Account Receivable Factor Funding Companies Provide The Secret To Cash Flow Financing . Here is Why And How

Understanding The Partial Victory Of A/R Financing . There’s No Shutdown Here !


OVERVIEW – Information on A/R Financing in Canada. What role do account receivable factor funding companies play in Business financing




Account receivable factor funding companies provide cash flow financing to Canadian businesses. What is the secret to their success, how do they work, and why is this sought after method of financing your business. We've got some thoughts, and answers on that. Let's dig in.

These days all we hear about on the business news is the U.S. govt shutdown. Well there's no shutdown in Canadian A/R financing solutions - they are alive and well, and open for business.

The use of A/R factor funding in Canada can be considered a triumph of innovative financing. The reality though is that it’s only been around as a business finance tool for hundreds of years. At the heart of the matter is the concept of using your sales, and the business receivables they create as collateral for cash flow.

All of a sudden the time that it takes a dollar to flow through your business (your ' operating cycle ‘) is dramatically shortened... and that’s a good thing.

The cost of financing your receivables depends on who you finance them with. In typical cases it’s done by our Canadian chartered banks under commercial lines of credit; when that isn’t possible that role is taken over by and A/R factor funding firm, typically a non bank. When you finance your sales and receivables through the bank the cost is an annual interest rate based on bank rates available to business.

In the case of A/R finance the cost is not an annual interest rate, it’s a discount. Under that mechanism your arrangement is funded via a sale of your A/R, at a ' discount' as we have noted. Your balance sheet is affected in a very positive manner - receivables disappear and cash appears.

In our two examples the key concept is 'secured borrowing '(the bank) via assigning your receivables as collateral, and the ' SALE ' of your accounts via A/R finance.

Why is factor funding so popular then? It couldn’t be simpler - your firm receives immediate cash for sales made instead of waiting anywhere from 30-90 days these days. Result? Instant cash and working capital. We also note that factor funding is typically provided at 90% of your A/R base; typically banks only advance on 75%. In both cases the balance is a holdback of sorts.

Some of the largest companies in the world sell their A/R in this manner - the Bay street boys

call it a fancier name - SECURITIZATION



Old style A/R Finance in Canada typically has the factor funding company playing a major role in your billing and collecting procedures. Our recommendation for our clients is CONFIDENTIAL RECEIVABLE FINANCE , allowing you to get all the benefits of factor funding while still maintaining full control over all your billing and collecting.

If you want to be part of the triumph of A/R financing in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in utilizing this solid method of cash flow financing.




Stan Prokop - founder of 7 Park Avenue Financial
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 Receivable Factor Funding Expertise




Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?

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


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/account-receivable-factor-funding-companies.html





Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Phone = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


























Stan Prokop

Asset Based Lending Is The Simple Solution To The Complex Challenge Of A Business Credit Line

Have You Kept Up With The Newest Alternative In Business Credit Lines?



OVERVIEW – Information on the ABL asset based lending business credit line . Simplifying

business borrowing in Canada





The business credit line in Canada. Have you kept up with the newest alternative for this key Canadian business financing tool? Its ' ABL’... which is the acronym for ' asset based’ lending in Canada. Specifically we're talking about a non bank revolving credit facility. Let's dig in.

In business it's all about benefits. So what then is so beneficial about asset based lending business credit? Easier to obtain is frankly one key benefit, given that lenders everywhere, including of course here in Canada have tightened credit standards over the last 4-5 years .

The concept of the credit line is simple - it’s an overdraft allowing a company to enjoy flexibility in the financing of current assets such as inventory and receivables. When banks put such a facility in place they focus on certain restrictions and are structured in such a way that when things go wrong the revolving loan is 'called'.

While we have identified ABL asset based lending as fundamentally a business overdraft it’s important to realize that it’s a solid tool for a number of different business circumstances.

Those circumstances? They include:

The refinancing of an existing bank line of credit

A Corporate restructuring - this often allows business owners to maintain ownership without seeking additional equity dilution

Acquiring a business or competitor in a merger/acquisition type scenario

High growth situations - ( It's an irony of business that traditional lenders such as banks steer away from explosive high growth situations - it throws the ratios out of whack!)

Management buyouts utilizing the assets of the company as a key financing mechanism

Another key focus of the ABL business credit line is the ability of the business owner/financial manager to borrow higher amounts than in a traditional bank scenario. Managers of ABL firms have a laser like precision focus on the value of your current and fixed assets. Fixed assets ? Yes, because a true asset based non bank line of credit will allow you to borrow, under one umbrella, against A/R, inventory, and fixed assets that are not otherwise collateralized.

While Canadian banks continue to be the most respected (and liquid) lending institutions in the world Canadian business has simply realized there are other alternatives available when it comes to business credit. (ABL is a lot more popular in the U.S. where it originated, given bank liquidity there is a whole different kettle of fish.)

While we have spoken of a ' true' asset based lending credit line there are some solid ' subsets’. They include:

A/R Financing
Inventory Financing
Tax Credit Financing
Purchase Order/Supply Chain financing

These can be singularly considered for any firm seeking business credit, or combined in a number of ways that make sense for your operational and growth needs.

While any type of business is theoretically eligible to be considered for non bank credit lines certain industries such as manufacturing, wholesalers, etc are perfect for this type of business solution.

While we focus a lot on the benefits of the asset business credit line it’s important to note that these facilities are more often than not more costly from a financing point of view. The simple explanation? Non bank lenders borrow from banks... so it’s a higher cost of capital for them. Typically the risk premium is often higher also as companies financed cannot meet the same level of liquidity and meet traditional lender criteria such as acceptable profits, debt to equity covenants, etc.

That cost though is offset nicely by the ability to get approved. Fundamental requirements are your ability to provide monthly financial reporting and acceptable turnover of A/R and inventories. Appraisals will often be required if you're throwing fixed assets into the mix.

While there is no upper limit on asset based lending typical deals will start on the low end in the 250k range. However, as we have noted, there's no ceiling in business credit in ABL and it may come as a surprise to many that some of Canada's largest and well known corporations abandoned traditional commercial banking for this type of credit.

Don't get caught being up to date on financing solutions that are available to your firm. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of delivering solid financial solutions for your firms growth 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 Credit Line and Asset Based Lending Expertise




Have A Question Or Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Phone = 905 829 2653

Email = sprokop@7parkavenuefinancial.com























Stan Prokop

Cash Flow Misunderstandings? Canadian business Financing Often Struggles With This Term

The Perils Of Not Understanding Cash Flow

OVERVIEW – Information on cash flow and business financing in the Canadian landscape



Cash Flow. We find that the term, or concept is widely misunderstood - having different meanings to different parties.

There are at least 7, if not more, methods in which the term is utilized in a number of areas of finance.

First of all the term is of course just a general term used in finance literature and textbooks relating to investments, etc.

When we see a company financial reports in the press there are often references to cash flow in the financial reports of the firm.

Getting even more specific, there are three parts to any financial statement, the balance sheet, the income statement, and the Cash flow statement. In older times this cash flow statement was called the Sources and Uses statement - simply indicating where a company got the money, and where they spent the money.

Some financial analysts refer to a company's ' funds statement ' and designate the total funds provided by operations as ' cash flow '.

Confused? We're not there yet. Financial managers and business owners use various types of analysis when making long term investments for the company. They use sophisticated financial analysis known as rate of return, payback analysis, and, guess what ' discounted cash flow ' analysis.

When a business owner is planning he will often prepare, and refer to, his ' cash flow ' budgeting.

And finally, business owners and financial mangers refer to; cash flow;
controls as they monitor the flow of funds and the control of those funds inside any company, small or large.

What becomes clear is that ' cash flow ' has become somewhat of a ' catch all ' wording and is somewhat confusing as more often than not it does not reference actual ' cash ' on hand, or even the flow!!

Most financial people would probably agree the purest form of ' cash flow ' is in fact one of the items we have mentioned above - that is to say its the cash referred to in the company’s CASH FLOW STATEMENT - we referred to it as one of the three pillars of any financial statement . The common calculation of this number is the net income of the company, plus the depreciation, which was not an actual cash outlay.

In summary, we have seen that the term cash flow means a lot of different things to different people - Business owners, and financial managers should know what method of cash flow they are utilizing, its uses, and how it will be interpreted by lenders, financial analysts, shareholders, etc.
Cash flow financing itself is achieved in many ways – it can be asset monetization , or working capital term loans.

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

And yes, you are forgiven for misunderstanding the term!

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.


Have A Question Or Comment On Our Blog Or Canadian Business Financing Alternatives ?


CONTACT:

7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8


Phone = 905 829 2653



Email = sprokop@7parkavenuefinancial.com

Company Business Mergers Become More Productive When The Leveraged Acquisition Is Done Properly

Let Your Business Acquisition Move In The Right Direction

OVERVIEW – Information on company business mergers in Canada. How does a leveraged acquisition work and what issues need to be avoided or addressed In financing a purchase

Company business mergers or acquisitions have the ability to go in the wrong direction pretty quickly sometimes. What makes a financed leveraged acquisition work, what are the risks, and what needs to be done right? Let's dig in.

When structuring a deal to purchase a company it helps when the buyer has all cash and the seller wants all cash. Unfortunately the planets never really align on that one

and top experts tell us that over 80% of all deals need some for of financing to close properly.

The reality is, and it’s often forgotten by Canadian business owners and managers contemplating a purchase, is that a solid financing proposal will often get a higher price for the seller.

Business people know that leverage is a two edged sword. As such an all cash deal often puts the purchaser at risk when things go wrong.

A couple key issues quickly emerge in business mergers and acquisitions. One is that share sales are difficult to finance, and secondly the buyer assumes all the risk of assets and liabilities in such a deal. Therefore asset financing in a business purchase is the preferred method for buyers of a business.

What are some typical ways in which a business purchase can be accomplished successfully? One is borrowing against inventory and receivables of the company being acquired. Typical bank margins on A/R are 75%... and inventory tends to be valued on a one of basis depending on the nature of the asset. It's important to note that if you use a non bank lender in Canada, for example an asset based lender, you can achieve better borrowing power on current assets, but probably a higher interest rate will come with that.

Earn outs and vendor take backs are a great way to make a deal happen, and if the seller is agreeable an installment scenario is often a key part of making the final piece of the financial puzzle work.

It's no secret to buyers, or sellers for that matter that a deal almost always comes down to price and valuation ,and the differences therein! That's where the concept of an ' earn out ' often works, making the deal contingent on what happens in the future. Numerous things can often go wrong relative to loss of a major customer, product issues, and financial issues such as operating losses

What are some of the issues the buyer in a leveraged transaction should consider? They include sales history, client credit worthiness, asset valuation of fixed assets, quality of receivables and inventory.

When we meet with clients who wish to purchase a business we focus very quickly on the quality of financial statements of the target company in question. Issues such as asset turnover and examination of assets that already might be financed via leasing companies are key.

Who can provide the business owner with the right amount of financing and business guidance in a leveraged deal? Those parties include appraisers, business financing advisors, your lawyer, accountant, respected peers, etc.

The business owner’s ability to assess key issues such as gross margins, cash flow, and inventory turns will ultimately affect the size and type of financing you need.

All business purchasers want their proposed deal to move in the right direction. For company business mergers and purchases seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in a practical manner with leveraged financeable transactions in the SME sector in Canada.


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 M
:


7 Park Avenue Financial = Leveraged Financing Expertise For Business Mergers & Acquisitions





Have A Question Or Comment On Our Blog Or Canadian Business Financing Alternatives ?


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

The SR ED Bridge Loan . Missing Out On A Key Benefit Of Your Tax Credit Claim ? It’s The Financing

Stop Dumbing Down On The SR&ED Bridge Loan Process And Benefits

OVERVIEW – Information on the SR&ED bridge loan in Canada. Tax credit financing of your SR ED claim provides valuable cash flow financing

for your research achievements








The SR&ED Bridge Loan allows Canadian business owners and financial managers to achieve... immediately... the one key benefit of their tax credit claim under the govt's ' SRED ' ( Scientific Research And Experimental Development) program . That benefit? The Cash! Let's dig in.


We suppose our favourite saying this week is ' Dumbing Down ‘...all sorts of connotations, but essentially its evidence of ' lacking intelligence' and ' good judgement’ we’re told. But armed with some basic yet key info around SRED Financing there is certainly no need in our opinion do ' dumb down’ when it comes to financing your tax credit.

Getting back to basics, we are quite sure there is still a large contingent of Canadian business that does not know that financing to claimants under the program is even available. It is, and the cash flow and working capital you secure via your collateralized claim allows you to continue your R&D under the program and replace valuable cash resources that have been spent on that whole process.

The key benefit of financing a SR&ED credit is simply beating the time factor. While the processing of your claim can take months, sometimes much longer (first time claimants are often audited) your ability to cash flow your claim is really what it's all about in SR&ED financing.

Historically the entire program has been around for close to 30 years now in various forms. In the 1990's popularity exploded, with Billions of dollars issued every year under the program. Top experts agree that it’s the largest ' support' program for private companies, partnerships, and even sole individuals who are working on new products, processes, etc to stay competitive and grow their business.

It's interesting to note that in the 2011 time frame the entire program came under massive review... was streamlined to a certain degree, and brought the role of the SRED consultant front and center. It's this group that typically business owners turn to prepare claims.

Govt stats show that over 75% of all tax credit claims under the program are in fact in the SME sector. That is where cash flow is king, so financing your claim emerges as a solid benefit.

And the process? Claims are typically financed in the 70% LTV range (loan to value)... meaning that a 200k claim , as an example provides a 140-150k range financing . Having your claim prepared and by a knowledgeable consultant is a solid key factor in financing approval.

The true beauty of tax credit financing under the program is that no payments are made for the duration of the financing... hence the term ' BRIDGE LOAN '. When the government processes your claim you are advances the remaining 30% of the tax credit, less financing costs.

99.9% of tax credits financed under the program are done by non bank entities... and rates are typically mezzanine in nature. It all comes back to the ability to achieve instant cash flow under the financing of the credit.

By the way .. Innovation has crept into SR&ED financing , and most claims can even be financed while the research and expenses are still in process. It’s a concept known as ' Accrual financing’ of our tax credit.

So if you're utilizing the program (your competitors probably are) there's no need to ' dumb down' when it comes to financing your claim. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of tax credit finance success. Accelerating your claim is what it's all about.




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 = SR&ED Bridge Loan Financing Expertise In Canada


Have A Question Or Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:

7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Phone = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

Stan Prokop

Inside Mergers And Acquisitions Success In Canada. It Starts With Business Valuation

Can Anything Replace Good Business Valuation When It Comes To Buying A Business In Canada


OVERVIEW – Information on business valuation in Canada. What makes a good deal when it comes to mergers and acquisitions financing ?





Successful mergers and acquisitions deal making in Canada, particularly in the SME sector (small to medium enterprises) often starts with good business valuation. It’s a bit of art and science quite frankly, and if you don't have an army of analysts of investment bankers

doing the work for you these tips and advice should help. Let's dig in.







The proper valuation of a business you are looking at buying or acquiring is often driven by the amount of captial you can either invest or raise financing for. While there are a number of ' rules of thumb' in business valuation nothing makes better sense than... you guessed it... common sense.

In hindsight buying a business or merging with one will seem like a good or
bad deal. Many clients we meet boast they have been able to purchase a business for a great price - with often the reason being poor sales and profitability that they hope of course to turn around.

Knowing the amount of cash you need to both acquire and run the business is critical - and if you're not supplying equity then its all about the right amount, and cost... of debt.

A good business in Canada, when acquired, can often be financed with bank debt. However our bankers and lenders need to clearly understand the nature of the business. Issues you will want to cover off are seasonality of cash flows, client profiles, revenue recognition and billing issues and the level of financial control that you can demonstrate in running the business.

Cash flow analysis is critical, if only for the simply reason that your bank and other lenders want to know how and when the will be paid back. Here's where a clean business plan and cash flow forecast matter most. The latter document should show clearly how debt will be covered, and how profits will be generated via asset turnover, etc.

If your transaction has a proposed high debt to equity ratio a non bank lender will often be required to complete the deal. This type of deal can be successfully consummated via a cash flow mezzanine type loan, or even a non bank asset based line of credit. This latter facility simply monetizes their assets to the maximum allows by your ABL asset based lender.

Very few deals in Canada when it comes to mergers and acquisitions can be accomplished without some level of personal guarantee

from the purchasers. What many business owners don’t realize when it comes to the ' PG ' is that they are often negotiable in size, and can be negotiated to be released based on certain ' pivot points' in the future.

Although generally rare it is possible in Canada to have one bank place less emphasis on the personal guarantors than another bank. One age old technique is to provide a resolution of your directors confirming PG's of owners aren't allowed. That forces a bank to consider the transaction on its own merits. Possible, but not probable as we have hinted.

At the end of the day it comes down really to 4 key issues you face when acquiring a business and financing the transaction:

The amount of internal capital you have and the external capital you need

Types of financing that will accommodate your transaction

Distinguishing between working capital needs and long term debt

Cash flow generation

Proper business valuation focuses on benchmarking the proposed deal within industry parameters, understand key operating ratios, and being able to put solid mgmt in place to close a deal and run a business.

For solid business valuation financing advice seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing needs when it comes to buying a business.



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 = Mergers and Acquisitions Financing Expertise





Have A Question Or Comment On Our Blog Or Canadian Business Financing Alternatives ?


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