Buying A Business In Canada: How To Hedge Your Risk With Proper Company Financing & Loans That Fit

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Avoiding Egg On Your Face Financing Mistakes When Buying A Business

OVERVIEW - Information on loans and cash flow solutions for buying a business in Canada. Acquisition finance involves company financing that matches the balance sheet and prospects for the target company

Buying a business in Canada will often involve looking beyond the numbers when it comes to ensuring proper financing can be in place. It's not all about negotiating the sale price - it's also about the necessary finance solutions that must be put in place to ensure business survival and profitability. Let's dig in.

The pros of course call it ' due diligence’. For us it's a pretty basic common sense premise: ensuring sales, inventory, accounts receivable and accounts payable are all reasonable. Bottom line- the finance solutions tie together your plans for mgmt, mfg or delivering services, and marketing.

The essence of any business, large or small, is cash management. Working capital solutions for financing an existing business include:

A/R Financing/factoring

Bank revolving credit lines

Non bank asset based lines of credit

Inventory Financing

Tax Credit Financing

Small business govt guaranteed loans (maximum 1 Million $)

Firms that are not profitable or that have ' challenged' balance sheets will not qualify for what we call ' traditional' finance. These types of companies can't comply with the financial ratios and collateral demanded by our Canadian chartered banks. Almost all businesses that sell on credit, large or small, need some sort of business credit line.

Numerous alternative financing solutions are in fact available - but at the same time new owners/mgt must be able to address and talk to items such as gross margins, operating inefficiencies, etc.

Buying a business for ' all cash ' is almost never the option available to purchasers. Top experts tell us than not even a 1/3 of businesses purchased are done via ' all cash ‘. Unfortunately sellers like/want cash! More often than not the final structure of your transaction will be:

Owner Cash

External Financing

Vendor Take Back/Seller Financing (not always, but often)

‘ABL ' (Asset Based Lending) is often a solid solution for a business financing strategy. These types of facilities allow you to borrow heavily against inventory, accounts receivable and equipment/fixed assets.

One legal/technical issue often becomes a critical point in acquisition financing. That is the issue of ‘asset sales' vs. 'share sales'. From a buyers perspective asset sales tend to make more sense - sellers focus on share and tax strategies for selling their businesses. This can often complicate financing.

We've seen there are some critical issues that can make or break the success of financing a business purchase. Those issues include proper valuation pricing, debt load, working capital and cash flow financing challenges.

If you're focused on a winning deal and financing a business purchase properly seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding needs.

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 '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Buying A Business In Canada : Acquisition Financing

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Buying A Troubled ( Or Successful !) Company In Canada ? Finance Strategy 101

OVERVIEW - Information on buying a business in Canada . Numerous finance strategies and solutions exist for acquisition financing . Sources of capital are identified as well as understanding the differences between turnarounds and successful acquisitions

Acquiring an existing business in Canada. Talk About Temptation! We’re talking about buying an existing business that's already profitable, or, on the other hand a firm that is challenged and due for your turnaround. In both cases current owners might be motivated to sell, but for different reasons!

How do firms for sale get themselves in trouble? Often it's lack of funding and too much existing debt, as opposed to operating problems which are a whole different kettle of fish.

Some immediate issues to look into are arrangements with current lenders. This is often the scenario of working capital being extremely limited due to the current financing structure.

There are numerous ' valuation techniques ' in establishing the right price for the business. If a business is already losing money and has poor or negative cash flows it's time to take a hard look at the assets.

The good news about existing assets is there are numerous financing strategies to assist in finalizing a transaction these solutions include:

The Govt of Canada Guaranteed Small Business Loan (It finances assets and leaseholds and has a new maximum borrowing cap of $1,000,000.00

Sale Leasebacks

Asset based bridge loans and business credit lines

Naturally the quality of the assets is key, whether they are fixed ' hard' assets or the assets that represent working capital components - i.e. accounts receivable & inventories. Key point - book values don't tell the true value of the assets, and in some cases you might need to make an investment in new technology - i.e. computers / software, etc (Equipment Leasing is almost always the best way to acquire tech assets given their cash outflow flexibility)

Service companies that have few assets are always more challenging to finance given lack of hard assets.

While new owners will almost always be required to put some of their own cash into the business many financing solutions will also drive the minimum and maximum amount they will need to put up. Asset based lending strategies will often help minimize owner equity investment.

While Canadian chartered banks are a great source of financing for acquiring existing profitable businesses they are somewhat more than reluctant to finance firms with obvious financial challenges. Banks will almost always focus on a business plan, mgmt experience, the balance sheet and owner personal financial statements.

The bottom line? When buying an existing profitable or challenged business have a strong understanding of your opening balance sheet and the proper mix of current assets and debt. Understand the value of your hard assets and ensure you have financing in place to cover working capital needs.




Stan Prokop - founder of 7 Park Avenue Financial –

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :

http://www.7parkavenuefinancial.com




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 '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Inventory Financing In Canada : Here's Your Business Loan Funding Solution Playbook !

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What's The Secret To Inventory Financing ?

Information on inventory financing solutions in Canada. Funding a business loan current assets such as inventories and receivables

Inventory Financing - Canada has a number of potential alternative financing strategies for Canadian business owners and financial managers. Canadian business has an ongoing challenge to finance inventory, which is a key component of any firm’s current assets.

Inventory options available to Canadian firms are potentially stand alone, or in conjunction with a current financing strategy employed by your company.

Firms require inventory financing to support both on going growth, and, on occasion, large new orders or contracts.

If you company is looking for inventory financing you probably fall into one of the following categories:

1. You require financing for your goods as part of an existing asset based line or credit, or a ' one of ' purchase order financing ' scenario

2. Your firm is financed via a Canadian chartered bank but you do not qualify for inventory financing under this facility - (Many customers we work with are just able to finance receivables under their bank line, but not inventory)

3. Your firm is financing inventory through a chartered bank facility but the margining of this inventory per the bank formula continually places working capital challenges on your business.

Customer who require inventory financing also need to be clear on and understand the different components of inventory , and how they are viewed by an inventory lender . Inventory in Canadian business financing tends to be in one of three categories, raw materials, work in progress, and finished goods.

We spoke above of inventory as a part of your firm’s working capital or operating line facility with the bank. Most of our firm’s customers have bank financing that is margined based on 75% of their receivables under 90 days, and a fixed amount of percentage of inventory. Banks probably understand least, and are least able to address the inventory issue. In fairness to the banks there are hundreds of industries, and each industry has unique inventory qualities re salability, liquidation value, etc.

When your company does not have any inventory financing and inventory is a component of your current assets you are clearly challenged from a working capital and cash flow point of view.

So what’s the solution? Our firm is of the opinion that the best solutions for inventory financing in Canada is a non bank asset s based line of credit. This is a true working capital and revolving facility that margins your receivables, AND your inventory! Moreover the margining of the inventory is significantly larger than you typical bank advance or cap on inventory. That is because a true asset based lender takes time to understand the breakdown and value of your inventory in your business model.

Although this type of financing is more expensive than bank financing you have significantly more liquidity to your business - that’s important!

When we meet with customers to share with them inventory financing solutions we try offer up tools that will allow the customer to quantify their inventory investment. One very basic tool is the ' INVENTORY IN DAYS SALES ' ratio. It is calculated by taking your inventory and dividing by your average days sales. (Sales per year/365!)

You can calculate this annually, quarterly. Monthly etc. An increase in the inventory in day’s sales ratio means that purchasing is taking place faster than selling, or that sales are declining and inventories are not declining at the same percentage. It's a great business measurement tool. In a perfect world your ratio should not be varying too much.

In summary, inventory financing - Canada is a challenge for Canadian business owners. The best solution in our opinion is a true asset based line of credit. Finally, businesses that have a solid inventory component in their business model should employ tools to measure the overall quality and turnover .

Work with an trusted, credible and experienced Canadian business Financing Advisor with a track record of success if you need assistance in Inventory Financing in Canada.




Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
http://www.7parkavenuefinancial.com

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 '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Business Purchase Finance In Canada: Takeover Financing For Acquisitions That Makes Sense

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Smart Ways To Finance A Business Purchase Or Management Buyout

OVERVIEW – Information on business purchase finance in Canada. Acquisition takeover financing for SME companies in the Canadian marketplace

Business purchase finance in Canada often requires some, shall we say ' deft ' takeover financing strategies when an acquisition is made. This often includes the management buyout scenario. Let's look at some of the acknowledged ' smart ' ways to buy and finance a business purchase. Let's dig in.

There are often great rewards when an existing business is purchased properly with the right underpinning of finance and mgmt skill. We're told by ' experts' that the financial markets are ' imperfect ' to some extent, and that's probably the case with valuing and then buying a company.

From a ' valuation ' perspective there are of course several time tested ways to value the target firm. Naturally there are different motives for buying a business that is already doing well. (Or a business that needs to be repaired! which often presents even greater opportunity, and risk)

Those motives might be synergies, economies, faster growth, less competition, etc. Because a lot of valuation strategies are subject to opinion we've often focused more on the ' assets' in the business. Good mgmt can usually reverse any losses, grow the business, etc

It's the assets in the business that will allow mgmt to increases earning power if the true value of the assets is understood. In many cases a proper appraisal of assets may well be required or simply the right thing to do.

The ' hard ' assets in the business are typically equipment, technology hardware, vehicles. We also mustn’t forget leasehold improvements as a part of any firms potential asset mix.

The ' current assets ' in the business will be providing the takeover with the liquidity and asset turnover it needs to be successful. Understanding the quality and turnover of accounts receivable and inventories is key to successful takeover financing.

Note also that almost always intangible assets and goodwill are normally not financeable in the SME (small to medium enterprise) marketplace. Many firms invest in R&D, and in those cases SR&ED tax credits can be part of the financing plan.

Getting proper financial statements from the target firm is key to any financing takeover success, again keeping in mind all the ' subjectivity' that comes with every item on the balance sheet ( except cash !).

What strategies are used to finance business purchases and mgmt buyouts in Canada? They include:

Govt Small Business Loans (new limit = $1,000,000.00)

Asset based loans

Sale leasebacks

ABL Business Credit lines

Tax Credit Financing

A/R financing

Unsecured Cash Flow Loans

Franchise loans

In many cases a combo of financing methods may well be required to ensure the right amount of debt and equity and cash flow and working capital needs required by the business. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in proper business purchase finance.



Stan Prokop - founder of 7 Park Avenue Financial –

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
http://www.7parkavenuefinancial.com

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 '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Business Financing In Canada : Avoiding Bad Decisions In Your Asset Finance & Loan Search

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On A Scale Of 1-10 How’s Your Business Financing Doing ?

OVERVIEW – Information on business financing in Canada . Asset finance and loan solutions can more effectively be accessed with a solid understanding of your balance sheet

Business financing in Canada , even when you're wildly profitable is always still a challenge for owners/financial mgrs. On that scale of 1-10 how comfortable are you that your firm has access and knowledge to the best financing solutions? Let's dig in.

‘Cash flow is tight ' is the common term we hear when we talk to customers struggling with their sales goals. Ironically, as we've hinted it even gets tighter when sales and profits are strong. ( Spoiler alert - that's because you're building current assets such as receivables and inventories as well as acquiring new assets and technology )

Sometimes it's almost as if there's a ' leak' in your funds as the owner/financial mgr struggles to put financing in place. The clues are often in your financial statements, but sometimes difficult to pin down for some.

Those cash flow and working capital shortages can put a huge strain on the business - often straining relationships with suppliers and lenders such as your bank.

It sometimes makes a lot of sense to get a third party outside opinion on your current financial position. That's when unlocking valuable business finance techniques can really pay off to cover off short term and intermediate funding needs.

It's no secret that a major focus of business is to increase sales. As important though is the need to ensure you understand what in fact is happening to your overall cash flow. What we're really talking about is your ' operating cash flow ' and what ' drivers ' are in fact increasing or decreasing that cash.

In many cases it's always best to use longer term financing for acquiring new assets and technology. By the way, even business software can be financed! Your overall profit situation as well as your profit margins will often help drive what financing your firm is eligible for.

Also the types of assets your firm carries on the balance sheet and understanding their size and quality will often also drive finance solutions you need are eligible for.

Assets that can be monetized include:

Receivables

Inventory

Equipment

Tax Credits

Purchase Orders

Solutions such as A/R financing, inventory loans, equipment leasing, sale leasebacks, and SR&ED tax credits can all be ' cash flowed' into immediate liquidity. By the way these solutions tend to be ' non bank ' in nature and predominantly available through commercial finance companies or alternative lenders.

Newer businesses are often eligible for the Government of Canada Small Business Loan (new loan maximum is $ 1,000, 000.00).

If you want to avoid making ' bad decisions' in the financing of your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your capital and cash flow needs.


Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
http://www.7parkavenuefinancial.com

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 '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Business Financing In Canada : Solid Tips On Cash Flow Finance & Company Finance Strategies & Solutions

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Looking to Enhance The Power Of Business Financing ?

OVERVIEW – Information on business financing in Canada. Numerous debt and cash flow solutions are available for your company finance strategy

Business financing in Canada probably can deliver on more options that most owners/financial mgrs might be aware of. The truth is some of these options are ' external ' and some might be surprisingly ' internal ‘. Let's dig in.

Taking on some business debt, or monetizing/cash flowing assets you already have (receivables/ inventory/ equipment) is the alternative to bringing more equity into your company. Yes, you don't have to repay equity but to the current ownership is simply a devaluation of what is currently a growing asset - your business! So while equity and new share capital is not selling all of your business, you're certainly selling a part of it.

That brings us back to external business financing solutions, which of course have a cost and risk to some degree. A preferred solution for many companies is the business revolving line of credit. That comes from one of two sources - A Canadian chartered bank, or alternatively a commercial finance company that is independent and unregulated as the banks are.

Those two types of credit line both give you liquidity and don’t add additional debt to your balance sheet. If managed and accessed properly those credit facilities grow as does your sales and asset base.

How can the owner/financial mgr increase cash flow ' internally '? The most obvious manner should be to accelerate your receivable collections. By the way, either the bank or commercial finance company will always be more impressed if your A/R is in good shape!

Don't forget also that you can bring in cash by postponing cash... outflows! How do you do that? Simply by managing payables more effectively, using long term asset acquisition strategies such as equipment leasing to acquire new assets, technology, software, etc.

Inventory is often a large component of many a firms overall asset base - certainly in the case of retailers. They can almost always be included in business credit lines as part of your overall financing strategy, but inventories can also be financed via inventory loans, and also as part of a purchase order financing solution.

Types of term debt and cash flow solutions available to your firm might include:

A/R financing

Revolving credit lines

Govt Small Business Guaranteed Loans

Royalty Financing

Unsecured cash flow loans

SR ED tax credit financing

Sale leasebacks

To ensure you're harnessing the true power of business financing seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow and long term asset financing needs.



Stan Prokop - founder of 7 Park Avenue Financial –

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :

http://www.7parkavenuefinancial.com



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 '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Asset Financing Strategies In Canada : Understanding Equipment Leasing For Your Equipment Financing Requirements

Want To Stop Chasing Asset Financing Solutions ? Here's How !

Information on equipment leasing in Canada. Proper asset financing strategies are a key part of financing equipment and technology needs in Canada

Lease Financing – Canada continues to view this option as a major source of capital expenditure financing in Canada financing in Canada. More and more companies are gravitating to leasing as an effective financing option for their equipment needs.

Canadian business owners and financial managers need to be aware of the types of lease financing out in the marketplace, with respect to documentation, rate, term and structure, and of course, most importantly, approval .

The term for most leases in Canada, based on our firms experience tends to be between thee and five years. With respect to what asset type can be leased, probably the better questions is to ask ‘what can’t I lease ‘? That’s is because almost every type of asset can be lease financed. Leasing firms do like to focus on equipment and assets that are ‘revenue producing ‘in nature – i.e. those assets that will generate sales and profits for your firm – that’s because the lease is of course paid from the cash flow out of those profits and sales.

Many business owners do not, unfortunately, have a solid understanding of what types of leases they can enter into. Doing your basic homework in this area will save you potentially thousand of dollars over the term of the lease, based on estimated asset values and the type of lease you enter into. (There are two types – capital and operating).

When we ask business owners and financial managers why they lease more often that not the answer comes back relating to preservation of capital. In today’s difficult financing market Canadian forms want to preserve cash and credit lines for other basic business needs.

Other firms are very focus on how the optics of the lease will affect their balance sheet – many larger firms focus solely on operating leases, where the asset remains off their balance sheet as debt, and the payments are reflected as an operating expense. When debt to equity ratios and cash flow coverage ratios are important to your firm, your bank, or your shareholders then leasing via an operating lease becomes a very effective financing tool.

Leasing tends to be ‘fixed rate’ financing. Given today’s relatively low interest rate environment it of course makes a fair bit of sense to lock into a good low rate for the next three to five years.

There isn’t a day goes by when we don’t hear of in the radio or the financial press concerns about inflation. When costs go up in an inflationary environment the business owner takes solace that his lease payments are fixed and at a respectable rate.

We spoke previously of capital conservation – more often than not leasing is 100% financing – on occasion a customer may be required to provide a first, or first and last payment, and sometimes a down payment, but in general business view leasing as 100% financing. That’s a good thing relative to cash flow management.

When we talk to business owners about leasing we frequently use the term ‘options ‘. That is because leasing lets you have a final vote in your capital expenditure financing. Properly structured leases allow you to return equipment, buy it out at end of lease, or extend the term of your lease if you feel the equipment will be used for another specific period of time. Many lessors will even allow you to go ‘month to month ‘.

Naturally in today’s competitive environment it makes sense to stay ahead of technology whether that is computers or plant equipment or rolling stock. Leasing allows owners to use the asset and ensure that you have access to newer assets if your firm needs them – upgrades are very common in lease financing in Canada.

We spoke of ‘approval ‘previously .Since most lease financing is done outside of the banks in Canada independent finance companies focused on lease financing work hard to generate an approval for your asset financing. Typically a lease finance approval can be obtained in a week or so as long as you have the required information, which is generally an asset description of quote, and the basic financial information on your company, i.e. your financial statements.

Investigate the benefits of leasing by talking to an experienced and credible advisor who can ensure your firm is maximizing those lease finance benefits! Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your asset finance needs.




Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :

http://www.7parkavenuefinancial.com

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 '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop