Acquisition Finance. The Heart Of The Matter When It Comes To Mergers Acquisitions Financing In Canada

Avoiding The Canadian Tragedy Of Poorly Executed Acquisition Financing


OVERVIEW – Information on acquisition finance in Canada . Mergers and Acquisitions financing .. done right !





Acquisition finance in Canada. Whether the business environment is turbulent or going smoothly savvy business owners and managers are always looking for successful mergers and acquisitions opportunities that... you guess it... require financing. Let's dig in.

In Canada both traditional and alternative financing solutions lend themselves to a business or merger opportunity, therefore posing the question - ' How is this opportunity to be financed to ensure success '?

In small to medium sized acquisitions a tremendous amount of creativity on a transaction can come from innovative methods of seller financing. Any form of seller financing obviously lowers the amount of external debt - traditional or alternative, that you are forced to take on.

Here on common challenge we see all the time is that the seller has serious tax ramifications depending on the type of sale that is in motion. Only two real types of sale exist by the way - ' ASSET ' or ' SHARE '. Share sales in Canada are typically very impossible to finance, in that private companies offer no real liquidity event for the financier. Naturally with public companies that’s a bit of a different story. The seller, unfortunately, is usually very ' tax conscious ' on the outcome of the deal, which many times makes the going difficult to close successfully and properly.

We point out also that when a motivated seller is open to some sort of Vendor Take Back scenario that also can become a potentially good source of income for the seller based on the interest charged on the VTB.

Smaller transactions in Canada require a commitment from the purchaser in the form of some sort of buyer equity, down payment, etc. Anywhere in the range of 10- 50% is required... and that's quite a range! Business owners who have to invest their own capital in a deal source those funds from personal funds, savings, investments, etc.

Less money down on any deal is the ultimate double edged sword on any acquisition finance deal. Leverage works for and against you, either propelling greater return on investment or significantly higher risk of failure based on too much debt - or the wrong debt. Talk about a real double edged sword! We point out also that lenders and other investors you may have lined up are generally ' impressed ' with an owner’s equity commitment to any deal. To paraphrase in the language of the people - you've got SKIN IN THE GAME!
While many clients we talk to in the Small business and SME sector think they can approach ' VC's' and Private Equity groups for assistance they rarely can meet the rigorous demands of those two types of external finance. Suffice to say you'll be giving up significant equity also, which in general is highly undesirable at a point when you haven’t realized the true financial benefits and returns of a good merger or acquisition.

In the small and SME sectors of business in Canada a great way to finance a business purchase is the government Small Business Loan - aka the ' SBL '. It offers tremendously attractive terms relative to what you are trying to accomplished, and allows you to retain tremendous upside re your projected financial performance.

Two final very typical ways to accomplish mergers acquisitions financing are to consider traditional bank financing and ABL (Asset based lending). If you can meet some basic cash flow coverage and debt to equity ratios you're a solid potential candidate for well priced acquisition finance. Asset based lenders will throw those ratios , generally speaking, out the window and simply focus on the assets you're acquiring and how they can be margined via term or operating solutions .

Avoid the tragedy of poorly executed financing when contemplating a merger of acquisition .Strive for a good grasp of acquisition financing basics, which can be sought via your accountant, lawyer, or a trusted, credible and respected Canadian business financing advisor with a track record.




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/acquisition-finance-mergers-acquisitions-financing.html







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

Inventory Financing In Canada. Exploring How Canadian Companies Finance Inventories

Why Used Submarines Can’t Be Financed




OVERVIEW – Information on inventory financing methods in Canada . How does the Canadian business owner/manager finance inventories in a manner that enhances working capital and cash flow







Inventory financing in Canada. What are the methods that Canadian business uses to ensure that working capital investment is maximized? Let's dig in.

When business owners/financial managers are challenged on how to finance inventories it's important to focus on two areas - we'll call them ' tips' and ' traps'!

Financing inventory typically revolves around either retail or commercial concerns. Smaller retail businesses have a huge challenge as banks and other commercial lenders are reluctant to lend against inventory. Compounding the problem is the fact they view that type of business as an ' all cash ' business - so why would it need financing?

Typically when inventory is financed by a bank or commercial concern it's important to realize that it's always financed at cost. Another good thing to know is that in certain types of financing actual physical counts, inspections, or appraisals will be required by your lender - again typically a bank or non bank commercial lender . That won't always be required, but on occasion it’s an absolute must. The lender needs to determine the ' margin formula ' that they will lend against on an ongoing basis.

Margin formulas vary significantly based on several key factors. They include an analysis of which one of the three stages your inventory is in (raw materials, work in process, and finished goods). Businesses that are able to demonstrate they have perpetual inventory systems in place stand a much better chance of ' borrowing power ' when it comes to financing inventories as part of your overall ' current assets'.

Your overall gross profit also plays a key point in financing. Ultimately important is the lenders / banks opinion on how marketable your goods are under a worst case ' forced sale ' scenario.

Many business owners consider the Canadian Small Business Loan program for the financing of their business. They wrongly assume that the program covers some sort of working capital, cash and inventory components. That is not the case! In that program only 3 classes of assets can be financed - equipment, leaseholds, and real estate.

Is there a winning way that we constantly recommend and implement for clients looking for inventory finance? The answer is that most successful financing in this area is in the context of a combined credit facility that also financed receivables. Two sources of financing exist here - The Canadian Chartered bank, and, in some cases even better: Non bank asset based lines of credit.

While the bank or commercial non bank lender places a higher emphasis on receivables due to their more immediate liquidity they also fully realize those sales are generated from inventory turnover. While banks differ in Canada on inventory margins it is non unusual in ' ABL ' (asset based credit revolvers) to achieve anywhere from 30 - 75% borrowing power.

Oh, we almost forgot. Why can't used submarines be financed? We would offer up that they can't be readily liquidated, and valuation is extremely hard to determine. Although we suppose the lender could utilize a ' FLOATING DEBENTURE '!

If you want to beat the challenge of inventory finance in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record , allowing you to achieve the business finance you require.




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 Inventory Financing Expertise





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 Financing . Avoiding What Can Go Wrong When Funding Canadian Businesses

Here’s Why Your Business Financing Just Isn't Bullet Proof Sometimes!


OVERVIEW – Information on the perils of business financing in Canada. What does the business owner and financial mgr. need to know when sourcing , evaluating and discovering funding Canadian businesses



Business financing . When it comes to funding Canadian businesses there are a tremendous amount of ... mistakes you can make! Almost anything can go wrong, so lets looks at how you can ' bullet proof ' some of that financing. Let's dig in.

Why do many clients we meet, talk to and help advise us that they have in essence failed at getting the financing they need? That failure can come from a variety of different reasons - however at the end of the day it all really comes down to problems caused by management of the company, the peculiarities of the lending landscape in Canada , and third part events that range from cataclysmic to simply annoying and time wasting from a management view point .

How then can the business owner and manager focus on successfully completing any form of Canadian business financing? That might include, for a starter the willingness to see the view point of the lender in negotiations re terms, rate, and structure.

Many owners / managers see failure in financing more often than success because they are unable to appreciate the time and work that goes into a proper financing process. On the other hand we also see clients that have taken on improper or too costly financing at almost any price and terms. That of course, if you’re properly prepared, doesn't have to also be the case.

Realism. In Canada, whether you're a start up, SME sector, mid market or large corporation you eventually have to face the fact that you're more of a candidate for either traditional or alternative financing. While many forms of alternative finance are becoming more ' traditional' and time worn every day the business owner/mgr we meet often is barking up the wrong tree relative to what can be realistically achieved.

Your ability to present positively and properly your current financial status and need is key to successful finance. At a simple level it means being able to provide year end financials, interim statements, and the ability to address any issues that arise out of the analysis of those documents.

While many larger financings absolutely require your lawyer or your accountant business owners can often complete a large if not all of the process themselves, saving significant time and expense, delay, etc.

Businesses that are self financing have a larger challenge in obtaining traditional bank and term type financing. Many alternative finance methods such as:

A/R FINANCING
SALE LEASEBACKS
TAX CREDIT FINANCING
ASSET BASED LINES OF CREDIT

Can readily supply working capital and cash flow needs.

Unrealistic expectations are a large part of business financing. If you have assets they can be monetized, if you have orders and contracts they can be funded via PO / SUPPLY chain financing. If there is a bottom line it's simply that you require assistance in educating yourself on financial solutions that are available and applicable to your particular situation.

Seek out and speak to a trusted, credible and experienced advisor with a track record of assisting funding Canadian businesses. You'll be more bullet proof when it comes to making capital decisions that work for your company.


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 Funding





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 Credit Line? Here’s 2 Solutions for Operating Capital Success

Getting Business Credit Lines Doesn’t Have To Be Like Taking A Bet

OVERVIEW - Information on the business credit line in Canada . Does the business owner/financial manager have a choice when it comes to operating capital requirements for short term day to day needs ?



The Business credit line in Canada . Most clients we initially meet tend to say 'what are our chances ' when in fact we maintain they should be asking ' what are our choices ‘! Let's dig in.

The essence of what we're talking about is the type of borrowing that's associated with the monetization of assets via line of credit. That's current assets by the way, which typically are essentially your A/R and inventory.

Business credit lines should be focused on short term borrowing. Longer terms are associated with term loans for equipment, mortgages on the business property, etc. Naturally while a term loan expires when you make that final payment business credit facilities are there and available to your firm based on your ongoing level of receivables and inventory.

You will of course want to match the amortization of term loan with the useful life of the asset. Let's use computers as an example - A typical lease term might be 3 years, and you would want to retire the lease or loan by that time as it is typically time to upgrade technology. But we digress..!

And what about those ' CHOICES ' we talked about. It comes down to essentially two solutions for the business revolving line of credit:

1. The Canadian chartered bank solution

2. The non-bank asset based business credit line - it’s typically called an ' ABL ' by the industry

Years ago any non bank financing was viewed as ' alternative ‘, in some cases there was a perception it was financing of last resort. Absolutely not the case today as the world of business credit changed dramatically, moreso after the 2008 world wide recession, where many firms, including banks , went under . That new form of financing, the ABL business credit line all of a sudden seems available and cost effective in most cases.

Bank business credit agreements tend to be what is known as ' covenant based '. Even if the business owner and financial managers considers the company to be in growth mode it might in many cases not be able to meet some basic debt to equity and cash flow rations that are required by Canadian chartered banks.

Bank credit lines typically margin just A/R and receivables. In the case of an Asset based business credit facility the borrowing allows you to borrow the market value of the lump sum of all your assets - so that might be a/r, inventory, tax credits , and equipment . Any unpledged asset becomes financeable.

Recently we were at a clients and the CEO asked a very basic question - ' What then is the downside of ABL ‘. The answer? Other than a typically higher cost the benefits are no outside collateral, higher borrowing power, and unlimited growth - it’s not a capped credit line per se. In truth if we had to state one ' downside ' it might be the fact that you are required to report more regularly on your asset lists. In many cases that made most of our clients better managers of their business.

Bank business credit is always going to be low cost and flexible if your firm meets traditional criteria. When it doesn’t know that you have another choices, the ABL line. And by the way, many clients often try ABL for a year or so and then are faced with the decision that they are eligible to be ' bankable ' in the traditional sense.

Bottom line. They had a choice, so seek out and speak to a trusted, credible, experienced Canadian business financing advisor with a credible track record who can help you facilitate the business credit line you need.


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 Credit Line Expertise


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

Working Capital Finance. Untying Funding For Business Cash Flow Needs In Canada

Abandon All Hope Ye Who Enter World Of Canadian Business Financing . Not So Fast Though





OVERVIEW : Information on working capital financing in Canada . Funding for business cash flow solutions can be achieved in a number of ways via asset monetization


Working capital finance in Canada . Talking to clients some days feels like they have entered the world of Dante's Inferno, via his famous quote ' Abandon All Hope Ye Who Enter '!

So when it comes to funding for business in Canada does it seem to you that you’ve got that ' tied up ' feeling when it comes to unlocking sales and assets and turning them into cash flow? That doesn’t have to be the case, so let's dig in.

The concept of assets ' tied up ' is key to understanding working capital financial solutions. Ultimately you want to monetize current assets and allow those funds to flow through your business - growing your company.

Two types of what we can call ' instant cash ' immediately come to mind. The first is of course assigning your receivables to a bank via a Commercial business line of credit. If your firm qualifies rates are low and you're typically allowed to borrow 75% of month end margined receivables. The margining formulas pretty simple - you can draw down on your line of credit on any accounts under 90 days old. A/R over 90 days is typically viewed as ' uncollectible, as a result your bank is reluctant to finance those specific accounts.

Another solution, which gains traction everyday in Canada, is the RECEIVABLE DISCOUNTING financing that uses another method of financing your 2ND most liquid current asset - Your receivables. (Cash is most liquid ... inventory is 3rd!)

This method of working capital finance differs from the bank solution in Canada. Instead of pledging your receivables essentially the same security agreement is used to denote the sale of your receivables on a one of or ongoing basis. While this method has a different pricing model, (it’s higher!) It allows you to borrow 90% of your A/R value, which is significantly better than bank limits.

The A/R Discounting model can also be combined with inventory and equipment financing, allowing you to maximize borrowing power on all you unencumbered assets. When combined in this manner it becomes what is known as an ' ABL ‘; an asset based line of credit working capital facility .

Both receivable discounting and asset based credit lines, or traditional bank credit allows you to reverse your ' slow growth ' policy if that’s because of a lack of funding for business.

All of these types of facilities do one thing - they reduce the time gap between building or selling something, and collecting your cash from clients. It is important to note that in all these facilities described you are only paying what you are using, so the ability to draw down on working capital is always there.

In summary, it’s quite easy to feel ' tied up ' when it comes to cash flow financing. You have orders, projects, contracts... the only thing lacking is the capital to move forward. Get the breathing room you need in cash flow financing - seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of solving funding for business success.



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 Finance Solutions





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

Equipment Finance In Canada. What Are Great Lease Financing Companies Worth To Your Business

If Perfect Asset Financing Was Real What Would It Look Like?

OVERVIEW – .Information on equipment finance in Canada . Let lease financing companies bridge the challenge of asset acquisition for the growth of your business




Equipment finance in Canada . Is it possible, clients ask, to achieve asset financing ' nirvana' when it comes to running and growing your business? Lease financing companies just might be the solution to that eternal conundrum of acquiring equipt. you need for your company. Why? Let's dig in.

Leading experts tell us that 80% of North American companies use lease finance when acquiring assets. So when the Canadian business owner / financial manager understands how the leasing marketplace runs they are immediately ahead of the game Just investing some time in the basics we have always maintained can save you thousands of dollars . Simply things like knowing how a lease finance firm generates a ( fair ) profit, how they evaluate your firm and asset finance request, and even simply saving tons of mgmt and ownership time by knowing who the players are .

In Canada today you can pretty well lease any asset, many intangibles included, such as computer software, or service and maintenance contracts related to your acquisitions. The industry thrive on serving all aspects of asset size, from the small ' micro ticket ' transactions right up to and including that personal corporate jet aircraft you've placed an order for !

If your firm has solid credit, typically exhibited by growing revenues, cash flows, and profits that are reflected in your balance sheet you're even in a strong position to negotiate rates that are extremely aggressive these days. Even the banks have fairly strong ventured back into offering equipment finance via separate divisions within the banks. Although credit criteria are high interest rates and structure flexibility are extremely attractive.

Medium sized and larger corporations and governments commonly even find themselves in the enviable position of tendering out their lease finance business - thereby acquiring finance rates and terms that are the best within the industry.

It always helps to have some expertise backing you when you venture into the lease finance world as a ' NEWBIE '! That might include advice from a seasoned business advisor, accountant, or lawyer on financial statement issues related to your lease request, the type of lease you are choosing, how to protect yourself in the documentation process, etc .

If you know your business you should clearly know your firms assets and their values. A large part of the ' profit strategy ' of lease financing companies in Canada revolves around the bet that you'll return the equipment. So low monthly payments sometimes come at the risk of having to return the asset at the end of term, allowing the lessor to capture that ' reasonable ' profit we alluded to earlier.

We find many of our clients don't fully understand operating leases, as such they are seduced by low payments, and even what can seem like negative interest rates, not fully understanding their obligations at the end of the lease term.

Don't forget also that you can often increase your own firms sales by lowering the sales cycle time by implementing a customer finance program for your own customers if your product allows you to do that . You an easily align yourself with a finance partner that will work with you and clients to maximize revenues, eliminate client budget challenges, and simply make the adoption of your products ' hassle free '.

Business owners and managers never want to lull themselves into complacency when it comes to staying competitive. However, as we have shown a strong grasp of asset financing via Canadian equipment finance companies saves you money, time, and prolongs your competitive edge. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your asset finance 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 85 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 Equipment Finance Solutions




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

Credit Line For Business? Choose Between An ABL Or Bank Commercial Finance Facility

We’re Not Kidding . There Are Two Types Of Business Credit Lines


OVERVIEW – .Information on choices for a credit line for business. Canadian business owners and managers can choose between non bank ABL facilities or Canadian chartered bank credit lines. Which one is best





Credit Line for business ? The other day we were talking to a business lawyer friend of ours, and we asked him which was better , the traditional Canadian chartered bank line of credit, of the non bank ' ABL' ( asset based line ) for commercial finance purposes . Being a lawyer of course he started with. ‘Well on one hand, but then again on the other hand ...’ ; we wanted to get a bit more specific than that though. So let's dig in.

The reality. You have two choices for business credit lines in Canada. They are both suited to companies that are growing , but non bank ABL's fill the gap for many firms that can't acquire the traditional financing they need from chartered banks in Canada . That might be due to lack of proper equity or profits that are struggling for a temporary period.

Both bank credit lines and asset based lending facilities can also be used for other purposes, other than day to day financing .That might include acquiring another business.

A key area that always becomes a discussion point with clients is the cost of these two different credit facilities. On balance asset based lines of credit are more expensive. However, while cost is no doubt a factor in financing any business suffice to say that access to capital is just as important. We quite frankly remember one client who hasn’t significantly increased their borrowing power after having considered an ABL COMMERCIAL FINANCE facility. In fairness, on occasion better quality borrowers will find they can equal or better bank pricing, but on balance they can expect two things from an ABL credit line:

INCREASED BORROWING POWER ( GOOD! )
HIGHER COST OF FUNDS ( YOU DECIDE! )

The basic mechanics of setting up either a commercial bank facility or ABL in Canada isn’t that different. You need to be able to demonstrate that you can produce on going financial statements, as well as proper regular reporting on aged receivables, payables, inventory summaries, etc.

We suppose that you can set up a bank line of credit for almost any amount, even unsecured for smaller facilities. These smaller facilities via a Canadian chartered bank don’t even require regular reporting, and as much emphasis is also placed on the owner’s personal credit as the business, as all business owners in Canada guarantee their credit facilities. There's rarely no chance of getting around that one!

But when it comes to a ' real ' credit line of business typically 250k facilities are the entry point. And the upper limit. There is no upper limit if your firm has financial strength!

We stress to clients that if there is one key benefit to ABL facilities over bank lines it’s simply that margin power is more generous - typically A/R is financed at 90%, Inventory anywhere from 25-75%, and the uniqueness of an asset based credit line is that you can borrow against unencumbered fixed assets also.

Bottom line - when it comes to business credit lines you have a choice in Canada. While bank facilities are low cost and plentiful, if your firm can’t quality of has special needs ABL credit comes to the rescue. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your commercial financing 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 Credit Line Expertise






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