Business Line Of Credit Interest Rate Concerns ? Dissecting Lending Rates For 3 Different Solutions

Blowing The Whistle

On Business Credit Lines And Rates Why 3 Types Of Business Lending For Credit Facilities Have Different Rates


OVERVIEW – Information on how differences exist in the business line of credit interest rate. Differences occur with the type of lending you access for revolving credit facilities







Business line of credit interest rate issues are often the concern of the Canadian business owner and financial manager. So in a positive (hopefully) sort of way we're ' blowing the whistle ' on the differences in business lending rates when it comes to revolving credit facilities. Let's dig in.

We’re hopefully not surprising the majority of business owners /finance managers around the fact that there are several types of business lines of credit. The most common, and often most difficult to achieve is the Canadian chartered bank line of credit. Why is that the case? It's pretty simple - it’s based on the quality of your business financial statements.

We often meet clients who are unable to initially produce financial statements that are up to date and reflect the current status of their business. While it’s obviously a bit more acceptable if they are prepared by a C.A. firm, or audited quite frankly any good accounting firm should be in a position to provide you with data that shows clearly the relationships of balance sheet accounts, sales and your income statement, etc.

Banks totally focus on this data and are looking for evidence of a strong position. It's this data that will drive the lowest and most flexible interest rates that properly allow you to negotiate personal guarantees, loan covenants, ratios that make sense to your business and industry. With Canadian rates at an all time low those rates tend to be in the 4-6% range these days. Our comment... wow!

Bank financing is all about relationship lending and shortfalls in your financials will not let that relationship develop, forcing the owner/manager to consider business lending via alternatives.

Alternatives? Yes, Virginia. Two other alternatives exist. The first is commercial finance asset based lending. While any positive business relationship or lending relationship is desired asset based lending, i.e. non bank commercial finance lines of credit zero in on the collateral in your business - namely receivables, inventory, and equipment. Your ability to collateralize these to the maximum available often allows companies with no chance of accessing bank credit to have significant revolving credit facilities.

Its formula based business borrowing - with typical margins being 90% on A/R, 30-70% on inventory, and 70% of liquidated equipment asset values.

Asset lending rates are almost always more expensive but provide valuable liquidity to businesses that can't access Canadian bank credit.

A smaller, but growing subset of business credit lines is ‘factoring '. This is purely receivables focused, and allows the business to generate immediate cash on every sale they make. Again, costs are 3-4 times higher than bank rates but business credit becomes virtually unlimited - important to smaller, new or growing businesses in the SME sector.

Yes, the business line of credit rate will vary with your business needs, but take solace in knowing alternatives and flexibility abound. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can ' blow the whistle ' on business lending alternatives that make sense for your firm.



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 LINE OF CREDIT 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






















Stan Prokop

SME Commercial Finance : Let Confidential Factoring Be Your Invisible Cash Flow Weapon

SME Commercial Finance Has One Solution For Flawed And Hard To Fix Business Financing : Here It is

OVERVIEW – Information on confidential factoring in Canada . SME Commercial Finance solutions include, but are not limited to , creative solutions including confidential invoice discounting . Here’s how it works






SME Commercial Finance (small to medium enterprise) Options can be found in both new and old business financing solutions. A twist on one of those old options, invoice discounting, is found in CONFIDENTIAL FACTORING. It is one finance solution that helps the business owner/ financial manager fixed ‘flawed’ or non existent financing. Let's dig in.

A/R financing on its own has been around for awhile - hundreds of years to be exact!

Does a finance solution that old still work? Absolutely, which is why tens of thousands of businesses just like yours access this ' cash flow acceleration ' technique.

Unless you're working with an expert you might find the industry itself does a fairly good job, hopefully unintentional, of educating and offering Canadian business with this working capital ' fix'. Part of that is the terminology, which might include references to ' invoice discounting ', ' asset based lending' ' receivable finance ' etc.

So while wading through those terms the business owner/manager in the SME commercial area loses the key meaning of this financing solution. And here it is: Products and services you sell to your business clients generate sales revenue on invoicing.

Utilizing a solution such as (confidential) factoring allows you to receive 90% of your sale as soon as it is invoiced. The remaining 10%, less a finance charge, is banked by yourself as soon as your client pays, which typically these days is in the 30-60 day range. By the way a tight credit and collection policy make solutions such as confidential factoring even more appealing when considering this SME COMMERCIAL FINANCE option.

The whole aspect of ' CONFIDENTIAL ' factoring really revolves around an ' old school ' 'new school '

term we need to clear up. The majority, pretty well close to 99% of business factoring companies ‘notify ' a client, i.e. your customer! When they are financing your receivables. CONFIDENTIAL A/R FINANCE skips this process, allowing you to bill and collect your own receivables. That whole ' verification' and ' notification' process can be a huge turn off for companies that see the true value of this method of Canadian business financing.

So whether it makes simple ' economic sense' not to involve your clients in your own financing, or whether the optics of wondering what clients and vendors might think

about your access and need of capital , the bottom line is that utilizing this finance vehicle has given you full blown cash flow financing and its nobody's business but yours.

And here's another dose of reality - you just might find your competitors will now be wondering about where that new found financing strength came from , as they see your company taking on larger orders and contracts.

If your firm is looking to finance sales at reasonable and competitive costs and you require cash flow to grow that might not be available from traditional bank sources seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success on the merits of CONFIDENTIAL FACTORING in the SME Commercial Finance solutions category .



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/confidential-factoring-sme-commercial-finance.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

Business Finance Options And Solutions : You’re Cleared For Financing

Borrow Or Monetize When It Comes Canadian Business Financing ?

OVERVIEW – Information on business finance options and solutions for Canadian SME Commercial Financing . Financing businesses involves the proper match of asset monetization and new or re organized debt




Business finance options and solutions often come down to the issue of either borrowing to take on new debt or monetizing assets. Financing will take on one of these two forms to achieve the financing solution that your company needs. But is it better to borrow, or monetize? Let's dig in.

Being able to identify the right type of financing your company needs will always keep you on top of staying competitive and successful, and, in the extreme, avoiding business failure.

At the end of the day it comes down to knowing which solutions make sense for your firm and your industry (some do not). The comfort that comes from knowing you have access to cash flow and capital can only be described as a good feeling!

Companies seeking SME COMMERCIAL FINANCE options generally have fewer choices that larger corporations or firms having public company listed status.

So how does the business owner/financial manager avoid a cash flow shortfall? It boils down to a simply piece of thinking - knowing your asset base and how it's monetized - understanding the timing of inflows and outflows. Easier said than done, right?

One of the great ironies in business lies on page 3 of your business financial statement. It's the cash flow statement, and when properly understood allows the owner/manger to identify why the firm is having problems even when sales are growing quickly and your accountant advises that ( paper ) profits are being generated.

Note ** Most employees and suppliers don't want to be paid in paper profits!






Asset monetizing solutions such as:

Canadian chartered bank credit facilities
Receivable Financing
Inventory Financing
PO/Contract financing
Non bank asset based lines of credit
SR&ED Tax credit financing

are ' asset monetization' strategies that will increase operational cash flow. All of these come at different costs and work differently, but at the end of the day they all solve the same problem.

To take on debt to fix the cash flow problem might entail considering a working capital term loan. Careful consideration should be given to that strategy because it has fixed payments and adds debt to the balance sheet, in effect changing what the Bay St boys call your ' capital structure'.

The key point we are making essentially is that your business finance options boil down to understanding:

Working Capital
Cash Flow

Your working capital accounts, i.e. A/R and inventory can be used to generate business cash. The more assets you have the more access to capital you will almost always have. Cash flow on the other hand is simply the timing of profits generated over a period of time. That allows you to consider adding debt options such as:

Lease financing
Term loans
Bridge Loans
Sale Leasebacks

Unfortunately in business no one arrives to give you a heads up warning about future financing needs. All along the way the owner /manager can address some issues internally - tighten credit terms, manage payables, focus on better asset turnover of a/r and a/p, etc.

When you want to be ' cleared to go '

in monetizing your assets, or taking on new debt either traditionally or with alternative finance solutions 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 finance options .


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 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

Business Credit Lines Shouldn’t Be An Extreme Sport : Revolving Facility 101

Today’s Brilliant Idea : Business Credit Line Flexibility

OVERVIEW – Information on the right type of business credit lines in Canada for growing businesses . A revolving facility is needed to finance current asset growth for maximum business decision flexibility





Business credit lines provide ' flexibility ' when it comes to financing your business. A revolving facility provides business financing when new equity or taking on debt aren't the preferred method of growing your company. Let’s dig in.

If the Canadian business owner / financial manager accepts they need such financing why then does it seem like an ' extreme sport'

challenge to achieve success in this area. Don't forget also that this same type of financing has other uses, including the ability to merge or buy another firm using the same assets inside that acquisition, as well as to be key in an business restructuring.

We're still surprised that a large contingent of Canadian business doesn't know that you have some alternatives in sourcing a business credit line. While the ' go to ' is always the bank thousands of firms in Canada have migrated to non bank asset based lines of credit. While this second alternative is more costly from a ' rate' perspective ( not always, but mostly ) the same flexibility that comes with Canadian chartered bank facilities is in fact often even more enhanced with the ' ABL ' ( Asset Based Line) credit facility .

How does the actual borrowing ability compare between bank credit and commercial based loans. While banks traditionally margin A/R and receivables at 75% the asset based credit line typically starts out in the 90% range.

And while banks are somewhat reluctant to finance inventory when they do the borrowing margins are somewhat conservative. So how does the asst based lender handle inventory inside the credit line formula? It focuses on the actual market and liquidation values of the inventory asset in question. So inventory borrowing can be anywhere from 25-75%. So it’s not hard to see that with good A/R and inventory the ABL line can deliver in many cases 50-100% more cash flow borrowing power.

Any established business with a clean balance sheet, profits, and several years of history, and marginable assets can apply for a bank credit line. Typically ABL facilities tend to start in the 250k range and can go anywhere into the millions of dollars. We can comfortably say that there is almost no upper limit on an asset based line of credit. The proof? Some of the largest and well known corporations and even retailers in the world have migrated to non bank facilities, if only for the borrowing power it brings.

While top experts agree that an ABL facility is much easier to get than a bank line it’s important to note that a lot more due diligence goes into getting an ABL facility as it relates to asset inspections, ongoing reporting requirements, etc.

Whether you're focusing on a bank line or an ABL facility its always important to deliver on a ' positive spin' on your business - that includes growth potential, and getting comfortable with areas such as ratios and covenant maintenance ( the bank ) and reporting requirements ( the ' abl facility ') .
With the right expertise and good business information on your company business credit lines don’t have to seem like entering into an extreme sport contest. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can help you access one of businesses brilliant ideas – the revolving credit facility for operations and growth.



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 CREDIT LINE EXPERTISE







Stan Prokop





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

Franchising : Make Franchise Business Financing Loans Your Finest Hour

Feeling ‘ Unfriended ‘ By Franchise Finance Solutions ?

OVERVIEW – Information on franchise business financing loans for the Canadian would be franchisee . Franchising finance requires expert laser like focus to successfully complete finance needs



Franchise business financing loans can often make the potential or existing franchisee fee very... shall we say ' Unfriended ‘when it comes to achieving the goals they have set out.

Franchising for the entrepreneur or existing franchisee comes with two business challenges at the start of the journey- how to buy a franchise and how to grow one. Let's dig in.

We can't think of a ' hotter' industry to be a part of these days, and that’s a good thing given the tremendous importance the industry plays in economic growth, employment, etc. In many cases both experienced and new entrepreneurs view this business model as a way of achieving viable employment and business ownership

If all of the above is the case why then are many business people challenge for the franchising finance they need. While it might seem logical that the franchisor itself might be a source of financing for the business those situations are very rare ones. It's not that the franchisor doesn't want to help; it’s just that their business model involves selling franchises, not financing them.

So who then are the lenders that focus on Canadian franchising finance? While they are a very small select handful of specialty lenders the majority of franchises in Canada are financed by the Govt SBL loan, owner equity, and assorted finance strategies from commercial finance firms that play a key role in asset acquisition and cash flow finance.

For your bank to consider financing in this Canadian business segment it’s a case of ensuring your relationship with the bank is well established. That will come down to providing income history, employment history and experience, and ensuring you have the credit score and financial net worth to approve a stand alone loan. While some maintain that the type and name of the franchise you are looking to acquire is important we maintain it's all about the basics we've mentioned already.

When a Canadian chartered bank won’t finance your business on a stand alone basis doesn’t forget you have a great partner in the CSBF loan, which has recent changes making it even more attractive to entrepreneur. Don't forget also that we're talking about existing franchises also - if you have determined valid reasons for a current owner to sell, and the franchisor will allow that sale the benefits of buying an existing and proven business are significant .

In specialty, or indirect franchise financing the basics NEVER go away. They include having a solid business plan, cash flow forecast, good personal credit, and the ability to verify your assets and net worth.

When considering the purchase of an existing franchise don’t forget to do the right amount of due diligence - get the current and historical financials, examine bank statements to verify cash inflows, and ascertain the right reason the owner is selling.

Don't forget that franchise business financing loans are a journey in some respects. Financing is needed to acquire the business, and you'll need working capital and possibly new debt alternatives to grow the business.

Don't want to get ' unfriended ' by the challenges of financing? If you want to make franchising success your finest hour consider seeking out and speaking to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in your loan 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/franchise-business-financing-loans-franchising.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

Business Cash Flow Challenges : The Case For An AR Factor

Always Business Cash Flow Challenged? Here’s Why And One Solution


OVERVIEW – Information on business cash flow solutions in Canada . How does the role of the AR factor contribute to a positive cash flow and working capital financing balance


Business cash flow pretty well always comes with challenges. The A/R factor has emerged as a solid solution that has stayed constant through turbulent and normal times. What then are the benefits of such solutions, which type is best, and just how do things work? Let's dig in.

In business it's all about performance and the ability to generate cash flow and working capital from A/R financing can be a solid contributor to that performance.

Why does a business owner/manager choose an ' AR FACTOR’ more traditional Canadian chartered bank financing? The process seems simple enough once we explain it to clients - it’s the ability of your company to generate immediate cash against your sales. This can happen, at your choice, periodically, i.e. weekly, monthly, etc, or constantly... ie all the time!

It should be no secret that the primary ' collateral' of this method of Canadian business financing is your actual accounts receivable. Bank lending, in contrast, relies on that same collateral, but places a very large amount of emphasis on historical and present profits, clean balance sheets, and business and personal collateral. Suffice to say that that latter combination provides a strong safety net for our Canadian banks.

Utilizing an AR factor in Canada is almost always a short term or intermediate solution to a growing company, or one has faced and is fixing some challenges. Using Europe as example top experts tell us that anywhere from 15-30% of all businesses in the SME sector (small to medium enterprise) have used A/R financing solutions as offered by commercial finance firms. Those same experts also draw a very clear conclusion that financing A/R outside of the bank plays a large role in economic development.

Cash flow that is generated from an A/R factor solution is used for a variety of reasons - it’s ' asset monetization' and is not term debt of any sort. For that reason the business owner/manager has the flexibility to use funds for immediate needs primarily related to growth and operations. Think of it as a ' buffer ' to ongoing working capital requirements.

So why don't more business access business cash flow via A/R financing. Studies tell us that one major reason is Canadian business simply doesn't know about this solution. They also tell us that there are key misconceptions around what type of company is using these methods. It might surprise many business owners/managers that the largest and most well known of corporation’s access this same financing vehicle... in certain cases the Bay street gang just gives it a fancier name - such as Securitization.

Cost also plays a factor in the adoption of the use of an AR Factor. It's critical to understand also that this method of financing works best in a normal or high growth environment. Companies that are in a downward sales spiral would not benefit from the solution.

Still others feel its complex to administer on a daily basis. While that might be true our recommended client solutions, CONFIDENTIAL RECEIVABLE FINANCING allows for the business to bill, collect and cash flow their sales in a completely confidential manner.

So bottom line, the AR factor solutions is NOT a loan, it’s not a bank overdraft facility, it’s simply a method to cash flow sales on an ongoing basis in an unlimited manner. 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 A/R financing and growth 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 AR FACTOR 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

Sale Leaseback Financing : Changing Your Mind On The Sale Lease back Option

When Time Waits For No Sale Leaseback Financing Might Be the Perfect Alternative to Cash Flow Replenishment !

Information on sale leaseback financing in Canada. The lease back option provides a solid cash flow alternative to working capital and cash flow replenishment








Sale leaseback financing is a solid alternative for Canadian businesses that wish to refinance business assets, or real estate, with a view toward enhancing working capital or for generating capital for business needs.

In certain cases it simply might make sense for owners to cash flow some of their business assets for personal needs. But how does the owner/financial manager evaluate the lease back option? Let’s dig in.

While the term ' lease ' is inherent in our subject title we point out to clients that many of these types of transactions can also be accomplished via a bridge loan. Depending on the type and timeframe of the financial need the balance sheet could well reflect a ' bridge loan' versus a lease. The ultimate gain, ' cash flow’, is still the same. Generally speaking a bridge loan is shorter term in nature while a ' lease ' often denotes a multi year payback arrangement at a fixed rate.

Clients of course are always asking us what the financing rates are for a lease back. We hate to on our ' lawyers cap ' and say , well ' one hand ..'

but the real answer here is that the rate on such a transaction boils down to the credit quality of the asset and the business, or a mix thereof.

As important as the ' rate' is in any transaction it's equally important to understand the legal terms and conditions of your transaction, as well as ensuring you and your accountant are on board relative to the tax and accounting treatment of the transaction. A quick example here to consider is that in some cases the sale of the asset to the lender or lessor might actually trigger a tax liability if the asset sold has a much higher price than it's carried in your financials.

A very typical transaction these days is for owners and financial managers to consider the sale leaseback option for additional growth capital. If the business can't secure that financing from traditional bank or commercial finance company sources the leaseback options becomes a solid solution.

In some cases it makes perfect sense to consider retiring existing debt that came at a higher interest rate with the proceeds of a sale leaseback transaction. We recently completed a transaction for clients that allowed the sale leaseback to retire debt that was incurred in a management buy out.

Properly structured the lease back or bridge loan strategy can ' fix up ' your balance sheet as it relates to key issues such as debt to equity or current ratios, as well as depreciation that was previously being taken on the asset as an expense.

If time can't wait for your company's needs for cash flow replenishment 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 a lease back option that makes sense from all points of view.





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 SALE LEASE BACK 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