SR and ED Or SRED - Call It What You Want But Take Advantage of SRED Funding Or Factoring!

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Semantics we tell clients. You can call it you SRED claim, your Shred claim ( they use that a lot also! ) or your SR and ED claim. You can even throw in an ampersand and correctly write it as SR&ED.

But there is only one bottom line, which is, why you aren't considering financing your claim. Putting our semantics aside many business owners and financial managers are inquiring as to the financeability of their claim. More often that not they have been told by their bank that this type of claim is not financeable, and even though you are showing it on your books as a receivable it cannot be margined for working capital and cash flow.

Two words. They are wrong, as Sr Ed claims can be financed in a large number of situations. They are financed utilizing Sr Ed Canadian business financing advisors who are experienced in this niche area of Canadian finance.

We believe it's always good to recap the basic and set the stage for our financing discussion. The program is of course a federal program, in concert with the provinces, that encourages small, medium, and dare we say it, large corporations to conduct research on products, process, etc.

How committed is the government to this program ask clients? Very we say, given that approximately 4 Billion dollars are doled out each year to the 1/3 of the companies that take advantage of the program. That of course infers that 2/3 of eligible customers in fact don't use the program. We have heard a litany of reasons around why they don't from clients - they include: we're too busy, its sounds complicated, we don't want to get audited, our r&d spending is not large enough, etc. These firms would simply be better off keeping it simple and saying, ' No we don't want funds that are non repayable that re -imburse us for our r&d', because that's in effect what they are saying.

If you have a valid claim prepared by either an experienced internal party, but more preferably a true SRED consultant then you can finance your claim. Funds for approximately 70% of the claim value are provided to your firm with the collateral of course being the SR ED receivable. Of course you can wait for 3, 6, or 12 months to receive your funds, but why not consider putting that valuable cash flow and working capital back to work in your business.

Clients who finance Sr &ed claims typically use the funds for general working capital purposes, further r&d, new equipment, marketing, etc. The bottom line is that you choose the use of the funds. And by the way, that other 30% of your claim is still yours of course, it's returned to your firm, less financing costs, when the government sends your cheque. And get the news get any better, but no payments are made on the SR Ed loan, interest simply accrues and is calculated at the end of the financing.

Don't fail to consider SR&ED financing as a way to stay one step ahead of the competition and satisfy your cash flow and working capital needs at the same time. Speak to a trusted, credible and experienced SRED Canadian business financing advisor to assist you with the factoring of your claim.

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

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 100 Million $ of financing for Canadian corporations .

' 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





















Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/5297123

Dear Abby - Can I Really Use The Canadian Film Tax Credits (credit ) For 30 - 45% Of My Film Finance Projects ? Signed - 'Anxious

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Use Canadian Film Tax Credits For Your Project Dollars!

Information on Canadian tax credits in the film finance industry and how the effective use of film tax credit utilization and financing can help ensure financial success for your project

Dear Anxious - Look northward - to Canada that is, and you'll find that with all the turbulence in U.S. film finance as it relates to tax credits that the Canadian tax credits as they relate to film televison and digital animation will provide you with a tremendous sense of relief. Often the Canadian tax credits can finance anywhere from 30 - 45% of your entire project (sometimes more) based on proper certification of your credit and a solid finance plan completed by yourself as producer.

Ontario, British Columbia, and Quebec have historically been the dominant geographies for film, TV and animation production in Canada - but tax credits are available in all provinces. On many occasions the geography that is best suited to your project is often the most sensible with respect to that provinces tax credit program.

It comes as now surprise to anyone in the industry that film finance is a journey. The challenge is maximizing the true value of your project via a potential theatrical release, and of course the pre requisite DVD, downloads, and broadcast and international rights. All of those will create your future revenue streams, but unfortunately won’t get you the cash flow you need today.

We’re assuming you are the owner of a Canadian project in our aforementioned genres of movies, TV, and digital media. There are what we can call 4 pillars of financing your project. They are grants, debt, equity, and of course our favorite - the film finance tax credit sponsored by the combination of federal and provincial government.

We're going to have to let you take care of grants, debt, and equity - but, and its good news, the Canadian tax credits on your project can cover anywhere from 30-45% of your project. In many cases even a higher amount is available, which comes into play due to certain factors such as shooting or production being held farther away from major centers such as Toronto, Vancouver, Montreal, etc .

The enhanced tax credits come back to you as a cheque - a true non repayable tax credit. The add on good news is that your film tax credit can be monetized or cash flowed, thereby securing automatically a very large percentage of your budget. The government in Canada supports the program strongly; having determined it’s a major overall economic benefit in employment, tax generation, and culture benefits. Bottom line - it’s a direct cash subsidy to your project.

In order to maximize your film finance utilizing the Canadian tax credits you simply need to ensure you have a proper production budget and finance plan. An experienced entertainment tax accountant will help you maximize the total amount of funds applied for in your credit. You will want to ensure you have valid title to your project, and that you have a properly legal entity set up to capture all the revenue and expenses of your project.

A special point system around any Canadian producers and key personnel will further enhance the total dollars you receive. There is data to suggest that 80% of the films that leave the U.S. for production in other geographies end up in Canada.

Your Canadian special purpose vehicle for your project must be Canadian owned, and pay special attention to the points system for creative positions such as director, screenwriter, etc.

So in summary dear ' Anxious ' you can definitely use Canadian tax credits as a key part of your finance plan. Applications can even be made online these days!

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

Click here for 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 100 Million $ of financing for Canadian corporations .

' 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

Is the Lack of Cash Flow and Working Capital My Firm's Doomsday?

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Business owners and financial managers know the importance of cash flow and working capital as generated by their accounts receivable and inventory accounts. What is the ultimate effect of a lack of cash flow and working capital - we know the answer - it is a business failure.

Business owners can utilize a financial analysis technique that finance textbooks call the 'DOOMSDAY RATIO '. What is that ratio and what is its significance?

The Doomsday ratio is calculated by the following easy formula:

Cash divided by Current Liabilities.

This is one of the most powerful and effective solvency ratios that a business owner can utilize. Business people might be aware of two other similar ratios, the current ratio and the quick ratio. The current ratio included the firm's current assets, including accounts receivable and inventory. The Quick ratio did the same but excluded inventory.

The business owner can quickly see that the doomsday ratio focuses solely on Cash! We can call it a very demanding ratio because it focuses solely on the liquid gold within the company, cash! As liquid as your receivables and inventory are, they aren't cash yet, and everyone knows the day to day business challenges of converting receivables and goods into a final cash customer payment.

Really the best way to look at the Doomsday ratio is to view it as an ongoing measure of the firms cash 'buffer'. The bottom lien is that it will show the business owner what 'cushion' of cash the firm has. Business owners could even choose to monitor the ratio daily, as it could very well warn against impending shortages of working capital.

Many business owners know that it is also not productive to carry cash on hand, particularly in today's low interest rate environment. So it makes common sense that the doomsday ratio may in fact be less than one, but at least we have a number that, on an ongoing basis, we can monitor.

Each business over time has a philosophy and business practice around how much cash is kept on hand. Naturally it's also obvious, and important to know that if you reduce your operating line of credit with you cash you still have the full liquidity of your operating line, but you aren't paying any interest to borrow. That's a good strategy also.

Customers can also enhance their position by factoring or selling their accounts receivable, which would put them in a strong position to generate cash and maintain a positive Doomsday Ratio.

In summary, the analysis technique is a valuable took to monitor cash flow/working capital for any business.

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

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 100 Million $ of financing for Canadian corporations .

' 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
















Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/3715322

Investigate Canadian Asset Based Lending for Your Capital Needs

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Breakthrough Lending Discovery ! How To Triple Their Access To Business Financing Via An ABL Asset Based Facility



Information on Canadian business financing and an ABL asset based facility . How this type of lending can double your access to working capital financing

Impossible clients say. How, in the current business financing environment could any company triple their access to working capital? The answer is an ' ABL ' or asset based lending facility for cash flow needs. Lets examine what, who, and how!

As asset finance is more of a general term we find lets confirm first exactly what we are talking about. That is to say we're focusing on what we can call a comprehensive business line of credit (not through a bank by the way) for your receivable, inventory and equipment and real estate financing needs. The industry term for this credit or business financing facility is an ' ABL ' or Asset Based Line of Credit.

While this type of lending has been popular and very prevalent in the United States for years it continues to gain traction in Canada everyday. A lot of mis information exists around this type of lending and financing for a variety of reasons - those include cost of the financing, how it works, and who offers it. So you are forgiven for not fully understanding or knowing about an asset based facility for cash flow and working capital - trust us you are in good company on that one!

Cost is a factor in any financing that your firm undertakes, and when we are talking about the largest business credit facility you can have cost is important. Larger Abl facilities for medium size and larger companies are very competitive with Canadian chartered banks. Smaller firms and start ups - yes even a start up can employ this type of financing! pay a premium to access this type of credit . However that premium can be explained or covered off in a number of ways.

First of all if you could double or triple your access to working capital and cash flow business financing via an asset based facility then would that lending be worth it. We certainly think it does, and have numerous examples of firms that have just done that. Recently one firm who envisioned much stronger growth in the 2011 economic environment replaced their chartered bank facility with an asset based line of credit. The facility gave them 90% advance on receivables, as well as a 60-70% advance or borrowing base on inventory. They were previously ' capped' on inventory at an arbitrary smaller amount that had nothing to do with the true value of the inventory.


ABL asset based lending is done via highly specialized firms. Typically they are not banks, they are independent, and they are experts in only one thing - your assets! As a result the due diligence and value they place on your assets can in our experience at a minimum double you access to business credit. In some cases firms that were self financing previously and had no access to business financing now have significant borrowing facilities in place.

Interested? Want to separate the wheat from the chaff as they say, on who offers ABL business financing in Canada, how it works and what it costs. Seek out an expert, credible an experienced Canadian business financing advisor for your business lending needs.

P.S. Let us know if you were able to double or triple your working capital requirements!

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

Click here for 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 100 Million $ of financing for Canadian corporations .

' 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

Has Your Company Overlooked the Business Financing of Receivables or Factoring as a Working Capital Strategy?

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Here's A Solid Working Capital and Cash Flow Solution for Canadian Business

Information on receivable financing & factoring as a consistent cash flow business financing solution for Canadian businesses

Have you forgotten something? Perhaps it is just a case of overlooking or not knowing all your alternatives in business financing for working capital. Factoring receivables for cash flow is just one of those strategies that you may have missed, not heard about, or not fully understood or investigated.


Let's do a basic ' primer' on this somewhat unknown or mis-understood form of business financing. Many Canadian business owners or financial managers mistake factoring or the selling of your receivables as a ' loan '. That is not the case, it’s simply the case of monetizing or cash flowing your probably largest current asset, your receivables, and paying a financing charge, or discount fee for the service



In general approximately 90% of the value of an invoice is advance to you pretty well the same day that you issue your invoice. Your normal obligation is to provide some sort of proof of delivery or acceptance of that invoice related to your goods and services.


We're of the opinion that factoring receivables seems to be viewed as a small business financing tactic , but we can assure readers that some of the largest corporations in Canada utilize the tactic also - in some cases its simply jazzed up with a fancier name such as ' securitization' or financing via 'asset backed commercial paper ' , etc. So the big boys are doing it also! Don't forget that.


When clients talk about moving forward on this type of business financing the largest challenges seems to simply be their ability to understand pricing, pick the right firm to work with, and finally, to ensure that the daily flow of paperwork around this type of business financing makes sense . If the wrong factor partner is selected there are countless stories out there of firms who have experience a negative level of customer intrusion around the whole factoring receivables process. So choose your partner well, and probably the best info or advice we share in this regard is to seek the services of a trusted, experienced and credible business financing advisor who can steer you towards financing and cash flow success.


A common question related to our 'primer' on factoring (also called invoice discounting or receivable financing) is: ' Do we qualify '. The short and positive answer is absolutely, if you have receivables you qualify, that's what this form of business financing is about.


Many business owners or their financial manager’s struggle with the cost of this type of financing which typically is in the 1- 2.5% range in Canada. The bottom line on the costs is simply that they will vary relative to the size of your receivables, the perceived credit quality, and the type of firm you contract with in this regard. That’s where the help of a Canadian business financing expert can help you immensely. In fact more often than not that expert can demonstrate how you can significantly reduce the cost of financing receivables to almost zero in some cases, but certainly a reasonable amount in most situations.

So whats our primer summary on receivables and business financing via factoring. It’s simply that if you’re reading this you probably have a business financing challenge. A/R financing is a method to eliminate that challenge. Working hard on your financing is commendable; working smart on your financing with an expert is a must. Investigate the solution that will bring cash to your firm’s door tomorrow.

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

Click here for 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 100 Million $ of financing for Canadian corporations .

' 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

Are Working Capital Loans What Your Company Really Needs? What Type Of Finance Company Can Help?

Cash Flow Solutions You didn’t know about !

Information on working capital and cash flow solutions . Loans might not be your only alternative when looking for a finance company to increase your access to liquidity for growth and survival

The shock has probably worn off by now. We're referring of course to the business owner and financial managers realization that sales don’t equal cash flow and that your management of working capital might just be your key to short and long term survival.

So what type of finance company or institution can help you in the access to liquidity? The reality is that every industry needs a different level of working capital. That relationship of your assets to your turnover to your cash on hand is what is going to make the final call on what type of loans you might need for your cash flow management solution.

And we will add that you might find that ' loans' or bringing on additional debt to your balance sheet is not only the wrong solution, but you have alternative non loan solutions!

The reason you are looking at your working capital situation hinges probably on two areas, your firm is growing too quickly, or you have asset management challenges or problems with inventory and receivables. So hopefully you can now see that what working capital management is all about comes down to matching the financing you need to the assets and equity you have on your balance sheet. As your business and profits grow the owner equity component grows also

So are loans the solutions to your cash flow challenge (or crisis?!). Sometimes, but definitely not all the time. The long term solution to a cash flow management solution might in fact be a working capital term loan, in effect injecting long term capital into your business. If you can qualify for this loan, which is more often than not unsecured, it certainly is an option. Larger loans of this nature are called subordinated debt, but cash flow term loans are available for almost all firms - generally the minimum being 50k , but as we noted, going to several million dollars depending on the size of your firm .

But why would you borrow externally and bring debt onto your balance sheet when the solution is inside your business, not outside? Clients are often surprised when they find out that two other solutions, and not loans, are possible.

We're talking about asset based lines of credit, which are generally non bank in nature, meaning they are offered by private finance firms. Rates on such facilities can be competitive to bank rates, but more often than not come at a premium. However your ability to, in many cases, double your working capital liquidity can significantly increase profits and sales. Just think about it, if you can double sales, keep your overhead costs relatively fixed, the additional profits you generate can easily cover your new increased financing costs.

The other solution we will mention is the sales of receivables. This type of financing brings zero new debt on to your balance sheet, improves your cash position, and provides immediate cash flow for growth. Perceived as expensive and non traditional it is gaining traction with Canadian business every day. In effect it is the trade off you have between growth and survival and additional financing cost, of a non loans nature.

In summary, working capital loans can come from external finance company sources. Alternatively you can become your own finance company by managing and monetizing your assets in a variety of ways. Speak to a trusted, credible and experienced Canadian business advisor to determine which solutions work best for your firm.

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

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 100 Million $ of financing for Canadian corporations .

' 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

Does My Firm's Cash Flow Support Additional Borrowing?

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When business owners and financial managers contemplate additional borrowing for their firm they must think it terms of whether the business does, or will have, enough cash flow to make the debt repayments. We can further assure business owners that the bank or lending institution is thinking the same way!

When businesses enter into bank loans or other institutional loans the payments are, 99% of the time fixed and specified. The business owner and financial manager must ensure those payments can be made. If the company has over relied on debt it is viewed as highly leverage by the lender.

So how can a business owner determine if the company has the cash flow to support the debt? More importantly how does the lender do that calculation?

The calculation that banks and other term lenders focus on is called 'Times Interest Earned '. The business owner (and the banker) can calculate that formula very simply.

The Times Interest formula is calculated as follows:

Net profit before taxes, plus interest expense / divided by interest expense

The calculation becomes an absolute number. If the number is in fact '1 'that means that the company has in act made just enough to pay the exact interest expense for the year. We would point out that this calculation is always usually done on an annual basis.

So is '1' the magic number? The answer is no, and the answer should be intuitive to the business owner. That is because a times interest of 1 means there is absolutely no cushion for anything going wrong, and all business owners no about Murphy's Law!

So if earning decline or if the company takes on additional debt our ' times interest earned ' number become unsatisfactory - that is to say that we have determined there is not sufficient cash flow to service the debt.

We have determined '1' is not a great number then, well what is? The answer, as in many facets of business, is of course 'that depends '. Many industries differ and there is not really any specific number that is viewed as the Holy Grail by lenders. What we have found though that higher is better than lower. When the number is hovering around 1 both the business owner and the lender, should and will, respectively, have some concern.

We point out also that income, as a key component in our calculation varies between companies in final calculation re tax rate and other accounting adjustments. Some lenders and business owners also add deprecation to the profit because it is not a real cash expense.

Another quick calculation business people can perform is to calculate the cash flow number as a per cent age of debt. This calculation is often done by lenders to ensure long term debt is not being miss-used. If a company has a high percentage of total debt to cash flow it should be a strong indicator to the company owners that growth will be constrained, as all cash is going to debt, not growth. Therefore new equipment, inventory, receivables, etc will suffer in terms of growth.

In summary, business owners, by doing actual current calculations, as well as projections, can easily calculate their 'times interest earned' and cash flow as % of debt. This will allow the business to position loan repayments positively with their lenders, at the same time providing them with insights into how the bank or other lender will view payment capability.


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

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 100 Million $ of financing for Canadian corporations .

' 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


















Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/3693745