How To Get Franchise Financing In Canada

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How To Finance A Franchise In Canada

 

 

Financing a franchise and the purchase of that business is no doubt on of the larger decisions in the entrepreneurs life. It is safe to say that when we meet potential franchisees at 7 Park Avenue Financial they want some solid options on funding and financing their new business.

Franchise loans in Canada to some extent are limited vis a vis who finances these businesses - it is therefore important to know who the players are and what lending options are available from franchise lenders.

Business people can be forgiven when they seem skeptical around whether franchises can be easily financed in the current business environment . After the 2008-2009 worldwide recession business loans of all type in many ways became more difficult to access. The bottom line though is that funding is still available, and the lending criteria and solutions are not as demanding as they might think.

No business loan is a cake walk - therefore the preparation in the franchise loan process is key to ultimate financing success.

 

How Does Franchise Financing Work ?

The way we like to look at the ' being prepared ' process is essentially in two key categories - having a strong proposal and ensuring you can meet the basic qualifications for the franchise loan . And by the way, that also means being able to prove you have some solid business experience. Keeping up your part of the bargain is also key ! What is that?

It's your equity investment of down payment into the business, the balance coming from your franchise finance loan funding. Suffice to say that there is typically no 100% financing in this area of Canadian business.

One key aspect of franchise risk is that fact that it is probably actually more easy to secure business franchise funding than any other normal start up since you have the benefit of a ' brand ' and ' reputation' backing you .. I.e. the Franchisor.

When it comes to your ' deposit ' or equity position in the loan these funds typically come from various parts of your 'net worth '. While you may think that you have to tap into major savings or home equity, or collapse RRSP's, the reality is that you need to come up with anywhere from 20-40% , generally speaking , of your desired loan amount.

Personal credit history is also a key aspect of the franchise loan .Unfortunately, and we run into this almost all the time, many franchisees don’t have a sense of how the franchise funding lenders assess their personal credit history. It's more simply than you think. The entire personal credit history of everyone in Canada comes down to a numerical score at the credit bureau. Borrowers can easily check their credit scores with a local credit bureau, and by the way the 'magic score ' in most business loans is 650. Poor credit histories make it close to impossible to achieve almost any type of business loan, including franchise loans.

Next steps generally revolve around assessing your financing options. For some of the larger franchise chains one or two well known independent finance companies can handle all your franchising needs from a lending / loan viewpoint. But, here’s the kicker, the majority of franchises in Canada are funded by the Government Small Business Loan program .

Key benefits of the loan include:

Flexible rates

Terms of 2-5 years

Attractive structures including some pre payment and interest only options,

Low personal guarantees - typically 10% of the loan

Naturally you want to expedite your transaction. That is done by ensuring you have a crisp business plan and financial forecast in place - highlighting your business experiences, profit and cash flow potential, and info on the success of your franchisor as your new partner in Canadian business. You simply want to focus on one thing, showing your ability to repay the franchise loan.

Supplemental financing can also be achieved quite creatively if you have the right assistance - that might come in the form of a merchant advance loan against future sales, equipment leasing, or a straight unsecured working capital term loan.

Franchise Finance Options In Canada

So the good news is you have some great options in franchise finance and financing your new business. It’s up to you to assess those options, be prepared to present your plan. Want some great assistance? Seek out and speak to a trusted credible and experienced Canadian business financing advisor with a track record of business finance success in franchise finance funding.


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

Solving Cash Flow Problems With Solutions

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Cash Flow Solutions For Businesses In Canada

Cash flow solutions in Canada often revolve around effective working capital management - It is nice to know there is help and assistance in funding your company. In effect, someone has got your back!

We only need to read the GLOBE & MAIL or NATIONAL POST to learn why some businesses fail, or stop growing. In many cases inexperienced management is a major cause , but often poorly timed working capital management and financial solutions are a true close second!

So how can business owners and their financial managers create a roadmap to business financing success? In many cases solutions exist that you did not even know you have!

In current times both traditional as well as alternative financial solutions exist to your business capital needs. And while many business people might not comprehend the meaning of ' alternative ' business finance solutions we at 7 Park Avenue Financial can assure our clients these solutions are not as ' esoteric' as you might think. A large portion of Canadian companies use these solutions every day - both large firms and small who are looking for SME COMMERCIAL FINANCE answers to cash flow and debt finance.

Commercial lenders who are in the ' alternative finance ' area are simply not as regulated as our banks who must, of course, maintain very stringent lending based on their fiduciary responsibility to their depositors. They have the solutions you just might need to run, and grow your business.

What does it take to get the proper business financing you need. Whether it is a Canadian chartered bank or and alternative finance commercial lender you need a story and proper financial statements that often can be complemented with a good business plan or executive summary.

Naturally, every business in Canada is located at different spots along what we at 7 Park Avenue Financial call the ' maturity spectrum'. Naturally larger more established firms have access to more financing from investors, both public and private, capital pools, venture capital, etc.

The reality is though is that for the majority of firms its the management and financing of their assets and growth that is the crux of cash flow solutions, and without this management of working capital during the sales and growth of sales period that make allows the Canadian business owner to make the transition from a dream to reality when it comes to business success.

We don't, and can't, blame clients we talk to for thinking there is not a lot of financing options available in Canada for them - it certainly can feel that way on occasion. The reality though is that the lending of business finance funds is, in fact, the backbone of business in Canada. Borrowing and investing, in fact, make Canadian business.

The 6 Alternatives For Financing Your Business In Canada

- You fund it yourself

- You borrow funds

- You sell assets

- You finance internally through growth and management of assets

- You are given funding, via grants, etc,

- Raise equity/sell ownership stake


Our focus is really # 2; borrowing funds... actually monetizing assets. Those solutions as we said, are more plentiful than you think.

Business Finance Solutions

Receivable financing

Equipment leasing

Working capital term loans

Asset based lines of credit

Tax credit monetization

Securitization of sales / Purchase Order Financing


Someone in fact does have your back in Canadian business cash flow solutions - that person just might be a trusted and experienced Canadian business financing advisor with a track record of business finance success.

Consider reviewing the above mentioned solutions in the context of both surviving and growing your business in Canada.





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

What Are Sources Of Business Financing In Canada

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How To Secure Business Financing Via Traditional & Alternative Solutions

Business financing often becomes a ' smackdown' when it comes to both traditional and alternative financing sources available to Canadian business owners. What type of business finance solution will work best for your firm if in fact it's somewhat of a contest for your cash flow and debt needs?

Two major competitors for your business credit lines needs are Asset Based Lending, known as ' ABL ' , as well of course, as traditional Canadian chartered bank solutions.

Although banks can provide virtually unlimited business credit there are numerous requirements that many firms cannot meet when it comes to borrowing criteria . Enter ABL ( asset based lending ) which is enjoyed incredible popularity when it comes to funding sources for business.
The business owner / financial mgr of a company needs to ensure they understand the benefits and options under both financing solutions.

Asset based lending really took off in Canada after the 2008-2009 recession.

When that economic implosion of happened thousands of Canadian businesses started to review their financing options with either their banks or on their own accord.

At that time it was certainly not unusual for businesses to have credit lines reduced or pulled, or , even worse, having a firm being put into a ' special loan ' category, which we can assure you is not a ' special ' feeling!

So why do asset based credit lines flourish when other forms of finance, often traditional in nature, just don't work .

ABL financing takes a 'holistic' approach and takes all of your business assets and sales growth into account. Risk management at non bank commercial lenders has the underwriter looking at your firm in a whole different matter .

Naturally banks focus on key issues in lending that focus around their own mandate based on capital ratios, borrowing bases , etc . They then adjust their risk accordingly. That means ratios, covenants, the need for outside collateral,personal guarantees,etc.

Asset based lending takes a different approach, focusing on your assets and sales and liquidity needs in those two areas . The goal is achieve a maximum liquidity/borrowing power via a business line of credit that makes sense for your business.

Abl costs more , but will almost always achieve a higher level of financing than your company enjoyed previously . By the way in some cases, albeit fewer in nature, asset finance might actually cost less!

Assets that are margined in your credit line include receivables, inventory, equipment that is owned, and , where applicable, real estate. All of those assets are in effect thrown together to get you a business line of credit that makes sense.

Snapshots are taken typically monthly on your sales and assets to ensure your borrowing power makes sense.

It is therefore no surprise that thousands of Canadian firms are gravitating to asset based loan financing for their lines of credit. Abl lenders take more risk and that risk and return issue they face translates into more liquidity for your company.

So who in fact wins the batter for your business credit line facility ? Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who has a track record of business finance success putting yourself in a better position to determine which business financing solution works best for you when it comes to a business line of credit.



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

Government Small Business Loans : Canada

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Qualifications For The Federal Government Loan Program In Canada

Government Small Business Loan approval success depends on the quality of information that you as a business owner have on being successful for this popular government program administered by Industry Canada.

We're going to provide some key explanations and information around the ' SBL ' , the common name for the Govt Small Business Loan. And by the way, the loan amount is not that small for firms in the small and medium enterprise sector who are privately owned.

By the way, the actual name of Industry Canada's program is the ' CSBF ' ; the Canadian Small Business Financing program.

So forget all the acronyms, call it what you want, but if you're a smaller or newer business in Canada you might well want to consider utilizing the program - in recent times the govt has increased the amount that can be borrowed - up to a million dollars in certain situations. That's a large amount, but here at 7 Park Avenue Financial typical loan amounts for the program tend to range in the 350k range on average.

How To Access the Government Guaranteed Loan :

There are a number of key stages in completing a successful funding for your business, not the lease of which is being able to determine if you qualify .

Here are some key basics in the initial determination of qualifying

Actual or business revenues must be less than 5 Million dollars per annum

The owner or owners of the business must have a decent personal credit history - typically this means a credit score in the 650 range - Safe to say that since it is a federal program your personal tax filings should be up to date - Bottom line - no tax arrears

Understand what can be financed under the program - These loans are not cash or working capital loans - The loan is used to finance 2 key asset categories - equipment and leaseholds


So our point... simply call it whatever you want, but consider using the program! And by the way, whats so ' SMALL ' about 1/2 Million dollars. That’s the formal cap on the program, although most financings are done in the 350k range. Again, it’s probably just us, but that’s not small. Everything’s relative we guess.

Let’s examine the stages of getting a completed funding under the program. Stage one is of course determining if you qualify. Some basic guidelines are as follows - your first must have revenues, or projected revenues under 5 million dollars. We say ‘projected ' because thousands of firms financed under the program are in fact start ups who might clearly not be able to achieve this level of financing outside the program.

Owners of the business must have a respectable personal credit history and be up to date in their personal tax filings. Doesn’t it make sense that you might not get a government loan if you have tax arrears? We certainly think so.

Documentation for the Small Business Loan

It might be easy to feel overwhelmed on the documentation required for the loan - that should not necessarily be the case - You should have a business plan or executive summary of the business, one that includes financial projections - Additional back up info would include your personal net worth statement

It might come as a surprise to many business people that no interaction with the government is required under the program . That is because Industry Canada works with your local bank who adjudicates applications for the loan .

At 7 Park Avenue Financial many clients searching for govt guaranteed loans tell us they can't find bankers who are familiar or comfortable with the program

Recommendation :

Speak to a trusted Canadian business financing advisor with a track record of business finance success in the program

Presenting Your SBL Loan Package:

Be prepared to discuss typical questions that might come up under any loan for business - that includes use of proceeds of the loan , your relevant business background and experience, etc.

Its simply a case of presenting your package in person, and answering typical question that might come up on your business, the use of the proceeds, and your own business background and experience . Here again a trusted business advisor can do this for you and with you.

Approval Under Govt Loans:

All invoices you submit under the program are paid by the bank and are paid up to 90% of the face amount of the invoice - Your contribution to the program is the balance of 10%. That ten per cent is your ' equity ' component of the program. The govt, aka Industry Canada guarantees the bank the majority of the loan .

Hundreds of millions of dollars of loans are advanced annually under the program, for pretty well ever industry in Canada . By the way, franchises are a huge component of the program in our experience.


If you are looking to take advantage of the solid rates, terms, and flexibility of the Govt Guaranteed Loan speak to a business financing expert who can help you navigate the program in the lease amount of time - allowing you to start, run, or grow your business.


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

How Do You Finance A Business Purchase ?

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Sources Of Finance For Buying A Company In Canada

Buying a business in Canada is the goal of many entrepreneurs in Canada . The financing of that purchase requires some specialized skills when it comes to the strategies involved in acquiring an existing family business, or in some cases capitalizing on the unfortunate circumstances of firms that might be challenged in some manner. In some cases it's a solid way , versus organic growth, to grow revenues and profits via a merger/acquisition type scenario.


We at 7 Park Avenue Financial leave it up to our clients to identify the business opportunity they wish to explore from a purchase perspective. Our focus is on what comes next - ensuring you have access to solid a time worn financing strategies that will work for your success in a business acquisition.


Financing a Business Purchase In Canada

One part of the business finance puzzle that is often overlooked is known as the VTB .. AKA the ' vendor take back, if only for the reason that it minimizes the financing your are required to generate to close the transaction. That is not the only reason though! Another term for this strategy by the way is ' owner financing '. Anyway you look at it VTB's are a solid strategy that make it easier to access the other types of financing that you will need to complete the loan , which typically are term loans and business revolving credit lines.

We forgive business people for thinking that ' the bank ' is the only way to acquire financing to purchase a business. That's a logical thought, but of course there are a number of other options, some of them alternative in nature . However caution is required if you are unprepared to understand how a bank looks at financing - which can in some cases be an immediate road block.

Early on in the business acquisition cycle you must also agree with the seller as to whether the sale will be a purchase sale or an asset sale . This is a key accounting and legal type issue which is a separate subject in an of itself .

It should be noted that in the SME COMMERCIAL FINANCE area it is difficult to finance a ' share sale ' given that shares in small private companies are not liquid . So if financing is required in your purchase most owners are encouraged to choose the 'asset sale ' scenario. Naturally larger companies , public companies etc have a number of ways to finance purchases - they have much more access to capital . Those companies often consider share sales, and also are looking at numerous tax minimization strategies.

In looking at assets of the company you are focused on buying it's key to determine the value of those assets . In many cases in modern times some of those assets might even be ' intangible ', and might include patents, contracts, software, etc.
Tangible hard assets, typically the ' fixed assets ' on the balance sheet can easily be valued by appraisals from reliable and experienced third parties.


Goodwill is the excess dollar amount you're paying on top of the assets. Goodwill is typically difficult to finance, which is why our owner financing/vendor take back strategy is sometimes a good place to start. The sellers financing, often referred to as ' holding the note ‘can allow you to complete a purchase satisfactory to all parties.


Both banks and non bank commercial finance lenders view vendor take backs very positively. Since the seller of the business has a vested interest in making the purchase also successful you often can get very favorable, in fact below market financing rates from the owner or owners of the company being acquired.

Many smaller businesses in Canada, including franchises of new and existing locations can be financed with the assistance of the Canada Government Small Business Loan . The government guarantees a large part of the loan to your bank as long as you meet minimum requirements, which we at 7 Park Avenue Financial view as very reasonable .Owner financing can also be a part of the gov't loan . Many small and medium sized enterprises can utilize the Small Business Loan govt program to acquire a business. It works, as we have proved time and time again at 7 Park Avenue Financial.



A typical structure for financing a purchase when you’re buying a business in Canada is the down payment, debt financing, and the vendor take back/owner financing. This three piece solution to buying a company can also be complemented with a number of ' Alternative Finance ' strategies that might include:

A/R Financing

Non Bank Credit Lines

Equipment Finance Leases

Sale Leaseback strategies

Inventory Finance

Purchase Order Finance

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success when you're looking for assistance in structuring the best deal and financing for your business purchase.






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

How Does Asset Based Lending Work ?

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Why Use Asset Based Lending ? It Works

The asset based credit line is a key part of alternative financing options available to Canadian businesses. As simple as the solution is ( i.e combining all your business assets into one borrowing facility ) it just might be the perfect solution for businesses that can't access any, or all, of the business credit they need in Canada.

It is interesting to note that this revolving facility is perfect for new, growing, and even large mature corporations , many of whom use the facility now days. When it comes to SME COMMERCIAL FINANCE needs business people would be surprised as to how many firms use this type of business finance.

There's probably no agreement on actually how tight business credit is or isn't in Canada - that debate constantly rages on . We continually read in both the GLOBE & MAIL and FINANCIAL POST that Canada is awash in capital, but here at 7 Park Avenue Financial we encounter clients with borrowing needs everyday, many of them dissatisfied with traditional access to business credit.


Naturally it goes without saying that Canada, despite the complaints of the Canadian business owner and financial manager, is probably in better shape than many other countries.

Asset based financing can be used for a business credit line, as we have noted, or also as a financing vehicle for purchasing a business or competitive business. It used the leverage in your assets to monetize your cash flow needs .

The ability of a business to fund both it's operations as well as growth is key to any level of business success. When it comes to banks and other more ' traditional ' lenders thousands of businesses can't meet the credit quality criteria that is required by these lenders.

So why has asset based lending gained such a dominant foot hold in the Canadian business landscape. While chartered banks have great rates and virtually unlimited amount of capital to lend many companies don't have the balance sheets, profits, and outside collateral often demanded by our banks, who for all the right reasons are more conservative in their lending practices.

So for that reason alone thousands of firms have gravitated to asset based finance solutions that focus on your assets and sales levels. As an interesting aside asset based lenders provide close to half of all of the business credit lines in the U.S. - So it is not hard to see why ' ABL ' facilities are growing in Canada - where relatively speaking it's a newer business finance solution.


So why consider ABL financing ? Simply if your firm can't meet traditional lending criteria and you still have assets and sales it allows you to harness new borrowing power .


Yes of course those same assets are being margined, just as your bank would have, but there are two major differences, we can call them the core of our ' naked truth ‘.



How Does Asset Based Financing Work ?


First of all your borrowing levels are raised significantly because your assets are margined at a higher rate , and the inventory component of margining is very aggressive, where in some case a bank facility might not even address that asset at all, or at lease only nominally .

Asset based credit lines also can include your equipment and real estate, if applicable, as part of your new borrowing power - bottom line : increasing borrowing power of your company .

And what about that 2nd difference or truth? It's a key point, in that the focus on ABL approval is not cash flow coverage and covenants, its just mainly about assets, which has great appeal to Canadian borrowers, especially those that struggle to meet those cash flow covenants imposed by traditional lenders.


Quite often we see tremendous flexibility in the size of such a facility, because in many cases business has peaks and valleys and bulges in financing requirements.

We don't consider it a drawback necessarily, but most asset based business lines of credit have your reporting on your monthly levels of a/r, inventory, sales, etc, allowing the ABL lender to monitor and justify your borrowing needs. In many cases we have seen that it allows companies to understand and run their business more successfully.

That then is some of the naked truth in this asset credit line .It's a part of the new reality of Canadian business financing that you should take a serious look at, especially if things are not working well now .

Speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success - Get the stripped down truth on the Asset Based Lending advantage .

How To Finance A Business In Canada

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Traditional and Alternative Debt Financing Solutions To Run - Grow - Or Start Your Company In Canada

How to finance a company in Canada - It is not secret that the ability to start a business, fund it for operations, and , as importantly , grow the company is a key challenge facing business owners, financial mgrs, and start up entrepreneurs.

There are basically only 3 ways to finance your company -

Equity


Debt


Cash Flow Financing Assets/Sales

Lets take a look at some key basics surrounding how these solutions can be accessed , and in some cases ' cobbled together' to identify the right source of business capital for your firm. Our comments will not focus on the ' equity ' component of your business ; private and public equity is a subject for another day .

In business the old adage ' timing is everything' is critical . Naturally financing your business in a healthy economy when your company is firing on all cylinders is much easier than a faltering economy or with your company experiencing financing challenges. The right amount of debt and cash flow is often the life blood of any firm . Companies large and small go out of business due to their inability to get the proper mix of financing in place.


Banks and commercial finance companies are of course your ' financial partner ' when it comes to generating financial support for your firm. As companies growth they need additional cash flow financing to support sales, a/r and inventory levels, etc. It should not, but it might ! come as a surprise to many that companies can fail when they grow too quickly.

As we noted the main providers of business financing in Canada are our chartered banks and commercial finance firms . Some of these commercial finance firms offer traditional financing - many of them are 'bank alternatives ' ,providing capital to firms who cannot access bank credit.

Debt And Cash Flow Financing Options in Canada

Banks are often the first ' go to ' when it comes to business looking to access financing solutions in Canada. When companies have the right amount of owner equity, corporate and personal assets and collateral the rates, terms flexibility, and amount of capital is virtually unlimited.

Unfortunately the banking system in Canada does not support the many thousands of firms who have basic or specialized needs and can't qualify under bank criteria. These companies just don't have the ' secondary repayment sources' and outside the business collateral often required by the SME COMMERCIAL FINANCING sector in Canada.

So what then are the options to finance a company . The options are asset based lenders and other ' alternative finance ' firms that provide

Non bank lines of credit,

A/R financing,

Inventory financing,

Purchase order financing

Tax credit finance solutions.

Sale Leaseback financing

Short Term Working Capital Loans

And it is safe to say that these firms do not require the same qualifications required by banks . It's a bit of an over simplification but the two main requirements for alternative financing are

Sales


Business Assets


Equipment financing, aka leasing your key assets is also a very effective method of financing your firm. It also relieves the larger cash outlays your business needs when it acquires assets.


Start up and small businesses have access to the Government SBL loan program - This is a government guaranteed loan which has great rates, terms and structures when it comes to acquire assets and even financing leaseholds and real estate. Many franchises in Canada, as well as business acquisitions in the SME sector are financed by the Industry Canada govt loan program .As stated the majority of the loan is guaranteed to the bank by the Federal government. A partner you might not have known you had !


Cash flow financing, or ' Asset Monetization ' can be accomplished by utilizing receivable financing, inventory finance, and even selling your tax credits such as those under the SR&ED program . The SR&ED program provides billions of dollars in non refundable credits and these credits are easily financed.


One of the best methods of cash flow financing comes your a partner you know only too well - yourself and your firm. By managing your assets such as inventory and A/R you can generate internal cash flow through your business operations.


Speak to a trusted, credible and experienced Canadian business financing advisor who has a track record of business finance success on those debt and cash flow financing options when it comes to how to finance a company in Canada.



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