry in Canada do a great job of explaining pricing for this key area of business financing. On balance we would say ' no ' , so seek out and speak to a trusted, credible and experienced Canadian Business Financing advisor who can assist you with your A/R factor financing needs at costs and a structure that makes sense - for you !

P.S. Don’t forget also that funds generated from A/R finance allow you to stay cash flow positive , take discounts with current suppliers ( reduces your overall cost of financing !) , and allows you to take on business and contracts that otherwise might have to be forsaken .





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 10 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 :


ACCOUNTS RECEIVABLE FACTORING FINANCING COSTS





7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com















Stan Prokop

7 Park Avenue Financial - Canadian Business Financing Blog Stats

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7 Park Avenue Financial provides the financing you need for working capital, cash flow and business loan needs. Our reputation is based on 16+ years of trust and Canadian business financing expertise. All major Canadian banks have referred and continue to refer transactions to our firm for business finance solutions.

We strive to provide flexible alternative finance as well as traditional finance solutions to companies that are growing or experiencing cash flow challenges. We are experts in alternative finance solutions.

We focus on financing solutions that are available in the least amount of time possible and strive to provide the finance solution most applicable to your firm's needs. That might be acquisitions, growth, or restructuring and refinancing needs.

Our solutions include asset based credit facilities, purchase order financing, accounts receivable and factoring solutions, term loans, equipment leasing, and franchise finance as well as tax credit loans.

Referral sources for 7 Park Avenue Financial solutions come from bankers, consultants and advisors, brokers, accountants, law firms, and of course our clients!


Click here for the business finance track record of 7 Park Avenue Financial








Stan Prokop
7 Park Avenue Financial/Copyright/2020

Canadian Business Financing . Capital Funding And Finance Solutions And Tips

Business Finance For Smart People !


OVERVIEW – .Information on Canadian business financing solutions . Capital funding for your business is crucial to long term growth and operations .




Canadian business financing solutions. Does it seem that the capital funding you need to finance your business is always ... elusive? Knowing how healthy your company is allows you to select methods of financing your business.

Over the long term that adds value to your business and allows you to make the best decision possible around accessing capital, or even buying a competitor or synergistic partner. So consider us your mentor on one of the biggest challenges to business in the SME sector today - funding!

Are you effectively financing your assets? How you do that effectively allows you to manage your cash flow and working capital, budget for next year, and determine if you're as profitable as you can be. In cases where you are not generating profits now the ability to finance assets and growth can turn that around quite nicely.

Quick case in point? The other day we met with an established small business that had modest revenues in the 400k range. They had aggressive plans to grow to well over a million dollars this year. Only problem? No financing to get there, or eliminate the current operating losses due to a heavy investment in marketing their product to the ' BIG BOX ' stores.

Our recommended solution to the client? A combination receivable / inventory working capital line of credit, combined with a supply chain/PO financing solution. If implemented the client would have a lot more confidence in reaching that new aggressive sales goal. Hey, maybe they could turn a profit also?!

A lot of clients we meet shy away from the financing... or dare we say it ' accounting ' aspects of their business. In some cases they entrust that role to a book keeper or other employee who is the farthest thing from a finance analyst, controller, CFO, etc. Our point - you don't have to be any of those to have a strong handle on your business. It's simply about understanding some business relationships (others call them ratios) and getting some solid assistance from, let’s say, a Canadian business financing advisor to implement solutions around some of those balance sheet, profit, and cash flow parts of their business.

Investing some time and internal or external expertise allows you to finance the assets you have to their highest use. Are you 100% comfortable in answering the following questions:

- Are we aware of all options to finance inventory and equipment needs

- Will it be necessary to put in more owner capital (sometimes it is, but never always!)

- What in fact are the basis sources of traditional and alternative capital?

- Should I lease business assets, or purchase them outright?

- Can we generate more cash flow out of our accounts receivable?


Business Financing Canada style doesnt have to be the challenge and mystery that it seems to be for many business owners and financial managers, Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your finance and funding needs.






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 10 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 :

CANADIAN BUSINESS FINANCING CAPITAL FUNDING





7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com












Stan Prokop

Business Financing In Canada . Looking For Smarter Funding And Access To A Commercial Finance Loan?

Butter Or Margarine ? Good Financing Solutions Or Poor Business Credit Alternatives ?



OVERVIEW – Information on business financing options in Canada. Proper funding for a commercial finance loan or asset monetization is a timeless need for the Canadian business owner /manager.




Business financing in Canada. It's an age old challenge... probably going back to before the Dead Sea was even sick . We're talking about the risks inherent in not getting the right funding or commercial finance loan and ... surviving. And that’s short term operating finance or long term debt solutions.

A lot of top 'experts ' will give you their opinions why business finance in Canada today is either working or not working - its kind of like the age old debate ' butter or margarine ?" . We won't weigh in on that one but we have some solid observations and solutions for smarter business financing strategies in the Canadian landscape.

Accessing financing solutions at the right time, cost and structure comes with risk and reward - much more so when you're a private company that doesnt have access to capital markets , and certainly the majority of businesses in Canada, the ' SME sector ' will fall in that category.

We're talking primarily about debt and asset financing, as equity raises and going public are a whole different kettle of fish. In general we're not big fans either of capital pools or reverse takeovers; our own clients who have utilized those two strategies seem to be in pretty well the same boat they were in when they started, other than the fabulous benefit of higher legal and accounting costs. Sorry for that bit of sarcasm!

One other reason that businesses seek business financing and funding in a commercial finance loan is the ability for them to continue research and innovation on their products and services, hopefully staying one step ahead of their Canadian and ( these days ) international competitors.

One key aspect in the search for financing is to properly address your stage of business, i.e. start up, high growth, mature, and even, dare we say it ' dire straits '.

While the majority of business owners and managers in Canada focus on Canadian chartered bank financing this solid, well priced and robust finance solution is unfortunately not fit for all. So if your firm doesnt have the great balance sheets, solid profits, and positive cash flows and external collateral you should well be considering alternative solutions such as:

Receivable financing
Inventory financing
Working capital term loans
Tax Credit monetization ' SR&ED Bridge Loans'
Purchase order/contract financing
Sale leaseback of owned assets
Non bank asset based lines of credit

Your current financial challenges will seem a lot less problematic when accessing alternative solutions, as they are tailored to firms that have sales revenues but are experiencing financing challenges that make their commercial credit profile deemed ' more risky'.

These solutions and even others solve the Canadian business financing conundrum. And by the way, there is always going to be an industry that’s a little, or very ' out of favor '. In that cases the financing challenges increase commensurately, because your financing needs will barely be considered if you're anywhere near working with the wrong funding partner or lender or bank.

In summary, do you feel that your firm has less access to capitol than your competitors? That might not necessarily be the case, your current ' commercial credit profile ' notwithstanding. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding needs. It will probably be easier than our ' margarine or butter' analogy!


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 10 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-financing-funding-commercial-finance-loan.html




7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

















Stan Prokop

Buying A Business Loans? Easier You Think With This Acquisition Loan And Valuation Help !

Inside The Dangerous High Stakes Of A Business Purchase





OVERVIEW – Information on buying a business loans . An acquisition loan with proper valuation and financing makes your transaction work




Canadian business owners and financial managers will not always meet their personal and corporate goals through organic growth - as a result they seek purchasing and acquiring a business to further those goals.

Valuing and financing that new business is what it's all about - and we're talking about the ' right ' financing!

There are some strong basics you can follow to ensure that acquisition is done properly, meeting your goals and not putting you at risk. In certain occasion the value of the assets you’re are acquiring and financing can make, or break your deal.

Those assets are reflected at ' book value ' in the financials and may have significant real world swings up or down when it comes to financeability. Oh and by the way, when those assets are a lot less than your agreed upon price the GOODWILL aspect of your financing becomes a major challenge.


We're often asked to help with the actual cash flow and valuation around transactions in the SME sector. It's sometimes dangerous to generalize but businesses in that sector would typically sell for 2-5 times proven cash flow.
Keyword : proven!

The challenge then becomes putting financing in place that achieves the acquisition finance goals. Where does that financing come from? It can come from a variety of solid solutions - they include of course our Canadian commercial banks ( good financials required please ) , but alternate sources that work well include the Government Small Business Loan , asset based lending facilities that monetize the assets we've discussed, equipment lessors or a bridge loan of sorts, and even more creatively , a partial vendor take back . Quite often negotiating some co operation and assistance on a VTB or earn out of some sorts is the final piece of the puzzle.

Is there a short check list of some other key issues? You knew there were! They include:

- The ability to deal with existing banks or lenders of the firm you are acquiring
- Your personal financial credit history/experience/background
- Industry visibility re competition, etc
- Supplier /vendor issues re existing sales, contracts
- Current managers/employees

A lot of financing around an acquisition focuses on cash flow and companies with good cash flow bring in higher valuation and even higher chances of successful financing.

'SHARE SALES ' are difficult, if not impossible to financing in Canada, certainly in the SME (small to medium enterprise) market because liquidity cannot be attached to those shares.

Other key factors that will probably affect your financing success include the cyclicality of the business, current financial progress/success, our prior mentioned cash flow, as well as existing debt that you will have to wrestle down, manage, and address.

So, buying a business and getting the right financing in place. High stakes poker ? ! It certainly doesn’t have to be, so seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your valuation and financing needs .




7 PARK AVENUE FINANCIAL
CANADIAN ACQUISITION 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 10 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/buying-a-business-loans-acquisition-loan-valuation.html



7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

EMAIL - sprokop@7parkavenuefinancial.com























Stan Prokop

An ABL Cover Up? Is The Asset Based Loan That Good When It Comes To Canadian Business Financing?

OVERVIEW – Information on the abl loan facility in Canada . Why is this Canadian business line of credit financing still a best kept secret ? Who’s behind the cover up?!




ABLcover up? It's probably just us, but it sure seems that the Asset based loan business credit line facility is still somewhat of a best kept secret in town - and we do not understand why.

Cover up notwithstanding , let's take a look at how asset based lenders are filling one of the biggest voids in Canada - the ability of small, mid market and even larger corporations, public and private , to secure business lines of credit that meet their needs .

Although clients and everyone else, including us use the term ' loan ' the ABL facility is simply a revolving credit line secured by assets of your company. Those assets can vary in size and mix, but they typically include receivables, inventory, fixed assets, and on occasion, real estate.

The primary focus and driver of the ABL are your current assets, and they would typically be A/R, inventories. Those two seem to drive the majority of asset based financings in Canada.

The good thing about asset based credit facilities is that the business owner or financial manager knows the % margin levels on receivable and inventory up front and therefore also on an ongoing basis . In ABL lending A/R is margined at 90% typically, which is 15% more that commercial bank financing in Canada.

Inventory is always another question, and is analyzed separately on its own merits relative to your product and the different components of any inventory cycle, ie raw materials; work in process (‘WIP’) and finished goods. As an ABL lender better understands your business and operating cycle and quality of assets/clients you'll find your borrowing power ' increases ‘, or solutions are put in place to handle ' bulges'.

The beauty of asset based lines of credit is that they serve a broad number of situations. And those situations? They include start ups, fast growing firms, turnaround situations, high growth scenarios, and dare we say it, even firms that are in distress or in the midst of bankruptcy or debtor in possession scenarios. Talk about a catch all !We feel its important to point out though that ABL financing is not to be viewed as a ' lender of last resort ' / 'when the bank says no' scenario . It’s simply a viable alternative to Canada's mainstay in commercial business credit lines, our Canadian chartered banks. Oh, btw! Some of Canada’s largest and most successful corporations and retailers use this type of facility to finance the entire business.

And would the banks agree with us ?It's a resounding yes because most of them have small boutique divisions within their banks with small ABL teams that in a way almost compete internally for transactions . Hard to believe. Trust us; we've been in those hallowed halls!


We're not saying every aspect of ABL business lines of credit is a cake walk. Most of the time ( not always !) its more expensive, and you’ll be reporting more on asset quality and turnover re aged receivables, inventory lists, a/p summaries, etc . But when you balance all that out against more liquidity that comes sooner, quicker, faster that’s becomes a very positive trade off.

So, you decide, but we’re forgiving ourselves for thinking that ABL financing is a cover up on a good thing. We’re just trying to find the culprits. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your Asset Finance business line credit needs.




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 10 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.






7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com














Stan Prokop

Fix Your Business Finance & Cash Flow Financing Challenges Today !

Are You Sitting Down ? Your Firm Is Not A Cash Cow ! Take Off Those Blindfolds!



OVERVIEW – Information on business cash flow financing in Canada . Finance solutions for the company that uses, not produces ‘ cash ‘!


Business cash flow finance . We're going to shock you, but your firm is probably NOT a cash cow. That term is reserved for the probably 1% of all Canadian larger corporations that no longer require a lot of new investment in their firm - so that's why if they are running their business well ( collecting receivables and turning over inventory ) they become cash flow generators - they are always generating positive financing inflows. And yes, we're jealous.

So if you're not our friendly CASH COW then what in fact are you? That reality is in fact pretty clear, your firm is not a large mature corporation, you're growing, perhaps you're even a start up, and you need... cash!
A great mentor of ours is often quoted as saying ' you're not a real business person until you've sweated a payroll '. That’s the extreme part of running a business on a day to day basis.

So how in fact does the Canadian business owner or manager determine his or her cash flow financing needs, and when those needs are determined what a solutions are available? You're looking for reliable indicators and even more reliable solutions! In fact it’s this method of looking at and solving your business challenges that will be one of the most reliable indicators of your long term business survival and success.

Having access to solutions and resources around working capital simply allows you to meet your current financial commitment sand grow your business. We don't think there is one perfect solution for all firms when measuring and managing this aspect of your business. But if you use tools to gain solid insights into your current situation the solutions will become a lot more obvious!

At the crux of the business finance challenge is your ability to operate on a daily basis. So while your balance sheet and profit and loss statement tell you the amounts of your assets and your ' paper profit ' respectively its a cash flow analysis that really opens the kimono on your business!

Why does your banker, other lenders and lessors, etc focus on cash flow. Simply because over time it’s a strong measure of your survival. Many people will tell you to calculate your ' CURRENT RATIO' to determine your working capital and solvency. That's actually a very poor measurement in our opinion only because it doesn't measure asset turnover and the actual changes in the working capital accounts of A/R and inventory. On many an occasion we've profile the story of the American dept store W.T. Grant - as it filed for bankruptcy it had a lot of assets and a lot of ' paper ' profit . The only thing it didn’t have was cash and asset turnover; resulting in the bankruptcy.

So what tools do you in fact use to assess your true working capital and cash situation? The most reliable is probably operating cash flow, which simply takes your profit or loss and then asses the changes in your receivables and inventories. Quick example? Let's say your sales grew by 15% but your receivables and inventory in our example grew by 40%. You're using cash, and you're far from CASH COW status. On the other hand if you sales , for example are flat, but your a/r and inventory levels are down over the previous compared period you're well ... along the way to becoming a Cash .... Well we think you get the story!

Solutions in Canada to address business cash flow financing include:

A/R FINANCING
INVENTORY FINANCE
COMMERCIAL BANK LINES OF CREDIT
NON BANK ASSET BASES LINES OF CREDIT
SUPPLY CHAIN /PO FINANCE
TAX CREDIT MONETIZATION
SALE LEASEBACK STRATEGIES

Any one of combination of these, used properly, monetizes assets, and doesn’t increase debt. Structured properly they put THE FIX in your business financing challenges.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor today.



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 10 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-finance-financing.html


7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com



















Stan Prokop