The Government Small Business Loan In Canada : Skipping Intelligently Through Changes In The SBL

Translating New Rules For Government Small Business Loans Into … Plain English !

OVERVIEW – Information on new rules around the government small business loan in Canada . The good, bad and some ‘ugly’ around SBL loans in Canada

The Government Small Business Loan in Canada , aka the ' SBL ' is undergoing some dramatic changes in the program. Are you up to date on the good, bad and ugly (there’s very little ugly!) and the ' who cares' of this very popular program that finances thousands of new and existing businesses every year? Let's dig in.

Many clients we meet and talk to have not even heard of the program in some cases, so a super quick ' primer ' just might be in order. Patterned similarly to the U.S. equivalent ( there it's called can 'SBA' loan ) this financing was created by the Canadian government many years back to allow Canadian business owners and entrepreneurs to have access to capital where they might not normally access traditional Canadian chartered bank financing .

Although it can be debated how seriously the banks embrace the program the reality is that over the years tens of thousands of businesses have qualified and been approved under the program. The government guarantees a large portion of the loan to the banks in case of default.

If the government guarantees default why wouldn’t the banks fall in love with the program? The main reason is... which you might not believe, is ' paperwork' at the bank level.

Yes, it’s correct that top experts in the field tell us that the ' administrative burden' that come with banks filing for the loan had become too much.


So... enter Change! And while significant, on balance they still in our opinion make the program robust and a solid solution.

So what are those changes? First of all the old program had a personal guarantee scenario that was quite attractive to borrowers, in that they only had to guarantee 25% of the loan from a personal liability perspective. New legislation via INDUSTRY CANADA (the program administrator/manager) allows banks to take a full personal guarantee on the amount. What's our take on that one? Pretty simple actually - since almost 99.999% of all business in the SME financing sector requires shareholder guarantees anyway what’s really the issue here.

Oh, and by the way , under the SBL small business government loan no personal collateral can be taken or secured, which definitely isn't the case for most normal bank borrowers under SME Commercial Finance conditions.

Other changes to the program include small fees to be charged for set up, documentation and registration of SBL loans in Canada. The truth is that in any financing in the SME sector the borrower almost always pays the legals and doc fees anyway, which are often in the several thousand dollar range or more. So the few hundred dollars charged for an SBL loan is somewhat of a moot point, don't you think.

It would initially appear that the old cap of 350,000.00 for equipment and leasehold financing may be lifted. So. Does that mean ' unlimited financing '? Hardly, we think given that new borrowers still have to meet the same equity requirements and working capital requirements of the program.

Rates, terms, and overall structure of these loans still remains the same, and they are ultra attractive in our opinion given the often start up or early stage nature of businesses that apply.

So, while Mr. Dylan

might still be right ( " The times they are a changin' ")
the CSBF program - the ' SBL ' Government Business Loan is still a great deal and should be considered by all borrowers who can't qualify for full traditional financing. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can guide you successfully through changes to the program.



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 SBL Small Business Loan 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

Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

Juggling Acquisition Finance Solutions : Financing A Business Purchase In Canada

Fixing Your Business Acquisition Financing Challenge


OVERVIEW – Information on financing a business purchase in Canada . What are the key issues in SME acquisition finance for the owner/entrepreneur . What solutions are in fact available?



Financing a business purchase in Canada often has the business person juggling

various acquisition finance solutions. Which solution makes sense and how do you access that capital properly? Let's dig in.

At the end of the day it's all about a proper valuation and moving forward with a source, or sources of financing that make sense for your transaction.

Suffice to say, but often forgotten by many, it’s critical to start assessing financing solutions for a business purchase well in advance of when funds are needed. The analog we could also use is one of getting ' pre qualified ' for a home mortgage, which then gives the buyer both security and negotiating power when it comes to price, or in our case ' valuation' .

Management depth and experience is also critical to your financing. Your lender/lenders, whether that is a bank or a commercial finance firm, will want to know the ability you can demonstrate to properly manage and run their business - with their focus on getting repaid! That goes for both traditional and alternative sources of capital, as both of those are used to finance the purchase of a company.

Without getting to technical on some higher level business concepts and jargon it needs to be clear that you understand capital structure and debt and equity. Those later two points are of course your 2 sources of finance to properly execute your transaction.

Debt financing will come from commercial sources such as banks and finance companies. In the case of banks many smaller transactions can be financed under the auspices of the Government Small Business Loan. Major changes to the program, including removal of previous borrowing limits make this option, aka, the 'SBL ' very attractive.

The other side of debt in your transaction is equity. Family, Angel, and private investors, will demand ' shares’, diluting your own ownership. This then becomes the difficult balance act of sourcing the right amount of debt and equity. Naturally if your own investment into the firm, along with debt will cover the transaction no ' dilution' of your investment will be required.

By the way, ' share sales' are difficult, if not impossible to finance given the bank or finance company has no way to liquidate or monetize their loans. Going public is of course a whole different story.

While many owners focus on closing the acquisition they sometimes forget to focus on the working capital and cash flow requirements of the newly acquired business. That’s a recipe for failure.

Debt financing for a business acquisition can come from:

Canadian chartered banks - term loans, operating lines of credit

Asset based lending

Equipment financing

Term acquisition loans from Canada's crown corp. bank

Equipment financing

Mezzanine Finance

Receivable /inventory monetization...


If you're focused on putting the proper' fix' in place for financing a business purchase seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you ‘juggle ‘ those solutions into a successful business acquisition.




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 Finance Acquisition 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

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