Receivable Financing In Canada : The Factoring Credit Line Solution Explained

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The Not So Thin Line Between Commercial Receivable Financing & Cash Flow Success

OVERVIEW – Information on receivable financing in Canada. A factoring credit line offers numerous benefits to business liquidity and growth - here is why and how!

Receivable financing in Canada continues to play an important role in the newer ways to finance a business. Also know by the general term "Factoring ' this solution works best works best when it involves ' growth ' - simply speaking clients tell us that they cannot access traditional financing to handle new sales opportunities . Let's dig in!

A/R financing is one of the components of asset based lending. It focuses solely on the immediate conversion of your receivables into cash. Your company can also combine A/R finance with inventory and equipment to get a total business credit line solution - it's the bank alternative.

When businesses choose factoring or receivable financing (also known as invoice discounting) as a financing mechanism they have options on how to structure that facility. The challenge - working your way through the different product and service maze that's lumped together in that term ' factoring '!

Let’s recap why you would consider non bank commercial A/R financing in the first place. Some of those reasons might be:

" to generate additional working capital
" to purchase another firm, utilizing receivables as a key part of your overall financing strategy
" To reduce payable and improve relations with suppliers
" To access cash flow and working capital without taking on debt (factoring is not borrowing - you are simply monetizing more quickly your largest liquid asset)
" To utilize funds for the down payment or purchase of equipment (Note - we don't recommend to clients that they use short term working capital to fund long term fixed assets
" In some cases your firm might be re organizing or coming out of a difficult period

Understanding why this solution works is all about what's known as your
Cash conversion cycle - you have operating cash tied up in receivables.
Part of your overall growth strategy might be to offer extended payment terms to key credit worthy customers. To do that you can utilize factoring by offering those terms, yet at the same time converting the receivables into cash.

Additional cash from factoring can be used to purchase more inventories, which is in term converted into receivables, allowing your cash conversion cycle to come full circle. In simple terms it's all about tracking how a real dollar of cash moves through your company.

Clients ask us what size their firm has to be in order to be considered for this type of facility. The reality is that it works for firms of any size, whether your firm has 250k in sales or 25 Million. (Even some of Canada's largest firms factor their receivables, you just didn't know that!) That includes both public and private companies by the way.

When considering this type of financing option cost is often raised as an issued by our clients. So what does factoring cost? In Canada the cost ranges from 9% per annum to approx 2%. Clients focus on these rates as annualized interest costs, when in reality the best way to look at them is reduction in gross margin with offsetting benefits of immediate cash flow and working capital.

Here's how we prove to our clients how over a long period of time this financing solution can offset perceived higher costs. Are any of the following important to your term?

" Immediate cash flow and working capital in an unlimited fashion (if you have sales you can always finance those sales - you don’t have a limit per se
" Better supplier relations
" Ability to offer extended terms to customers that generate good profits for your firm
" The ability to now take supplier discounts and take advantage of better pricing based on your ability to pay cash

When evaluating your options the best advice we can share is to understand what’s happening in the Canadian factoring market. Work with a trusted advisor who can take you through the various industry nuances such as:

" Recourse factoring
" Full notification
" Non notifications - We consistently recommend CONFIDENTIAL RECEIVABLE FINANCING as the best solution in Canadian A/R finance
" Annual contracts or open contracts
" Pricing based on your facility size and customer base,


In summary, naturally Canadian business owners and financial managers realize there is no one single Holy Grail of business financing.
But if you want immediate cash flow, no focus on your balance sheet by the factor firm, better supplier relations, ability to finance your business as you grow, etc .. then you should consider factoring as an option. The weight of evidence might just suggest that factoring is the right financing right now! for your business .
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with the right cash flow solution for your business.


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

How To Finance Tax Credit Loans In Canada . SR ED Financing Via A ‘ SRED ‘ Bridge Loan.. Works!

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Everything You Should Know About Financing SR&ED Claims in Canada – More Exciting Than The History Of The Pencil!

OVERVIEW – Information on tax credit loans in Canada. SR&ED bridge loans monetize your refundable ‘ SRED’ tax credits , ensuring instant cash flow for your R&D Capital investment

Tax credit loans, especially a SRED loan under Canada's SR&ED program are arguably one of the best uses (maybe 'the best ‘? ) of the Canadian SR&ED program administered by Ottawa and the provinces. It's a solid way to more quickly recover on your firms r&d investment. Let's dig in.

Our view on SRED loans is pretty simple - it's a way to ' supercharge' your SR ED claim - generating an instant ' cash back '! The reality is that if you have filed a SR ED claim now you can immediately convert that claim into cash flow and working capital now for your business.
To us that's even more exciting than say... the history of the pencil! (In the mid-16th century, a storm uprooted a tree in England's Lake District. Clinging to the tree's roots was a shiny black substance - graphite! We don't know how much truth there is to that story, but we do know that just a few decades later, the site had been transformed into the first commercial graphite mine.

It's also not a secret why thousands of Canadian businesses utilize the program - it allows firms to stay competitive in today's ultra competitive environment - it's not secret everyone’s going global as an example.

In talking to clients we get two constant questions in the area of ' SR&ED"

" Why should we financing our SR ED claim
" How do we finance that claim?

Your firm’s ability to utilize a SRED bridge loan to inject working capital into your business is clearly the key advantage. Remember also that financing your claim is not the process of taking on more debt; you are simply cash flowing or monetizing that SR ED receivable now, in an effort to use that capital to continue and grow your business. Many firms we work with consider their SR ED claim as the largest receivable they will have that year.

We hear ' timing is everything'. If you have filed a first time SR ED claims it certainly would not be out of line to say that you might have to wait close to a year for your funds. Remember of course those funds are non - repayable. So if you have cash coming a year from now why, and its non repayable, why wouldn't you consider financing your claim and putting that cash to work now.

How do businesses typically use the proceed of their Sred loans? Most common uses include, but are not limited to:

" Reduce payables
" Purchase new equipment
" Invest in marketing
" Start your new Sr ed process for the next fiscal year

The reality is that its company's funds use them as you would another other injection of working capital. AKA ' any general corporate purpose'!

How are claims financed? The process, with an expert in tow, is simple. It involves a basic business application, the usual due diligence around any type of financing (info on your company, owners, etc) and the documentations that collateralized the SR ED into an asset to be financed.

To say that sred financing is a boutique and niche industry would be an understatement. Would you consider entering into a new business without the benefit of working with an expert? We don't think so, so seek out a trusted, credible and experienced advisor in your area to maximize your Sr Ed loan.
Finance loan amounts are typically in the 70% range of your total federal and provincial claim. Sr Ed is a national program and your sred claims can be financed in any province in Canada.

In summary, business owners should avail themselves of the SR ED program. They should also consider financing their claim which allows them to inject working capital immediately into their firm. Speak to an experienced credible advisor in the area and maximize the benefits of this great Canadian program.


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

Alternative Bank Financing : Let Asset Based Lending Eliminate Business Finance Anxiety!

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Redesigning Your Business Financing ? These Solutions Just Might Help

OVERVIEW – Information on asset based lending in Canada. Bank alternative financing solutions can make or break your business . Here's why and how !

A bank alternative financing solution traditionally has been thought of as a ' non traditional ' form of Canadian business financing. The truth of the matter is these forms of alternative financing (sometimes dubbed ' fintech ‘) are becoming more mainstream every day. If you're looking for a ' redesign ' of your business finance capital solutions we think we've got some solid solutions. Let's dig in!

The goal of owners and financial mgrs is always to increase their cash flow and working capital to run and grow their business. There's no bigger fan of Canadian banks than us, but there is a general feeling from many businesses looking for SME COMMERCIAL FINANCE solutions that the bank alternative isn't always available when they need it.

Canada's Globe & Mail business newspaper on OCT 11/2016 highlighted insights from many entrepreneurs, many of who maintained that Canadian bank solutions were either unavailable or irrelevant. Another article on the same day accused the Royal Bank Of Scotland of literally forcing small businesses defunct in an effort to improve capital ratios!

Asset based lending in Canada is a previously non traditional ( but becoming more traditional every year!) form of financing that significantly increases cash flow and working capital for Canadian business .

The two main drivers of an asset based line of credit facility in Canada represent the majority of every firm's current assets or working capital assets - they are receivables and inventory.

Asset based Lending for Canadian firms differs from traditional chartered bank type financing in that lines of credit are made available against inventory and receivables on their own merit so to speak . What do we mean by that? Simply that these type of facilities are very non covenant based. Unlike bank operating facilities which have a lower cost of financing asset based lines of credit do not have covenants, rations, and significant external other collateral attached to them .

This type of business financing is very much formula driven, to the point where the Canadian business owner or financial manager always knows his or her working capital availability subject to current and projected sales growth .

This type of financing works best because asset based lenders are experts in quality of receivables and value of inventory. In an asset based lending facility you are not taking on debt, you are simply liquidating receivables and inventory at a fast pace, and as you grow your working capital and cash grow commensurately with your sales and revenue growth!

Security for the facility is imply a charge on the assets being financing- as we have stated those assets include a/r and inventory, but in many cases equipment and real estate can be added on also . A general security agreement, commonly known to financiers as a 'GSA 'is taken as collateral for the facility, in exactly the same manner as a Canadian bank might take. This collateral is in effect the 'underpinning' of the facility.

A simple way to understand this new type of financing in Canada is to simply think of the assets being the collateral, not your overall balance sheet and financial strength and operating metrics.

Because you receive a higher margining or borrowing base in asset based lending there is more reporting required. As a business owner you can view that as a bad thing or a good think - many clients have told us the additional monthly reporting they do for their asset based lines of credit helps them understand their business better

In the case of the receivables component 90% of available a/r is financing, and depending on the overall quality and liquidation value of your inventory margins on the inventory component tend to be anywhere between 40-75% in our experience.

Numerous 'subsets' of asset based finance can deliver on short term and intermediate term finance needs. These should also be understood by the owner/mgr. They include:

Equipment financing

Inventory Loans

SR&ED Tax credit loans

Factoring/ Confidential receivable finance

Sale leasebacks

If you're focused on growing your business, eliminating finance anxiety, and redesigning how you currently fund your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with alternative financial solutions that make sense.


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

Working Capital Loans In Canada : Unearthing Business Financing & Cash Flow Sources You Need To Grow & Profit

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Working Capital Loans In Canada : And This Isn’t Just Locker Room Talk !

OVERVIEW – Information on working capital loans in Canada. Successful business financing will always require the right cash flow and capital solution that matches your companys' needs

Working capital loans in Canada have the ability to provide the cash flow & business financing solution your business needs to achieve overall funding success. Let's look into these real world funding solutions you can access, and let's dispense with any ' locker room talk ‘!

True cash flow loans (there are numerous variations) come with attractive rates at the expense of not having to issue or generate additional owner equity. Let's dig in.

Real working capital term loans come with a typically 3-5 year short term /intermediate term focus. Typically payments are made monthly out of the cash flow your company proves it can generate on a regular basis. In essence the solution is one that’s a permanent working capital solution to your overall capital structure.


In some cases a true working capital loan can have some collateral attached to it such as equipment or other business assets, but typically it's all based on your ability to prove consistent and positive cash flows.

These type of facilities are made through 3 types of organizations-

Chartered banks

Independent Finance Companies

A Government owned Crown Corporation

Achieving success in a working capital loan scenario will come with some conditions, as business owners will normally be required not to take out excessive funds from the business, and must be able to demonstrate that they have the cash flow in place to repay the loan, as we've stated.

The lenders challenge in a cash flow loan is their need to ensure your current and projected funds can meet your repayment requirements.

Only a small handful of organizations that typically provide such business financing in Canada. Canada's chartered banks provide the lowest rates, while other firms and organizations have a higher cost of borrowing which is passed on to your firm as the borrower.

Why should your firm consider a cash flow solution? The typical reasons might be capital improvements, equipment purchases, and working capital to support investments in receivables and inventory.

It is important to ensure you are entering into a working capital loan arrangement for the right reasons - as working capital loans should not be confused with asset based lending on items such as receivables, inventory, equipment, real estate, etc .

Typically a working capital facility loan will require the guarantees of the owners of the firm. One of the smartest things you can do in positioning a facility such as this is to provide a crisp well thought out cash flow analysis - (an updated business plan wouldn't hurt), to give the lender the comfort that you can make payments. In your document you should know that the lender will be looking at total debt to equity once the loan is in place, and also that you have cash flow coverage to repay.

In our experience with clients working capital requests tend to be in the 50k-250k range. Larger facilities than this become known as mezzanine debt, or subordinate debt - these are fancy terms for 'unsecured cash flow loans '.

In recent times numerous alternative finance solutions have emerged to address the working capital challenge. These solutions include:

Short term working capital loans/ merchant advances

Factoring

SR&ED Loans

Sales/Royalty Financing

Sale leasebacks

In summary, working capital loans are available in Canada from various entities. It is important to position your request properly, and careful attention to the metrics that the lender will be looking at will pay off for your firm.

Speak to a trusted, credible advisor in business financing who will help you maximize the benefits of a true working capital loan facility or alternate solution that makes sense for your business or industry.


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

Financing Assets In Canada : Business Equipment Leasing Via Lease Finance Should Be Your Go To Asset Funding Strategy

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Just The Good Stuff On Financing Assets For Your Business

OVERVIEW – Information on financing business assets in Canada . Lease finance solutions deliver and 80% of owners/financial mgrs consider the equipment leasing solution

Financing assets in Canada is based on the premise that your business requires these assets to stay both competitive and probable. The reality of acquiring assets for you business of any type is understanding that they typically depreciate in value - that’s why lease finance works! Want the ' good stuff ' on this accepted and popular asset finance strategy? Let's dig in.

A commercial lease finance company is more often than not your best partner to acquire and pay for assets on your behalf - and that means any king of assets - plant equipment, rolling stock, software, technology, etc. Almost any asset can be financed.

So how does a truly effective lease financing solution work? Simple actually - you lender purchases the equipment on your behalf - they outlay the full purchase price and you ' lease ' it back over a fixed period of time - typically from 2-7 years.

Numerous benefits accrue to your form when you acquire assets through lease acquisition. Simplicity is often the key driver here, as many applications can be adjudicated in a manner of days, if not hours! Typical info you might need to provide is description of the assets, or perhaps a quote from a vendor, your business financials, and miscellaneous info required to prove that the asset will generate cash flow and revenue and profits to grow your business.

That simplicity becomes a little more challenging by requiring you to ensure that you have picked the right type of lease/ financing partner. Here it might be good to get the assistance of an industry professional.

Not only the type of lease you pick is important - it’s also critical to ensure your company knows your rights and obligations at the end of the lease. Most clients wish ownership of the assets or technology to revert to their company at the end of the lease term. However in certain cases many businesses should look at operating leases to simply use the assets with the lease term - that often lowers the monthly payment. Bottom line - it's all about knowing what value the asset has to your business at the end of the lease term.

Looking for some good news in these challenging troubled times? Well the reality is that lease finance solutions are available to pretty well every firm, from start up to established corporation. Even the largest well known public companies of significant size use equipment leasing for cash flow and balance sheet reasons.

Quite frankly, as is the case in a lot of banking scenarios transactions for smaller or start up firms are based significantly on the credit history and business experience of the owners, so Canadian business owners should be prepared to demonstrate the proper credit history and business acumen.


There is no limit to the amount of financing that is available in Canada for lease financing. During the economic crunch of 2008 and 2009 many lease firms actually got assistance from the government to keep the wheels of lease financing moving. Markets have stabilized and funding is generally as abundant as it ever was for the right types of assets and credit quality.

Our bottom line today? Lease financing is very simply and has clear benefits. As we noted the challenge is in getting approval for the right transaction in terms of credit approval, rate, and overall lease structure.

Seek out and speak to a credible, trusted, and experienced advisor in this area to ensure you are making the best use of this valuable Canadian business financing strategy.




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 Based Financing : A Guide To Unfiltered Cash Flow & Business Loan Solutions

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Operation Business Financing : Cash Flow & Asset Finance Solutions

OVERVIEW – Information on asset based financing solutions in Canada. Completing Your Search for the right business loan and cash flow solution

Asset based financing is one of the newer terms business owners and financial mgrs keep hearing about these days. Growth in this area has been driven by the tightening up of banks and traditional lenders in the SME COMMERCIAL FINANCE sector when it comes to commercial business financing needs for the right business loan and cash flow requirement.

When times get tough it's critical for owners/mgrs to look at all the alternatives available to their business as it relates to funding needs.
When times get tougher businesses of all size look to alternatives in their overall financing strategy. The acronym for this form of finance is known by industry insiders as ' ABL '.

So who exactly provides this financing? Typically it's non bank commercial finance companies who are independent and unregulated relative to banks and insurance companies - who no doubt find themselves extremely regulated - given they don't take deposits and can take on more risk . Firms in the industry are a combo of Canadian, U.S. and even international.

The challenge? Sourcing the right type of facility that meets your needs and ensuring you've got the right advice and expertise to take on those funding decisions.


The most fundamental definition of asset based financing in the context of our information here is simply the provision of working capital and cash flow for your receivables, inventories, and in many cases equipment and real estate if that is applicable.

The ability to successfully finance A/R and inventory and equipment makes or breaks a business when it comes to financial success. Doing that properly avoids ' cash flow problems' - both short term and long term.

As a result, financing sales via Receivables and inventory finance tends to dominate the majority of this type of financing. Many firms have problems with ' growth finance '- and most business folks quickly learn that sales and paper profits don't pay bills!

Asset based lines of credit generally is available to all medium and larger size companies in Canada - generally start ups and very small firms simply don't have the bench strength in assets to warrant this type of financing .

Asset based lending is simply maximizing the true value of your assets without the same focus that a bank might place on your overall financial statement quality. The facility generally has a limit, similar to a bank, but the reality is that as your assets grow your ABL facility will grow also?


When clients ask what it takes to qualify for such a facility we simply advise that your business must overall be viable, and quite often ABL facilities can be uniquely structured to your specific industry and business model.


The benefits of asset based credit facilities are very significant - they include:


Improved cash flow and greater working capital

Shorter approval times to get the facility set up

Reporting is more stringent in asset based lending because it focuses on the assets, but many clients tell us this additional reporting helps them understand their business better.

Higher financing costs in asset based lending bring a higher cost of borrowing, but a huge portion of these additional financing costs can be offset by better purchasing , taking advantage of supplier payment discounts, etc - In some unique cases we have seen the entire cost of an asset based financing facility being nicely absorbed by those two scenarios alone!

There are numerous ' subsets' of asset based financing that can quickly fix any cash flow or sales finance challenge. They include:

A/R Financing/Factoring/Confidential Receivable Finance

Inventory Loans

Permanent cash term loans

Merchant advances/Short Term Working Capital Loans

SR&ED bridge loans

Royalty based financing

Sale Leasebacks


In summary, clearly the overall benefit of an asset based financing or lending facility is simply access to greater cash flow and working capital. It is an alternative form of financing that quite frankly is developing into a traditional method of 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