How To Finance A Franchise ! Great Question !

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Can You Finance A Franchise ? Yes You Can !

Canadian franchise financing - When Canadian business owners and entrepreneurs ask us what their financing options are for a Canadian franchise we indicate to them that the options certainly aren’t unlimited, but a number of standard and also creative options do exist.

Naturally all of these options are supplemented by your own savings or investment, what the finance world typically calls ‘owners equity ‘. In the current somewhat difficult challenging environment we have observed that there is upward pressure on the amount of owner equity you need to put into the business yourself.

How to Get A Business Loan For A Franchise with Franchise Financing Lenders

Most franchises in Canada are typically financed via loans, or debt – Canadian franchising does not really lend itself to a venture capital type environment. So where do those loans or debt come from – typically it is from traditional sources such as banks, and our firm has found success in effect cobbling together a couple of different financing sources to ‘ get the job done ‘.

When entrepreneurs come to us for franchise financing them is either looking for one of three scenarios – they are:


Looking to renovate their franchise location
They are wishing to purchase a brand new franchise
They have entered into a purchase agreement to purchase an existing franchise


Each of the above scenarios is worth mentioning with respect to a couple key points and observations:


Renovating an existing franchise via leasehold improvements or new equipment is probably the easiest financing scenario – as we have a real business already on our hands that is hopefully doing well, making some money, and looking to grow / expand
New franchises are probably where most of the financing challenge is as the entrepreneur and his trusted business financing advisor have to sell the lender(s) on the nature of the franchise, the probability of success, the industry business model, etc
Existing franchises are fairly easy to finance as again we have a business with sales, assets, and profits already in place. Some owners we work with target franchises that are existing that might not be doing well, they negotiate a fairly reasonable price, and have the determination that they can ‘turn the franchise around. Sometimes that is not necessarily as easy as it sounds.



One of the most popular methods of financing franchises in Canada is the Govt of Canada guaranteed small business loan . A large majority of franchises are financed in this manner .



Highlights of the Program include :

Eligibility for any franchise with under 5 M or less from an actual or projected point of view.

Loans up to 1 Million $ are available, with a large portion of the loan guaranteed by the government . An appropriate business plan and other key documents supporting the is required to commence the loan process. 7 Park Avenue Financial prepares proper business plans for our clients in the franchise segment.

Loans are used to either purchase the building/land , new equipment, as well as leasehold financing improvements.business.

Repayment terms and rates are very attractive and similar to traditional financing that is available to non franchise businesses.

We can’t over emphasize the fact that the ‘financing’ aspect of the business purchase should be entered into very early on in your whole process. Typically you have selected a franchise, or are entertaining a couple different options. In the last couple years we have been made aware of specialized firms that match your own business traits and style with the type of franchise that would most suit you. Not everyone is cut out to sell donuts and pizza, and we find some owners simply look at the appeal of potential revenues and profits, and not into the issue of ‘does this franchise suit my overall business style, work ethic and skills.

‘Skills ‘– Let’s focus on that for a moment. In our experience owners stand a significantly more better chance of success when they have some industry experience – We are not saying you ‘can’t be successful with no industry experience, but certainly those chances improve, and we hasten to add that issue is one criteria of any lender – i.e. does this business owner have the skills to run this business on a daily basis and grow and profit.

In summary, finalize your franchise purchase and start early on in your process to determine a financing strategy that works and will compliment your skills and investment. Rely on the services of a trusted , credible and experienced Canadian business franchise advisor with a track record of business finance success who will work with you through the entire financing process.




7 Park Acvenue Financial:
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

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

Quick Tips to Help You Find the Best Equipment Financing Company

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Important  Things You Need to Know About Equipment Financing

Equipment Financing in Canada is a specialized type of financing. Lease financing on its own goes back hundreds of years and is a widely accepted financing tool. Major companies in Canada utilize lease financing, why shouldn’t your firm.


Lease financing covers all sorts of equipment – that includes production equipment, transportation equipment, machine tools, computers, etc.
Heavy equipment financingis a popular category in this segment, for both new and used assets . In general most Canadian banks do not offer lease financing, although two of the Chartered banks have dedicated lease operations but require a very high quality credit quality.


You should consider leasing because it’s a simple to arrange financing agreement between yourself, your vendor of the equipment, and the lessor. Leasing should not be considered complicated, however Canadian leasing practices and the parties that participate are much different than in the U.S. . . . It benefits Canadian business owners and financial managers to ensure they understand why leasing is so popular.

Equipment Leasing and Financing Options

Two basic types of leases are available for the Canadian business owner – they are capital and operating leases. Operating leases are often promoted by manufacturers or vendors and they often include maintenance and insurance. You should consult with an Equipment financing specialist to ensure an operating lease is right for your firm.


The essence of an operating lease is that your intent is to use the equipment, but not to own it. When you enter into an operating lease ensure that you have no intention of owning the equipment at the end of term. In this case your payments will be much lower than if your intention is ownership, and you will have the benefit of some balance sheet improvement, as this lease is not shown as debt on your balance sheet. The alternative lease is a capital, or financial lease, which denotes ownership.



We can’t over emphasize the need to work with a trusted, experienced and credible advisor in this specialized area of financing in Canada. An equipment financing specialist will help you maximize the benefits of lease finance when it comes to acquiring assets, new or used, for your business .Seek out a professional that will assist you in acquiring the equipment you need and answer any questions you have about the proper rate, term and structure that your firm deserves based on overall credit and asset quality.


Equipment can be new or used, and a good lease financing specialize will be pleased to assist you in maximizing the benefits of lease financing, which include:

Simple Ways to Benefit From Lease Financing

1. Better use of working capital
2. Saves cash - often eliminates down payments
3. Often cheaper than a term loan  
4. Faster and convenient re application time/process 
5. Wont restrict your current banking arrangements  
6. Payment flexibility  
7. Pays for equipment out of before-tax savings rather than after-tax profit  
8. Financing Leverage - leaves normal bank lines undisturbed  
9. No ownership dilution  
10. Fixed rate financing in today’s low interest rate environment.

Specialists in any industry are a benefit. Consult a lease financing specialist for your asset acquisition needs. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist your with your capital needs.

Funding Business Cash Flow Needs In Canada

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Working Capital Loans & Asset Based Lending & Merchant Cash Advance Solutions Do The Trick

Information on Funding Options For Business Cash Flow Needs Via Alternative Finance Solutions

How Does A Business fund it's cash flow needs ? There isn't a day these days when we don’t meet or talk to a small business client who is having cash flow funding challenges. Several solutions in the alternative finance area are becoming increasingly popular . These include short term working capital loans, long term loans of the same nature, merchant cash advances , and asset based lines of credit .

With the right partner firm we have found this type of financing to be a solid interim solution for cash flow financing and working capital. Let’s look at how this type of financing helps our clients achieve working capital success and why it might be right for your firm.

Short Term Working Capital Loans

You can call it non traditional or alternative, but quite frankly its becoming more popular everyday and thousands of businesses are taking advantage of this type of business cash flow funding . The success of short term working capital advances finance always seems to come back to the issue of your business not being able to secure working capital financing from what we call our traditional sources, i.e. banks, finance firms.

And the reality around this type of financing is that it is quick and easy, and , more remarkably, often unsecured , depending solely on your ability to generate sales based on historical performance and projected profits . Even though the government continues to encourage banks to pay more attention to small business financing the reality is that traditional financing is 99.9% of the time secured via collateral, personal net worth’s, strong personal credit scores of the owners, and generally stable financial performance from a historical perspective.

The above is all well and good, but tends to eliminate the hundreds of clients we meet who have real business challenges and can’t meet some or all of the aforementioned lending criteria.

So how does this type of financing work. You may have heard of the business financing known as factoring. This, in a nutshell, is the financing of your receivables as you generate them. - I.e. same day cash for sales you make. However, thousands of firms, perhaps yours, have a major revenue component made up of cash and credit card sales, and you still need financing for the same reasons: purchasing inventory, reducing payables, making loan payments, etc.

That’s where short term working capital loans come in - in essence you receive cash today for future credit and cash sales , but the formula is based on your historical and current sales revenues.

Isn’t this risky for the lender, asks our clients? That may or may not be... but the reality is that if your firm, as an example , can demonstrate via bank statements or credit card sale stats that you have solid sales then the working capital lender is prepared to advance you funds today for a percentage of those future sales . A quick example is that you could receive , again, as an example, an $80,000 cash flow loan today and repay it, by agreement, with , for example, 20% of all future cash or credit sales . You are receiving cash today, allowing you to fuel further growth in sales and profits.

These loans typically are 1-2 years in length . Longer terms are available, with better rates, for businesses with fairly decent financials and who can evidence current positive cash flow.

Working capital via asset based lines of credit are a more robust solution for firms that have assets . These non bank credit lines margin your inventory, receivables and equipment into one borrowing line that fluctuates with your needs and cash flow .

If you are looking for the right way to fund short term or longer term cash flow and working capital needs speak to a trusted, credible, and experienced Canadian business financing advisor with a track record of business finance success. Find out how your company can benefit from innovative and valuable cash flow financing.


7 Park Acvenue Financial:
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

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

How Does Purchase Order Financing Work vs Traditional Financing : Finance Your Orders & Inventory

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Information on Purchase Order Financing & Inventory Finance Companies

Purchase order financing is a relatively new addition to the Canadian business landscape . When utilized successfully it allows companies to take advantage of major opportunities that might otherwise not be possible .

Typically purchase order financing is most relevant to companies that are unable to obtain capital either in the amount required or at favorable rates . The financing is especially suited for firms such as importers, distributors, and manufacturers.

Other forms of financing highlight a clients historical financial results . P O finance looks to the future, without the collateral need that the former results require.

How does the financing work ? In essence the purchase order financier purchases the materials required by the client for their order or contract . Many transactions are time sensitive for the client , and the type and amount of financing required do not lend themselves to traditional lending time frames re due diligence required , etc . In essence the client is using the lenders capital to finance future growth .

A simple breakdown of the transaction flow on a purchase order/contract financing is as follows :

* Company obtains a large contract or purchase order
* Payment is made by lender to the supplier directly
* Suppliers ships goods/product
* End user customer acknowledges receipt
* Company's receivable lender ( usually a bank or factor firm ) pays purchase order finance firm


It is important to note that purchase order financing usually focuses specifically on the order or contract . The client requires an additional credit facility in place in order to retire the receivable and payback the purchase order financier .

Our experience is that a purchase order finance firm is looking for a longer term relationship, this is not a one shot deal business .

In the current banking and lending environment, with more increased focus on risk, it has been very difficult for firms to get traditional bank type financing for large new orders and contracts . Most firms quickly realize that banks prefer more stable predictable growth, and large new contracts or orders are challenging to financing when they significantly increase a banks exposure . Needless to say that foreign aspects of many purchase order transactions only exacerbate that issue - i.e. how does a supplier in China get paid, or even ' vetted '.

Our experience is that purchase order/contract financing only works when the client has solid gross margins that can handle the additional financing expense .

Customers looking to finance purchase orders and contracts need to focus on solid partnerships with firms that have capital, experience, and relative ease of doing business re paper flow, documentation, etc . The proper mix of those attributes will foster a solid business relationship that is mutually profitable for all within the unique purchase order financing realm .


Hand in hand with P O financing we at 7 Park Avenue Financial find that more and more Canadian firms require inventory financing as a component of their business and sales growth . Inventory financing in Canada is relatively under utilized and most business owners don't understand how it works . This new form of financing is growing .

Inventory growth needs put financial pressure on the balance sheet as vendors and suppliers continue to dictate payment terms in order to meet their own business and profit goals . As more financial managers know the ability to turn inventory over as many times as possible is a significant operating measure for any firm .

A company computes its inventory turns by simply dividing the ' Cost of Goods Sold' by the amount of ending inventory and ending up with a turnover rate . The rate of inventory turns is never an absolute number , as different industries have different acceptable inventory turns . Also, we should note that there are sometimes different inventory components - i.e. raw materials, work in process, and of course the final finished goods .

Many Canadian, ( and U.S.!) firms moved significant purchases to China in the last number of years , As China has changed its banking policy, and has also been a victim of the world liquidity crisis , more and more Chinese manufacturers are not willing to carry accounts receivable in the manner they did several years ago .

The crux of the inventory problem issue for any firm is the inability of the company to convert orders into sales simply because they don't have the inventory to satisfy their customers . Without orders the firm has no financeable asset . Day to day cash flow rarely is enough to generate significant additional inventory purchases.

The ability of a inventory finance firm to finance required inventory in turn allows a firm to generate receivables which are converted in true working capital .

An inventory finance firm will evaluate the company's overall prospects , its management, inventory controls, etc and determine what per cent of the companies inventory can be financed . To take the matter further a lender might, on occasion, require the inventory to be inspected at regular intervals, or in extreme cases, held in a separate location under the control of the lender . The inventory lender is looking for an acceptable business model which is replicable . Generally speaking inventory financing is never done on a ' one shot deal ' basis.

The risk in this type of financing is reflecting in the pricing . Normally the only other way a company could attract capital to generate high inventory levels is to issue additional equity . This is categorically more expensive than debt, or in this case the inventory financing cost .

They types of companies that require inventory financing are usually in the following categories :

1. Growing importers who sell wholesale in North America

2. Importers who sell to consumers

3. Intermediaries who purchase product and ' flip ' the inventory to someone else

4. Manufacturing firms with fast turnaround business cycles

They also have good gross margins which can withstand the more expensive cost of this type of financing .

In summary , inventory financing is a growing component of business financing . It works well in certain industries . Most firms who require inventory financing are either start ups, or those who cannot get traditional bank financing . ( In our experiences banks can rarely, if ever, meet a company's inventory margining requirements .

If you are looking for purchase order finance solutions seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success.



7 Park Acvenue Financial:
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

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

SR&ED Tax CredIt Financing vs Waiting For Your Refund

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Information on SR&ED Tax Credit Finance Solutions In Canada

Sr&ed tax credit financing is an important method of raising cash - primarily for younger or higher growth firms who can utilize the capital . Claims can be financed for approx 70% of their filed value . The financing works more efficiently when the claim is prepared by a firm with a solid track record .

The formal name for the program is the Scientific Research and Experimental Development ,( hence 'SR & ED' ) program . The Canadian government allocations well over a Billion dollars to this program annually, and it can be a valuable source of financing for many firms, particularly those in early stage.

Claims are generally in the 35% + range for all r&d performed. and can include portions of a firms overhead costs! After filing a proper SR ED claim business owners can finance that claim with our assistance. 7 Park Avenue Financial encourages all its clients to file SR ED claims where applicable, and if financing those claims makes sense we will get the job done !


Many Canadian firms are not aware that they can finance their SR ED tax credit claims. Lets backtrack a little bit. The SR ED Tax credit program is a Canadian government program which allows Canadian privately controlled firms to recoup a very large amount of direct and indirect expenses related to their innovative business processes, research and development, and asset acquisition related to those very efforts.

Thousands of Canadian firms file such claims and the program has disbursed close to 2 Billion dollars annually to Canadian firms.

Funds received from the government, while taxable, are NOT repayable, we repeat, NOT repayable! Claims are generally prepared by one of two parties, either the firms accountants, or, more frequently, an independent SR ED preparation firm who are experienced in the writing of these claims, and have amassed expertise and bench strength in that customers particular industry. We note also there is a growing SRED industry around film and TV credits, digital media, and gaming.

We are continually amazed at the number of companies who are eligible for the program but in fact have never heard of the program. You can imagine the expression on the business owners faces when they are told they have been eligible for the program for years, and have in fact relinquished their rights to these funds.

As a technical matter companies can only claim funds for the last 2 years of r&d, business process development, etc. Furthermore the claims have to be file at the same time the firm files annual tax returns.

Let's get back to the financing of the claim!

The financing of the claims is in effect a temporary loan against the SR ED claim, allowing the company to monetize immediately the incoming cash flow related to the SR ED claim. One of the key factors around the financing of the claim is the size. Generally speaking it makes sense to finance claims that are in excess of $200,000.00.

However, realistically many smaller Canadian firms file claims significantly below that amount. While these claims are somewhat more difficult to finance it certainly can and does makes sense in many instances. Our firm has worked with many customers who view the claim as one of their most significant cash inflows during that year.

 Typically it takes between two - four weeks to arrange for a proper financing of the claim. Proper due diligence around the general financial health and prospects of the firm is done, and typical credit assessment is done around the lenders ability to properly secure the claim vis a vis a collateralized registration against the claim.

Loans against the claim are typically made at approximately 70% of the total of the combined federal and provincial claim. Why 70%? A safety buffer is in fact created in the event that the claim is adjudicated by the government and a portion of the claim is downsized or disallowed. We have noted that this happens when customers or their consultants file claims that are too aggressive. The customers mentality seems to be ' I will file a claim for $300,00.00, if they knock it back a bit I will still get more funds than originally intended '. In general this is probably not a good strategy.

Should You Finance Your SR&ED Claim ?

In summary:

* Companies should file claims if they are eligible * If cash flow and working capital is important the SR ED claim can be financed

* Customer should use their accountants and financial advisor to originate proper financing of the claim

Seek out and speak to a trusted , credible and experienced Canadian business financing advisor with a track record of business financing success to discuss your working capital and cash flow needs.







7 Park Acvenue Financial:
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

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

How Does Receivable Financing Work ? Factoring 101 ! Now You Know

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Information on Account Receivable Financing in Canada

Most people agree that Canadian business model and the Canadian psyche differ from those of our friends in the United States in many aspects of business

Accounts receivable financing, also called ' factoring ' goes back to the 1400's and is an accepted way of doing business . Simply speaking it is the ability of a company to immediately obtain cash for their receivables , thereby augmenting cash flow . Factoring is generally viewed as expensive , as the company views the discount rate as the ' interest rate ' on the transaction .

Key benefit of Proper A/R Financing and Factoring :

Improved Cash Flow

In both the U.S. and Canada very typical accounts receivable factoring rates range from 1 - 2% per month. Issues that drive the overall rate are the over all transaction size, the credit quality of the debtor , and the historical time that the debtor has taken to retire invoices .

To be clear, when we talk about the participants in a factor transaction, there are three, the company selling the receivable, their customer ( the debtor ) and the finance or factoring firm . Choosing the right receivable financing companies is critical!

Customers choose factoring , or are forced into considering factoring, when they do not have bank financing, or the financing that is in place is not sufficient to fund working capital .

Companies in Canada have been slow to utilize factoring - there are numerous smaller finance firms that offer the service, and more predominantly, the landscape is covered with branch firms of U.S. and U.K. companies who are established leaders in their respective countries .

A few in Canada offer factor facilities, a fact not generally known to the Canadian business market .

More often than note smaller and medium firms who don't have access to traditional bank lines of credit utilize factoring . They use this financing facility to grow their business, maintain acceptable levels of cash flow, and ensure debt and government payments re taxes, etc . are made on time .

How much is it? No we aren’t in line at a department store, we're sitting with our clients who are always asking what the true cost of factoring receivables is and if a receivables financing facility is their real solution for working capital problems. They ask other questions also, such as how the facility works and what is the best type of facility for the Canadian business marketplace, so we we'll cover those off also .



We don’t think there is more of a misunderstood business financing in Canada, notwithstanding the fact that receivables financing is growing in popularity traction everyday. The biggest stigma around the topic is really the true cost, and we use the word true cost because many Canadian business owners and financials managers simply don’t understand the components of that true cost, and more so, how these costs can be significantly offset and reduced.

We'll point out that coming up the rear fast and furious behind true cost are the issues of how the facility works and what type of facility is the best one in Canada - as there are several types.

To properly address our issue lets quickly define our subject - factoring, ( also called receivable discounting and invoice financing ) is simply the sale of your receivables to a third party firm, that firm providing you with immediate ( and we mean same day!) cash to finance your business

One of the misconceptions clients have around pricing is related to the fact that you receive (depending on who you are dealing with) 80-90% of your invoice amount in a receivables financing scenario. This must be taken into account when you are looking at total factoring cost.

One thing that constantly disturbs us is that the terminology mumbo jumbo that many factor firms use when they are offering you pricing on your facility. That’s why it makes total sense to talk to a trusted, credible, and experienced Canadian business financing advisor that will work with you through the (industry created) maze of factoring, factoring cost, and day to day paper flow.

You can quickly and easily focus in on the true cost of factoring by simply keeping in mind three things that you need to know - they are:

1. The percentage that you are advanced on your invoice (refer to our previous comments)

2. The discount rate charged on the advance

3. The length of time that you typically collect your receivables in

Most business owners are not readily facility with their DSO, their ' day’s sales outstanding '. You have to be, because it’s an ongoing measure of the time it takes to collect your receivables in days. It’s calculated simply by taking your receivable on an annual basis, multiplying them by 365 (days) and then dividing that number by your sales for that time period.

Therefore, if you know your collection period, and get an honest, clear answer on our three points you can easily determine the cost of factoring.

Let’s give you a clear example: Your factor firm advances you 80% of your invoice. Their discount rate is 3%. So if you are in the lenders shoes your annual return on the client (that’s you!) is simply: Discount rate % times 365 days Divided by number of days invoice is outstanding.

In Canada that rate is typically going to work out to be in the 1.5-3% per month range depending on the lenders perception of the size and quality of your accounts receivable portfolio.

Is that expensive financing? You tell us, because if you take into account the receivables financing facility provides you with unlimited cash flow to generate sales and profits, and that you can use the cash to offset financing costs, well... we dont think so .Costs can be offset by using the funds to take supplier payment discounts, and purchase in larger volumes and better prices re your inventory needs, etc.

Typical advance rates on factored invoices are in the 80-90% range . Firms utilizing factoring are often not aware of the mechanics of how these facilities are priced on a daily or monthly basis. Two different business models exist within the industry, recourse, and non- recourse . If the debtor does not pay the invoice a recourse transaction forces the company to pay back the factored amount, or replace it with another invoice .

As stated, many firms do not properly focus on the many nuances of the factoring transaction . These include the amount held back by the factor firm, when the hold back is released, and most importantly the paper flow involved in the transaction.

Canadian firms have tended to view factoring as very intrusive . They , unlike their U.S. and U.K. counterparts , have not appreciated that their customers are contacted regularly by the factor firm to verify invoices, demand payment, etc.

Ultimately the Canadian market seems to desire a non-notification factor model which is not widely available .

Prudent business owners and financial executives , both in the U.S. and Canada , can enhance their use of factoring by negotiating arrangements specific to their business , re receivable size, quality, customer time to pay, etc . Many firms also quickly realize the cost of the factoring can be significantly offset by the use of additional cash to negotiate supplier discounts, take trade discounts offered by suppliers, and in general , improve supplier relations .

When you are considering factoring a/r seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success, who can assist you with your working capital and cash flow needs.



7 Park Acvenue Financial:
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

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

Best Business Line Of Credit Solutions In Canada ? Read On !

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Every Business With Working Capital Needs Requires a Business Line Of Credit

Whether you call them Operating Lines of Credit , or a business line of credit, or even Asset based lines of credit via ' non-bank' lenders, these asset based lending and corporate finance solutions are fast becoming one of the most flexible and popular methods for small, medium, and large customers to finance their operations .

What if your business does not qualify for a bank credit line ? The solution ? Asset based lending is getting increasing popular with Canadian firms.Terms are more accommodating, and are usually ' non covenant' based . Unpredictable cash flows and seasonality are often other reasons why an asset based line of credit has substantial appeal to business owners and CFO's. These operating loans are totally focused on the assets of the business , most predominately receivables and inventory . The total focus of the facility is the ' Current asset ' portion of your balance sheet, ie receivables, inventory.

In certain cases equipment, real estate, and intangibles can be financed . Credit line facilities are set up based on your borrowing requirements relative to your receivable and inventory assets . Generally receivables under 90 days are financed, as those > 90 days infer uncollectability . Although some focus is placed on over all viability and secondary sources of repayment overall the focus is on the business assets . Rates vary based on size of facility, overall asset quality, and the lender pricing model.

This type of financing provides the firm with significantly more liquidity as the Canadian chartered banks usually lend only 50-75% on current asset categories such as receivables and inventory .


More and more Canadian businesses in the small and medium sized enterprise space are finding it difficult to achieve the operating lines of credit they need from our traditional lenders such as the Canadian chartered banks. These firms are turning to asset based lenders . In our experience many companies are not even aware that such a financing option exists .

Asset based lending places less emphasis on proven track records and financial strength , instead focusing on key business assets such as accounts receivable, inventory, and in some cases equipment and real estate .

True asset based lending should not be confused with ' factoring '. In a factoring environment the company in effect sells their receivables to another firm at a discount . Asset based lending allows the company to bill and collect its own receivables . The loan is paid down and reduced , in a fluctuating manner , as the company collects its invoices .

This type of financing can in effect become a strong lifeline in the current liquidity and credit crisis . Banks traditionally margin receivables in a more conservative manner , and further significant reliance is placed on the customers over all financial health with respect to the current balance sheet and income statements .

The one negative aspect of this type of lending is that it comes with a higher cost . The lender usually has a higher cost of capital and is looking for a significantly higher return than a traditional chartered bank .

In most cases more reporting by the company is often required . That is to say they are more often submitting updated reports related to current receivable and inventory levels . Overall a more rigorous due diligence is in place .

The current asset based lending market in Canada is still quite small , but the industry is clearly growing .

In summary, small and mediums sized businesses should check out asset based lending , ie an ' abl loan ' , as an alternative to traditional bank financing . Due to the complexity and relative lack of knowledge around this industry the firm should work with a trusted business financing advisor . Asset based lending can provide unlimited liquidity to firms who are growing - because it focuses on the assets, not the balance sheet and income statement !

Business owners and managers should seek qualified assistance in locating an asset based lender that suits their industry and overall financing requirements re loan size, etc . A study done by the CIBC several years ago indicated that business owners who sought out trusted financing advisors had revenues 76% above those who did not seek a business financing specialist or trusted advisor . Traditionally these types of loans or operating facilities are for firms with under 50 employees .

Asset based lending in Canada is a classic case of a source of capital at the right time, given the current turmoil in the financial and credit markets . Many special situations can be addressed by a constructive asset based line of credit - these include buyouts, cross border projects, and debt restructuring .

Many firms that are even in bankruptcy or receivership can avail themselves of a true asset based lending agreement . Although it is often a more expensive type of financing the case can be made that the asset based financing is much cheaper than the firm issuing additional equity and diluting ownership . Key benefits are improved cash flow, stronger reporting capabilities and the maximization of receivables and inventory financing .

Whether you are seeking of small business line of credit or if your firm has substantial working capital needs owners and financial mgrs should ensure they speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist you with your traditional or alternative finance needs.








7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

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