Business Cash Flow Financing In Canada . Making The Case For Financing Options

Where’s the Safety Patrol When It Comes To Business Financing In Canada ?


OVERVIEW – .Information on business cash flow and financing options for the Canadian business owner/manager . Timing is … everything!



Business Cash Flow . Confusing sometimes ? It shouldn’t be . The term ' cash flow ' is widely used …. And somewhat widely misinterpreted ! Where’s our safety patrol when we really need one ?!

Its a specialized term in business and has often confusing definitions. The most pure form is the cash flow statement for any firm. At its simplest its a ' cash in' and ' cash out' analysis. Key to this analysis though is the timing of the receipt of funds. Any good business cash flow statement or projection will show projected inflows and outflows over a period of time - usually annually.


We mentioned wide misinterpretation. That is because it is often confused with other accounting terms such as 'profits ', ' income ', and 'revenue'. Naturally real cash is the life blood of an business. We don't pay our bills with ' revenue'!.


So, yes, our firm makes things, we sell them, and eventually we receive payment. During that time we are paying out cash to employees, suppliers, and also waiting to get paid ourselves. We are only able to pay our bills as a business with real cash!
When businesses prepare a cash flow statement they list their monthly expenses, both fixed and estimated, and then focus on anticipating when customers will pay invoices, thereby generating cash.

Naturally there has to be some solid work around any assumptions in that whole process - for example:

Are the projected sales going to be realized?

Will the payments from those sales be made on time?

How much can be drawn out of the business in the meantime?

As most business owners who have borrowed already know this type of document is probably the most important one that the bank or finance company wants to see.
Business owners therefore need to properly understand the total ' cash flow cyccle ' That cycle consists of purchasing inventory, booking receivables around the sales that are made, and then collecting hose receivables. Simply right? Not really, the true challenge is in the following: ' TIMING'!

Many textbooks in finance have been written around the mis-timing of the cash flow cycle - where large and once great companies went bankrupt by misunderstanding the subject of our article.

Most lay people find it very difficult to comprehend that a company that is profitable can go bankrupt. As we have discovered that can absolutely happen as financial managers confuse profits from a sale from receipt of cash from a sale. If the cash pipe is ' blocked ' problems will occur!

In summary, any business owners or financial managers understanding of the business cycle and proper cash flow will add value to the success of the business from a financial perspective.

To seek financing options for the business cash flow challenge seek a trusted, credible and experienced Canadian business financing advisor who can assist your with your working capital 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 :

7 PARK AVENUE FINANCIAL = CANADIAN BUSINESS FINANCNG



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

Restructuring Financing . A Day In The Life Of DIP Debtor In Possession Finance

Anyone for a DIP ? Here’s The Basics On Debtor In Possession Financing


OVERVIEW – .Information on restructuring financing, including Debtor In Possession ‘ DIP ‘ finance to save Canadian troubled companies






Debtor In Possession Financing - aka ‘ DIP ‘ . Many business people and financial managers are not aware of the term 'DIP' Financing .

DIP financing revolves around companies who are in distress and more often than not, in fact almost always, in a bankruptcy proceeding. Why would any firm want to finance a bankrupt company?

The answer is that many firms, especially those that are larger and have significant assets have a strong chance of emerging from bankruptcy, obviously as a stronger company ( less debt of course ) and a more reasonable chance of being successful and profitable again. We say ' less debt 'of course because the original secured lenders of assets,etc are in fact going to take a partial, or in some cases whole loss on their original financing.

DIP is clearly a very specialized area. Lenders who are specialized in this area enjoy the highest level of security over the assets they are temporarily financing.

Naturally the goal of the company while it is in a temporary bankruptcy (U.S. = Chapter 11 - Canada = CCAA ') is to emerge with new financing. The players and leaders in this specialized area of financing tend to be banks and specialized independent finance firms with significant capital and expertise. It is of course ironic that many of the banks that finance firms and take losses also have specialized DIP divisions which provide capital to the bankrupt firm.

The essence of DIP financing is that the DIP lender is given a super priority security on the assets of the firm. It goes without saying that when a company is in a bankruptcy preceding that the interest rates on the financing can in many cases be quite a bit higher than the customer enjoyed in its normal operating business model.

The advantage of a DIP lender are several - many times they are in fact over secured. That is to say, as an example, that a DIP lender may be providing a 5 Million dollar financing for the customer during bankruptcy, while the total assets might be values significantly higher. In many cases DIP financing are very large, and in that case two or in fact a number of lenders, band together to create the temporary working capital financing for the firm as it re - organizes.
In some cases DIP lenders may intend to take a future partial ownership in the post bankrupt firm, as well as of course, their place in line as priority lender over all others.

Many larger institutions actually create large multi million (billion?) funds that focus solely on making investments in DIP financing and partial future ownership of the firm. In general the competition for DIP financing is in fact growing - as ironic as it seems to the lay person and non finance professional, there is money in bankruptcy!

Naturally if a company is in bankruptcy there is still certain, if not a large amount of risk involved in DIP financing and the chances of a final successful emergence and re-financing of a firm. That is where experience comes to play, as seasoned DIP lenders know their industries and work out and re-finance strategies very well.

When a firm does successfully arrange DIP financing most finance professionals take that as a sign though that there is a strong chance that the company will re-emerge. Most importantly, as yet undiscussed, is the fact that DIP financing allows the company to continue on to sell, pay suppliers, employees, etc. Stopping a company in its key operating activities is of course highly risky with respect to a successful re-emergence of the firm.


If your business requires restructuring / DIP financing or requires extreme changes to current financing seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with ‘ the turnaround’!


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 = RESTRUCTURING FINANCING







CONTACT:
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

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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

Business Start Up Financing . Basic Rules For Startup Loan Funding

Cracking The Start Up Financing Code In Canada




OVERVIEW – .Information on business start up financing in Canada. How does the entrepreneur achieve the loan funding he or she needs for a new or early stage business



Business start up financing in Canada . Whether it's traditional, alternative, or just plain creative Canadian entrepreneurs want to know some of those ' basic rules' for ' cracking the code' to finance success. Let's explore some of those methods - and by the way some of these solutions can also help you grow an existing company.

It's no secret that that many business owners feel the door has closed on their chances of getting all the financing they need. Is that necessarily the case? It certainly doesn't have to be when it comes to a number of funding sources that allow you to access real world funding when you know what’s available and who to work with.

Canadian banks widely tout their offerings and expertise in business financing. However where the rubber hits the road is when the entrepreneur slowly realizes the capital he or she needs is harder to get and feeling scarcer all the time.

Business owners can of course dip into personal savings and assets to fund their business. This is typically done by tapping into home equity and registered savings plans. That is certainly not optimal, and always against our own preaching to clients relative to separating your business life from your personal finances.

The hard reality of startup funding is also that quite often not one single source of funding will get you all the loan financing you need. It might in fact come from a variety of sources, when, cobbled together, allow you to reach start up nirvana.

That brings up the point of proceeding with your business venture when in fact you don’t have the necessary funds you need. It can certainly be a double edged sword when you are unable to execute on your promised business plan, or vision.

We're primarily talking about debt financing here - equity financing on the other hand might be available from angel investors, friends and family, even that rare breed, the venture capitalist. If there are some basic rules for start up financing they often are somewhat non financial in nature - it’s simply maintaining our patience, flexibility, and the ability to downsize some of those earlier lofty goals.

A fundamental resource for start up success in Canada is in fact the bank, but it’s not what you think. We're talking about the government small business loan, aka the ' SBL ‘. While many SBL applicants may not become some of the largest corporations in Canada they can finance and grow a successful, profitable business in the SME (small to medium enterprise) sector in Canada.

The SBL loan has a lot of appeal to the start up. It includes very attractive rates commensurate with start up credit quality (let’s be honest - that's minimal!), long amortizations, no repayment penalties, and, can you believe it, a personal guarantee that is limited!

You can in fact approach a bank for a traditional (non SBL) bank loan, but be prepared with a solid business plan, demonstrable strong personal credit and collateral, and copies of purchase orders or contracts that make sense to a Canadian chartered bank.

Many entrepreneurs finance some or all of their start up with credit cards, both business and personal. While rates can in fact be attractive a real danger exists when problems arise and a personal credit crisis ensues, often taking years to correct.

There are some creative ways to finance startups - they include royalty agreements, or loans from strategic suppliers. In general suppliers are a valuable part of your start up loan consideration, as their capital via terms they extend is in fact real cash flow. Even SR&ED tax credits can be financed for real cash flow, allowing you to recover early stage R&D expenses.

Other more creative situations include business incubators, and even the new kid on the block - crowd funding.

So, can you crack the code on start up financing? Numerous realistic and viable options are available, as we have shown. Some work great, some work well in connection with others. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your loan and funding needs for any new or early stage venture.



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 = CANADIAN BUSINESS START UP FINANCING




CONTACT:
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

Factoring Is A Threat To Working Capital Problems. Alternative Financing Just Might Work

Factoring Is Easier To Understand Than Klingon!




OVERVIEW – .Information on factoring and working capital finance in Canada. Alternative Financing just might be the solution to cash flow challenges – and its not that alternative!


Everyone is talking about ' factoring ' these days, even the people who don't really understand it! While one could maintain that factoring has been around for a number of years in Canada it is absolutely getting more prominence.


We feel that it is getting that prominence for potentially all the wrong reasons, namely that in the current Canadian economic and banking reality financial, cash flow and working capital facilities from traditional institutions such as the banks have been significantly curtailed.


So lets do a basic primer on factoring, and then discuss how it's similarities and differences from what is offered in other parts of the world, and why it works and when it is problematic. We also have a solution for some of the business owner challenges associated with factoring and receivable financing.

Factoring has been around for hundreds of years (if not longer!). What's the basic premise? It's simple. You sell one, (or a number) of your receivables, and you immediately get cash. In our article we will continually try and point out some of the nuances of factoring that get Canadian firms into trouble - here is the first one - when you sell your receivable make sure you understand whether its recourse or non recourse.


By that we mean that on a recourse deal if your customer never pays, goes bankrupt, etc you are responsible for paying back the finance firm. If you arrange what is known as 'non-recourse' financing the finance firm is responsible for the loss, not you. As you can imagine non recourse factoring is a bit more expensive, as you are eliminating all collection risk.


Let's touch on another relatively unknown point in factoring, and that is that it is a key component of a potential asset based lending strategy. Asset based lines of credit are available to Canadian firms - these facilities are generally not with our Canadian chartered banks and are offered by very specialized firms. Not only can the business owner get financing for its receivables, but inventory and equipment and real estate can be included also. As the business owner knows, inventory and equipment are crucial parts of working capital, inventory more so.

When businesses factor their receivables in Canada, they, for the most part, are no longer involved in the collection function of those receivables. Two very important points come into play here -

1. You have just eliminated cost, personnel, and time involved in collections - ( that's a good thing


2. You have just handed over part of the key customer relationship to a third party with whom your customer has no previous knowledge, dealings - (That we feel, is a bad thing!) Avoid that by utilizing a CONFIDENTIAL RECEIVABLE FINANCING PROGRAM!


In summary, we have touched on a few key basics revolving around factoring and receivable financing in Canada - i.e. the history of factoring and why its growing more popular; and, in addition we have focused on some ' nuts and bolts ' of a factor / receivable financing offering with respect to some positive and negative aspects of such an alternative financing facility.


Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your working capital and cash flow 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 :


7 PARK AVENUE FINANCIAL = WORKING CAPITAL FINANCING EXPERIENCE


CONTACT:
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 Loans & Working Capital Financing Options for New or Smaller Canadian Companies

Start Up Anyone?

OVERVIEW – . Information on business loans and working capital financing options for Canadian business entrepreneurs



Start Up Financing ? Canadian chartered banks, usually by virtue of their ‘relationship’ with business owners and entrepreneurs are in a position to pass on valuable financing tips and information on business loans and working capital for start up or smaller firms. Although the banks are a solid source of such information the banks themselves, by virtue of their charters and credit policies, are unable to directly satisfy the financing needs of the customer.

Business owners are often therefore encouraged by banks to ‘self finance ‘the venture via equity or owner capital and commitment. It is clearly a misconception that banks play a key and major role in the financing of new ventures. Possibly the only exception to this statement is the fact that the banks offer up, in their role as administrators, the Government Small Business Loan, which is a Canadian federal government program providing loans up to , in some cases 500,000.00$ for purchase of real estate, business assets, or leasehold improvements . (The more typical loan amount maximum is 350,000.00$)

We may or may not agree with Canadian banking policies on start up and young venture financing, we should however appreciate the banks stance – they are lending out our capital at very low rates, with potential to lose the entire investment if your firm can’t repay loans and financing.

How can the small or newer business succeed in financing options? Businesses of the size that we are discussing need thousands, literally millions of dollars of financing to fuel their growth in Canada. In our commentary that we are providing it is important to note that as companies develop along the ‘stage of development ‘timeline they of course have much more access to traditional bank and private equity financing. We are primarily talking about earlier stage companies, who may be still developing products and services and may not be yet profitable as they start delivering and billing for those products and services .

So what are the immediate challenges of firms that are unable to provide traditional financing and what are, more importantly, some immediate solutions?!

The challenges tend to be painfully obvious to the Canadian business owner or financial manager that has worked to get traditional bank and equity financing. They are as follows:

Perceived industry or product risk
No collateral
Uncertain financial projections
Limited Performance history

How can the Canadian business entrepreneur overcome these very traditional roadblocks and challenges? There are a number of ways.

First of all, all alternative methods of financing should be pursuing. Alternative financing methods are most non dependent on the above noted risks and challenges. Those alternative methods of financing might include:

*Business Angels or strategic partners (think suppliers!) for short term arrangements
*Equipment Lease financing
* Sale leasebacks on equipment already purchased and paid for
*Asset based lending arrangements that provide working capital facilities against initial receivables, inventory, and purchase orders (These facilities don’t have the same requirements as banks)
* Sr Ed Tax Credits – Customer who have filed claims can finance those claims for cash
* Invoice / Receivable Financing – Immediate cash for your firm’s receivables (these facilities can be of any size)


In summary, newer or smaller firms fall into the ‘ void ‘ area of financing, where very few traditional financing strategies can be implemented, at a time when cash flow and working capital are most critical .

Business owners should review non alternative strategies which can be of great assistance in early growth periods.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your start up and ' new company ' 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 :

7 PARK AVENUE FINANCIAL = BUSINESS FINANCING START UP OPTIONS IN CANADA


CONTACT:
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 Leasing . It Seems To Always Be The Future Of Equipment Asset Financing And Here’s Why

Mystery Of The Universe? Not Quite But Business Leasing For Asset Acquisition Seems To Work All The Time


OVERVIEW – Information on business leasing in Canada. Asset Financing Via The Equipment Lease continues to be a proven business finance solution





Business leasing in Canada. Day in, and day out it seems that Canadian business owners and managers gravitate to equipment asset financing solutions as their preferred method of funding capital expenditures. Why is that? While we might not unlock the secret of the universe along the way we can sure provide some powerful insights into what makes lease finance tick! Let's dig in.

Let's take a look first at how clients typically approach the asset acquisition question. Typically it seems to be always driven from a ‘cash flow ' perspective. Companies determine over the course of the time that they need to acquire or replace assets. In many cases the cost of new asset acquisition (technology is a good example) is significantly covered off by savings in costs as well as opportunities in growth and profit. That's a good thing!

More sophisticated users of lease finance take a look at the cost of the asset, the savings and profits they will generate , and bench mark those against the actual lease, tax and accounting benefits that come with lease finance. Smaller firms in the SME sector might not actually do that level of analysis - but smart owners and managers seem to intuitively know that a solid alternative to taking on long term debt or depleting cash resources often comes via the lease finance solution.

In the old days many firms actually used operating lease to in effect hide debt on their balance sheet. The accounting rules have dramatically changed in recent times and most lenders and owners recognize that quite certainly the equipment lease is a liability The bottom line is that any firm, in any business financing decision has to ensure they are watching their debt to equity relationships and the cash flow that suffers and benefits from any financing decision.


Where business leasing is similar to secured lending is that at the end of the term (in a capital ' lease to own ') your firm owns the asset. Remember though that in a secured term loan situation your lender, typically the bank might have restrictive covenants around how much you can borrow now or borrow in the future. Leasing tends to place less or no focus on this issue - the focus is on the asset and the cash flow.

Remember also that today’s equipment finance markets are ultra competitive. The industry is on a total rebound and that drives interest rates and credit approvals to a positive convergence of ' goodness' for the Canadian lessee.

By properly negotiating leases in an upfront manner, either from a capital or operating lease perspective the Canadian business owner /manager is in a position to have a say in the ultimate value and use of the asset at end of the lease term. So your company benefits in knowing your fixed financing costs on the asset as well as having a say in its useful economic life .Talk about eliminating uncertainty.

Yes, you do have to pay attention to claims of ' 100% financing ' and other claims sometimes, but not always, not true in lease finance,

But, on balance, as we said, we're not quire sure lease financing is one part of the mystery of the universe solution, but we do know that 80% of the crowd cant be wrong, and that's how many companies utilize lease asset finance in Canada . Seek out and speak to a
trusted, credible and experienced Canadian business financing advisor who can assist you with your business lease 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 :


7 PARK AVENUE FINANCIAL = BUSINESS LEASING AND EQUIPMENT FINANCING IN CANADA




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