Navigating Business Capital Financing For Business Loans In Canada

 

Tweet

YOUR COMPANY IS LOOKING FOR  BUSINESS CAPITAL FINANCING!

WORKING CAPITAL & BUSINESS LOANS FOR CANADIAN COMPANIES

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

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

 

NAVIGATING THE COMPLEX WORLD OF BUSINESS CAPITAL FINANCING - STRATEGIES FOR THE RIGHT FUNDING FOR YOUR BUSINESS

 

Business capital financing in Canada, particularly in the SME COMMERCIAL sector, often comes with that feeling of ' dark days ' for the Canadian business owner/financial manager.

 

Despite those challenges, there are some great reasons to borrow for your business - we'll cover off 3 of them. Let's dig in.

 

UNLOCKING THE SECRETS OF BUSINESS CAPITAL FINANCING

 

When we talk about business capital financing for clients here at 7 Park Avenue Financial, it's all about the various financial solutions that a business has access to for raising capital and funding. That might include traditional bank financing or the more significant number of newer financing solutions in the alternative lending landscape.

 

 

Financing solutions come with benefits and in some cases, drawbacks - so picking the right  Canadian business financing solution is all about choosing the best financing option for your business - allowing you to focus on job #! -  growth! 

We're focusing in on cash flow solutions, working capital financing and debt financing,

 

While it's debatable how great the current business climate is, many firms are nonetheless able to grow their business these days. Business lending from banks, alternative finance and working capital providers, and others seems to rise.

 

3 REASONS TO CONSIDER BUSINESS FINANCE SOLUTIONS TO RUN AND GROW YOUR BUSINESS

 

So why should the owner/manager consider new or enlarged sources of financing?  Here are our three reasons:

 

1. Today's competitive business environment requires continual investment in your business. Very simply speaking - your competitors are there already for their particular working capital needs

 

2. Timing has never been better - Canadian chartered banks tout SME lending, and alternative finance solutions from niche providers have never been more abundant

 

3. Borrowing rates and costs for both traditional and alternative financing are low and competitive, with the consensus being that rates can only go up in the future. Naturally, though, not all business financing is done at locked-in rates

 

 

HAVE YOU CONSIDERED THE GOVERNMENT OF CANADA SMALL BUSINESS FINANCING PROGRAM 

 

Even the Canadian federal government is willing to step in, having recently revamped the Government Small Business loan program to a certain degree, which guarantees most of your loan to the banks. The government-guaranteed loan's key advantages are still the same - flexible terms, competitive rates, and the ability to finance equipment (new and used) and leasehold. Companies with less than 10 million in annual or projected revenue can apply.

 

The government loan is not a lump sum cash flow loan or line of credit - it's a term loan with typical repayment amortization in the 2-5 year range. To apply for a small business loan under the government program and discuss eligibility, talk to the 7 Park Avenue Financial team. Thousands of firms like yours use small business government loans every year, and Industry Canada, the program sponsor, allocate billions of dollars to the program. New businesses/startups are frequent users of the program.

 

Companies also can review bdc loan requirements around different financing the Crown Corporation offers.

 

 

HOW TO ACQUIRE THE ASSETS YOU NEED TO  RUN  YOUR BUSINESS 

Many businesses require key technology upgrades. It's often a wise choice  .to utilize equipment financing for new or upgrades in computers, software, telecom equipment, and other application software required by your business. How do you acquire assets without depleting day-to-day working capital - There are some solid solutions in acquiring assets that you need to know about!

 

 

  

HERE ARE 6  SOLID BUSINESS FUNDING SOLUTIONS FOR BUSINESS OWNERS   

 

Suppose you believe top experts that business finance capital via small business loans or asset monetization for small businesses is critical to success.

 

 BEYOND BANKS - EXPLORE ALTERNATIVE BUSINESS CAPITAL FINANCE SOLUTIONS   

 

Exploring options such as:

 

A/R Financing / accounts receivable finance

 

Asset-based business credit lines

 

Cash Flowing of SR&ED tax credits

 

Inventory Finance

 

Sales Financing/ Royalty Finance

 

Sale leasebacks

 

Equipment Leasing

 

All are potential solutions to your capital conundrum. By the way, debt and asset monetization strategies don't dilute equity!

 

  

IS THERE ONE BUSINESS FUNDING SOLUTION FOR ALL YOUR BUSINESS GROWTH NEEDS

 

  

There's often no one solution to all your business needs, and the ultimate solution is a ' cobbling together' of various solutions to match your overall financial strategy. You want a solution with repayment terms/ interest payments tied to your needs and designed to help you grow your products or services.

 

  

CONCLUSION - UNLOCKING THE SECRETS OF BUSINESS CAPITAL FINANCING OPTIONS  

 

As your business grows, you will always need additional business capital to finance your business operations. That might be investing in new equipment or technology or adding staffing. Focus on the right financing solutions  and access the capital at the right interest rate you need to grow and thrive.

 

Both traditional business loans and lines of credit to the broad spectrum of alternative financing solutions and funding options for the financial management of your business. Understanding debt financing, working capital loans, equipment financing, and other commercial loan options with interest rates and repayment terms suitable for our business and meeting your unique needs.

 

 

With knowledge and expertise, the bottom line can more easily eliminate those ' dark days ' often associated with business financing and succeeding in business loans of all types. Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can assist you with your loan and asset monetization needs.

 

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

 

What are the main types of business capital financing available, and how do they differ in terms of interest rates, repayment terms, and eligibility requirements?

 

The main types of business capital financing via sources of finance include financing from traditional financial institutions such as banks that provide term loans and lines of credit. Alternative financing options include invoice factoring, merchant cash advance / short-term working capital loans via online lenders, and other alternative financing options such as non-bank asset-based lines of credit and tax credit financing solutions.  The eligibility requirements for each type of financing vary based on creditworthiness, interest rates, and repayment terms.  Some companies may wish to explore a loan to buy a business

 

 

What are the most common reasons that businesses seek out additional financing, and how can business owners determine which type of financing is right for their specific needs?

 

Businesses seek additional financing for a number of common reasons - Which include the ability to meet short-term cash flow needs as well as acquiring assets and technology to grow and expand the business. The key factor that determines the ability of a business to acquire the capital it needs is the overall business creditworthiness of the company - in some cases in small business financing solutions, the credit score of the business owner determines loan approval .. In all cases, the amount and purpose of the funding and repayment ability will affect the ability of the company to get the capital it needs.

 

 

 What are the risks associated with business capital financing, and how can business owners minimize those risks while still securing the funding they need to grow and expand their businesses?

 

 

Risks associated with business capital financing include the ability of the business borrower to meet repayment terms without defaulting on a business loan - For that reason, business owners and financial managers must assess their cash flow and repayment ability, as well as ensure the business does not take on too much debt financing. In every business capital borrowing transaction interest rats and fees should be assessed in terms of being manageable for the business. Business finance advisors can assist in making informed decisions around financing options best suited to the business.

 

How do you qualify for a BDC loan in Canada?

To qualify for BDC loan financing in Canada different factors are assessed by the business lender. Key factors in loan approval include BDC's overall assessment of business viability based on a review of financial statements and other key business information. The credit history of the owner as well as the cash flow viability around the repayment of loans is also assessed. In some cases in some types of loans collateral may be required, and owners must demonstrate an equity commitment to the business.

Other factors include general economic trends in the industry and an assessment of growth and long-term profit potential.  The business experience of the owner is also reviewed.

BDC financing options include term loans, working capital loans, as well as a venture capital division within the bank.
 

 

 What is a working capital financing policy? 

A working capital financing policy reflects a company's ability to manage short-term operating and finance needs- The working capital of the business is funding required to cover those day-to-day business needs around wages, suppliers, and other short-term obligations.

A good working capital policy will target the minimum capital the business needs to meet day-to-day operating needs through financings such as bank loans, business credit lines, and supplier trade finance terms. Companies manage risk in these areas by maintaining cash flow projections, as well as having an effective credit and collection policy around risk management in account receivables and inventories,

Effective working capital policies maintain liquidity in the business and minimize risk while allowing the company to grow sales revenues and profits.

 

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

 

Unlock Working Capital with Sale Leaseback: The Lease Back Bridge Loan For Business Needs

 

Tweet

 

YOUR COMPANY IS LOOKING FOR A SALE AND LEASEBACK SOLUTION!

Working Capital Woes? Sale-Leaseback Financing Can Bridge the Gap

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

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

 

BRIDGING THE GAP WITH SALE-LEASEBACK FINANCING - UNLOCKING THE VALUE OF BUSINESS ASSETS

 

A Sale-leaseback strategy, if executed properly, is a classic refinancing scenario.  In this financing arrangement, a business sells an asset/assets and then leases it back - this provides valuable working capital that frees up the equity that was in the asset - This type of ' bridge loan' provides needed liquidity for the cash flow/business needs of the company via short terms loans that are strategically structured around immediate business needs.

 

A CREATIVE FINANCING SOLUTION FOR WORKING CAPITAL NEEDS

 

Leasebacks can be accomplished via business asset or real estate financing solutions for a property sale and leaseback lease financing or under various asset-based lending solutions in corporate financing In Canada.  Sale Leasebacks provide business liquidity without the company considering additional capital investment or debt financing as part of its financial planning for additional financial flexibility. The equity release in the refinanced asset is a solid alternative financing option for many businesses.

 

How does the lease back work as a finance source, and whether it’s a bridge loan or finance lease, what are the key benefits and mechanics of this financing solution when you might be at your borrowing limit?

 

 

WHY A LEASEBACK - EVALUATING THE PROS AND CONS OF BRIDGE LOAN 

 

 

It greatly appeals to small and middle market companies looking for business financing options, a financing rate, and lease terms that match their particular needs when they don't have access to more sophisticated capital markets and still want to keep the utility value of assets in question. In some cases, this type of transaction allows cash distribution to the owner/owners. Let's dig in.

 

 

WHY CONSIDER THIS TYPE OF FINANCING -  LEASEBACK BENEFITS FOR EXPANSION AND GROWTH

 

Sale leaseback transactions are typically utilized when a firm such as yours is looking to generate cash proceeds and working capital from unencumbered business assets and who at times are unable to access bank financing from business credit markets while giving you at the same time bargaining power regarding your assets.

 

These assets on the balance sheet can be almost any tangible asset, including trucks/vehicles, real estate assets, technology, shop floor equipment, etc.  In the case of real estate it's an alternative to mortgage financing. An owner-occupied real estate investment is a great investment to keep for the long term. They still have operating value to the firm. Proceeds of a company sales transaction bring value back to the balance sheet.

 

 

 

HOW DOES SALE LEASEBACK WORK? 

 

The legalities of the transaction are simple. As the owner of the asset, your firm sells it back to a leasing company. That creates a lease financing (or, in some cases, a bridge loan) which not makes your company the lessee or borrower in the transaction as part of a short-term or long-term lease agreement.

 

 

CASH GENERATION / MAXIMIZING LIQUIDITY 

 

Naturally, the key benefit of the deal is your ability to generate cash from the deal, while at the same time using the asset to hopefully generate profits and operational efficiencies within your firm at a time when all the bank credit you need is not available.

 

DETERMINING TRUE ASSET VALUE

 

A key factor in the whole transaction is, of course, the value of the asset. As we've experienced over the years business owners tend to place a higher value on the asset or assets in question as opposed to the lender!  So how then is this problem or challenge addressed?

 

POTENTIAL NEED FOR AN APPRAISAL

 

Typically the answer is a third party appraisal. Larger sale-leasebacks are rarely consummated without an appraisal. In years gone by, lenders were skeptical of this method of refinancing simply because they viewed it as a ' cash grab ' by the customer.  These days, when properly structured and valued, it’s a solid mechanism of refinancing that, more often than not, makes a lot of sense when it comes to a tailored lease payment to your cash flow via market lease rates, etc.

 

FINANCING ALTERNATIVES

 

Companies looking at financings such as a  mezzanine debt financing tool from alternative finance and mezzanine lenders will generally find that sale leaseback transactions are less costly and extension options deliver maximum flexibility in areas such as lease expiration.

 

  

THE IMPORTANCE AND VALUE OF APPRAISALS  

 

A common mistake many business owners and financial managers make is to solicit an appraisal on their own looking for greater value in the asset. That problem complicates two main things -

 

Lenders like their own appraisers, not yours!

 

Dollars can be spent on the wrong type of appraisal (there are three types)

 

Obviously, the best solution is when you and your lessor or lender agree on who will be performing good due diligence efforts via the appraisal, and what type is mandated for a timely investment decision and an offer price acceptable to both parties. The three types of appraisals include

 

FAIR MARKET VALUE VIA MARKET RESEARCH

ORDERLY LIQUIDATION

FORCED VALUE LIQUIDATION

 

Lenders and lessors will more often than not  ' go conservative ' on the asset and focus on the dollar value of the orderly and FLV asset liquidation prices. Because most (not all) lessors and lenders don't have significant asset expertise in diverse industries they want to know they can be disposed of an asset quickly in a worst-case scenario, even a real estate asset.

 

That worst case is of course a business failure. Equipment proceeds and real estate proceeds can bring significant cash to the balance sheet via sale leaseback proceeds. In the real estate this scenario for property owners will be more expensive than mortage rates but less expensive than mezzanine finance - these days any basis points make a difference. 

  

 

  

DO YOU NEED A BUSINESS PLAN?

    

 

For certain transactions, it might be appropriate to have a business plan in place - particularly more significant transactions where your firm is trying to position the true value of a transaction. 7 Park Avenue Financial prepares business plans that meet and exceed bank and commercial lender expectations.

 

SALE AND LEASEBACK ADVANTAGES AND DISADVANTAGES

 

Sale-leaseback financing brings immediate benefit in the form of cash flow and working capital from the equity in business assets and or real estate. This short-term infusion of cash allows businesses with assets/equity ownership to maintain the use of the assets while gaining access to business capital. Due to the specialized nature of these financing options, sale-leasebacks come with various tailored terms and structures customized to the needs of the business borrower.  Assets that were originally financed at high-interest rates can be refinanced in a lower-rate environment.

 

It's important to note that a leaseback or bridge loan has some tax purposes and accounting implications, so generally, sale-leaseback accounting should be reviewed with your financial team or 3rd party accountant. In some cases tax savings and book values of assets will come into accounting play.  When it comes to financing rates the interest rate on your transaction will vary with transaction size and overall credit quality of your company and the asset/assets.

 

CAPITAL VERSUS OPERATING LEASES

 

There are two types of leases in Canada - capital and operating. Operating leases are less in vogue due to international accounting standards being rewritten. So most often, the sale-leaseback/bridge loan is constructed as a full payout capital lease with fixed interest rates and monthly payments. The bottom line is still the same - new cash on your balance sheet.

 

 

In a small number of cases, equipment already under the lease can be refinanced also, although this is not really a classic leaseback... it’s just refinancing an unencumbered asset such as real estate or equipment. In some cases, an alternative to the lease back is to simply pledge the asset or asset in question under another type of financing arrangement, depending on overall credit strength.

 

  

CONCLUSION - UNLOCKING WORKING CAPITAL WITH SALE-LEASEBACK FINANCING

 

  

Our bottom line for the business owner looking to benefit from some asset company sale transaction?  Let this method of refinancing existing assets make sense for your firm when the planets align relative to asset value, cash needs, your growth objectives and accounting sense and as an alternative to mezzanine capital.

 

 

If you are forced to maximize liquidity with sale-leaseback financing arrangements, speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your refinancing needs - it's a great short-term solution to a long-term problem of capital structure and your company's balance sheet.

 

  

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

 

What is sale-leaseback financing, and how does it work as a bridge loan for working capital?

 

Sale-leaseback bridge financing is a business financing solution whereby a company can sell business assets or property it owns and then enter into a leaseback transaction structured as a   term loan or lease; the equity in the asset allows the company to receive cash for short-term funding to cover operations or other business needs from appropriate bridge loan lenders or other alternative lenders.

 

 What are some of the risks associated with using sale-leaseback financing as a bridge loan for working capital?  

Business owners should consider any risk involved in sale-leaseback financing/bridge loans. In certain situations, the terms of a transaction can be regarded as onerous as it relates to interest rates and financing costs. Additionally, companies should consider the potential depreciation of the asset or assets being refinanced. A default in the leaseback arrangement could trigger business disruption and risk losing required assets. Bridging loans can be accessed much more quickly than financing from traditional financial institutions such as banks - Financing can also be used to retire government super priorities.

 

    

What is the main advantage of a bridge loan?   

 

 

 

The main benefit of bridge debt financing is that bridge loans typically can be accessed relatively quickly. Borrowers in some cases, may pay high-interest rates, but most bridge loan structures are typically short-term loan structures with some associated closing costs and an origination fee.  Typically a bridge loan is not a long-term financing solution - allowing the company instead to meet some urgent current expenses.

 

 Are bridge loans/leasebacks expensive? 

Bridging loans can be expensive as a typical leaseback/bridge loan might include an interest rate as well as an origination fee or closing fee - It is important to note that bridge finance solutions such as the leaseback are usually short-term financing solutions with a goal towards a long term financing permanent solution that might be more traditional. The rate of interest in a bridge loan lease solution might be either a monthly payment structure or; interest will accrue with no monthly payment or interest payments under a balloon loan type structure,

 

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

How To Finance Your Business With an SR&ED Tax Credit Secured Loan SR&ED Tax Credit Financing - Cash Flow For Your Innovation

Tweet

HOW SR&ED TAX CREDIT SECURED LOAN FINANCING CAN DRIVE YOUR INNOVATION AND GROWTH

 FUNDING YOUR SR&ED ( SCIENTIFIC RESEARCH & EXPERIMENTAL DEVELOPMENT ) CLAIM

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

Let us help your firm just like our hundreds of other satisfied clients.

        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 government's role should be to facilitate entrepreneurship and capital formation, not stifle them with regulations and unnecessary barriers to entry." - Charles Koch

 

 

WHAT IS A SR&ED TAX CREDIT LOAN FINANCING FOR INNOVATION? 

 

SR&ED credit is treated as a future receivable, and businesses are provided with an advance loan (a cash flow facility). Businesses can draw down on this funding, to provide themselves with general working capital within their business.

 

Let's investigate how unlocking funding opportunities via sr&ed secured loans can drive your company's innovation!

 

This means they have the opportunity for improved liquidity at crucial moments of need, such as when there’s too much fluctuation in available funds or when companies are experiencing sudden growth due to increased market demand.

 

FUEL YOUR  BUSINESS GROWTH WITH INNOVATIVE FINANCING

 

To qualify, your firm should have an eligible claim, typically prepared by a ' sr&ed consultant', and be a private company in a pre-profit financial status.

 

The most significant upside that comes from SR ED program tax credits being treated like a pre-payment option via a sred tax credit secured loan? It offers better protection against fluctuations in revenue streams.

 

  

MAXIMIZE THE TRUE VALUE OF YOUR R&D CREDITS - LEVERAGING SECURED LOAN FINANCING FOR CASH FLOW  

 

In today's quickly changing and highly competitive business environment, the key to success is innovation. And when you're an innovative company with a great product or service that could be so much more if only you had enough money for it - then our SR&ED financing just might be your answer!


The Canadian government has invested in research & development (R&D), which means they are willing to support innovators like yourself who want their products developed further but don't have the cash needed for investment tax credits.

 

This funding will allow businesses of all sizes and stages better access to reliable capital at affordable rates while providing them complete flexibility by not tying up any collateral or equity stake from investors

 

  

WANT TO FINANCE YOUR SR&ED TAX CREDIT BEFORE YOU FILE? THINK OF IT AS YOUR SR&ED LINE OF CREDIT!   CAPITAL AS YOU NEED IT!  

 

 

Just as sr&ed financing is non-dilutive when it comes to not having to dilute or raise additional equity funding, your sr&ed claim in advance of filing is a tremendous cash management tool.   A simple application process allows you to access your refundable sr&ed tax credits while conducting ongoing research before filing your claim.

 

That allows you to accelerate funding and manage cash flow needs in the business to fund day-to-day operations and ongoing research.

 

The process is simple! .. Allowing your company to access investment tax credit financing for work you have accrued and documented on your sr&ed claim.

 

 

WHY SR&ED? WHAT ARE SR&ED TAX CREDIT INCENTIVES?

 

Research and development (R&D) is a huge part of a company's success. Canadian businesses can use the SR&ED tax credit program to help conduct research, develop new products or processes, and improve existing ones. The SR ED refund tax credit loan in Canada provides funding for companies that are conducting qualifying R&D activities such as: 

 

 Product development & testing;

 Process improvement, including automation;

 Designing equipment needed for production, such as machines or computer software

 

and more!

 

Companies can also apply this money towards owner salaries responsible for the work being done on these projects. If you have questions about how to claim your SR&ED expenses under the tax credit program, contact 7 Park Avenue Financial!

 

 

CAN YOU UNLOCK THE VALUE OF YOUR SR&ED CREDIT? 

 

Can you finance your Canadian business by monetizing an SRED tax credit secured loan? Absolutely, positively... maybe. We say maybe because if you don’t have an SR&ED tax credit, then it is of course not possible. However, if you participate in Canada's primary R&D tax credit refundable tax credit program, you're potentially on your way to increased cash flow and working capital.

 

 

 

 

WHAT IS SR&ED FINANCING? 

 

One of the biggest problems in small businesses is that they accumulate SR&ED tax credits over a long period, but there can be months or years before you submit your return to  CRA CANADA REVENUE AGENCY.

 

This means it's difficult for companies with tight cash flow issues and operating costs to access this money while waiting on potential refunds from the government because some funds are tied up until returns are submitted. Let the 7 Park Avenue Financial team show you how a company like yours can access advances against their accrued or filed! .. SR&ED credit investments as collateral instead of having this key receivable sitting idle- not making any interest gains!

 

 HOW FAST IS IT TO RECEIVE YOUR SRED FUNDING? 

 

SR&ED Financing can be structured in several ways.. It can come as a bridge loan from filing your SR&ED claim until you receive your refund checque from CRA. However, you can also get a cash advance as early as 3 months into your tax year - more than a year before filing for most claims if you have some historical claim experience.

 

 

Recent articles in the Canadian business press have criticized the need for the government to even further increase these tax credits. Typically most Canadian business owners and financial managers think that the SRED tax credit applies only to manufacturing, which is the farthest thing from the truth.  A recent article in the Globe and Mail, one of Canada's premier business publications, stated clearly that firms in the resource, services and technology sectors also participate vigorously in the program. 

 

If your firm innovates and spends money on R&D, the last thing you can be criticized for is under-investing in your future. Therefore monetizing your tax credit after it is filed (it can also be cash-flowed before filing in certain circumstances) makes excellent financial sense.

 

Is monetizing your tax flow credit risky in any sense of the word? Our clients hardly think so, as you are simply 'cash flowing', or 'discounting' your claim today, and you are not even adding debt to your balance sheet. Consider the SRED credit as a current asset; it’s a receivable, and you are simply collateralizing a bridge loan against your SR&ED claim.

 

SR&ED tax credits are more often than not prepared by an external consultant, although some firms choose to prepare the claim itself - we suspect it's because they think that they have a better handle on the nature of the claim. The reality is, however that you gain an additional 'brownie point' - if we can call it that by having the claim prepared by a professional SRED consultant.

 

Many firms in Canada aren’t aware that these consultants will even prepare your claim on a contingency basis - so if they are prepared to take the risk of time and expense on your claim, you can quite rightly assume they feel it will be approved, as professionals rarely choose to work for free!

 

While the Globe and Mail survey indicated that 70% of Canadian businesses thought the tax credits currently in place were not as generous as they thought they should be, let's be honest and can't we agree that receiving  40-50% back of every dollar you spend on R&D isn’t that bad of a start! And if you can turn your spent funds into instant cash flow by monetizing your claim, doesn’t that give you a leg up on your competition? We certainly think so.

 

  

 THE SRED APPLICATION PROCESS MOVES QUICKLY    

 

Cash for research tax credits is not a complicated process. A short overview is as follows - have your claim prepared in a manner that suits the government’s current filing process. File your claim with your tax return.

  

 

  

MANAGING YOUR CASH FLOW THROUGH THE SR&ED CYCLE!

    

 

If your business has an investment in research or technology, SR&ED funding can act as a continuous positive cycle. As you grow and continue to invest in R&D, the financing will flow back into more innovation under those tax incentives and help your competitiveness around the commercialization and monetizing of your products or services  - so if your company hires an additional programmer, as an example, with SR&ED loan approx. 33% of their wages are added to a larger tax credit at the end of the year! At  7 Park Avenue Financial, we think that's good business!

 

 

"Governments don't create jobs; entrepreneurs do." - Mitt Romney

 

 

CONCLUSION - SECURING SR&ED TAX CREDIT FINANCING FOR YOUR R&D PROJECTS

 

Speak to   7 Park Avenue Financial, a trusted, credible and experienced business financing advisor who will work with you to complete an SRED financing application - it is not dissimilar to any other business financing application you have ever filled out. Include your SRED claim as additional back up, as it is in effect the collateral for your SRED loan. Claims can be financed in two to three weeks after basic due diligence.

 

Financing SRED puts you in line with other firms to get your share of the 3 Billion (yes that’s billion!) dollars of non-repayable cash grants. Turning your claim into a cash infusion makes great sense if you are a small to medium-sized firm needing additional working capital.

Monetizing your claim will drive cash flow, which will undoubtedly inspire your firm to further innovation.

 

A FINAL TIP?

 

Be proactive about SR&ED to avoid headaches. Use SR ED financing strategically to ' bridge the gap ', overcome funding challenges, and maximize growth and funding opportunities. Canadian start-ups, early-stage firms, and pre-revenue companies can access sr&ed bridge loans and take advantage of government incentives / financial assistance.

SR&ED is a lot of work and a commitment  - and if you proactively track your expenses, then it becomes easier when filing taxes because you can get quarterly advances on accrued SR&ED instead of waiting for the CRA's refund checks that can take up many months from the start date or often  9+ months from the fiscal year-end filing of your claim and year-end tax filings.

 

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

 

  

What is the Canadian R&D Tax Credit  

 

For many Canadian companies, the SR&ED investment tax credit (commonly also referred to as shred credits) is a cash flow saviour. With 35%+ of eligible expenditures reduced in taxes or paid out in cash for Canadian controlled private corporations (CCPCs ) - the combination of federal and provincial programs allows firms to recoup up to 55% of r&d capital spent.

 

Canada Revenue Agency / CRA funds over 20,000 claims annually for billions of dollars in total - In 2021 alone, those fundings totalled almost 4 Billion dollars!  For companies not using  sr&ed finance solutions for funding sred credits, the process involves filing the r&d claim annually in connection with the business's year-end financial statement filing.

 

CRA reviews those claims and, over a period of months, processes and or audits claims. The waiting period for many firms restricts cash flow owing to the firm under the investment tax credit.

Canadian businesses view the sr ed program as a valuable part of the research and innovation process in Canada and the government's investment in the program helps foster innovation and makes research and development more accessible.

 

What are SR&ED Tax Credit Incentives?

 

Canada's Scientific  Research and Experimental Development Program .. aka  ' ' SR&ED "  is an investment tax credit program which helps businesses in every sector of the Canadian economy to conduct r&d.   The incentives can be a refundable tax credit or a deduction against reported income for technical challenges documented under program eligibility.

Privately owned ( i.e. non-public) companies, individuals, partnerships, and trusts can qualify for eligible credits under the tax incentive program.

  

 

What type of work is eligible under SR&ED  

Categories of work under the SR ED Program include :

Basic research

Applied Research

Experimental Development

 

Questions in areas such as " did the effort involve formulating a hypothesis specifically aimed at reducing or eliminating the uncertainty .."  is a cornerstone of the program

Supporting documentation in these three areas might include operations research, computer programming/software development, collection of data, and testing.

Items not eligible for sr&ed tax credit claims are items such as market research, quality control,  and exploration  and drilling in areas such as mining and oil

 

 

What is the CRA SR&ED Self-Assessment Tool? 

Canada Revenue Agency provides a self-assessment tool that helps companies determine if the r&d work they do qualifies under sr&ed. It allows a company to do preliminary calculations around the amounts that might be eligible for sr&ed claims and provides tools for assessing the documentation and information the company may need to support a sred claim around the firm's work in scientific or technological uncertainty.

 

 

What are the benefits of financing sr&ed tax credits 

The benefits of financing a sr&ed tax credit claim include the ability to access capital and additional funding for a business, as well as reducing the financial risk around research and development initiatives. Properly structured sr ed bridge loans improve cash flows and offer opportunities for additional growth and innovation in a business. 

 

Companies benefit from the fact that no loan payments are made during the loan's duration and the simple application approval process around financing sr ed claims under a sr ed project.

 

 

 

 

 

 

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

Unlocking The Benefits Of Receivable Financing & Invoice Factoring In Canada Invoice To Cash - Your Guide To Factoring & A/R Financing In Canada

Tweet

YOUR COMPANY IS LOOKING FOR RECEIVABLE FINANCE!

 

HOW INVOICE FACTORING COMPANIES ( CANADA ) WORK

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

 

 

ACCOUNTS RECEIVABLE FACTORING & FINANCING IN CANADA - YOUR GUIDE TO HOW IT WORKS AND WHAT IT COSTS 

 

 

Considering Receivable Financing in Canada? If you are, your thoughts and answers on two questions should help you out quite a bit when it comes to invoice factoring in Canada.

 

HOW CAN  MY BUSINESS IMPROVE CASH FLOW?

 

One of our favourite business writers recently focused on cash flow management and asked the following 2 questions -

 

1. Does your firm need cash right now?

2. Do you know what your cash balance needs will be a half year from now?

 

The fact that you are even considering an invoice factoring company/factoring fund in Canada suggests your business might be facing cash flow challenges or perhaps that you're smart enough to address a future problem now!

 

 

WHAT IS FACTORING 

 

The basics of factoring finance are easy to understand - setting up a factoring facility allows you to, at your choice, sell invoices to an invoice factoring company, reducing your receivables and adding immediate cash flow to your balance sheet.

 

The ' sale ' is made via a ' fee, 'not an interest rate. It is typically  .75%-1.25% / mo - the fee varies via several factors, including the size of your facility, overall quality and collectibility of the receivables, industry credit risk, etc. - For example, construction industry factoring might be viewed as having more industry risk.

 

Although some business owners consider the whole process as ' factoring loans, ' the reality is that you are simply accelerating a collected account receivable's cash flow benefits. That ' invoice purchasing ' allows you to turn your company into a cash flow machine at your option.

 

 

WHAT IS THE DIFFERENCE BETWEEN INVOICE FACTORING VERSUS ACCOUNTS RECEIVABLE FINANCING?

 

Invoice factoring agreements stipulate the actual sale of outstanding receivables to factoring companies, which are usually independent non-bank commercial finance companies - On the other hand receivable financing as working capital and cash flow management solution use the accounts receivables of a business as collateral to obtain financing.

 

Banks offer unsecured loans via receivable financing solutions, and they typically register a general security agreement on the business's assets. So the receivables are assigned to the bank under this arrangement. Both factoring and a/r financing provide valuable business funding, and each method of small business financing has its advantages and disadvantages.

 

HOW DOES INVOICE FACTORING / ACCOUNTS RECEIVABLE FACTORING WORK IN CANADA? 

In Canada the invoice factoring company has a credit agreement with the customer to purchase invoices at a pre-agreed discount - In traditional ' old school ' factoring many factoring companies also assume the collection role in the funding process. When a client pays the company for the invoice the factoring company charges a fee on the invoice value and sends the company the funds less a fee for financing the invoice when the customer pays -

 

The benefit is that companies can receive cash flow immediately on generating sales of products and services to their customer.  Many factoring companies use invoice tracking and automation systems to fund client transactions.

 

  

 

IS INVOICE FACTORING AND RECEIVABLE FINANCING A GOOD OPTION FOR YOUR BUSINESS?  

 

Both invoice factoring and accounts receivable financing are solid credit risk management and cash flow solutions for small business financing in Canada. Businesses can improve cash flow and focus on collections management while obtaining cash advances for invoices before payment by the end user customer. 

 

However, business owners must weigh the benefits and drawbacks of these financing methods while considering issues around fees, interest rates, and credit risk.  Working with banks and reliable factoring companies is vital in assessing this method of Canadian business financing.

 

THE DIFFERENCE BETWEEN FACTORING AND  OTHER RECEIVABLE FINANCING

 

It's more of a technical issue that shouldn't concern business owners. Still, the paperwork around ' factoring' invoices an agreement to ' sell receivables ' - whereas using a bank credit line as an example, the bank holds security against the receivables because you ' assign ' your a/r to the bank under a traditional business loan arrangement - Somewhat much ado about nothing.

 

 

IMPORTANCE OF CASH CONVERSION CYCLE / OPERATING CYCLE

 

A/R finance allows you to address what's going on with your firm’s working capital rapidly. And by the way, it puts you in control, which you might not be feeling now regarding your firm's overall cash/ business cycle. When we meet and talk to clients quite often, it’s clear they don't necessarily feel in control of their finances.

 

When you can exert control over your cash with a receivable financing strategy, all of a sudden, the uses of cash seem a lot clearer. You can now make or take on new lease payments or reduce debt in other areas such as accounts payable. Keeping those suppliers and preferred vendors on the side is important, pretty well all the time!

 

 MAXIMIZE CASH FLOW VIA FAST FUNDING OF YOUR SALES REVENUES 

 

Let's cover some basics regarding invoice factoring in Canada, also known as invoice discounting. First, it’s a business-to-business financial strategy, so it doesn't really work in a Business to Consumer environment. (By the way, if you are selling into a retail environment, then a merchant cash strategy which finances future retail sales might work for your firm, but we digress...!)

 

WHAT DOES INVOICE FACTORING COST

 

The costs of receivable financing in Canada vary greatly, and it’s probably our most significant discussion point when we explain to clients the benefits and costs of an A/R finance strategy. 

 

What is important here is that you understand that the cost factor around receivable finance, in fact, is the costs you are bearing now, except that now you're winning, and using this financial solution allows you to win.

 

Business owners and financial managers must understand that  overall financing costs take into account a variety of key factors - Some of those factors include:

 

Overall creditworthiness of your client base

The size and the monthly volume of invoices to clients

In some cases, certain industries are major users of factoring - i.e. trucking/staffing companies, distributors, etc

 

 

Factoring costs are expressed as fees, not interest rates, and some factoring companies charge miscellaneous fees around applications, funds transfers, etc

 

On-balance factoring is more expensive than traditional bank accounts receivable financing but provides access to unlimited cash flow that otherwise might not be available from Canadian banks.  Startups in the Canadian economy can also access this method of financing, and firms can benefit from credit insurance and non-recourse financing programs.

 

The cost of receivable financing has to be benchmarked against two or three critical points you might not be considering. One is that you are already in the banking business, whether you like it or not because you are carrying your customers 30, 60, or 90 days already.  Congratulations on doing a great job in growing your client's cash flow - although that’s probably not your goal, right?

 

  

USE THE POWER OF RECEIVABLES FINANCING TO TAKE ADVANTAGE OF GROWTH FINANCING OPPORTUNITIES  

 

Secondly, you are potentially missing the opportunity to grow your business because of the cash flow constraint that invoice factoring in Canada solves under the challenge of carrying a company's accounts receivable investment.

 

At 7 Park Avenue Financial, we work with our factoring clients to ensure they understand the fees and cost of a/r financing and how they can benefit from this type of financing; focusing on a prompt collection of your invoices always reduces your costs of financing  - and we are not big fans of misc fees, set up costs, and locked-in contracts.

 

Our most recommended and successful a/r finance solution is  CONFIDENTIAL RECEIVABLE FINANCING, which allows you to bill and collect your own invoices and receive all the benefits of traditional, dare we call it  ' old school '  Canadian factoring companies.

 

If you want to learn more about invoice financing, how it works, what it costs, and the best facility out there when it comes to being 'in control,' then seek and speak to a business financing expert today.

 

You'll then see clear answers to those two nagging questions: Do you have enough cash today, and will you be able to address your cash needs a half year from now?

 

  

CONCLUSION

Invoice factoring allows your company to fund outstanding invoices via a third-party financing company in exchange for immediate cash, less a feel  Companies accessing receivable financing post their invoices as collateral for an invoice factoring loan/line of credit facility. Managing working capital and accessing business capital are key benefits of these methods of financing sales.

 

Factoring invoices is a solid solution to the cash flow problems of small and medium-sized businesses -  using financing companies in Canada for working capital increases cash, and as cash is added to the balance sheet, no debt is taken on by your company - you are simply monetizing your 2nd most liquid current asset - accounts receivable ( Cash is your most liquid asset !!  ) - In most cases, receivable financing is complementary with other lenders your firm utilizes for banking, loans, leases, etc.

 

Factoring receivables via a factored invoice program in Canada should not be confusing for your cash flow needs. Speak to 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can assist you with your cash flow needs.

 

 

  

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

 

 

How does a business qualify for accounts receivable factoring? 

 

To qualify for accounts receivable factoring, a business must be able to meet specific lending criteria in the invoice discounting/factoring process -

1. Factoring is based on the general creditworthiness of  the customer of the businesses, so clients must generally be stable and have reasonable payment track records

2. Factoring is on a B2B basis and factoring does not apply to individuals - Government Receivables qualify for financing

3. Unpaid Invoices eligible for financing must be less than 90 days old -  invoices older than 90 days are generally deemed uncollectible by the accounts receivable financing company

4. Certain factoring companies may require a minimum of monthly or annual sales to ensure factoring makes sense for the factoring company from a cost and time perspective

5. Receivables  must not be encumbered by liens or other financing arrangements with other bank financing or a business loan from other  business lenders

6. Companies must acknowledge in the factoring agreement with the invoice financing company  the advance rates and fees under invoice financing for small business

 

 

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

ABL Lending And Current Asset Based Loan Rates Make Impossible Financing Possible

 

Tweet

YOUR COMPANY IS LOOKING FOR  AN ASSET BASED CREDIT FACILITY!

ASSET BASED LOANS AND LINES OF CREDIT IN CANADA

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

 

"Unlocking Your Business's Potential with Asset-Based Lending in Canada"

 

ABL lending means different things to different business people. So asset based loan rates differ, but in our context, we are talking about a working capital credit facility, in effect a ' business line of credit ' that is a solid alternative to traditional Canadian chartered bank facilities.  And as thousands of business owners and managers have discovered - they can often make the impossible... possible! Let's dig in.

 

 

 

WHAT IS ASSET BASED LENDING?  YOUR COLLATERAL IS CASH IN ALLOWING YOUR BUSINESS TO THRIVE!

 

ABL (' asset based lending’) credit lines secure your business's assets and turn them into a working capital and cash flow facility via comprehensive financial solutions tailored to your business needs.

 

The most common physical assets financed under ABL include inventories, accounts receivable, and fixed assets - and asset based financing may also often include real estate. Asset based lenders establish a monthly borrowing base against your assets, allowing you to draw down on funding needs for day-to-day operations.

Accounts receivable inventory lines are your most liquid assets and are the main types of funding in asset-based loans, but all assets on the balance sheet are eligible and used as collateral.

 

  (When real estate comes into lay in a business credit line, it's in effect the business version of a homeowner line of credit - the infamous ' HELOC’ that millions of Canadians borrow under.) But we digress because we're talking ' BUSINESS'! at 7 Park Avenue Financial

 

 

 

THE SMALL TO MEDIUM SIZE COMPANY WILL ALWAYS HAVE A FINANCING CHALLENGE  - WHY  ' ABL ' IS CANADA'S HIDDEN FINANCING GEM!

 

While public companies seemingly have access to more credit, Canada's SME sector often struggles with raising capital or monetizing assets. Enter ABL lending, which is a strong alternative to bank financing. The banks offer ABL lending; they're not big on TV commercials for this specific business borrowing product. The reasons for that we won’t explore today.

 

 

  

WHY BORROW UNDER ASSET BASED LOANS  

 

Why do companies consider borrowing under asset-based loan rates and facilities? While the predominant reason seems to be the bank credit alternative, it's also a solid way to increase borrowing power via business collateral value or finance a merger and acquisition or management buyout via monetizing assets. It is sometimes used to pay down other debt when that makes sense.

 

 

 ABL DELIVERS MORE BORROWING POWER  - MAXIMIZING LOAN-TO-VALUE RATIOS FOR ASSET BASED LOANS IN CANADA

 

We referenced more ' borrowing power '. That's because 99% of all ABL lending provides stronger margining of receivables via accounts receivable financing and inventory, typically 90% and anywhere from 30-80%, respectively. And when the business owner or the financial manager throws fixed assets into the borrowing mix, increased cash flow ability happens. The type of asset and the value of the asset determines your final facility line.

 

  

 LARGE CORPORATIONS USE ABL ALSO!   

 

While we reference ABL finance as predominantly used in the SME COMMERCIAL FINANCE sector, it’s also used by some of Canada's largest successful and well-known public and private corporations.  Typically large retail chains use the inventory finance component of ABL as their working capital facility, given they have no receivables as retailers are an ' all-cash ' business.

 

  

THE COST OF ASSET BASED LENDING VERSUS BANK FINANCING  

 

While Asset-based non-bank financing rates are almost always (but not all the time), higher current rates are coming down and provide even more consideration to consider this type of financing for credit approval. So while Canadian business financing needs tend to gravitate by instinct to ' the bank,’ the business owner and financial manager should not forget that bridging assets into cash is also provided by ABL lending.

The asset based lender will perform the average level of due diligence to establish lines of credit that are custom-tailored to your company and industry. The interest rates on ABL loans are higher, and the final interest rate will be based on overall credit and asset quality.

 

 

  

CONCLUSION - SECURED BUSINESS FINANCING OPTIONS IN CANADA  

 

"The only way to permanently change the temperature in the room is to reset the thermostat. In the same way, the only way to change your level of financial success 'permanently' is to reset your financial thermostat. But it is your choice whether you choose to change." - T. Harv Eker

 

At 7 Park Avenue Financial we think Mr. Eker had it right - it just might be time to reset your financial thermostat regarding business financing and financial success!

 

So if you want impossible financing made ' possible ' regarding business credit lines, seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with a feasible finance solution.

 

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

 

 

What is asset-based lending, and how does it work in Canada?

 

Asset-based lending is a type of business financing where companies pledge business assets as loan collateral - ABL lenders then provide term loans or lines of credit financing based on loan-to-value ratio calculations on the assets that are pledged - Asset-based lenders have formulas in place based on how liquid assets such as receivables and inventory value for borrowing purposes, - Asset-backed financing, has less focus on cash flow financing offered by banks, so financing options to access more business capital and borrowing money are much more accessible.

 

 

How does asset-based lending compare to traditional loan options in Canada?

 

When comparing Asset-based lending rates to traditional loan options from financial institutions such as banks, interest rates on ABL business financing facilities are typically higher, although not always. While traditional loans focus on financial metrics such as past credit history and financial performance, profitability, balance sheet ratios, and external collateral ABL lending solutions focus on secured lending based on sales and asset values of the business. In almost all cases, businesses borrowing money under ABL will access higher loan amounts and borrowing capacity due to higher loan-to-value ratios than an unsecured bank loan.

 

 

What are some best practices for managing pledged assets in asset-based lending agreements in Canada?

 

Borrowers accessing financing under asset-based lending agreements should ensure they have a clear understanding of the loan agreement. In general, all business assets are pledged as collateral under an ABL facility. Businesses should ensure they prepare and maintain up-to-date financial statements and agings of accounts receivable, accounts payable, and inventory lists. Equipment and fixed assets secured under the facility should be adequately maintained.

 

 

How does asset based lending work?

 

Asset-based lending works because business borrowers can secure financing based on their sales revenues and physical assets as collateral for a business loan structured as term loans or business credit lines - Typical assets under asset-based lending borrowing include accounts receivables, inventories, and fixed assets/property plan and equipment - If companies have commercial real estate that can be financed separately or under the credit line facility.  ABL lenders use different methods of valuing a  company's assets, such as market value, net orderly liquidation value, etc.

 

Why do businesses choose asset-based lending over unsecured loans?

 

Businesses will choose asset-based lending over an unsecured loan when they cannot access all or any business financing from traditional financial institutions such as banks - As well, more capital and additional working capital can be accessed through ABL borrowing, so companies that cannot meet traditional borrowing criteria around cash flow and profit and debt to equity ratios can access financing otherwise not available - Asset-based lending loans are typically specifically tailored to each borrower concerning repayment. ABL lending is known as ' covenant light ' with fewer financial covenants typically demanded by banks. Existing assets, such as eligible accounts receivable, will have an 80-90% borrowing value. Financing accounts receivables via factoring is a subset of asset based lending.

 

 

What type of due diligence does the asset-based lender perform?

 

 Asset-based lenders focus on the valuation and marketability of balance sheet assets that are used as borrowing collateral under credit facilities - In some cases, it will benefit both the lender and the borrower to have an asset appraised and inspected.  Traditionally financial analysis is also typically performed around financial statements and other business and industry issues. Adequate due diligence will ultimately determine the loan amount and interest rates associated with the transaction.

 

 

 

What are asset-based lending rates in Canada? Comparing asset-based loan rates in Canada to Traditional Loan Rates

 

Asset-based lending interest rates in Canada vary for a variety of factors. Some factors include the actual business assets being financed and collateralized and the borrower's overall business credit quality. Most rates under ABL lending fall between  8%  per annum to 1.25%  per month. Some banks offer asset-based lending solutions at rates slightly higher than traditional bank borrowing. The size of the transaction will also be a factor in determining rates, fees, and other miscellaneous financing costs. Asset based lenders in Canada may include foreign-owned banks and commercial finance companies. The impact of creditworthiness on asset-based loan interest rates in Canada is less significant than the type and value of assets being financed.

 

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