Types Of Business Credit Lines In Canada

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What Is A Business Credit Line ? What Type Is Best For My Company

Business Loans and Lines Of Credit - Revolving Line Of Credit

Business credit lines in Canada can come from different sources, 2 major sources in fact . Both of these sources are different on how they deliver your cash flow needs, their cost, and how they work on a day to day basis as you run and grow your company in good times, and less than good times!

Understanding those issues helps the business owner his/her financial manager to plot a ' key to success' strategy that helps ensure business growth and survival.

How To Get A Business Line Of Credit In Canada

A true business line of credit is offered by our Canadian chartered banks as well as what are known as 'nonbank' commercial lenders. These non bank lenders, often called asset-based lenders ( A B L ) operate outside banking regulations and are privately owned . Both solutions offer revolving facilities, except that the asset-based lines of credit are more focused on the actual assets in your business.

It is important to understand that typically your revolving line of credit is ultimately tied to your sales. As you sell your products and services you generate collectible receivables ( hopefully ), as well as turning inventory if your company sells a product vs. a service. Typical bank facilities focus on account receivable and sometimes have an inventory component tied to the borrowing formula. ( That formula by the way is known as a ' borrowing base ', which is an important concept to understand in business credit lines . Out of this borrowing base is what you will draw down on an ongoing basis your firms cash flow needs.

Asset based lenders focus and lend more against your assets, and in turn they tend to monitor your a/r and inventories more closely - as those two assets are typically the prime collateral for your asset-based loan.



KEY POINT - Asset based lines of credit, the nonbank type of facility, also can easily put your owned fixed assets into the borrowing formula. This total focus on ' assets ' great increases your borrowing power when combined with a/r and inventories.

Bank Line Of Credit Vs. Asset Based Credit Lines

While banks do require some ongoing reporting on your assets, typically monthly, sometimes only annually, they instead focus substantially on your operating characteristics of profit, cash flow, debt load, and character and personal collateral of owners.

Banks do finance inventories but are often challenged by the ability to both understand and monitor inventories - while asset lenders have developed experience in numerous industries and inventory types. Borrowing conditions for inventories depend heavily on the type of inventory and it's overall liquidation ability - as an example perishable foods are often hard to finance.

Business Credit Line Rates & Cost

What's my rate? That's the ongoing battle cry of business owners and financial mgrs when they consider line of credit needs and benchmark the offerings of their bank or asset-based lender. While your borrowing capacity can often double or triple in asset-based revolving facilities they do come at a higher cost.

Conventional bank financing is cheaper, but more challenging when it comes to the amount of approval, or whether your firm is bank financeable at all ! An interesting note is that in recent times, due in part to general competitiveness and the low rate environment asset loans have in fact dropped in overall cost.


Startup, fast-growing, as well as financially challenged companies are prime candidates for asset based lines of credit. They have limited or challenged cash flow generation performance, but require rapid access to cash flow and working capital. The conservative financial position as demanded by banks focuses on ratios, cash flow, debt to equity relationships, and owner guarantees.


It's important to note that many, shall we call them ' subsets’, of asset based loans can help deliver liquidity to your business.

Other Working Capital / Cash Flow Alternatives

Factoring/Confidential A/R financing

Inventory loans

Bridge loans

Sale-leaseback strategies

Purchase Order Financing

SR&ED Cash flow loans

Short Term Working Capital Loans ( Note - while these short term working capital loans are popular and positioned as business revolving credit lines they are in fact just short term loans based on 15-20% of your sales volume and are tied to personal credit history of the owner/owners


If you're focused on ' keys to success ' in your working capital and cash flow needs seek out a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success , who can assist you with your business finance needs.

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How To Obtain Business Financing In Canada

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Could You Put Some New Business Financing To Good Use?

Business financing in Canada has never been as important as in recent times - A company can fail in the best of times, whether it's poor finance practices around your existing financing strategy or simply the inability or lack of knowledge around business capital , cash flow, and working capital solutions . At 7 Park Avenue Financial we believe any firm can benefit from a better overall financing strategy.

And boy have things changed ! Long gone are the days when funding a company simply revolved around low interest long term bank loans, when approval seemed cumbersome but ultimately successful.



7 Park Avenue Financial's vision was founded specifically on that landscape that changed. No secret that these days not all business borrowers fit the mold of traditional financiers such as the Canadian chartered banks.

Many businesses try online lenders - yet while the applications and loan process is viewed as online there is a distinct lack of personalization that your company and industry might need. Even worse is that the multitude of on line lenders simply confuses the business owner, if not downright deception in a few circumstances.

In the case of the short term working capital industry, which evolved out of the U.S. Merchant advance loans many Canadian borrowers have found they can approach and get approved by several lenders.. in effect they ' stack ' new loans on top of each other

When investigating on line solutions we encourage clients to ensure they are dealing with a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success to eliminate any disastrous financing.

A proven solution towards the path of solid business financing is simply to analyze short and long term cash flow needs ( a cash flow plan ) that allows your company to understand where liquidity is needed.

An ' informed ' business borrower armed with proper knowledge around the types of financing and cost of their financing needs is the best scenario to strive for. In many cases your industry will typically benefit from a type of financing used by many of your competitors and that can assist your own firms funding journey.


While many owners/ mgrs and entrepreneurs in general focus on sales revenue growth as the key metric to success that motivation has to be complemented with good cash flow management & financing solutions geared to your cash flow and asset monetization needs .


Sales will drive a lot of your financing choices and will in many cases dictate or suggest what type of debt finance or asset monetization you will utilize. While it's important to be optimistic about sales growth that same revenue issue can be a source of stress when it comes to cash flow.


One reason why ? Simply because building inventories and receivables and investing in new assets are cash uses, not sources, as our good friends accountants would say.


While cash flow and sales budgets are important and reflect good mgmt the real world dictates that Murphy’s law will often kick in , which might mean:

Large New Sales or Contract Opportunities

Seasonal cash flow needs

Loss of a major customer

What Is The Best Solution To Finance Sales Growth ?

ANSWER : A traditional or alternative business line of credit ( tradional = non bank )


1. Canadian Chartered banks


2. Non bank commercial finance asset based credit lines



It often also takes new/used assets to build and grow a business, i.e. equipment, machinery, rolling stock, technology a la computers, software, etc. In that case equipment lease financing is your best bet as it conserves cash flow and matches the benefits of the asset in question to cash outflows. From start up to mega corporations 80% of businesses of all size utilize lease based asset financing.

Business Financing For Smaller Companies / New Companies

Newer businesses, mostly start ups should consider the Canadian Govt Small Business Loan - aka the ' SBL ' loan. That loan is guaranteed by the govt and only requires a 10% personal guarantee against the loan which can be anywhere up to 1 Million dollars depending on the asset you wish to finance.


Cash flow concerns boil down to liquidity. The 2nd most liquid asset you have on your balance sheet is receivables. Collecting them promptly and financing them properly is key to business success.


For those firms that can't access or get approval for the amount of business credit line they need numerous solutions are available, the most popular often being A/R financing via a ' factoring' or 'Confidential Receivable Financing ' program. This solution monetizes sales as you generate revenues - instant cash. Key advantages include: instant liquidity and no additional debt on your balance sheet.


Businesses in the SME sector in Canada (small to medium enterprise) will never have too much cash. Increasing sales, buying assets, hiring people drains cash- sometime slowly, other time not so slow!


Some other solid real world solutions to cash flow and loan needs include:


SR&ED Tax Credit Financing


Sales Leasebacks


Unsecured cash flow loans


Short Term Working capital loans

Mezzanine Financing ( Unsecured cash flow term loans )


Financing a business in Canada, in ordinary, or extra-ordinary times takes some time, knowledge and access to funding solutions that are in your firms best interest . Stay educated and ensure you are working with someone who is on your side when it comes to maintaining finance solutions tailored to your business health. At 7 Park Avenue Financial we call that ' Financing With The Intelligent Use Of Experience '.

What Are Short & Long Term Financing Options For My Business

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The Best Canadian Financing Options For Your Business

Short and long term financing options are not always comparable to the U.S. borrowing options we read and hear about in the business news. That is a double-edged sword when it comes to financing your company with the right loans, debt and cash flow options that allow the business owner and financial mgr to fund the company.

At 7 Park Avenue Financial new clients tell us they feel strongly that there is a lack of proper business funding options for small and medium enterprise firms in the Canadian business landscape.

For those companies that are clearly a ' barrier to growth', let alone survival in economic turbulence! Primarily we're talking about debt financing as well as ' asset monetization' to grow cash flow and working capital without taking on debt. Solutions such as business credit lines, either via the bank or a non bank lender, are critical to operating any business.

Businesses are funded in different manners, whether they are new and ' out of the gate ', often funded by owner personal investment and the proverbial ' friends and family '. Debt financing for the SME sector in Canada has historically been difficult to achieve.

Many new businesses, franchises included, are funded by the Canadian Govt Small Business Loan progra,m which offers significant capital to new and growing businesses. A combination of generous limits, low rates, and government guarantees and low personal guarantee makes this program very appealing to thousands of businesses every year.

We spoke of the business finance options in the U.S. It is important to note that there is probably a lot wider variety of options and lenders in the United States.

EXAMPLE : Canada set up its own version of the U.S. ‘SBA ' program. In Canada we call it the ' SBL ' - It's a govt guaranteed loan with the federal govt guaranteeing 85 % of your loan to the bank. In Canada, the program only finances equipment, leaseholds and real estate. In the U.S., numerous other options are available under the same program.


A different banking and financial system create the perception that there are more banks and lenders in the U.S., offering a larger variety of funding. But Canadian businesses should realize that a combination of traditional, as well as Alternative Financing solutions, do exist for borrowing needs.

Our Canadian chartered banks are significant ' deposit takers', as a result they are understandably risk averse, leading of course to a stronger banking and financial system ( that's a good thing ), but on the other hand limited business lending options to a certain degree.

The good news is that Alternative Lenders are providing more choices every day to thousands of Canadian firms, due somewhat in part to U.S. business financing models becoming more popular in Canada. Short term working capital loans, asset based lending ( ' ABL ' ), and numerous A/R and Sales financing solutions are now readily available to the Canadian business borrower.


The traditional financiers in Canada are:


Banks

Business Oriented Credit Unions

Insurance companies

Leasing Companies

Mortgage Institutions


Traditional financiers in Canada use the same approach for almost all borrowers, which of course has a tendency to restrict financing. In Canada companies seeking SME COMMERCIAL FINANCE (small to medium sized firms) constantly are challenged to finance sales and assets. Access to business lines of credit is always a challenge; Our previously mentioned Asset based lines of credit in Canada have exploded in popularity.


WHAT FINANCING OPTIONS ARE AVAILABLE TO ENTREPRENEURS & BUSINESS OWNERS?


Offerings Business owners should consider include:


A/R Financing

Non Bank Asset Based lines of credit

Equipment financing

Sale leasebacks

Bridge Loans - asset based

Tax Credit Financing (film and SR&ED)

Franchise Loans

Govt Guaranteed Loans

Working capital term loans

Merchant advances


To borrow with a full understanding of your business finance options 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 loans, funding and growth finance and survival options specifically suited to your business 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

What's Alternative Financing In Canada ? Capital & Cash Flow Sources

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Alternative Financing Options For SME Commercial Finance Needs

Alternative financing options and sources is all about the right capital and cash flow from sources you can depend on to grow your company's sales and profits.These lending options tend to come with fast approvals although non bank lenders demand a higher rate of return based on the flexibility of their capital and the eligibility requirements .

Any current economic upheaval notwithstanding, it's safe to say that after the 2008-2009 recession businesses in the SME ( small to medium enterprise ) sector in Canada had greater difficulty in obtaining proper traditional bank financing . The ability do do business and raise business credit had many firms wondering what the commitment was to this key segment of Canada's economy.

Bank lending guidelines focus on key elements such as accountant prepared financial statements, personal guarantees, outside collateral, and performance ratios / covenants your company must abide by . That can be a challenge.

Alternative Financing Canada

 

The business line of credit is typically a major necessity for any company . when access to credit lines dry up your company is more often than not able to support ongoing sales and daily operations.

So what can small and medium sized businesses do ? Whether its start up funding, or growing a business the landscape of Canadian business financing has changed. Experts tell us that the reasons alternate capital sources are growing is a combination of regulations in commercial lending and technology. Many new lenders can provide access to financing previously only offered by Canadian chartered banks.

While in some cases banks are pulling back to certain types of lending new technologies and many new commercial finance companies are providing complementary financing to run and grow business.

At 7 Park Avenue Financial  we talk to new clients about the differences and benefits of traditional versus alternative finance solutions . Many firms have to utilize non-traditional business credit and business loans.

Though these sources of credit may not be perfect for every business, they are at least options to keep your company going through rougher economic times when you have been, as the saying goes ' de-banked'

Alternative Sources of Business Loans

 

Asset based loans - These facilities rely heavily on the hard collateral in your business, typically equipment, rolling stock, real estate, etc.

Non bank revolving credit lines - These business credit lines, often called ' ABL's " are used to manage the cash flow gaps that arise out of the need to carry inventory, collect receivables, pay employees and suppliers, etc. Similar to bank lines the carrying cost is calculated on the ongoing balance . The best way to operate these type of facilities is to make sure they ' revolve ' - hence the term ' revolving line '.

Another key benefit of the non bank asset based line of credit is that they can easily be increased as your sales and working capital needs grow.

Inventory Loans - Using inventory as collateral is often best facilitated in the context of the asset based credit line . The facility combines inventory and a/r financing to create an important source of ongoing cash flow.

Sale Leasebacks - Equipment your firm owns can be leased back to create valuable working capital,with your firm still maintaining full use of the equipment.

Equipment Financing - 80% of all North American businesses ( that includes Canada !! ) utilize lease financing to minimize capital outflows for new and used assets. Yes, used equipment can be financed !

SR&ED / Film Tax Credit Financing - Tax credits for the Government Scientific Research and Experimental Development program can easily be monetized to recoup valuable investments your company makes in R&D

Receivables Financing / Factoring - The ability to cash flow your receivables on an ongoing basis is one of the fastest growing parts of the alternative finance area . Our recommended solutions to clients of 7 Park Avenue Financial is Confidential Receivable Financing, allowing your firm to bill and collect your own a/r and be able at the same time to cash flow sales immediately as you generate revenues.

Royalty Finance - Royalty finance is quasi form of equity financing and allows your firm to raise funding based on sales

Purchase order financing - P O Finance is similar in many respects to a/r financing, but takes the whole process one step further , allowing the P O lender to pay your supplier for products related to legitimate purchase orders / contracts.

Working Capital Loans/Cash Flow Loans - Technology has allowed many firms to apply to short term working capital lenders who offer loans, typically 12 months in duration based on only your sales volumes. This type of financing is a key part of the whole wave of what the experts call ' FINTECH '. These loans fill a short term void and are typically based on loan amts equivalent to 10-15% of your annual sales volume. Other names for this type of loan is ' peer to peer / B2B ' financing.

These shorter term working capital loans/advances arose out of Merchant Advance industry in the U.S. , having spilled over into Canada . Those loans, called " MCA's " typically work best for retailers . In effect this area is a ' shake up ' of ' old school ' traditional financing. While these solutions are available to both public and private companies the majority of these types of financing revolve around private firms who want to both survive and grow their business.

We're not 100% sure that banks are abandoning small and medium sized lending - although many of our clients certainly feel so! But post the 2008 global recession it's safe to say business financing in Canada has changed. That's why the amount of capital available via private alternative finance firms should be often appealing to business owners and financial managers.

To explore the numerous capital and cash flow sources available via commercial alternate finance sources 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 business loans that makes sense for your company / industry.



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 Is Alternative Financing For Business In Canada ?

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Alternative Financing Options From Non Bank Business Lenders In Canada

Alternative financing isn't something that most business owners and their financial mgrs equate with ' shopping ' , but the reality in today's environment is that it's a requirement for your company to know what traditional, and non traditional business financing solutions are available to your company . More and more companies everyday are looking at ' non bank ' solutions from credible lenders who can assist their business with cash flow, debt and working capital financing .

In some cases it's somewhat of a ' forced ' situation as some companies find themselves in what the banks term as ' special loan ' situations due to any number of events that have triggered a default in bank covenants, loan payments, etc. There is one immediate bottom line :

Turnaround Financing Is Required !

We'll take a look at different aspects of alternative finance solutions in Canada, as well as a re-focus on key issues within that damaged bank relationship that sometimes happens in the world of banks and traditional financing.


It's no real secret that interest rates for commercial business financing are at all time lows . Even bank fees associated with business lines of credits are not all that unreasonable. Nevertheless damaged relationships with your bank can exist, in certain scenarios that might even be about ' personalities ‘, i.e. the human side of business.

Clients sometimes feel that Canadian banks or their own banker specifically does not ' understand ' their business. In fairness to Canadian bankers they are sometimes just challenging a client and should often be viewed as a ' sounding board ‘for challenges your business might face

The limited amount of choice that owners/financial mgrs have when it comes to banks in Canada is of course a limited number of banks in a highly regulated environment . That's a good thing for banks and the health of Canada as a whole, but not so good when it comes to your business or your industry being able to achieve it's financial and sales goals with the right amount of financing.

That is of course unlike the U.S. which has different tiers of commercial and business banking, with hundreds if not thousands of individual bank lenders.

In certain cases your industry might be ' out of favor ' and traditional lenders are looking for ways to end relationships in certain economic sectors. With all due fairness to there being two sides of the story, we at 7 Park Avenue Financial can commiserate with the Canadian firms who suddenly find their total future and destiny in the hands of a third party.


As a short aside, probably the best advice we can give a client is to choose a banker that is relationship oriented and had internal credibility within her or his bank. Our belief - all banks are the same; all bankers are not the same.

What Then Are The Alternatives For Canadian Business Finance Solutions From Alternative Finance Lenders ?

Using our ' shopping analogy ' there's some solid choices when it comes to business funding .

Alternative Financing For SME'S In Canada:


Solutions include:

Asset Based Finance Firms

Equipment Lessors - Sale Leaseback Specialists

Accounts Receivable Financing

Inventory Financing

Purchase Order Financing / Alternative Sales Financing For Procurement

Royalty Financing

Tax Credit Loans ( Primarily SR&ED )

Key Point: Any of these alternative finance solutions can be combined in a variety of manners to allow for full scale financing of your sales revenues.

Speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business financing success, who can assist you with achieve refinancing 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

Business Cash Flow A Problem? Here’s 6 Working Capital Financing Methods

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How To Manage / Increase  Business Cash Flow

Business cash flow! In times of economic or industry turmoil most business owners and their financial mgrs would probably be happy with  1 solid working capital financing solution for  cash flow business needs. We'll beat that and give you 6 ways to improve your business finances going forward . All of these solutions are accessible immediately if you have the right help . How is that for alternative solutions to your working capital and cash flow needs? Let's get started.


The funding of working capital continues to be a large challenge for Canadian businesses of all size - The business owner/financial mgr wants to be able to comfortably run the company on a daily basis, as well as growing the company.

That requires funding of potentially different types,  and along the way those suppliers and employees want to be paid on time also!  That's called running a business.

What's Your 2nd Most Valuable Liquid Asset In The Business ?

The most liquid asset any business always has, (next to cash) is your receivables. Working capital financing is best generated by the collection, or financing of your receivables. This can be done by:


1. Faster collections - Many companies should consider offering a discount for prompt payment - a typical offer might be 1-2 % for payment on delivery or withing 10 days for example


2.Financing / selling your receivables as you generate sales revenues


This type of financing is called receivable discounting or factoring, and is becoming increasing popular every day. If your company qualified  for bank credit, i.e. traditional bank financing, then setting up a business line of credit is optimal . When this type of facility revolves up and down based on your selling products and services and getting paid the facility is operating well


3.You've spent your valuable business capital - would you like to get it back ? Clients of 7 Park Avenue Financial  

always ask what we mean by that.  Any equipment you have already paid for can often be refinanced, the technical term is

Sale Leaseback

That strategy, or a short term bridge loan with the equipment as security is exactly what our clients need to bridge the cash flow gap.


4. We spoke above about receivable financing - one of the best facilities for Canadian business is a combo working capital facility that finances, or ' margins ' both your A/R and your inventory. Since many firms previously couldn't finance their inventory either elsewhere, or via banks, the combined liquidity of borrowing against your A/R and inventory is a true power punch! Typical this type of financing is known as an:

Asset Based Lending Facility

This makes most sense when the facility is at least in the 250k range, and business owners/mgrs will be please to know there is virtually no upper limit in this type of business credit . The facility will grow as your sales and assets grow . Unlike bank lines of credit these are more flexible when it comes to growth business owners will probably recognize the most bank lines of credit are reviewed annually and place a heavy emphasis on issues such as personal guarantees, covenants, financial ratios, and outside collateral . Those issues are NOT the underpinnings of asset based business lines of credit.



5. Many clients are totally unaware the Purchase Order Financing is available in Canada. This is a strong potential cash flow saver, and generator, since your suppliers are paid for product when you order it, once you have received the P O. and entered into a P O finance facility agreement .  The Purchase Order financier  takes the inventory and receivable as security, but in effect finances your whole sale.  While it is an expensive form of financing - typically 2-3 %  per month companies that have good gross margins and could otherwise not facilitate the sale of large new orders and contracts it is a most welcome solution for large contracts, orders, etc.

 Short Term Working Capital Loans - Where Did All These Loans Come From?

6. Canadian business owners are somewhat bombarded by potential short term loans that appear via online firms as well as some ' bricks and mortar ' companies.

Where did this type of loan come from ? The answer is ' from the United States . It originated via a "new" type credit card borrowing in 1995, which has morphed into what is know known as a working capital loan, aka a ' Merchant Advance '.

These loans were for mostly  small businesses  who could not get bank credit or had no personal ability to borrow money for purchasing assets, supplies, etc.

The loans were based on advances against future sales, and were originally focused on the credit card sales of the business .  The industry grew and now services small and medium size companies , including having become very popular in Canada . A typical loan is paid back in 1 year in fixed installments, and the most common requirement is for loans to be approx 10-15% of your firms annual sales. This was a novel new way of lending and has become popular with many businesses.

SUMMARY/BOTTOM LINE :

Ensure you are aware of your Canadian business financing options. Working capital and cash flow are available if you have assets and orders. We have demonstrated that clearly to you via 6 separate solutions. Speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success  to to determine what works 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

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 Is A Cash Flow Loan ? Invoice To Cash Financing Alternatives

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Cash Flow Loans For Business - Here Are Your Alternatives

Invoice To Cash Financing should always be a top priority for Canadian business owners and their financial mgrs. Whether it is a cash flow loan, factoring your receivables, or utilizing a combination of asset based lending solutions available to your firm it's always about ensuring you have the best strategy to convert sales revenues into much needed working capital and cash flow .

No secret that even the largest corporations in Canada place a significant emphasis on ensuring the right strategies and people are in place to monetize sales revenues. Accounts receivable financing solutions such as factoring ( those Bay St boys have a fancier name - ' Securitization ' but it's pretty well the same ) are gaining tremendous popularity with Canadian business.

So business wants to know more - what those solutions are, why they work and how to ensure your company has the best strategy in place . These solutions are particularly applicable to those looking for SME COMMERCIAL FINANCE solutions - that small and medium sized sector of Canada that powers a huge portion of the economy . Interestingly definitions of SME always vary, depending on who you are talking to - with governments usually using under 100 employees as the benchmark ! We wish !

For those that buy into the concept of looking at 'alternative financing solutions' it should be a priority and focus to ensure they are entering into the right facility - it's all about avoiding financial pitfalls .


The Canadian alternative financing marketplace is significantly different from the U.S. and European markets where these forms of financing such as factoring and asset based lending and working capital loans originated. It is therefore important for Canadian business to consider which type of receivable financing , sales financing and inventory finance solutions come with what options and benefits and how they work on a daily and long term basis.

NOTE - Many non traditional financing services often simply act as a bridge to bring the client back to solutions offered by banks, etc.

That is because Canadian non bank business financing companies - we can group them together as ' Asset Based Lenders ' , fill the gap when a firm cannot obtain satisfactory receivable financing from their Canadian chartered bank. That also will often include the challenges of inventory finance, purchase order finance, and equipment financing and leasebacks .

Many clients of 7 Park Avenue Financial tell us they do have some for of bank financing in place, but it essentially does not meet their needs re growth and facility size. In many cases clients had a challenging 2008-2009 , or have been impacted by ' COVID ' and have no financing facilities in place , resorting to self financing or looking at our alternate solutions we have mentioned.

Many firms are start up, early stage revenue, and virtually have no ability to qualify for standard Canadian operating facilities that are enjoyed by more larger and established firms, via Canadian chartered banks and insurance companies.


As an example ,factoring works for your firm when you have decent receivables but there are issues on your balance sheet and income statement that prohibit you from obtaining the amount of financing you need on an ongoing basis . This working challenge is further exacerbated when you have large new contracts or volatile growth spurts based on the uniqueness of your industry. At 7 Park Avenue Financial we will often focus on a combination of a/r financing and purchase order financing to ensure our client can successfully monetize sales, enter into new contracts, explore new markets, etc.

BUYER BEWARE ?

We have spoken about the importance of ensuring you enter into the 'right' finance strategy . Example : There are two types of factoring in Canada, ‘notification factoring ‘, and non- notification factoring. Both work well if you understand how they are structured and priced, however we favor non notification factoring in our recommendations since we feel it more closely suites the Canadian way of doing business. At 7 Park Avenue Financial we are a huge fan of Confidential Receivable Financing .

HOW DOES A/R FINANCING WORK

In ' old school ' notification type factoring the process is very simple and mechanical:


Your firm invoices your customer

You generate an invoice

You receive a large, almost same day cash advance against that invoice (typically 90%)

Your factor firm verifies the invoice with the customer prior to disbursing funds

The factor firm more often than not collects the invoice, an remits to your firm the remaining balance due yourself, less their financing fee - typically 1-2%

WHY CONFIDENTIAL RECEIVABLE FINANCE ?

Non notification factoring is dramatically different - with this type of facility more due diligence is spent on your firm and its way of doing business, invoicing, creating proper financial records, etc. Your company bills and collects all its invoices, and you receive funds immediately after you ship and provide proof of delivery.


Factoring pricing in Canada has dramatic price swings. Factoring rates range from 10% per annum and for some firms 1-2 % per month.

WHAT FACTORS CONTRIBUTE TO HOW A/R FINANCING IS PRICED ?

Factors that determine your price are the over all facility size, your usage of the facility, the overall quality of your customer based, and ,unbeknownst to your firm, how the factor firm itself is funded, usually either privately or institutionally .


In summary , alternative financing does work, and is working in Canada. Choosing the right facility shouldn't be a leap of faith of having to guess at how these concepts work . Take a hard look at solutions such as a/r financing, sale leasebacks, purchase order finance, short term working capital loans, and larger non bank business lines of credit - They work, and are working every in Canada.


Speak to a trusted, credible and experienced Canadian business financing with a track record of business financing success . Ensure you understand the benefits of this valuable and popular method of Canadian business financing.



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