Working Capital And Factoring Solutions In Canada – Considered The The Plus And Minus Scenarios?

What’s The Difference? A Factoring And Working Capital Term Loan Primer


Information on working capital financing and factoring solutions in Canada . How does the Canadian business owner evaluate the positive and less than positive aspects of each cash flow solution?



When business owners and financial managers think of ‘cash flow ‘two terms are almost synonymous, 'factoring', and 'working capital'. Is there a difference? Yes, a major difference. It kind of comes down to a ‘plus’ or ‘minus’ situation – a term that’s universal in any language.

We believe that when Canadian businesses think in terms of working capital that is often in the context of permanent working capital. This can be in a couple forms, a term loan, a mezzanine loan, or subordinate debt. These are the key terms of ‘high finance’ for working capital loans! With loans such as these businesses typically use the working capital derived from the loan to invest in sales and marketing, implement new products and strategies, and purchase inventory and materials for further corporate growth.

There are numerous advantages to a working capital term loan. Repayment of the loan is typically in the 5 -7 year range. As such that clearly frees up cash flow. Let’s do a quick example – If a Canadian business borrowed $ 150,000.00 and was successful in getting a term loan in place the monthly payments over a 5 year period would be approximately $ 3000.00 per month. (We used an interest rate of 8% just as an example).

Depending on the flexibility of the lender payments can be structured, or even potentially deferred, based on the nature of the customer’s needs and overall financial situation.

Naturally any financing scenario as positioned above is long term permanent working capital, which is generally viewed positively by business owners and their lenders. It is in effect a form of ‘patient working capital ‘.

Long term working capital loans in effect ‘compliment ‘your existing secured creditor relationships. For the purposes of this article we won’t dwell too much on the aforementioned subordinated debt and mezzanine debt – we will simply say they are unsecured ‘ cash flow ‘ loans, long term in nature, with rates substantially higher than chartered bank rates due to the general unsecured nature of the loans . The lender is simply taking a position that your firm will be able, based on historical and present financials, to repay the loan out of cash flows.

We’ve discussed the ‘permanent ‘ working capital loan and have seen its characteristics, i.e. term loans, longer repayment schedules, fixed rates, terms and structures .Now lets look at totally immediate working capital/ cash flow, which many customers in Canada are achieving by a factoring or working capital cash flow facility .

The factoring solution is immediate. Transactions and facilities can usually be approved in a much shorter time frame. Every customer is different of course, and in many different industries, but based on a review of your financials and your business customers receive immediate significant advances (typically 90%) of their sales invoices.

Since the heart of any business cash inflow comes from collected receivables business who ‘struggle’ with the collection process often face cash flow shortages due to slow paying customers. Conversely, as receivables and inventory build up for good reasons (good reasons = more sales) the companies investment in receivables and inventory grows.

Factoring, or receivable discounting as it is also known, is based on the overall size, quality, and collection experience related to your billings. It is very safe to say that current invoices are more easily factored (sold) than 65 day unpaid invoices from slower paying customers.

Many factor firms assume the role of your collection department, some business owners actually welcome this as they have in fact utilized the very popular concept of ‘outsourcing‘re their collections . We're not a fan of these type of facilities and we prefer CONFIDENTIAL INVOICE FINANCE. Here the Canadian business owners bill and collects and administers their own receivables and client relationships.

So is factoring all goodness. Certainly not, what type of financing is. In factoring there is a usually a higher cost to finance your A/R portfolio. In Canada there are tens and hundreds of nuances and administrative procedures around the factoring process that many business owners struggle with. Factoring should be used for growth, not survival, and other strategies can be explored at a lesser cost and less intrusiveness to your business.

In summary, business owners considering the ‘ working capital/cash flow ‘ conundrum can consider long term working capital loans or short term receivable financing strategies for growth . There are a number of options around both of those financing, and in fact other options (example: a sale/leaseback of your assets or a real operating margined facility with a Canadian chartered bank) should also be potentially explored.

Review alL options, and work with trusted, credible, and experienced business financing advisor to find your optimal working capital solution.


Stan Prokop - founder of 7 Park Avenue Financial –

CANADIAN BUSINESS FINANCING

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 :

WORKING CAPITAL FINANCING AND FACTORING



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

Commercial Business Funding And Alternative Financing In Canada

A Bunch Of Different Ways To Finance Your Company?



Information on commercial business funding and alternative financing solutions in Canada . The right amount of debt and equity, with the right lender is key to successful capital structure.



Businesses need to in essence estimate the funds they will need ' over time'. We say over time because those funds will cover different periods in the company's growth.

Broadly speaking we can call this ' business financial planning '; however the whole process is somewhat more complicated due to the external financial and economic environment.Naturally after a firm develops some solid estimates around capital and growth needs the question then becomes 'How much of this funding should be borrowed via debt?'


Contrary to what management and financial mangers understand, debt is actually the cheapest for long term financing, supplemented of course by the fact that the interest on the debt is tax deductible. So should the business owner or financial executive take on all that debt? Clearly too much debt will restrict and potentially damage the firm, and perhaps even exposing the company to failure. Having said all that the business owner still then has a legitimate right to ask "What is the appropriate amount of debt for my company then?"

The answer is that a company has to plan towards finding a target debt ratio, or capacity that reflects their business and industry, as well as the concerns of any of the owners, re: guarantees, etc.

The essence of the business owner's analysis is the ability to understand the company cash flows which will pay down, or service that debt. Most business owners don't do enough planning in this area, and their analysis needs to be much more formalized.

Company owners quickly understand that because there is a limit to how much debt a company can take on, there has potentially to be an influx of owner or equity capital. Business owners and equity investors at that time have to have a strong sense of the value of the company both currently and on a longer term basis.

Practically speaking entrepreneurs and business people in all business sectors and in companies of all sizes are never going to be always eligible for either Venture capital or traditional financing, most commonly associated with Canadian chartered bank finance.
It sounds almost too simple but the famous 3 C’s of business credit (actually its personal credit also) can help the business owner /financial manager determine if they are eligible for the full amount of the funding they might need from traditional sources, (In many cases they will be eligible, but not for the full amount of borrowing they require to run/grow).

So those C’s? They are the world famous (to finance people at least) character, capacity and capital. Traditional financiers are of course risk adverse so when debt is high, or your growth is rampant that’s when alternative financing must and should be considered.

Some examples of alternative financial solutions include:

Factoring/Receivable Finance
Inventory /PO / Contract funding
Sale leaseback and bridge loans
Royalty finance
Private equity loans
Asset based non bank lines of credit

Business owners must be totally focused in the current environment of understanding the current realities of loan and debt negotiation. It is here an experienced advisor can become invaluable. Quality of the lending partner becomes key here. Most business owners eventually realize that all the banks have, give or take the same rates. They don't have the same people though! Therefore quality of service and commitment from the lender becomes ultra important.

In summary, business owners need to constantly assess their needs for debt or equity capital. Those needs are immediate, intermediate, or over the longer term.

Cash flow and owner philosophy on borrowing will dictate how much capital, and as we have seen, from where it comes. Owners that plan and understand the borrowing market will be more successful than those that do not. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business funding needs.




7 PARK AVENUE FINANCIAL

CANADIAN COMMERCIAL BUSINESS FUNDING AND ALTERNATIVE FINANCE EXPERTISE










Stan Prokop

The Canada Small Business Loan . Here’s Your Free ‘ How To’!

Who’s The Winner In the Business Financing Popularity Contest ? It Just Might Be The ‘ SBL ‘ Finance Program!


Information on the Canada Small Business Loan Program in Canada. Providing financing up to 350k for equipment start up, growth , assets and acquisitions.



The Canada Small Business Loan program is an ongoing major initiative by the Canadian Federal government to provide capital financing to new and existing businesses that meet the criteria of the program.

The program is very popular in Canada, primarily because it a business loan that the business owner may not have been able to achieve elsewhere.

Many business owners and financial mangers either aren't aware of the program, or, as is more often the case, don't understand the requirements of the program and how to ensure a proper approval in a timely manner. Naturally, rightfully or wrongfully so, there exists a perception that any government type funding program is extremely paperwork and administratively burdening to the business.

There are several key basics that allow a business to ensure that they are in fact qualified to pursue the program.

Those basics are as follows:


1. The company must be a private corporation - public firms are not eligible

2. The company must be under 5 Million dollars in revenue

3. The loan must ' flow through' a registered administrator of the program - In Canada this is typically a chartered bank - this is one of the key perceptions of the program, in that the banks ' administer ' the program, but they don't own it

4. Only three major asset classes are covered under financing in the program - they are as follows: Equipment, Leaseholds, and Real Estate

The government, as we have shown, doesn't lend the funds, but it guarantees the funds to the bank


Almost every type of business in Canada can qualify for the loan program.
The challenge of course, as always, is ' How does my firm get approved?!'
If a business owner or manager feels they are not capable of providing a proper submission to the bank it is highly recommended that they used the services of a trusted financing advisor or intermediary.

We cannot overemphasis that the key to dealing with the government and the bank is that it is critically important to have all the necessary paperwork in a properly submitted and, hopefully, professional package.

What does that ' paperwork ' include? Companies should ensure the package reflects the current financial position of the company, a proper business plan and or executive summary, and miscellaneous personal data surrounding the bank and government requirements - i.e. statement of net worth, proof of no tax arrears, etc.
Most importantly is the need to position a proper purpose of the loan re dollars, timing, use of funds, etc

On occasion it might be appropriate to offer up other guarantors or additional collateral, but in general this is not required.

Most business owners don't realize the true benefit of doing everything once, the right way! In lending and loan approval that is important. You can re- submit and renegotiate, but that is not an optimal strategy for business financing success.
In summary, the bottom line is ' do it once, right '.

If you feel that can't be done internally engage the services of a trusted financing advisor with credentials in this area. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your ‘ Small’ business loan .

P.S. Is it just us or is 350,000.00 not that small?!



7 PARK AVENUE FINANCIAL
CANADA SMALL BUSINESS 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 :


Canada Small Business Loan



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

The Asset Finance Lease Company In Canada - Leasing Capital Equipment 101

A Hitchhikers Guide To The Asset Finance Lease Company Galaxy in Canada !





Information on the benefits of utilizing an asset finance lease company in Canada . Leasing Equipment is the chosen financing solution for Billions of dollars of equipt. in Canada





The asset finance lease company in Canada. There probably is a better way to travel through the equipment leasing universe in Canada than the fictional character in the classic ' Hitchhiker ' series.

We think there's an easier way to understand how the Canadian business owner can understand the benefits of lease finance without hiring an alien guide as in the series! And there's certainly no reason for panic! Let's dig in!

There is certainly no reason by Canadian firms should be surprised at the continued growth of asset finance firms. But that growth has brought choice, and many business people and their financial managers are sometimes confused by the potential myriad of credit approval, tax, accounting, and asset classification rules that can come with a solid lease finance solution.

The benefits of a lease finance solution become complicated in some ways only because there is so much choice in to can provide you with the best financing for your lease dollar size and asset class. That might range from a laptop program for your company, to rolling stock, all the way up to the proverbial corporate jet!

Therefore knowing when you should lease and who you should finance with makes you a winner when it comes to tax and accounting benefits, managing cash flows, and ensuring you have picked the right type of lease, which in Canada pretty well boils down to capital lease to own scenarios, or operating lease to use solutions .

Computers, software and telecom equipment make up a huge portion of the assets financing in Canada. Your ability to realize the benefits of these assets and technologies and then match them with the right asset finance lease company solution does one thing - it keeps your firm alive and competitive !

Costs and the future value of the assets you are financing are foremost in the mind of the business owner/manager. Tailored solutions via lease equipment allow you to hedge against obscolescence and replacement issues, as well as affording new assets that you otherwise might not be able to afford.

While bank term loans are one aspect of acquiring an asset adding that type of term debt to your balance sheet and credit line facility is not always the best solution - let alone being approved in a timely manner.

While bank capital is both unlimited and low cost the challenge of the majority of business financings always come back to full credit approval and the time spent to get that transaction in place. Leasing companies in Canada, in both the small, mid and large ticket sectors distinguish themselves with some of the fastest approval times in any type of business financing.

While it is in fact true that many asset finance lease transactions do often require first and last payments in advance, etc they are much more attractive than down payments required in bridge or term loans for the same asset.

In Canada lease solutions come from mfr. related finance firms, bank subsidiaries, independent commercial finance companies, and insurance companies

Why do companies utilize the leasing industry for acquisition of assets? It's not as complicated as you think - technology has boomed, cash is king ( that's cash conservation by the way ) and lease finance can even be a solid sales tool for many firms offering products and services that are ' sticker shock' intensive .

Our hitchhiker guide in the leasing galaxy may well have traveled hundreds or thousands of years through the lease universe. What did he discover? Simply that asset finance of equipment addresses obsolescence, replacement, tax and balance sheet and working capital mgmt. flexibility - all at the same time.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with knowing which market segments in the industry can help your firm, and which elements of a good lease transaction can bring benefits to your company.



7 PARK AVENUE FINANCIAL
CANADIAN ASSET FINANCE AND LEASING EQUIPMENT EXPERTISE



Stan Prokop - founder of 7 Park Avenue Financial –

Canadian Business Financing

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 :


asset finance lease company leasing equipment


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 Basic Finance - Time for Boot Camp

A great article in today's FINANCIAL POST by ' RICK SPENCE '

ARTICLE LINK = OWNERS STRUGGLE TO PASS BASIC FINANCE TEST : SURVEY

http://business.financialpost.com/2013/03/11/most-small-business-owners-cant-pass-a-basic-financial-test/

The thrust of the article was that an astonishing 83% of business owners / entrepreneurs have some ... 'basic business finance ' challenges . They are looking for ' mentorship programs that help small businesses learn ..'

We strive ' daily ' to help that cause and the 45,000+ that have followed our 'CANADIAN BUSINESS FINANCING ' blog to date have hopefully been helped by our 1100++ tips , solutions and attempts at demystifying business score carding and viable traditional and alternative financing solutions.

Stan Prokop
http://www.7parkavenuefinancial.com
CANADIAN BUSINESS FINANCING

Finance Factors In Canada . Decided If You’re For Or Against Receivable Factoring Cash Flow Solutions ?

The Dreaded ‘ F ‘ Word - It’s Factoring, Funding and Financing Your Sales !



OVERVIEW – .Information on RECEIVABLE FACTORING AND FINANCE FACTORS
in Canada . Letting the Canadian business owner/financial manager understand the role and value of finance factors




Finance factors in Canada. When the Canadian business owner / financial manager considers the weight of evidence for a receivable factoring solution he or she wants to be in a position to have the facts on how this method of financing sales works, costs, and attracts benefits otherwise not obtained . Let's dig in!

Whether your business is mature, a start up, or growing like crazy you need to be in a position to ' model ' your cash flow. That's something you need for your own management of your business, as well as being available for any term or operating lenders. The advantage of having such data is that over time you get a strong sense of your cash flow and working capital needs, giving you comfort on what’s coming in. and going out!

Feeling disconnected lately? One reason for that is what we see in talking to clients all the time - actual cash flow and profits are vastly different things. Are you really comfortable with the way your A/R tracks sales, or visa versa, and do you understand the implications of growth and working capital needs.

That’s where Finance factors come in. A receivable factoring solution reduces the time gap that it takes you to generate cash out of your products and services.

Unlike bank financing where you assign or collateralize your receivables via a line of credit the Factoring solutions is a straightforward immediate ' sale ' of your revenues as you generate sales. It gives you ' immediate funding ' and by that we mean basically the same day. So if you hopefully generating invoices to clients in the morning you receive the cash for that sale the same day. That’s cash flow optimization!

Although the function and the formula for A/R financing seems either strange or exotic or unheard of to some in reality this form of financing has been around for hundreds of years. It is widely popular in the U.S. and gains more traction in Canada everyday. Quite frankly it’s the alternative to having to put more equity in your company, or arrange debt financing that you may or may not be eligible for. (And business owners can unfortunately spend a lot of time these days on financing solutions that are either wrong for them or unattainable)

Where confusion reigns supreme sometime is when some of the terms, pricing and players in the Canadian A/R financing industry seem a bit confusing to the factoring ' newbie '.

A short overview of some key issues, points to consider is as follows:



A/R factoring documentation is between your firm and the finance factors.

Our absolute recommended solution is a confidential invoice financing facility whereby you bill, collect and finance your sales to the amount you require and need.

Generally receivables under 90 days can be financed at anytime. Your receivable might be 1 day old or 60 days old. It's your call on when you want to cash flow them

The terms advance rate and discount fee are absolutely critical in understanding A/R receivable factoring in Canada. Typically 10% of the financing is held back as a buffer or hold back, and the charge to discount or finance that sale is in the 2% range for a 30 day period. So using a $100,000.00 invoice as an example you would receive 98,000.00 of immediate cash for that item. Proceeds could be used to generate more sales and service and profits - and in fact your payables could be offset by taking discounts for prompt payment with your own suppliers.

If you wish to smooth out and normalize cash flow, be less afraid of growing or taking on larger orders and contracts, and avoid ' cash crunches ' the weight of evidence might just suggest you should consider receivable factoring. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow needs.



FINANCE FACTORS
RECEIVABLE FACTORING





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/receivable-factoring-finance-factors.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 Success . The Before And After Of Valuation And Financing

Welcome To The Zone ! The Business Acquisition Zone



OVERVIEW – .Information on buying a business in Canada . Financing and valuation play a key role and are two principles of success in acquiring a company / business




Buying a business? The success of that transaction can revolve around 2 key elements, valuation and financing. Frankly, knowing what your business is worth at any given time isn’t the worst thing also. How exactly do you approach valuation and financing?

The business owner or manager might also want to remember that equity valuation doesn't necessarily become a key factor in debt financing - that's when it's all about the assets. However, just like how we might view our personal homes it’s always a good thing to know what things are worth!

There are numerous, lets call them ' data points ' when it comes to taking a look at value. Assets play a key role, and it's important to look at both the cost of replacing them as well as their current estimate value, which often differs from ' book value ' with respect to the role of a deprecation policy.

In fact if you're looking at buying a business or even a franchise that might possible have little or no current profits it becomes all about the assets that will play a key role in your financing. It would be great of course to have data that allows you to compare other similar businesses, but in the SME (small to medium enterprise) sector that type of info or data is not always possible - that type of information is usually received for companies that are either public or much larger.

Another way to approach valuation and then financing is using income and cash flow approaches. At the end of the day it's in fact that cash flow that is going to play a role in your financing approval.

As complicated as some valuation concepts might seem there are really just a few basic key points that are looked at - they are current and future profits, multiples of sales or cash flow and the assets we've talked about already.

Quick example. If you are told or determine that business in this industry sells at, or is valued at a multiple of 3 then a company you are looking at with 100k in net income would be potentially valued at 300k. The financing challenge comes when there arent enough assets to finance and a large part of what you are paying in effect becomes ' goodwill ‘, which is generally not financeable for businesses that are small to medium sized.

We should mention that that Canada government Small Business Loan, aka the ' SBL ' is in fact a very solid and recommended way to finance an asset acquisition, but we caution clients to understand that the financing vehicle is only able to finance assets and leaseholds . One piece of good news in that type of deal is that an updated appraisal of the assets and their current value might in fact help you get the full financing you need.

When poor or ' not enough' banking or financing arrangements aren't in place there is a greater chance of business failure, let alone your ability to grow or operate the business.

We think it's clear by now that an outside opinion on what you are paying and how you will financing buying a business might well need some outside help , both in the valuation and the financing of assets . Businesses can be acquired via Canadian bank loans; asset based lending arrangements, and even monetizing current assets such as receivables and inventory.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor My Pagewho can assist you with your business purchase and financing needs.


BUYING A BUSINESS FINANCING VALUATION




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 :


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 - 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 :


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