Your Guide To Asset Based Lending In Canada

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS!

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

Financing & Cash flow are the  biggest issues facing businesses 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

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

CASH STRAPPED? HOW ASSET-BASED FINANCING  SOLUTIONS CAN HELP YOUR BUSINESS GET BACK TO THRIVING!

 

WHAT IS ASSET BASED LENDING - ' ABL '

 

Asset-based lending in Canada is a Canadian business financing solution that provides Canadian business borrowers with a ' one-stop ' solution for their business credit needs line. 

 

BDC defines ABL very simply - ‘Asset-based lending occurs when a loan is granted primarily on the value of the assets the borrower offers as security “

 

Asset-backed lending, called " ABL' for short, it’s a business bank alternative to traditional unsecured loans from banks via the funding of your company's assets - creating greater borrowing capacity for day-to-day operating needs such as payroll expenses. Traditional operating facility advances offer much less borrowing capability in most cases. Let's dig in.

 

ABL solutions provide the borrower with financing based on the value of the assets of the business. Typically these assets include accounts receivables, inventories, fixed assets and commercial real estate if the latter is applicable.  Appraised values for fixed assets facility limits are the benefit of proper asset valuation for more growth financing funding via that greater credit availability.

 

These assets are pledged to secure financing and funding a business in this manner is a popular finance option for Canadian SME borrowers – as it provides access to capital and improves cash flow.

WHY CHOOSE  ASSET BASED LENDING SOLUTIONS

 
Although business borrowing costs are at all-time lows when it comes to cash flow financing, the main reason business owners/financial managers consider asset based credit lines is simply the flexibility and additional borrowing power they provide for specific assets in your business. The asset lender a welcome relief for firms that can't always access any or enough Canadian chartered bank financing via multiple forms of finance solutions such as term loans or business credit lines.

 
By the way, some of the most recognized and large firms also use ABL credit lines if only for the same flexibility they provide. They have made the choice to replace bank borrowing with commercial finance borrowing even though they categorically qualify for bank credit.

WHAT ARE THE BENEFITS OF ASSET BASED LENDING SOLUTIONS IN CANADA?

Asset based lending solutions provide a company with quicker access to capital compared to bank loan decisions which can be time-consuming – That is because loans are based solely on the value of the assets of the business – with less or no emphasis on business credit history – The vast majority of firms using asset-backed lending solutions utilize ABL based on the challenge of obtaining all the business capital they need to run and grow their business.

Additionally, asset based loan solutions are often tailored to the specific requirements of the company – This improved cash flow solution for the business allows a company to pay suppliers and meet short-term working capital needs.

Borrowers in asset based loans should ensure they understand the typically higher cost and the need to work with asset based lenders who can service their market and industry.

 
Sizes of asset-based credit lines range from 250k on the low end to tens of millions on the high end, with numerous players - both Canadian and U.S.-based providing Canadian borrowers with these facilities.

 
ASSET BASED LENDING RATES

Cost is, of course, always a discussion point when it comes to business borrowing. Although large creditworthy firms can borrow almost at the same or better prices than bank offerings the truth is that the majority of loan rates for Asset Credit facilities will always be more expensive.
 
It's a case of balancing costs against the benefits of all the financing you need for working capital and cash flow based on your revenues and assets.
 
As with any type of business financing, you have to balance costs with access to capital and flexibility and the time it takes to get approved. (ABL financing can happen in a matter of a few weeks if the borrower has all the proper up-to-date financials and asset lists)

Interest rates for asset-based lending solutions in Canada will typically range from 8% per annum to 1.5%  per month, and a number of different factors influence final pricing such as:

Transaction size,

Overall credit quality

Whether the ABL lender is a traditional or an alternative financial institution.

 

BRIDGING THE GAP – HOW ASSET BASED LENDING SERVICES WORK FOR SMALL AND MEDIUM-SIZED BUSINESSES IN CANADA

 

FORMULAS FOR ASSET BASED LOANS  CREATE A BORROWING BASE

 

Asset based lending rates are based on the types of assets that are used as collateral for the loan or line of credit –  More liquid assets on the balance sheet provide a higher loan-to-value ratio. Using accounts receivable as collateral for asset based loans is a key use of ABL -

 

Accounts receivable is often the largest current asset on the balance sheet and receivables typically represent the largest cash flow need.  Receivables are typically financed at 90% loan to value, while inventory financing through asset based lending is also widely used;  inventories are also financed based on the overall marketability of the inventory – Most companies have inventory in different stages, such as raw materials, work in process, or finished goods.

 

The uniqueness of an asset-based credit facility is that it can include the unencumbered value of equipment and vehicles owned by the company  - Also,  when it comes to asset based lending for real estate that is company property owned , commercial real estate, if owned by the business, can also be a component of the credit lien facility – or financed separately as a short term bridge loan.

DIFFERENT USES OF ASSET BASED FINANCE

 
In some cases, firms also used asset-based credit to acquire a competitor or re-arrange existing debt.  In other cases, ABL is simply a temporary bridge loan to get your company to where it needs to be without taking on more debt. Business owners/managers quickly pick up that if sales are growing and there are receivables and other assets to back them up, they have just discovered they now have all the financing they need.

 

Many companies find themselves in a cyclical or seasonal industry, placing even more pressure on predictable cash flow.

 
Canadians are always recognized as being conservative - if only for that reason some firms never check out asset-based lending as a good choice for their business - for whatever reason they associate not having bank financing in place with a stigma.

 

Not the case these days as many forms of alternative finance via asset based lenders are in fact the new ' mainstream, including the ability to refinance existing debt around asset lending values based on the true value of business assets.

 

Even some traditional financial institutions have become asset  based lending banks – although ABL bank lenders have a higher credit bar and a much higher minimum borrowing requirement – often starting at 5-10 Million dollars.

 
Let us not forget ratios and covenants. ABL lending is either covenant or ratio light or non-existent. It's your assets that back up the facility - not ratios. Banks love ratios in case you haven’t noticed!

 
In fairness, reporting requirements are often more stringent when it comes to ABL borrowing for asset-based loans. So be prepared to provide updated A/R, inventory and payable agings on an ongoing basis. Monthly is an absolute minimum but weekly reporting might also be required. It's the trade-off you make for the non-bank alternative via asset-based financing and getting a ' covenant light structure ' that appeals to many business owners.

 
CONCLUSION - ASSET BASED LENDING CANADA

"Finance is not the only thing that matters in business, but it is by far the most important." - Peter Drucker

Consider asset-based lending for more business credit availability via a flexible financing solution customized to your business and industry – Reap the benefit of no restrictive financial covenants and access to more capital when executing abl transactions.

If your business is a Canadian SME and you need to finance sales growth or focus on a financial turnaround let asset-based lending solutions help you avoid raising additional equity and avoiding equity dilution in your ownership of your business.

If you're looking for someone who understands cash flow lending and asset-based lenders and your business borrowing needs and you finally want to choose a non-business bank alternative to speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your borrowing needs and help to structure flexible financial solutions.

 

When comparing asset based lending to traditional bank financing businesses can properly assess their capital needs for credit and loan terms that make sense for their business.

 
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK/MORE INFORMATION

 

   
How do asset based loans work?  

 

 In ABL financing lenders consider the value of your business assets and your sales growth which generates accounts receivable. Business assets typically financed by ABL lenders and asset lenders include a/r, inventory, fixed assets and real estate - in some cases intellectual property can be considered in the borrowing facility.  Asset based revolving credit and term loans can fund all types of business assets, not just physical assets.

Those assets collateralize the loan and the emphasis on borrowing power is based on the more liquid an asset is. Asset-based lending examples include margining of receivables in the 90% range, which is higher than unsecured bank financing for accounts receivables via traditional commercial banking. Banks place a large focus on cash assets on hand and operating cash flows.

 
What are examples of asset-based lending? 

Asset-based lending examples include the financing of accounts receivable, inventory, and fixed assets /property and equipment and rolling stock – Real estate can also be financed under asset-based guidelines. Equipment financing is often a substitute for some forms of asset based loans.

 

 What is the Process To Obtain An Asset-based line of credit?

The process to determine the eligibility in obtaining asset-based financing will involve the appropriate due diligence around asset values, financial statement review, and any other issues that are of interest to the asset-based lender around your company or your industry.  Businesses should be prepared to provide year-end and interim financial statements, as well as up-to-date agings on accounts receivable and inventory –

 

A review of that information will allow the ABL lender loaning money  to provide a term sheet/finance offer that includes advance rates, interest rates, and repayment terms and any required minimal financial covenants typical in an asset backed loan which greatly differ from conventional lending criteria to access working capital.

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

Top Funding Options To Buy An Existing Business In Canada

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LOOKING FOR BUSINESS PURCHASE FINANCING?

ACQUISITION FINANCING

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

        Financing & Cash flow are the biggest issues facing businesses 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

 

Unleashing The Secrets Of Successful Business Purchase Financing

 

THE ART OF SECURING FINANCING OPTIONS FOR  BUYING AN EXISTING BUSINESS IN CANADA

 

 

When business owners and entrepreneurs make the decision to buy an existing business they need some solid info about how to finance  the business purchase transfer for the transaction

 

Funding the business venture purchase is a critical part of buying a business  - Acquisition finance comes in the form of owner business equity financing, as well as loans from traditional or alternative lenders - in some cases complemented by seller financing from the business purchase transfer financing final solution. 

 

KEY FACTORS IN BUSINESS ACQUISITION FINANCING include loan terms and conditions and covenants and personal guarantees, as well as repayment option flexibility - as well as the ever-present focus on the interest rate and financing costs and external collateral.

 

Ensuring effective financing for business ownership for existing businesses allows a smooth business transition with funding that allows for repayment and financing costs based on general market conditions as well as loan terms and conditions that meet the buyer's needs.

 

 

Key Factors in Business Acquisition Financing

 
  Loan Terms and Conditions
  Repayment Options
  Interest Rates
  Collateral Requirements

 

So what are in fact the best ways to execute your strategy on business purchase financing? Let's dig in on expert tips for navigating business purchase financing successfully and choosing the right lender and funding source.

 

In many situations, clients tell us they often have the 'inside track' on a business or company that would accept a good offer based on the current situation of the seller. There are of course various reasons for sellers wishing to divest their business - these days succession and management buyouts are popular reasons.

   

3 GREAT REASONS TO PURCHASE AN EXISTING BUSINESS   

Obviously, there exist key reasons why buying an established company is a solid way to execute your business plans and business acquisition loans.  Key factors to consider buying a business often seem obvious -

Existing revenue and profits

Experienced management and personnel already in place

Elimination of start-up risk

Etc. !
 

 

Buying a business is an effective strategy to attract new and additional clients, as well as the ability to expand capacity, operations and headcount - Typically the company is already established and has a reputation in the market, as well as access to suppliers and distribution logistics.

 

SELLER FINANCING - A DIFFERENT TYPE OF FINANCING FOR BUYING A BUSINESS!

In many cases, some seller financing from the current business owner may in fact prove to be critical in financing your deal. Previous owners remain in a subordinate position via what's known as a vendor takeback, and often the skills and expertise of the seller are valuable in the early stages of the takeover. A seller note for  Business purchase financing for small business is often a great way to help close the transaction and has the potential to lower the down payment of the buyer.
 

 IS BUYING  A BUSINESS EASIER THAN STARTING A BUSINESS?  

A debate sometimes exists, but most experts believe it is easier to arrange funding for an established business. When cash flow and sales are positive they play a key role in establishing the ability to repay business acquisition loans of various types. In many cases franchises are part of today's acquiring of businesses - they have brand and reputation already in place. Qualifying for business purchase finance solutions is often recognized as easier than funding a startup. Understanding the process of business purchase finance is key.

 

THE VALUATION OF A BUSINESS - THE KEY TO UNDERTANDING FINANCING OPTIONS TO BUY A BUSINESS 

 

The concept of business valuation is key in purchasing a company. Higher valuations might in fact mean you have to finance goodwill when most lenders prefer asset financing solutions

We should point out that many businesses that are purchased are in some form of ' distress'. Here valuations are often attractive but the buyer must demonstrate confidence around ' the turnaround'. Valuations can be made through the buyer's own expertise, or you can use the services of qualified business valuators.

What are the key issues in valuation and financing? They include:

Quality of financials

Revenue trends

Cash flow and working capital positions (Throwing off cash is better than using cash!)

When we work with clients we spend a lot of time 'normalizing' those financials to ensure the right assumptions and costs are in place. Factors affecting the interest rate and financing costs will revolve around key areas such as debt load,   or the requirement to fund unsecured loans around intangible assets and goodwill or intellectual property, cash flow, and overall profitability.

In some cases, buyers may wish to obtain an independent business valuation and business advice from a third-party professional, which often happens for larger transactions.

 

  

HOW CAN BUSINESS FINANCING BE ACCOMPLISHED  

 

How do you finance a business acquisition in Canada? That's a question we get a lot at 7 Park Avenue Financial. Funds come from your own equity investment into the transaction,  and a combination of a VTB/ Seller financing component, as well as participation from a ban, commercial finance company, or an asset-based lender.  If the target company has enough assets the transaction can be significantly leveraged. Understanding the factors to consider around on funding of the business is key .

 

Business acquisition loan rates vary due to a number of factors - the size of the transaction, the overall credit quality of the target company, management experience, type of financing utilized vis a vis traditional financing or alternative finance.

 

Government SBL loans can also be used to finance a purchase under 1 Million dollars, which is the cap under the program. It is very rare, in fact, impossible to do a  'no money down' transaction in Canada. The 100% use of  ' OPM ' - other people's money simply doesn't happen

 

The Canada Small Business Financing Program is the equivalent of U.S. sba loans '. These loans are commercial loans using bank financing with the majority of the loan guaranteed to the banks and credit unions  by the government of Canada.  Talk to 7 Park Avenue Financial about how we can streamline the loan application process!  Buyers may also qualify for another type of government financing if they can meet bdc loan / bank loan requirements.

 

Business purchase financing for franchises is a popular use of the program .

 

We also prepare a business plan and projections as required by the government program - Our business plans meet and exceed the requirements of bank and commercial lenders.

The bottom line? Business acquisition finance can be facilitated through :

 

Term loans from traditional and alternative lending sources - credit lines , etc

Government loans

Asset-based loans - business asset financing - Alternative lending options for business - The role of business collateral is a key focus in asset-backed lending

Cash flow loans / Mezzanine financing ( when collateral requirements don't meet all the needs )

Seller financing/vendor take back notes to help complete an optimal financing structure

Commercial mortgages for commercial real estate transactions

 

CONCLUSION - YOUR LOAN FOR BUSINESS ACQUISITION NEEDS

 

Acquisition financing allows you to access business capital to purchase an existing business, including a franchise. Proper financing allows you to meet your entrepreneurial goals with the right financial resources tailored to your particular transaction  and will help you maximize the chances of being approved successfully.

 

"The most important aspect of business acquisition financing is to find the right partner to help you achieve your goals and support your vision." - Bill Gates, co-founder of Microsoft   - Let the 7 Park Avenue Financial team be the financing partner you need for your business

 

Speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor with a track record of success in how to finance business acquisitions via business acquisition lenders.

 

 

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

 How do you finance a business purchase? 

 

Buyers finance a business purchase via a combination of:

 

Personal equity injections

Government Small Business Loans

Seller finance

Bank term loans

Alternative lending sources

 

 

How do small businesses obtain financing?

 

Small businesses obtain financing via traditional and alternative  sources of business funding - that includes a bank loan or loan from another financial institution , financing from commercial finance companies as well as the potential ability to access government loans.

 

 

What is business purchase financing and how does it work?

 

Business purchase financing is a type of  commercial financing using a variety of types of loans to buy an existing business - Funds are used to acquire the assets of a business as well as to provide financing for ongoing operations and growth

 

What are the key factors to consider when evaluating financing options for a business purchase? 

 

Key factors to consider in buying a business include understanding the due diligence process around the evaluation of financial statements, operations of the business, as well as the true value of assets. Operational performance as well as existing liabilities of the business are also important to consider.

 

 

What are the risks and benefits of using alternative lending options versus traditional bank financing? 

Alternative lending options versus bank financing often offer faster turnaround approval times with more flexibility around repayment and overall deal structure. Asset-based lenders will often come at a higher cost but have the ability to provide more financing on a transaction. Buyers of a business should compare traditional versus financial institutions such as banks.

 

 

business purchase financing buying existing business

 

 

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

The SR&ED Loan Process - Financing Simplified! Unlock The Benefits Of SR&ED Tax Credits - Cash Flow!

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YOU ARE LOOKING FOR SRED TAX CREDIT FINANCING

INVEST IN R&D WITH CONFIDENCE VIA THE BENEFITS OF SRED LOAN FINANCING

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

        Financing & Cash flow are the biggest issues facing businesses 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

Or Email us with any questions on Canadian Business Financing

                                      EMAIL - sprokop@7parkavenuefinancial.com

 

 

 

THE SECRET TO MAXIMIZING SR&ED TAX CREDIT -  A SHORT-TERM BRIDGE LOAN

 

Is it possible to combine the benefits of SR&ED with the benefits of SRED tax credit financing for an SR&ED loan that makes sense?

It sure is and let’s help you understand some of those basics for Canadian companies. Let's dig in!

 

"The government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." - Ronald Reagan

 

Well,  not Canadian, but Ronald Reagan might have had it right, given Canada's commitment to helping subsidize r&d in Canada. Canada's  Scientific Research and Experimental Development (SR&ED) tax credit are one of the 2 most popular government programs in Canadian business ( the other one is the Canada Small Business Financing  Loan Program !), demonstrating Canada's commitment to helping customers with innovation and economic growth goals under a government incentive program that works.

 

It's important to note that companies who qualify for SR&ED eligibility claims are candidates for the sr&ed loan process to capitalize on government financial incentives - That ability to cash flow their tax credits via the collateral of the SR&ED claim allows a company to receive cash in advance of filing the claim, or even prior to filing their claim based on accrued work in their r&d process.

 

WHAT IS SR&ED TAX CREDIT FINANCING AND HOW DOES THE SR&ED LOAN PROCESS WORK?

 

If you are either filing an SR&ED claim for the first time or if you're a repeat "offender" - translated = you have experienced SRED claim success for years... then why not combine financing power with your claim and recoup your funds faster. In today’s world it seems always about speed it seems, so if the Canadian government is paying you to do research, and you can recoup and deploy those funds even faster by financing your claim, well, why wouldn’t you? Advance funding is always better than waiting.

 

 

HOW DO SR&ED TAX CREDITS WORK? 

 

Companies performing r&d  via the tax credit program can utilize their qualified sr&ed expenditures to access the refundable r&d credit under the sr ed claim process. Canada Revenue Agency/CRA sets some basic requirements for a business to qualify for the tax credit,  It's a 4 part test around ensure that the purpose of the work is focused on new functionality in performance and reliability and quality of the firm's products or services.

 

As well the company must demonstrate the elimination of uncertainty via a process of experiments that are technological in nature.


Our focus here in our shared information is financing your eligible claim... so we assume you are fully aware that if your firm is developing new products and services, manufacturing prototypes, improving processes, developing software, or advancing manufacturing... well ... We think you get the point! This is simply because your firm is a poster boy for SRED financing and an SRED loan and you should be filing to recover in the range of 35-40% of all your expenses.

Your credit is a non-repayable credit, so your ability to monetize your claim and get that cash flow working into your firm's operating cycle is key.

So how can those SRED tax incentives be monetized? Simply speaking it’s the ability you have to use your SRED receivable, because it is an account receivable, and finance it in a manner that you would just as if it were any customer - except that in this case, the customer is a pretty good paying client... i.e. the federal and provincial government.

Sound complicated? Nothing could be simpler. Let’s cover the basic process and focus back in on those benefits.  That cash advance for your r&d refund becomes a predictable source of cash flow without diluting owner equity. A business's ability to manage cash flow is key in early stages, so the ability to ensure cash flow that is recurring under r&d helps a customer grow.
 

 

 

 

HOW DOES THE SR&ED LOAN PROCESS WORK - WHAT STEPS ARE INVOLVED

 

To finance a claim you have to have a claim. It makes sense so far, right? Claims can be prepared by either yourself or someone that is commonly called an SRED consultant. We wouldn’t be perfectly honest by telling you that claims prepared by outside respected consultants carry far more weight than claims prepared internally by yourself or your accounting firm. It’s simply a case of relying on expertise.

 

We're often asked - Do I need a SR&ED Consultant ? That is up to you as the business owner or financial manager when it comes to technical reports and demonstrating applied research - these consultants play a large role in the Canadian sr&ed industry. They assist in preparing claims from a technical content and financial point of view and work closely with Canada Revenue Agency and provincial authorities where required. They play a key role in the sr&ed tax credit calculation work required under the program under CRA SR&ED and sr&ed credits accounting treatment.

 

Consultants in this area can assess claim eligibility as well as helping to file the claim. Consultants with relevant experience in your industry will usually be the best choice - Most sred consultants work on a contingency basis, which transfers the risk of  sred project to the consultant - some firms work on claims at typically accounting firm rates on an hourly basis. Industries that are common for r&d projects include alternative energy, medicine, oil and gas, software, life sciences and environment and renewal energy.

 

 

 

ELIGIBILITY CRITERIA FOR SR&ED FINANCING - DOES YOUR BUSINESS QUALIFY? 

 

What are the eligibility criteria for SR&ED financing and how do I know if my company qualifies?

After your claim is filed you complete a simple financing application consisting of info about our firm, your current financial situation, as well as providing the actual technical claim and tax filing copy. SR ED tax credit financing relies on your claim being filed - in certain special situations you can actually finance the claim pre-filing - but we'll leave that one for another day.

 

 

  

BENEFITS OF SR&ED TAX CREDIT FINANCING VERSUS OTHER BUSINESS FINANCING OPTIONS

 

  
The ability of many firms, particularly start-ups and tech firms that burn through a lot of cash, to recoup SRED funds is a key driver in the whole SRED loan process. Understanding the SR&ED loan process is easy - That cash flow in many cases is seen by our clients as the lifeblood and in some cases the largest amount of cash they will receive in the current year.

Many business owners don’t know that you can file for two years, which of course simply means you’re doubling the amount of cash you can claim and that claim is financeable when it comes to the benefits of sred financing via the bridge loan process.

 

     

COMMON CHALLENGES FOR SR&ED .. AND THE SOLUTION

 

   

Many smaller filings these days for SR&ED claims seem to be coming through faster in the form of cash refunds... If you have a larger or first-time claim it can take many months, potentially calling for a technical review of your project.

  

 

  

HOW MUCH CAN YOU GET FOR YOUR SR&ED CLAIM - UNDERSTANDING THE LOAN-TO-VALUE RATIO & REPAYMENT

  

  

That’s where an SRED loan and SRED tax credit financing come in because 75% of the SR&ED claim is generally advanced in the form of a bridge loan. You make no payments on the loan and the loan is, in effect settled when your final refund comes in from Ottawa. That allows you to utilize those funds for working capital, equipment, ongoing SR&ED work, and just any general corporate purpose.

 

Understanding the eligibility criteria for sr&ed financing and the  sr&ed loan process and how to secure the sred loan is easier than you think - allowing your company to maximize the benefits of sred loan financing at very competitive rates. Canadian banks and traditional financial institutions are not the SR&ED tax credit loan providers in Canada.  And yes, you can finance your claim if you have not filed it yet.

 

Maximizing the sr&ed tax credit financing solution is easier than you think when it comes to fuelling growth -  with funding often provided in a matter of a couple of weeks - Talk to the 7 Park Avenue Financial team about the benefits of SRED financing versus waiting for your tax credit refund. We'll show you easy it is to navigate the sr&ed loan application process.

 

CONCLUSION - GET AHEAD OF THE R&D GAME WITH SRED TAX CREDIT FINANCE TO OPTIMIZE CASH FLOW

Speak to 7 Park Avenue Financial,  a trusted, credible, experienced Canadian business financing advisor in the SRED tax credit financing area.

 

This will increase your chances of a successful and timely approval, with most financings for an SRED loan happening within a 15-20-day period.  That’s an SR&ED cash flow optimization strategy that makes sense for Canadian businesses via innovative funding needs that accelerate one of Canada's best funding programs for business. right?

 

  

 FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION   

 

What is SR&ED financing?

 

SR&ED financing is a tax incentive program under the Scientific Research and Experimental Development program. Businesses that are Canadian-controlled private corporations performing r&d  in scientific or technological uncertainty are eligible to access financial support that helps in cash management in their r&d work.

 

The tax refund is in the form of a refundable tax credit and allows the company to access capital as it strives to overcome a technical challenge in its industry, Eligible expenditures can be financed after claims have been filed, or accrued sr ed work in the current fiscal year and can also be financed for eligible projects.  Focusing on technological advancement and technological uncertainty - with many companies working in software development.

 

WHAT ARE SOME IMPORTANT TECHNICAL TERMS TO UNDERSTAND IN SR&ED & SRED FINANCING

 

There are some key terms that will help business owners better understand the SRED program and the sred loan process -

Eligibility criteria: Companies must meet certain conditions to be eligible for sred approval and sred financing -  The Canadian government provides billions annually under the sr ed program for Canadian and foreign-owned businesses in Canada.

 

Tax Credit: this is a credit against income taxes owing or a refundable tax credit

R&D Activities: research and development activities   is work done in experiment development and investigating and technological development

Claim Preparation:  SRED claims must be filed  under a certain process  that allows a company to receive the tax credit

Tax credit rate: a certain percentage of r&d expenses are eligible for sred

 Loan-to-value (LTV) ratio  SRED Loans are advanced at a value of the total claim and are typically in the 75% range - Loan repayment is structured as a short-term bridge loan with no payments being made during the term of the loan - the loan collateral is the sred claim itself -  In the underwriting process the sr&ed lender asses general eligibility for sred financing

 Underwriting: The process of evaluating a company's financial situation and creditworthiness to determine its eligibility for the SR&ED loan. While there might be other financing options for a company to access capital  ( term loans, working capital advances) these forms of financing can be expensive and can add debt to the balance sheet.

 

What are the requirements for R&D credit?

There are 4 key requirements for Canada's r&d credit - businesses must show a qualified purpose around improving a part of the business through performance, reliability, etc. Additionally, the focus must be on eliminating uncertainty via the process of experimenting in a technological manner.
 

 

 

How much does an SR&ED consultant charge?

 

Sred consultants charge either an hourly rate or in some cases a contingency fee based on a percentage of successful claims of a sr ed refund.Consultants focus on maximizing refunds based upon their expertise in different industries. Claims on contingency avoid the cost and time in preparing claims andhelp to avoid rejection of claims by Canada Revenue Agency. Consultants focus on keeping proper records and providing CRA with the information it needs for the r&d credits.

 

 

Sr ed Tax Credit Financing Sred Loan Solutions

 

 

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

Revolutionary Tax Credit Financing Options You Need To Know About / Unlocking The Potential Of SR ED Loan Financing

 

YOU ARE  LOOKING FOR CANADIAN  SR&ED TAX CREDIT FINANCING! 

SR&ED TAX CREDIT FINANCING - YOUR ULTIMATE GUIDE

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

        Financing & Cash flow are the  biggest issues facing businesses 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

 

 

 

THE SECRET  TO MAXIMIZING SR&ED TAX CREDITS?   FINANCING !!

 

"Development is taking the research and turning it into something useful." - H. Dean Kamen

 

  

WHAT IS SR&ED TAX CREDIT FINANCING  

 

SR&ED (SRED) tax credit financing is a solid strategy used by more and more Canadian business owners and financial managers who wish to accelerate the benefits of Canada’s SR ED program.  Let's dig in on sr&ed tax credit financing options -

 

 Cash flowing, monetizing, or factoring via sred tax credit funding (they all mean the same thing!) your Canadian SR ED claim can accelerate cash flow and working capital for your privately controlled Canadian business that is utilizing SR ED credits under the government's program.

 

"Without financial resources, innovation remains a hobby." - John Doerr

 

In many ways the financing of your SR ED credit actually allows you to maintain your competitive edge, as the combination of your non-repayable tax credit and the immediate financing of it are a ‘double whammy‘ in the face of your competitors who might not use this strategy.

 

 

 

  

  

TURN YOUR SR&ED TAX CREDIT INTO A SOLID SOURCE OF FUNDING FOR YOUR BUSINESS  

  

  

 

A banker we deal with recently told us that current industry statistics show that many companies who are in fact eligible for the SR ED credit aren’t even applying for it, let alone financing it. Therefore when your firm maximizes the total value of your claim and then generates instant cash flow on that claim you are clearly leading the pack in this regard. That's the benefit of sred tax incentive loans.

 

  

HOW CAN I USE SR&ED TAX CREDIT ADVANCES  TO GROW MY BUSINESS  

 

Many clients tell us that they utilize the SR ED funds that they finance to assist in acquiring new equipment that allows them to maintain a competitive edge in their markets. The reality is of course that funds via  SR&ED financing solutions can be used for any general corporate purpose, which might be things such as equipment acquisition, advertising and marketing, reduction in payables or debt, or of course continued investing of even additional research and development efforts.

 

  

HOW DOES SR&ED TAX CREDIT FINANCING WORK?  WHAT DOCUMENTATION IS REQUIRED FOR  THE SR&ED TAX CLAIM  

 

So what is the cash flow and working capital potential in your SR ED, and how do you unlock that potential under the tax credit financing process?

 

If you are already filing for SR ED credits you are no doubt working with the assistance of your client, or, alternatively, someone that is known as a SRED consultant. Having a solid resource in one or both of these parties allows you to maximize on your potential claim. 

 

What is the role of SR&ED Consultants ?  Firms hiring a sr&ed consultant to rely on these experts to hand paperwork and documentation around their project to both identify the project clearly to CRA, as well as document the maximum allowable amount under SR ED - Quality claims will also avoid sr&ed audits by CRA.

Companies complete CRA form T6661 which is the actual narrative around the project and the challenges faced by the business in the sr&ed project.

Once you have filed your claim we recommend that you consider immediately financing the claim. Naturally, you don’t have to do this, and can simply wait the 3-12 months that it might take Ottawa and your particular province to review the claim, adjudicate it, and process it for payment. But, as we state, why not consider financing the claim?

 

  

HOW DOES A  SRED TAX CREDIT LOAN WORK?  WHAT ARE MY SR&ED TAX CREDIT FINANCING OPTIONS?  

 

Clients ask us how the actual process works. It is quite simple really. Your claim is generally financed at 70% of the total value of the amount you and your accountant and consultant have claimed. You can receive cash immediately after it is filed.

 

In certain cases you can actually receive funds for the claim prior to financing – that whole process is called SRED accrual financing. Some of the basic criteria are simply that you must have filed a claim before, have a solid reputable party preparing it, and be prepared to demonstrate good records and accounting around those expenses you are intending to claim.

 

 WHAT ARE THE BENEFITS OF SR&ED TAX CREDIT FINANCING 

 

So how can we summarize in a ‘bottom line' manner? It's simply as follows – you should be filing SR ED claims if you are eligible. On filing you have the option of financing that claim, so you are bringing immediate cash flow and working capital to your firm on funds that are not repayable to the government.

 

Funds can be used for any company purpose, and proper utilization allows you to maintain a competitive advantage over your competitors. That’s using research as a cash flow generator – a solid financing strategy!

 

Financing sr&ed tax credits for startups is always possible, even if you are a first-time filer or pre-revenue/early stage.

 

 WHAT ARE THE INTEREST RATES AND REPAYMENT TERMS FOR  THE SR&ED TAX CREDIT LOAN 

 

Financing rates for Sred Loans are very competitive for this form of non-dilutive financing. No repayment is made during the term of the loan, and loan facilities are closed out when Canada Revenue Agency pays the refund - Loan advances can be made after the business files its claim, or, if the company chooses financing can be approved prior to filing, ensuring a continuous road to cash flow on the claim.

 

Financing your refundable tax credits allows a business performing r&d to generate cash flows which can help the company run on a day-to-day basis as well as grow - all while not having to access additional owner equity and dilute ownership at a critical growth stage in the company.

Businesses can finance claims when they are completed and filed, or a company can choose to fund as they accrue their work in their project .  Most financings are approved within a 2-week period from start to finish via a basic application and information on the company.

 

 

 

CONCLUSION - HELP AND EXPERTISE FOR YOUR REFUNDABLE  TAX CREDIT LOAN

 

Get the cash you need to grow your business with SR&ED tax credit loan solutions. Find out how a SRED loan can help your business thrive in the new economy! Talk to the 7 Park Avenue Financial ( tax credit financing experts )  team about SRED tax credit financing services to grow your cash flow needs via maximizing the benefits of sred funding/tax credit financing as well as other financing options for business to assist in cash flow and cash management in your business.

 

 

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

 

WHAT IS SR&ED

Canada's  Scientific Research and Experimental Development (SR&ED) Program provides investment tax credits via a refundable tax credit to Canadian businesses that focus on r&d.  Companies of all sizes from start-ups to large corporations, and even public companies access the program - Most firms focusing on SR&ED receive a tax refund, and thousands of Canadian businesses access over 3 Billion dollars annually.

 

 WHO IS ELIGIBLE FOR SR&ED TAX CREDIT FINANCING 

 

SR&ED Tax credit financing for SMEs is available for any Canadian-controlled private corporation to claims research and development under Canada's  Scientific Research and Experimental Development (SR&ED) investment tax credit - R&D performed by the business must be done with a focus on the advancement of scientific knowledge and for the purpose of achieving technological advancement in science and industry. Companies that are not private receive a non refundable tax credit to reduce income tax payable in the tax year- i.e. public companies who conduct research around scientific or technological uncertainty.

 

WHAT ARE SR&ED ELIGIBILITY CRITERIA

 

Businesses qualifying for a SR ED refund/tax incentives must be able to prove criteria around technological advancement, and technological uncertainty and be able to provide information around technical content and the processes the business undertook in the research and development.

Project documentation must demonstrate the employees involved in the research and the amount of time spent on the project. The largest portion of any sr&ed claim typically involves wages and payments to subcontractors.

 

Financing via cash advances for the sr&ed claim can be funded via third-party commercial finance companies who fund the tax credit claim either prior to the refund being claimed or after the business has filed its year-end financial statements and documented their evidence-based documentation for innovation the business has focused on in their research and development.

 

 WHAT AMOUNT OF EXPENDITURE CAN BE CLAIMED? 

The amount of eligible expenditures that can be claimed in SR&ED falls under the categories of eligible salaries and wages, payments to subcontractors on the sr&ed project and materials cost pertaining to the sr&ed work under the category expenditure limit. Canadian controlled private corporations, aka "  CCPC's) " claim for specific percentages of these expenditures under the sr&ed expenditures for credit calculation.

Supporting documentation around the qualified expenditures must be kept by the business around actual work completed, people involved in the work and the calculations done by the firm under CANADA REVENUE AGENCY /CRA guidelines.

 

Stan Prokop

How Factoring Finance Works As Your Business Cash Flow Solution / Financial Engineering Via A Canadian Business Funding A/R Strategy

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Oakville, Ontario
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ACCOUNTS RECEIVABLE FACTORING IN CANADA - YOUR GUIDE TO FACTORING RECEIVABLE FINANCING AND WHAT YOU NEED TO KNOW

 

 

  "Cash is king, but accounts receivable is royalty." - Unknown

 

 

Receivable financing in Canada. Canadian business owners seem to have a major point of confusion around  finance factoring and why this form of ' financial engineering ' differs from bank financing. Let's find out why. Let's dig in!

 

 

WHY CONSIDER  INVOICE FACTORING FINANCING  / INVOICE DISCOUNTING? 

 

Growing your product sales/service and profits is job # 1!  When businesses grow they need cash. Your small business cash inflows are tied up in a valuable asset -  accounts receivable waiting to receive a cash payment from clients,  and suppliers who want to ship your product.

 

UNLOCK THE SECRET TO CASH FLOW TODAY

 

Start accessing these funds through custom-tailored financing solutions from accounts receivable financing companies  for fast funding via 7 Park Avenue Financial so we can help make sure all of your funding needs are met without adversely affecting your company's operations or other business loans that are in place.

 

 

 

A/R FINANCING IS SHORT TERM FUNDING FOR YOUR OPERATING NEEDS 

 

An A/R finance strategy is not tied to long-term financing via debt. That, in general, is a good thing, and it delivers constant recurring cash flow and working capital needs for Canadian businesses as you generate sales and receive cash.

 

  

IT IS CRITICAL TO UNDERSTAND THE DIFFERENCE BETWEEN BANK FINANCING AND COMMERCIAL FACTORING SERVICES  

 

At the core of understanding the A/R financing process via factoring is the need to understand the difference between ' assigning ' and ' selling.' When you finance your A/R through traditional bank loans and financial institutions such as a credit union, you provide them with an assignment of your book debts, i.e. your receivable base.

 

UNDERSTANDING FACTORING RECEIVABLE FINANCING

 

In finance factoring from a third-party financial company, the paperwork around your transaction revolves around the general credit strength of your company's customers ( credit checks are sometimes performed ) and the actual sale of the receivable as you finance them via factoring companies. The total amount advanced against a/r when factors buy your financial rights in an invoice  is always more than a bank typical 75%

 

ADVANTAGES OF A/R FINANCING IN CANADA - WHO USES FACTORING RECEIVABLE FINANCE SOLUTIONS

 

What are some of the key advantages of invoice financing utilizing a commercial third-party finance firm vs. a bank? They might include:

 

Constant availability of a positive cash balance as you generate sales-  The company selling its receivables will occur typically within 24 hours of invoicing get paid! Factoring providers have an easy to obtain and very quick approval process around invoice payment

 

The ability to address seasonal bulges in financing needs via a factoring facility

 

A strong balance sheet relative to the amount of cash you have on hand

 

WHAT IS THE COST OF FINANCE FACTORING

 

When we talk to clients about those advantages, the one negative issue in their mind is the higher cost of this method of financing from a factoring company. Remember, though, this higher cost is what we could term a ' rising and falling ' issue.

 

 

5 KEY FACTORS AROUND RATE AND COSTS IN  A/R FINANCE - MAKING THE RIGHT CHOICE FOR YOUR BUSINESS

 

1. The actual costs of factor finance from many factoring companies depend on several key factors

2. How fast you collect your accounts

3. The discount rate at which your sales are purchased,

4. The advance rate on your cash, which is typically 90% of your  a/r balance. (Banks in Canada only advance or allow you to draw 75%) - that's more cash for your day-to-day needs. The remaining balance is in your reserve account, which is paid back to your firm when your client pays, less the ' factor fee' -i.e. the fee the factor takes - typically in the 1-2% range.

5. The invoice value of your accounts receivable is also a factor in your pricing relative to the average size and amount of your invoices and the given period they are outstanding. Good collections = more cash /lower funding fees!

 

All finance terms can vary depending on the variety of issues we have outlined above.

 

Finally, factoring charges are expressed as a factoring fee and not confused with an interest rate - a point often misunderstood.

 

SHORT TERM ' FACTORING LOANS ' VERSUS TERM LOANS

 

Remember also that we spoke of finance factoring as being a short-term day-to-day cash flow solution. Yes, the business owner/manager could, in fact, implement a ' permanent working capital solution, 'which might be a less expensive form of financing, but that typically brings debt to a balance sheet.

But when small businesses weigh the costs of borrowing a large sum for a term of typically 5 years at a fixed rate, you will see that the actual financing costs of a permanent bank term loan are, in fact, significant.

 

Using that example, the business owner or financial manager may well find that receivable financing is, in fact, a better strategy!

 

So it is very important to analyze the actual costs and benefits around either pledging (bank) or to factor (commercial finance firm) your accounts receivable base.

 

Your company also has the option of choosing recourse factoring or non-recourse factoring financing, allowing you, in the case of the latter, to transfer bad debt credit risk to the factoring company if there is a non-payment by your client. Invoice factoring for startups is always available as well.

 

CHECK OUT CONFIDENTIAL A/R FINANCING!  THE BEST FACTORING SOLUTION?

 

Most factoring companies offer only traditional ' notification ' type factor solutions. If you use a confidential account receivable finance solution, you can also avoid any notification to your clients traditionally required by old-school finance factors who require third parties to be notified. Collecting payments remains in your control.

 

At 7 Park Avenue Financial, that is our recommended solution for a/r financing for outstanding invoices you wish to finance for short-term cash needs, solid advance rates, and no long-term contract by the way. That’s a key benefit! Talk to our team about business factoring and financing solutions. Get quick access to cash to keep your business moving forward.

 

DON'T GET CONFUSED BY THE TECHNICAL TERMS

 

At 7 Park Avenue Financial we find our competitors to do a good job of confusing clients with some of the technical terms in receivable finance - Here are some straightforward explanations of some of those terms

 

Lockbox - In certain forms  of receivable finance payments for the company's accounts receivable  are made into a secured account established via the financing company

Credit Insurance -  businesses have the option of taking credit insurance that protects them against losses to due non-payment and bad debt

Factoring Line - A factoring line is similar to a business line of credit and identifies the total amount the factoring company will advance on the business's accounts receivables

Concentration - Some factoring companies are concerned about the amount of financing made available to one single customer when in some instances a large percentage of the company's sales are to one or just a few clients

Factoring Agreement- this is a financing agreement that spells out the terms and conditions around the receivable finance facility - The agreement will identify advance rates, fees, etc,

 

"In a tight economy, factoring can provide a quick source of cash flow to help companies stay afloat." - Tony Robbins

 

CONCLUSION - MAXIMIZE YOUR BUSINESS POTENTIAL BY FACTORING RECEIVABLE FINANCING

 

Seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing engineering around cash flow and working capital and asset based loan solutions.

 

 

 

FAQ: FREQUENTLY ASKED QUESTIONS 

 

What is factoring finance? 

Factoring finance for small businesses is a  type of business financing often used by small and medium-sized businesses to meet immediate cash flow needs.  Using these financing methods a  company sells its invoices (e.g., unpaid customer bills) at a discount for an advance on future payments from those customers without waiting until they are paid in full or have been collected themselves directly -

 

The actual credit history of your firm is less important than the quality of your client base if your customer pays reasonably well to terms. Invoice financing for growth and expansion is available to any Canadian business selling on trade credit terms to other businesses. Trucking companies and staffing agencies are large users of receivable finance.

The transaction makes it easier for sellers to access funds now rather than wait months before collecting their receivables through regular channels.

 

 What is invoice factoring/debt factoring? 

 

Factoring is an alternative form of financing and is a financial transaction ideally suited to small and medium-sized businesses, especially enterprises that do not have a long and established banking record with a major lender.

Factoring is an innovative way for your business to access funds tied up in accounts receivable through cash flowing your sales immediately. You generate revenues without any obligation to do so if funds are not needed for a specific invoice

 

Why choose  7 Park Avenue Financial for your factoring needs?

 

7 Park Avenue Financial offers customized, flexible financing options and is an expert in working capital solutions. We will ensure you have a solid understanding of all available funding for your business and growth strategy priorities without hidden fees, etc. It's a true form of asset-based lending that strengthens your balance sheet, and your business incurs no debt.

Talk to the 7 Park Avenue Financial team about what your cash flow needs are directly related to day-to-day changes in cash needs and when cash reserves are low in your business cycle as specific industries have different funding needs. Find out how a factor provides the cash you need today

 

Who are the parties directly involved in a factoring transaction?

The three parties in a transaction involving invoice financing and factoring services via factor loans are the company selling its accounts receivables, the factor that purchases those receivables and finally, your customer. 

 

 What are the benefits of factoring receivable financing? 

 

The benefits of factoring receivables include the ability of a business to improve cash flow and access funding immediately upon sales made to clients - This financing process improves cash flow and makes cash management more predictable. Companies using traditional notification factoring can utilize the credit risk services of a factoring company.

When a business uses receivable finance solutions such as debt factoring no debt comes on the balance sheet - the business is simply monetizing assets. Businesses that are unable to access traditional financing from banks and other financial institutions still qualify for factoring solutions. Using a/r finance solutions generates cash available to reinvest in the business and take advantage of prompt payment discounts from suppliers

 

 

 What is the difference between recourse and non-recourse factoring? 

 

The difference in recourse and non-recourse factoring facilities revolves around the amount of risk a company wishes to take in accounts receivable as it relates to bad debt and non-payment. Companies using recourse fatoring assume full credit risk for products and services they sell t clients - Non-recoures finance facilities transfer bad debt and collection non-pyament risk to the factoring company - This additional risk is priced into the factoring fee and is more expensive given the higher risk assumed by the finance company. 

 

Businesses can also choose to offset credit risk by insuring accounts receivable via trade credit insurance.

  

 What are the qualifications for factoring in receivable financing?  

 

The qualification for a business to be successful in obtaining a factoring facility revolve around key actors such as the general overall creditworthiness of the client's accounts receivable. The age of invoices is also important, as invoices over 90 days old are not generally considered financeable . Factoring companies also look at overall facility size, invoice volumes and what industry the company is in.

Many firms such as freight companies and staffing and placement agencies are good client prospects for a factoring company, but any company selling on a b2b basis can access factoring solutions, While the client a/r quality for unpaid invoices is the main focus a company must also be generally financially stable and not in a downward financial spiral, Companies should be able to demonstrate they can provide proper financial statements and a generally reasonable debt to equity ration, and accounts receivable agings with accurate invoice documentation for goods and services delivered.

 

 What is the cost of factoring in receivable finance?  

The cost of factoring in receivable finance for financing fees is determined by the accounts receivable financing business/company and is based on a number of factors including the overall size of average invoices and the creditworthiness within the accounts receivables of the business as it relates to how fast customers pay. Companies choosing non-recourse solutions that transfer bad debt risk to the finance company will pay more for that service compared to a traditional business loan bank arrangement, - Miscellaneous fees also must be taken into consideration and include a setup fee, ppsa search fee, etc,  - A/R financing via factoring and accounts receivable firms is a more expensive solution than bank financing and typical rates from an accounts receivable financing company in Canada range from 8% per annum to .75% per month.
 

 

Selective receivables financing is also available for companies wishing to fund a specific or small amount of invoices - this is also known as ' spot factoring ' in the context of receivables financing.

 

 

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