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Business financing in Canada often ' revolves ' around the need to include revolving loans in your business finance mix. How does this type of credit facility work?

WHAT IS A REVOLVING LOAN FACILITY

Revolving loans are a type of business credit provided by banks and other commercial lenders that allow a business to draw down on financing and continue repaying and drawing down based on cash inflows from receivables, etc. These are known as ' facilities ' in that it is a type of service such as a defined line of credit that revolves.

WHY CONSIDER A REVOLVING LOAN?

Revolving business credit lines are a key tool in business finance and should be a part of your firm's overall business finance strategy. These ' revolvers' allow you to meet day to day operating needs and plan for anticipated cash flows based on sales and cash collection projections.  In more mature companies that are established, they are a part of the overall capital structure of the business and are complemented by other long term financings such as term loans, leases, etc.

HOW DO REVOLVING CREDIT LINES WORK?

Revolving business line of credit loans allows a company to access a defined amount, typically called a ' credit limit.  Normal uses of this type of credit facility are for buying inventory from suppliers, maintenance and repairs, funding marketing,  and addressing gaps in either the carrying of larger amounts of a/r and inventory or seasonal requirements based on the industry in question. A Typical revolving credit line is secured by the assets of the business - with the most common security being accounts receivable and inventory. In the case of asset-based lenders, they allow fixed assets that are owned by the company to be monetized within the same facility. Typically chartered banks do not include fixed assets as part of the' borrowing certificate ' that banks calculate monthly based on your levels of a/r and inventories.
In some cases, commercial lenders may utilize the concept of an Unsecured line of credit - which provides a certain level of borrowing based on a general security agreement - ' GSA ' on all the assets of the company. Typically personal guarantees of the business owners play a key role in unsecured credit.

The key aspect of revolving business lines of credit is clearly ' flexibility'. The continual drawdown and repaying of the facility creates a ' pay as you go ' scenario as businesses both use and consume cash as they run and grow their business. That's good news!

The key differentiator in business credit facilities that revolve is that it's not a term loan, via that continual drawing down and repayment we just referenced. However, like term loans, they do often come with ' limits’, but more importantly they vary with your assets.

Here an important distinction occurs. When it comes to bank credit lines these pre-imposed limits are often fixed and relate directly to typically receivables and inventory. However, if you chose an asset-based non-bank line of credit via a commercial finance firm that borrowing base typically has no upward limit if you in fact have growing sales and commensurate assets.

That monthly ' borrowing base' that banks and asset finance companies utilize comes with some pretty basic formulas. In the case of banks, utilizing receivables as an example the borrowing base is 75% of your A/R; asset-based lenders typically lend against 90%. (In both cases receivables must be under 90 days old). Those calculations are a key part of a revolving credit facility agreement, and establish your ' borrowing base ' which the lender documents regularly with a 'borrowing base certificate '

CALCULATING THE BORROWING BASED ON REVOLVING LOANS

Asset-based lenders and banks determine your borrowing power by ' margining' a discount factor against a specific asset based - most commonly receivables and inventory.  As an example, if an asset-based lender allows a discount factor of 90% on receivables, which is common, a 1 million dollar receivable portfolio can represent a revolving loan of 900,000.00. The same type of calculation applies to inventory, and asset lenders also allow your unencumbered fixed assets to be margined in the same manner! Banks typically have revolving loan facility agreements around a/r and inventory only, with possible exceptions.

Various nuances might exist in your A/R margining relating typically to issues such as government receivables, high balance concentrations with one customer, etc.

Revolving loans from banks come with various covenants and restrictions. In general, we can make the statement there is a lot less restriction from non-bank asset lenders on this issue.

What then are some of the key issues around pricing revolving loan credit facilities? No one disputes the fact that Cdn chartered banks offer the lowest cost business financing rates - if you can satisfy the risk profile desired by the banks. That risk profile typically includes growing sales, profits, clean balance sheets and demonstrable cash flows.

Interest rate pricing on non-bank asset financings varies proportionately to credit risk. The good news here is simply that almost any firm with sales and assets is eligible for asset-based credit lines. So it’s overall credit risk and the amount and type of debt a company has is the driver behind asset-based revolving loans and other alternative working capital solutions.

  
TERM LOANS VERSUS REVOLVING LOANS  

Commercial lenders have a clear separation around term loans versus revolving loans/credit lines. Credit criteria for a term loan involve a firm's total credit profile with a focus on clean balance sheets,  profits, and the ability to generate cash flow as repayment of the loan over several years.
Business financing when it comes to credit lines is all about operating performance. Credit lines don't require fixed payment terms, they ' revolve ' and we can make the case they come with a maximum amount of financial flexibility. A bank or an alternative lender offering non-bank lines of credit ultimately like the facility to revolve and at some point be very significantly reduced before it is drawn down again based on the needs of the business.  When it comes to revolving loans from either banks or an ABL lender it's your revenue and operating performance that allows you to access short term operating capital.

CONCLUSION

Revolving loans and bank or asset-based lines of credit provide a safety net for the business as the credit facility allows you to draw down on cash flow needs over time as your company generates sales. Interest rates are often higher when accessing business capital via an alternative lender but these ' ABL ' lenders provide capital when a company can't access traditional bank financing, particularly for small business and medium-sized companies who can't access public markets.
If you're on the search for the right type of credit facility for your firm your search will almost always end well by seeking out a trusted, credible and experienced Canadian business financing advisor who can assist you with your credit facility 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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Business Financing In Canada: Your Search For Revolving Loans & The Right Credit Facility Just Ended

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Asset Based Lender Solutions: Journey To The Center Of Non-Bank Receivables Financing

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Receivables financing in Canada is somewhat the crown jewel of the asset-based lender and asset based lending facilities in Canada . We're taking you to the center of non-bank A/R financing as an asset based loan . Let's dig in.

WHAT DOES ASSET BASED LENDING MEAN

Asset based lending, often called ' ABL finance  '  is simply short term loans secured by the collateral of a business. In the case of asset based lines of credit assets such as inventories, a/r, and fixed assets are margined in one facility to create a constant source of cash flow as sales are generated.

Asset based lenders allow your business  to leverage the sales and assets of your business to operate and grow the company. These facilities come with maximum flexibility and range in size from a small 250k facility to the tens of millions of dollars. ABL financing grows in tandem with your company!

Asset loans are almost always ' business to business ' type lenders for working capital and cash flow financing and lending needs for almost every size of business - from startups to sizeable corporations. The financing that these firms provide allows your company to consider almost all options - that includes:

Growing your business

Expanding into new products/services and geographies

Engineering a turnaround

Refinancing

Companies that typically manage their A/R well are also more inclined to take advantage of supplier pricing/discounts and are viewed more positively by trade creditors. A solid receivable financing solution will allow your company to do that.

Why do thousands of businesses seek and utilized the services of an asset based lender that specializes in receivables loan  A/R solutions? One of the most common reasons is their company's inability to access traditional bank financing. Owners are typically reluctant or unable to access additional equity financing that might be used to bolster cash flow.

One key aspect of a non-bank A/R financing solutions is the fact that a full facility will also include combining inventory and fixed assets into that same credit line!

 These solutions typically do not compete with banks as they are taking on more and different assets in an entirely different manner when it comes to margin calculations and borrowing limits. The asset based lender typically advances 90% of A/R as well as higher margins on both inventory and equipment which become part of that new borrowing facility.

Non-bank lenders also have the reputation of being timelier on approval. It is critical to note that in almost all cases the typical asset based borrower has a goal to migrate back to traditional banking.

HOW DOES ASSET BASED FINANCING WORK?

Companies who cannot access traditional capital will often turn to asset financing solutions to solve their working capital needs. Having said that we also note that many of Canada's largest and most successful corporations also utilize this method of financing as an alternative to bank and insurance company financing.

But it's those ' SME ' companies, the small and medium-sized companies in Canada that fuel the entire economy, using the  ABL  facility because it's flexible and customized to their particular needs when it comes to the balance sheet and their sales revenues.

While we are talking mostly about non-bank asset based line of credit solutions, these same facilities are used to complete acquisitions, restructuring, and m&a type activities.

The ABL lender will take time in due diligence to properly evaluate the true value of company assets - that's the flexibility that might not always come with a bank solution, as banks are reluctant to fund hyper-growth companies, as well as occasionally having the inability to understand different types of inventory.

That additional time spent in truly evaluating your asset mix allows for more margining of your assets, thereby increasing borrowing power. And, as we noted, your facility can usually grow with a phone call as long as sales are increasing commensurately.  It is very normal for a/r to have a 90% funding margin.
Unlike traditional bank credit lines the value of your real estate, if applicable, as well as your fixed assets are combined into one operating facility. ABL loan credit facilities revolve and fluctuate as you generate sales and collect receivables to reduce the operating line.

You should consider an ABL solution when you're looking for the optimal working capital/cash flow generation financing that might not be accessible via a bank for a variety of reasons. It the funding of those liquid assets on the balance sheet, namely a/r and inventory combined with maximum borrowing power based on the pre-agreed percentage of drawdown.  

That comes from what's known as a ' borrowing base certificate ' - allowing your firm to always know what it's borrowing power is as you generate sales and replenish cash. The borrowing base certificate is usually recalculated monthly, allowing you to always know the value of your remaining borrowing power on the sales and assets.

We note that businesses who might not qualify for asset finance credit lines can use based a/r factoring to still generate cash from sales revenues - usually it's a situation of a facility being too small to not make sense for the lender and borrower re costs,  set up fees, etc.

Fees associated with asset financing and factoring typically run in the 1.5-2% range on a monthly basis, so a firm should have decent gross margins to absorb the cost of the financing as well as take advantage of the benefits of receivables financing.

While bank credit lines typically tend to have fixed credit lines and yearly renewals the true beauty of receivables finance from asset based lenders is the flexibility to grow the facility almost instantly as sales and working capital assets grow. Simply speaking these facilities fund growth!

APPROVAL CONSIDERATIONS OF THE ASSET BASED LENDER

What do asset based lenders look at when it comes to approving and setting up such facilities. Key issues include:

Cash flows within the business

The ability of the company to report on financial performance - i.e. monthly financial and aged schedules of A/R and a/p

Government sources deductions being paid (Note - in numerous cases asset based lenders will construct financing to handle and payout CRA arrears)

Profitability (or the road to profitability)

Asset lenders put appropriate controls in place to make sure credit facilities are properly controlled.

HOW DO I GET AN ASSET BASED LOAN?

The bottom line, it's official - Asset Based Lending is a hit with companies of all sizes and financial positions in Canada. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you put working capital/cash flow solutions in place that match your firms borrowing 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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

HOW DO YOU FINANCE A BUSINESS ACQUISITION

Business financing sometimes presents an acquisition opportunity. How does acquisition finance work when the opportunity arises, and what loan scenarios might match your needs. We're talking about the ' buy-side '.  Let's dig in.

Naturally, the reasons to either purchase or merge into another company vary when it comes to a business acquisition. Some of the most typical scenarios include growing sales faster (i.e. non organically), entering new geographies for sales revenue opportunities, different client or market segments, etc.  The need then arises for financing to purchase an existing business.

How are mergers and acquisitions ( ' m&a ' financing ) financed?  Some key basics quickly emerge for business owners/ financial mgrs when contemplating a business loan and buying and financing another firm. Knowing these allows you to access and talk to acquisition financing lenders as you are prepared. Those basics?

THE FINANCE BASICS AROUND A SOLID ACQUISITION STRATEGY

Your business loan requirements investigation should  include, but not be  limited to:

Determining proper value

Understanding financial strengths and weaknesses

Knowing the optimal amount of debt/equity that will make the transaction work

Knowing where to seek financing and what type of finance alternatives exist when you're buying a business

The seller in some cases can in fact be an important ally in closing a transaction. If they have the proper personal or financial incentives their ability to help structure a  ' seller financing ' component to the transaction could be key to success. In some cases that might mean adjusting the purchase price higher, but that seller involvement can well mean a better chance of a more successful transition.

While the proverbial ' friends and family ' financing is certainly one alternative that has been used in the past most top experts will also warn against that scenario; as well pledging personal assets is also high on the not desirable list!

Since receivables and growth in A/R are often a significant component of any growth strategy accounts receivable financing solutions such as debt factoring and asset-based credit lines can play a key role in acquisitions financing.

'Small ' is of course a relative term, but don't forget to also consider the Govt Guaranteed SBL Small Business Loan when it comes to acquiring a business. That loan limit now is 1 Million dollars, but critical to note that it covers only two asset categories, equipment and leasehold improvements.

It is very safe to say that your acquisition plans should also include a well-crafted business plan or cash flow analysis of the new or combined operation.

A careful study of your working capital and loan needs will also help identify the proper method to finance a purchase.  Those other solutions to help finance your transaction are a combo of new, alternative, traditional and non-traditional methods of Canadian business financing. They will help you complete a final financing structure. They include:

BUYOUT AND ACQUISITION FINANCE SOLUTIONS

Bank term loans/ operating lines of credit
Asset-based bridge loans
Inventory Loans
 PO Finance
Confidential receivables financing
Sale leasebacks
Commercial mortgage financing/refinance
Royalty Financing
Refundable tax credit finance ( sr&ed loans )
Unsecured cash flow/mezzanine finance loans

The ultimate choice in your acquisition finance strategy should include some level of analysis around your overall expected rate of return. Ultimately success in the acquisition will be demonstrated by your ability to manage, grown and improve the value of the new or combined business.

Conclusion :

Financing acquisitions allows firms to leverage the assets and cash flow of target companies, allowing them to complete acquisitions with a combination of debt solutions, owner equity, cash flow financing, and a potential seller financing component.

If you're looking for the best financial acquisitions solutions and the proper funding to buy a business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business finance loan 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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial

Acquisitions Financing In Canada: Your Business Finance Loan Strategy Awaits

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Business financing needs in Canada often leave business owners/ financial mgrs with that ' not happy ' feeling when it comes to loans or alternative finance solutions. And by the way, in today's competitive environment there are some pretty smart people out there when it comes to running and growing their firms - yet even they are searching for ' the fix '.

Small businesses, that SME sector we're always talking about at 7 Park Avenue Financial often has the biggest challenge.  It's all about alternative small business funding. Let's dig in.


When it comes to raising finance needs and acquiring business loans for your business today’s environment calls for looking far beyond the traditional solutions of the past -  that is where alternative lending and alternative financing options have grown in popularity.

More often than not that has meant ' the bank ' as the sole solution provider of business capital and the 'go-to' for funding options. The variety of alternative finance solutions offered by the alternative lender has given rise to a whole new way of financing in Canada.

Banks by their nature put heavy emphasis on historical and present cash flow, external collateral, and personal guarantees and banking covenants. Not all businesses can meet those requirements!
Business owners who are unable to raise capital from conventional lenders have found that alternative business financing solutions that have significant benefits are readily available, It is of course important also to ensure that they consider any of the risks and costs that come with any type of business financing.
f you are a small or medium business owner who has struggled with obtaining a loan in Canada in the past, or even if you want to avoid the headache and frustration associated with conventional lenders, there are several sources of alternative lending from which you can choose. Each has its own unique set of benefits and drawbacks, so be sure to consider them all carefully.

Some have called it ' debanking'! Industry stats show that a large percentage of applications by firms in the SME COMMERCIAL FINANCE sector are in fact declined by banks for a variety of reasons - the bottom line is these firms simply don't fit what the pro's call ' the credit box ' of banks and their fiduciary lending responsibilities.

But by addressing the proper cost of capital versus growth opportunity as well as the ' risk ' element associated with any form of traditional or nontraditional finance a whole new world of capital providers is out there.  Traditional bank loans for small business have traditionally been unable to satisfy entrepreneurs hoping to start, grow, or acquire a business.

HOW TO ADDRESS SEARCH FOR BUSINESS FINANCE IN THE CANADIAN LENDING INDUSTRY

What then is the best way to look at some of those alternatives, and, as importantly, what are they?!   It starts by assessing your need, which is usually in one of three categories:

Growing sales
Refinancing
‘Other’

That 'other' can cover various scenarios, one of which might mean a forced exit from your bank relationship - i.e. the dreaded ' special loans' category.

As we have said, understanding how things work, cost and risk are the key elements of a new financing strategy. That kind of thinking will often determine what's best for your business.

Looking for some key tips around alternative financing as well as new sources of business financing and capital? We've narrowed it down for you as follows:

 

SOLUTIONS TO CONSIDER FOR TRADITIONAL AND ALTERNATIVE FINANCING

Keep an open mind to new solutions available

Consider both traditional and alternative financing solutions

Understand what you need - i.e. new assets, working capital, investment

Focus on potentially a combined solution of different methods of business finance

Ensure you are in a position to present your company properly - i.e. current financial statements, a strong exec summary or business plan, etc

Be prepared to consider ' Plan B '!

Cost of financing and interest rates

BUSINESS FINANCING SOLUTIONS RECAP

Let's recap business financing solutions most typically available to your firm - they include:

SOLUTIONS OFFERED BY TRADITIONAL AND ALTERNATIVE LENDERS - WHICH ONE IS RIGHT FOR YOUR FIRM?

Bank credit lines/term loans
A/R financing / Invoice financing / Invoice factoring
Inventory loans
Equipment finance
SR&ED Tax credit bridge loans
Sale leasebacks of owned assets
Non bank business lines of credit - Advanced alternative lending facilities
Unsecured cash flow loans
Royalty finance
Business Start Up Loans - The Canada Small Business Government Guaranteed Loan

CONCLUSION

The appeal of alternative lending arises from the ease of access as compared to traditional financing norms. Even online portals offering relatively quick ease of access to short term working capital loans and other types of financing have gained a lot of popularity.

In many cases, even the banks have participated in some of these online portals in some manner, including lender finance solutions. The domination of Canada's chartered banks has definitely seen a dent put into its dominance.

Part of the growth in alternative lending stems simply from the fact of a new and continue awareness of financing options - When it comes to asset based loans the ability to financing the balance sheet is at the top of the list in Canadian alternative finance.
It is interesting to note that a large portion of alternative finance solutions is in fact American owned firms who have chosen to enter the Canadian market.

So when it comes to alternative lending  and getting a loan in Canada , and if your firm needs finance ' fix ' seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your loan and cash flow needs for capital lending 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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Fixing Business Financing In Canada: Accessing Bank & Alternative Finance Loans

Business Financing: Maximizing Cash Flow Via Alternative Loans & Tax Credits

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Business Financing: Maximizing Cash Flow Via Alternative Loans & Tax Credits

The Hidden Gems Of Canadian Business Financing

Business Financing Loans And Financing Tax Credits For Cash Flow

Business financing success in Canada might well come from finding some of what we call the ' hidden gems ' of loans and other financing options. Even the govt via tax credits under the SR&ED program or gov't guaranteed loans might well become your best friend when it comes to business finance success. Let's dig in.

 

TWO GOVERNMENT SPONSORED BUSINESS FINANCE PROGRAMS YOU NEED TO KNOW ABOUT

Two of Canada’s government-sponsored business finance assistance programs are the farthest thing from handouts you can imagine. Canada's SR ED Tax Credit program for R&D is a solid tool for recovering your R&D capital via refundable tax credit financing.In many cases anywhere from 30-40% of your entire research budget can be recaptured via a refundable tax credit for a loan amount your require.

CAN THE REFUNDABLE SR ED TAX CREDIT CLAIM BE FINANCED?

 Even better news is that this tax credit can be financed via a bridge loan while you wait for your refund to be approved and arrive. It’s no secret that many of the thousands of firms who received billions in refunds every year take advantage of SR&ED loan financing.

THE ' SBL ' GOVERNMENT LOAN PROGRAM

 One other ' hidden gem ' for start-up and early growth companies requiring SME COMMERCIAL FINANCE solutions is the govt sponsored Guaranteed Small Business Loan. It's very accessible and is geared toward financing 3 asset categories - equipment, leasehold improvements, and finally real estate. While not often used to finance real estate thousands of firms do in fact finance their fixed asset and leasehold needs via this program. One of the main ' users' of the program is entrepreneurs wishing to start or purchase a franchise business.

The Govt small business loan is NOT a handout. It's not a grant. But what it is provides a flexible term loan with great interest rates and flexible terms and amortizations. It even can be repaid without penalty - which even other traditional financing methods don’t allow.

What are the approval criteria for SR&ED loans and the Government SBL loan that we've described? In the case of the SR ED tax  program, you simply need to file your claim with your yearend financials. Claims are typically 'written up ' via SRED consultants who specialize in maximizing your claim under the program. Naturally, your R&D capital investment spend under the program must be well documented when it comes to actual expenditures and monies paid/spent.

As far as the Govt SBL loan is concerned very typical lending criteria apply. Business owners must have reasonable personal credit and be able to provide a business plan and cash flow that assumes some realistic repayment of your loan. Invoices or quotes from suppliers on leaseholds and equipment you intend to finance also helps. The interest rate on the program is very attractive and competitive and comparable to main street financing rates given the nature of the program.

ARE THERE OTHER SOURCES OF ALTERNATIVE FINANCING FOR CANADIAN BUSINESS?

Our two ' hidden gems’ , the SR&ED program and Canada Govt Guaranteed business loans can be complemented with numerous other finance solutions. Those include financing under:

ALTERNATIVE FINANCING SOLUTIONS

A/R financing
Inventory Loans
Equipment Leasing
Non bank asset based credit lines
P O financing
etc.!

Business Financing  Loans Cash Flow Tax Credits: If you're focused on understanding all the finance solutions and business credit available to your company seek out and speak to a trusted, credible and experienced Canadian business financing advisor.


Click here for the business finance track record of 7 Park Avenue Financial 


Stan Prokop 7 Park Avenue Financial/Copyright/2020

business financing cash flow loans

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YOUR COMPANY IS LOOKING FOR  SRED FINANCE!



You've arrived at the right address! Welcome to 7 Park Avenue Financial



        Financing & Cash flow are the  biggest issues facing business today



                              ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS FINANCING OPTIONS?



CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs



EMAIL - sprokop@7parkavenuefinancial.com

A SRED financing tax credit loan is a great example of the good news around Canada's SR&ED program. If there's any 'bad news' it’s around the fact that once again some industry pundits are again wondering about the true benefit to Canada under its current ‘Scientific Research & Experimental Development' (aka 'SR&ED'!) program. SRED CANADA is Canada's premier refundable tax credit.

WHAT IS SR&ED

Canada's non-refundable tax credit program involving your investment in r&d capital is called the SR&ED program. Most business folks refer to it as 'SRED' and the government term is actually SR&ED (Scientific Research and Experimental Development) Program. It provides financing support to Canadian firms such as yours who invest in new processed and technologies to advance business and science.

Canadian provinces also partner on the program, providing additional assistance. SR&ED (Scientific Research and Experimental Development) Program is the flagship investment incentive program created by the Canadian government via tax credits.

It provides financial support to Canadian companies that are involved in creating new or improving existing technologies, with the aim of stimulating scientific advancement in the country. Most provinces have their own programs to encourage scientific R&D, which provides supplemental assistance to SR&ED claimants.

As one of the best of its kind in the world, many countries have followed Canada’s lead in setting up similar programs. It also makes it even more important to realize the quick and efficient cash recapture of your R&D capital investment via the help of an SR&ED finance consultant. Let's dig in.

While thousands of firms are still aggressively planning to file claims via their SR&ED consultant for their non-repayable tax credit refund, just as many might be wondering if financing that claim is still valid and accessible. The answer - a resounding yes!

While some business owners might view the program as a bit of ' danger and complexity ' that's definitely not the SRED loan process - which is, to put it simply - easy! We're the first to admit that properly preparing and submitting a claim is not for newbie and the weak of heart. Never has been your ability to prepare a proper claim, with proper assistance more important. The 1400 words and 3 questions you are required to address have never seemed more important.

Statistics in recent years show that over 20,000 claims annually, if not more are filed by firms just like yours. And as a note from our view in the trenches, all of those firms still view that tax credit claim as a key, if not a major source of financing for their firm. It's the private companies in the SME ( small to medium enterprise ) sector that file the majority of those claims. For more info on the dollars invested by the government in SRED click here.

That cash flow, when received allows them to do a number of things, including furthering additional R&D, starting or furthering revenue and marketing, and by virtue of that SR&ED work maintaining their particular dominance in their niche. The program has been around for over 30 years now and understanding the rules and the 'culture' around SR&ED is important.

Again, we'll leave that to the experts, pundits, and oh my god the politicians to assess the benefits and historical culture/perspective around SR&ED - We'll focus instead on the monetizing of those claims into real cash flow and working capital.

WHY SR&ED FINANCING VIA A SR&ED LOAN

If your company has address technological challenges and invested in R&D and has filed a SRED claim you are eligible for SR&ED funding. Your SRED financing can take one of two forms in Canada.

You can cash flow your claim anytime immediately after you file it, or alternatively (with a bit of a track record behind you) you can finance your claim on an accrual basis. The accrual concept is becoming increasingly popular as it simply fast tracks cash flow re your R&D capital spend.

In essence, you're recovering a portion of your R&D as you spend on it. That's a solid business premise as most Canadian business owners and financial managers would agree. SRED finance is agnostic to who prepares your claim, if, and it's a pretty basic if, your claim is prepared by a bona fide SR&ED consultant with some level of credentials and expertise. As the majority of SRED consultants seem to work on contingency naturally they are in some ways more at risk than your firm, so it's quite easy via references to find a suitable party to submit your claim.

It's these consultants that address key issues such as technical policies, claim eligibility, expenditures qualifying, etc. Looking for something simpler in the whole SR&ED process? The actual financing of your tax credit! Simple, as we stated. We explain to clients that they should view the process as a standard business application that is secured by the tax credit claim itself.

 

 

HOW DOES SRED FINANCING AND THE ' SR&ED ' LOAN R&D TAX CREDIT WORK? 

Other key aspects of SRED financing? The basics are as follows: 70% loan to value funding for your filed claim. Typically no payments are made during the duration of the loan, and final adjustments are made at government finalization, returning to your firm the balance of 30% less financing costs. Accrual financing for your tax credit claim might be funded at a lower loan to value.

 SR&ED Eligibility - Does your Canadian company qualify for an SR&ED claim? 

KEY FACTS ABOUT THE SR&ED PROGRAM

1. Almost any company can participate in the program - Scientific, medical, technological industries all participate. As long as your work is under eligibility criteria you will be allowed a claim and refund.
2. The program is all about advancing scientific and business knowledge and improving on those processes and products we mentioned previously
3. Many businesses are surprised to hear that the research you do does not ultimately have to be successful ( hopefully it will be ) so success is not part of your refund eligibility
4. Companies, with the help of their SRED CONSULTANT, have to only show their work in enhancing current knowledge levels and how they undertook to face technological challenges
5. At 7 Park Avenue Financial, we work with many firms that file year after year, as well as first-time applicants. Even firms that have filed unsuccessfully in the past can file.

CONCLUSION - SRED FUNDING

Your company should consider the SRED program and financing your claim if you want your firms share of the Billions of dollars that the government pays out annually. In fact, well over 20,000 companies in Canada participate in the program every year! At 7 Park Avenue Financial, we tell clients that the SR&ED program, along with the GOVERNMENT OF CANADA SMALL BUSINESS LOAN program are two of the best government-related programs in business.

The Canada  Government guaranteed loan program is often called the 'SBL LOAN' while SR&ED refers to sr&ed refundable tax credits that can be also financed to accelerate cash flow.

Speak to a trusted, credible, and experienced Canadian business financing advisor and sr ed finance consultant who can assist you with your tax credit finance loan today. Think of that person as part of your total SR&ED process!  Talk to us about Sred financing tax credit sr ed finance consultant implications for your firm.

Click here for the business finance track record of 7 Park Avenue Financial



Stan Prokop 7 Park Avenue Financial/Copyright/2020

SR&ED FINANCING TAX CREDIT LOAN VIA A SRED FINANCE CONSULTANT

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SME Finance, (that’s ' small to medium enterprise ‘), aka ' small business finance ' , in Canada no doubt requires a fix (or fixes?) of some sort. Getting a tailor-made business financing solution for the loans and cash flow solutions you need is not easy, but where there's a will there's a way. Let's dig in.

Alternative financing solutions for small business lending are a new and appealing part of the Canadian business landscape.

 These solutions are of course available to any firm, both public and private, but we're quite sure the majority of firms that use these solutions are privately held.

At a certain point in time, business owners come to that turning point where equity no longer works and debt or cash flow solution decisions around a company loan must be made. Now ' leverage ' seems to make a lot more sense than equity dilution.

Monetizing assets for cash flow, as well as securing working capital allows your firm to consider growth projects to enhance both sales and profits. In some cases you might be making investments in new marketing strategies, in other cases your company might be investing in research and development.  ( Don't forget to check out the Canadian Governments SR&ED Program - and by the way, you can finance those SRED Tax credit refunds !)


Many businesses find themselves in unexpected situations where they have maxed out on the liquidity available to them from current lending sources. That is the time to consider either cash flow or asset monetization solution. Cash flow solutions are best suited to firms that are unable to offer up additional collateral to lenders. They also place much less emphasis on the proverbial ' personal guarantee ' required by almost all lenders when it comes to borrowing in Canada. 


Working capital loans come in two flavours - short term loans that typically are repaid in one year, and of course longer-term loans that typically have a maturity of  3-5 years, and sometimes longer. These short term loans have become very popular with thousands of firms, and are a spin-off of the ' merchant advance ' industry which flowered in the United States and then moved into the Canadian domain.


Whether its a short term loan or one that matures several years out a good lender will work with you to tailor repayments based on your current cash flow inflows.
The danger in working capital type loans comes from how these funds are deployed - typically shorter-term loans should be used to augment your day to day working capital, and they should not be invested in asset procurement/capital asset purchases.


Working capital loans make sense if you have good sales; many firms use this financing simply because they are growing too fast and traditional chartered bank financing is not available. In certain cases, companies may wish to capitalize on short term opportunities that have arisen around inventory volume discounts, or large orders received from new or existing clients.


All businesses that sell on credit carry receivables, and there is a cost to that, as the buildup of both a/r as well as inventory places pressure on the investments you carry in receivables and inventory as sales grow. That's why it is important to focus management on good inventory turnover as well as the prompt collection of receivables, leading to a better ' days sales outstanding - DSO '.

Alternative finance for a small business capital loan and asset monetization from financial institutions is almost always more expensive than bank debt. But from the owner/entrepreneurs point of view working capital and cash flow cost far outweigh equity /ownership dilution - especially for growing firms with promise.

Let us not forget also that even established firms with relatively good financials often can't ' tap ' the financing they need. And going the VC/Private Equity route makes sense only for the smallest % of Canadian business

WHAT COUNTS AS COLLATERAL FOR A BUSINESS LOAN?

Typical collateral for a business loan in Canada revolves around accounts receivable, inventory, and fixed assets. When dealing with a senior lender for business capital they will typically collateralize these assets for securing the loan/financing.

So what are in fact some of those ' tailor-made' solutions that might be highly applicable to your business finance needs when it comes to small business loans  and business lending Canada

 

What types of business cash flow loans can a business use to finance their business?

Factoring

Confidential Receivable Financing

Inventory loans

Bridge loans

ABL loans (non-bank asset-based business lines of credit)

Equipment leases/sale-leasebacks

Unsecured cash flow loans - cash flow based lending

Govt Guaranteed Small Business Loans -  Business loan new business

Sales Royalty Finance

SR&ED Tax credit financing

WHAT IS CASH FLOW FINANCING

Important Point: Owners/ financial managers should understand the following about loans for small business

1. In some cases, these alternative finance solutions can be combined or added on to one another - example: term loan and cash flow facilities

2. In some cases it's possible to have traditional bank financing in place as well as an alternative financing vehicle backstopping your bank facility

3. While the majority of these solutions are almost always used to finance operations and growth it's important to note that they can also be used to acquire a company or to finance management or leveraged buyout

If you're looking for the right ' fix' or a ' tailor-made' solution for your business financing needs in Canada seek out and speak to a trusted, credible and experienced Canadian business financing expert to fully understand the requirements and benefits.





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

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

SME Finance Loans Cash Flow Business Financing Solutions