Accounts Receivable Funding In Canada : What AR Factoring Can And Can’t Do For Your Business

Putting Cash Flow Financing On Autopilot

OVERVIEW – Information on accounts receivable funding solutions in Canada . When , why and how does AR Factoring work for cash flow finance and working capital needs






Accounts receivable funding , implemented properly, is a great way to put your cash flow financing needs on ' autopilot'. Would AR factoring work for your firm, and more importantly, how in fact does it work? Let's dig in.

In business it’s a lot about sales revenues and cash flow drivers (there’s a couple hundred other issues, but let’s focus on these!) The core of our issue is that your sales, almost never, equals the amount of cash your company has in the bank.

Those two issues also are often key predictors of your current and future business ' health'. Another hard reality is that all businesses, small or large, are not created equal - as such some need a lot more cash on hand than others. A strong example is a capital intensive industry requiring heavy fixed asset investment, versus a service business that might carry no inventory and only requires receivable finance to support growth.

Unless you're a retailer selling on cash your only cash inflows are the A/R collections coming into your firm. (The only other way to get cash is to get outside equity or to sell assets) One of the great ironies of business is that you can be growing and profitable on paper and going broke on a cash flow basis. Ouch!

It's that operating cash that we're focusing on in our discussion - we're not talking about the ' investing' or ' financing' portion of the 3 part cash flow statement. Focusing on operating cash will always keep you business running ' normally.

If your business isn't generating the cash it needs relative to your sales or even how your industry competitors are doing you require AR factoring / financing of some sort.

To avoid small, or large cash flow crunches consider AR factoring as a solution. It's the ' unlocking ' of those receivables and converting them into cash that will put your company into cash flow problem immunity.

While most businesses sell on 30 day terms, most clients these days, small or large (the large clients are the worst?!) tend to pay you in 60-90 days.

AR Factoring, including our recommended version - (CONFIDENTIAL RECEIVABLE FINANCING) allows you to generate cash as you generate sales. Using a 30 day collection period this will cost you approximately 150-200$ on a $ 10,000.00 invoice. The key benefit - no A/R, cash in the bank.

While those financing costs are higher than a Canadian chartered bank facility they do provide you with all the cash flow and working capital you need to run your business, meet your obligations, etc.

While the only reason your firm would consider ACCOUNTS RECEIVABLE FUNDING is its inability to get proper bank financing we point out to clients that many of the largest corporations in the world utilize this same method of financing - they just call it something more fancy, such as ' securitization' etc, and in many cases for larger firms the costs is equal to or less than a Canadian chartered bank facility.

Factors that will affect your pricing and approval include size of your business, the quality and size of your A/R base, etc.

If you're considering a receivable financing solution , and you wish to consider the ' autopilot' features of AR factoring in Canada seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your Canadian business financing needs.



Stan Prokop

- 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :

http://www.7parkavenuefinancial.com/accounts-receivable-funding-ar-factoring.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

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

The Government Small Business Loan : Bypassing Business Finance Acquisition Challenges In Canada

A New Way To Buy An Existing Business In Canada ?

OVERVIEW – Information on successfully using the SBL government small business loan to finance a business acquisition purchase in Canada




Use a Government small business loan , aka, the ' SBL' to finance a business acquisition purchase in Canada? Absolutely, and by the way this is not something new, simply a tried and true way to purchase a business in Canada, including franchises. Let's dig in.

Small is always relative (we’ve found), so we're talking about purchasing a business with revenues under 5 Million dollars annual sales.

Why would an entrepreneur, or existing business owner purchase a business as opposed to starting one organically? One reason is pretty simple - risk is often minimized significantly if (and it's a big ' if ‘) the proper research, due diligence and financing is undertaken.

Pricing the cost of the acquisition :

There are, of course, some intangibles that come into your overall business acquisition decision - they include areas such as management depth and experience of owners, industry conditions, etc.

But at the end of the day a financing challenge always looms, and the Canadian Government Small Business Loan, via Industry Canada's program underwrites many thousands of business purchases every year. Those businesses also can include existing franchises in the booming Canadian franchise industry.

Business terms, rates and structures under the program are both attractive, and competitive. They include rates in the single digits, nominal personal guarantees, repayment without penalty, and long amortizations if in fact a longer repayment term is required.

Valuation is key in determining a financing structure that makes sense for the capital structure of the business. That capital structure is basically two components - debt and ownership equity. Purchasers should well be advised to consider a business financing advisor to help on valuation - as key issues around return on investment, cash flow, and asset appraisal are key to a solid and successful financing.

It's important to note that valuable business advice from you lawyer, accountant, or business broker can provide potentially valuable assistance.

When utilizing the SBL loan in the acquisition finance purchase decision it’s critical to know what the program in fact does not finance. Those seeking financing for intangibles such as franchise fees, advertising, etc will be disappointed - the program only finances two categories of assets - equipment and leaseholds. By the way, the programs maxes out at 350k, but other sources of financing can often complement a total finance solution approach.

Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success if you're focused on a success business purchase financing experience.




Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :


7 Park Avenue Financial = Canadian Government Loan And Business Purchase Financing 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

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

Acquisition Loans : Avoiding Spectacular Failure In Financing An Existing Business Purchase

Looking For A ‘ GO’ For business acquisition finance needs ?

OVERVIEW – Information on acquisition loans in Canada . Financing an existing business purchase comes with significant do’s and don’ts for ultimate success







Business Acquisition loans , and financing for that existing business can come with spectacular success, or spectacular failure.

Whether you are looking at purchasing General Motors ( temporarily not a good strategy!) or a pizza franchise its all about proper financing and planning with the info you need to help guarantee success. Let's dig in.

After the business owner/entrepreneur has made his or her ' valuation' decisions on a business its pretty well all about the financing. The amount you will need to borrow, as well as the equity in the existing business combined with your own new personal investment will make the financial structure of the business.

At this point a couple of key issues immediately need to be considered:

The amount of debt the business can take on

The cash flow that is required to manage and repay that debt - allowing the business to thrive during normal operations and growth stages

As we have said in the past, the normal ' go to' for most business people for acquisition loans is our Canadian chartered banks - so knowing how and if they will support financing an existing business purchase is key. For the banks we can pretty well say it's always about cash flow. An examination of the income statement and balance sheet is key here, as they will reveal the cash flow coverage the bank is looking for. Business owners and their advisors need to ensure that this ' ratio' aligns with bank policies.

As a business purchaser you can run these numbers yourself, or with your accountant and advisor. Ensure that you have some wiggle room as banks, (as well as other lenders) typically use 1:25 as the magic number.

1.25? It's simply the number that shows that cash flow can cover the current year’s obligations for debt by at least 1.25 times.

Preparing a business plan and cash flow forecast that is ' real ' will also help guarantee success. Here you have got to be a bit of a magician as perfection revolves around ' selling' how cash flow historically, as well as current cash flow, and oh yes, future cash flow all align to make the numbers work

. For non financial types it's pretty well now the right time to get some analytical help from your Canadian business financing advisor or accountant. It's highly recommended to assess the amount of debt you are taking on very carefully, well in advance of talking to your financing options.

Banks or other commercial lenders will also focus one the key business issues - be prepared to discuss and assess these:

Future financing that will needed

Timing

Industry and operational risks

Seasonality and how it will impact financing needs

Management depth and experience

The success of any business, as it relates to financing is ensuring you have the right amount of equity and debt. That magical mix will allow you to attract, and secure the financing you need for acquisition loans.

To help guarantee survival and ensure you have assessed those financing options properly seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your business acquisition needs.


Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :


7 Park Avenue Financial = Canadian Business Acquisition Financing 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

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

The Finance Lease Company Solution: Problem Solved When It comes To Asset Finance Leasing In Canada

Birds Of A Feather Asset Financing Solutions In Canada

OVERVIEW – Information on solutions offered by the finance lease company in Canada. Asset financing via leasing , or a bridge loan or sale leaseback is a cash flow savior for the majority of businesses in Canada




The finance lease company solution in Canada is a classic ' birds of a feather' scenario. Why that analogy? It's the business version, we think of ' attraction' as Canadian business owners and financial managers steer towards asset financing and leasing as the logical ' attraction' to their asset acquisition strategies. And in this case it's also pretty close to a ' one size fits all' solution. Let's dig in.


The need to acquire new assets for any business comes from both necessity as well as opportunity. The business owner/ financial manager always needs to constantly assess new equipment needs, which these days many times includes technology assets - i.e. computers, office pc's, software (yes, software can be financed!), etc.

Canada's current economic climate lends itself perfectly to asset financing .The interest rate environment is favorable, competition for your financing abounds, and growth opportunities are everywhere.

Simply the fact that technology changes a lot these days is one solid reason to consider leasing equipment - and we advise clients on numerous other benefits also. It's all about growing and Return on Investment.

Financing assets is more of an intermediate to long term solution for your business.

What factors then come into the ' lease versus buy ' decision? Top industry experts tell us that the following issues should come into play:

- Assessing the ability of new assets to make your business more competitive and simply run better

- Assessing long term growth plans

- Ensuring that assets financed are critical to your business needs

- Competitive stance

One solid aspect of leasing assets in Canada is simply the new found ability to match equipment needs to your overall financial strength and ability. In some cases lower or flat sales and profits might force the owner/manager to reconsider new assets if in fact they felt they could not sustain payment commitment for those assets. The irony is that new assets or technology can often grow and increase sales revenues, allowing firms to deliver more new products, service, take on larger contracts, etc.

Financing new assets often boils down to ensuring you have the ability to service the debt you are taking on to acquire new assets.

We make it clear to clients that the finance lease company is not the only solutions to asset acquisition. Other methods include term loans, bridge loans, renting assets, etc.

But the ' key benefits' of leasing are always there - they include:

100% Financing

Easier credit/finance approval

Flexible payment options

Ability to consider upgrading or replacing during lease term

Numerous lease term and amortization options

In some cases business owners might want to consider operating leases as a solid asset finance option. Despite major changes in accounting policy throughout the word utilizing operating leases is still a solid strategy. You achieve the benefits of using equipment, without owning it - and a lot of flexibility comes with that solution.

Are you working in MUSH? That’s the term the lease experts use to describe ' municipalities, universities, schools and hospitals ‘Even these bodies can properly utilize lease strategies. Here the benefits are crystal clear - the lowest finance rates, payment flexibility relative to budgets, etc.

If you want to consider new assets as a solution, not a problem, seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in lease finance strategies that make sense for your company’s current situation.







Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :


7 Park Avenue Financial = Canadian Equipment Leasing 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

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

Alternative Financing Methods In Canada : Business Loans And Working Capital Choices

Alternative Financing In Canada Is Not An Old Or Mysterious Practice

OVERVIEW – Information on alternative financing methods in Canada. What types of business loans and working capital solutions are available to the Canadian business borrower






Alternative financing in Canada : 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, they are often unable to directly satisfy the financing needs of all customers. Let’s dig in.


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 / Confidential Receivable Finance - 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 with a track record of success to discuss methods of alternative financing in the Canadian marketplace.



Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations .





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

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com





' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

Commercial Lenders In Canada : No Black Box Needed To Locate Working Capital Sources

Getting To Know Sources Of Working Capital In Canada



OVERVIEW – Information on working capital sources in Canada . Non bank commercial lenders offer a dizzying array of financing not generally know to all business owners and financial managers in the SME sector of Canadian business financing






Working capital sources in Canada often seem hard to come by for Canadian business owners and financial managers. And you simply don't need a ' black box'

to locate the key information you need around commercial lenders offering quite frankly a dizzying array of financial solutions to the cash flow challenges your business faces. Let's dig in.

Your firms need for cash flow and working capital solutions will almost always be evident from your balance sheet. But can the business get approved for, and in fact support the type of finance solutions that revolve around working capital?

A growing business (much more than a start up or a company with fairly flat revenues year over year) simply eats cash. That's because the day to day needs of fixed asset obligations as well as the continual need to build up inventory and receivables due to the sales growth are a massive consumer of cash.

Some concepts are difficult to explain to clients who are more focused on sales growth, profits, etc - which by the way are all good things. A simple way we explain it sometimes is that the whole situation around ' working capital' simply revolves around understanding what you customers owe you as well as your total current ongoing investment in A/R and inventories.

You might have some positive cash on hand, and you ' might' have access to revolving credit facilities, but at the end of the day those balance sheet accounts are going to dictate the ' cash flow' situation. There is a whole handful of ' cash flow' definitions but we'll get into that some other time!

Every company is naturally different, a tech firm specializing in software solutions in fact has no need to worry about ‘inventory ', while a retailers total business revolves around financing the inventory component of their business. A wholesale distributor might have great sales, profits, but be cash strapped because they have demand for more orders and no cash because clients won't be paying them in another 60-90 days - and we wont even get into seasonality and bulges in business!

The good news is that your business has in fact access to working capital financing within banking solutions, and outside Canadian chartered bank solutions. Those include:

A/R Financing

Inventory Finance

Tax Credit SR&ED financing

Asset based lines of credit (these facilities, similar to bank lines, monetize A/R, inventory and equipment into one borrowing facility

PO /Supply Chain Finance

Securitization

Royalty/Revenue Financing - a newer concept getting more popular

Sale Leaseback

Bridge loans

Unsecured mezzanine type cash flow loans

It's critical to think of this type of financing as short term, and commercial lenders in Canada will always be a bit more, or a lot more expensive than the low cost financing we associate with our banks. In many cases the finance solutions are very specifically structured to the type of business situation your firm finds itself in.

So while commercial lenders can't compete on price, they definitely compete on the solutions you need to secure asset financing Focus on need, opportunity to grow, and cost and structure when looking at working capital sources you require operating and growing. Consider seeking out a trusted, credible and experienced Canadian business Financing Advisor with a track record of success to in effect become your ' black box' for critical info on finance solutions in Canada.




Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :


7 Park Avenue Financial = Canadian Working Capital Solution 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

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

Rebooting Your Working Capital Finance And Cash Flow Capital Choices In Canada

Miracle wanted ? Some straight forward solutions to faster cash flow financing in Canada

OVERVIEW – Information on cash flow capital access in Canada . Working capital finance issues are often complicated by issues of cost, timing to achieve, and knowledge of alternatives offered











Working capital finance solutions often make the Canadian business owner and financial manager feel that only a miracle will solve the challenges they face in financing their business. When they understand the timing it takes to successfully achieve proper business financing, as well as being armed with the right info they will have a better idea of how to ' reboot '

financing issues in their company. Let's dig in.

When it comes to the issue of ' time' around a flexible finance solution the standard ' go to ' in Canada is our chartered banks. Here you have the lowest cost of borrowing capital in Canada, with numerous solutions available for term and revolving business credit.

For smaller firms it's even possible to get an unsecured business line of credit. But even if your banking facilities are in fact secured they are always ' low cost' and flexible relative to the number of services offered

So what is the big problem? In many cases it’s both the time it takes to get such financing in place, compounded by the criteria your company needs to meet to get approved. So low cost, and not so easy to get. That is the conundrum.


By the way, those criteria items for working capital finance approval? They include (but are not limited to!) clean balance sheets with tangible equity, income statements that demonstrate profits and key ratios that must be satisfied such as debt to equity and positive cash flow.

What then are the options? The gap it cash flow capital in Canada is filled by numerous non bank solutions. While these solutions almost always CANNOT match the cost of bank financing they do fill the gap nicely.

Typically these solutions include:

A/R Financing

Inventory Financing

PO Financing

Non bank ABL revolving lines of credit

Tax credit monetization

Mezzanine financing

Sale Leasebacks

Royalty/Revenue financing schemes - (relatively new)

These solutions tend to be specifically structured to your needs and are secured by the assets they finance. So at the end of the day the question that is faced by the business owner/financial manager is really the issue of the access to the financing needed, not the cost.

If you're looking to ' reboot ' your business with working capital finance solutions consider seeking out and speaking to a trusted, credible and experienced Canadian business financing advisor who can help you address issues of:

Alternatives

Cost

Time involved


That 'miracle' your business is looking for might just be around the corner.






Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :



7 Park Avenue Financial = Canadian Working Capital Finance 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

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '





























Stan Prokop