Alternative Financing For Business Cash Flow In Canada

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS!

Improve Cash Flow Instantly: The Power of Alternative 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?

CONTACT:

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

 

 

 

Accounts Receivable Factoring In Canada 

 

Alternative business financing for some folks might mean thoughts of their ' first trip to the rodeo '.

 

Not us though, so we're sharing some of the best invoice factoring company cash flow solutions for immediate financing for your sales revenues that are available in Canada today.

 

INTRODUCTION

 

Factoring is an alternative financing solution that addresses the cash flow struggles of business owners.

It allows businesses to convert the investment in accounts receivable into immediate cash, providing a boost to positive cash flow and supporting ongoing growth and business needs.

Traditional financing options often fall short for businesses seeking working capital, particularly small to medium-sized enterprises and SME companies in Canada help power the economy.

Financing receivables in different ways available offers an attractive alternative, enabling businesses to cash flow their accounts receivable.

 

  

WHAT IS FACTORING?  

 

Factoring is a financial transaction where a business sells its accounts receivable to a third-party factor at a discounted rate. This provides the business with immediate cash instead of waiting for customers to pay their invoices.

 

The factor takes over the responsibility of collecting payment from customers, allowing businesses to access funds for expenses, growth initiatives, and maintaining cash flow. Factoring is well-suited for industries with extended payment cycles, such as manufacturing, wholesale, and transportation. It enables businesses to unlock the value of their unpaid invoices and convert them into working capital, addressing their financial needs.

 

Many private companies in search of SME COMMERCIAL FINANCE solutions have the one prerequisite for this type of financing: Sales and a customer base!  These firms often cannot secure funding from what we term ' traditional banks  ' because they can't satisfy some of the basic criteria for bank loans and business revolving credit facilities to draw funds

 

. An investment in a/r will find the business needs large amounts of cash if cash flow decreases drastically, or the time period for a relatively low level of cash flow lasts long.

 

 

 

ACCOUNTS RECEIVABLE FINANCING - BACK TO A HEALTHY BALANCE SHEET! 

 

Therefore invoice discounting becomes a logical and readily available solution for the business owner as your firm receives cash for a significant portion of the invoice value ( typically 90% ) before customers pay. This funding option is preferred by many businesses because it does not involve a long-term commitment.

 

 

WHAT ARE THE BASIC REQUIREMENTS IN ORDER TO GET A FACTORING FACILITY IN PLACE 

 

Those requirements? Strong financial statements, assets, collateral, cash flow, and positive credit history. Have we forgotten anything? Yes, that focus is on personal guarantees.  (Note - Personal guarantees are a part of almost any financing for small to medium businesses - but with Canadian banks, they are a key focus point) Due diligence is often completed very quickly via an efficient application process.

 

FACTORING VERSUS TRADITIONAL FINANCING OPTIONS

 

While factoring offers numerous benefits, it's essential to understand how it compares to traditional financing options from traditional financial institutions such as Canadian banks.

Here are some key differences:

 

1. Creditworthiness: Unlike traditional financing options that prioritize a strong credit history and collateral, factoring relies on the creditworthiness of customers. This enables businesses with imperfect credit or limited assets to still access capital through factoring without collateral or emphasis on personal guarantees.

2. Time to funding: Traditional financing methods via banks and business-oriented credit unions involve lengthy application and approval processes, causing delays in accessing funds. In contrast, factoring offers immediate same-day cash as a company generates sales revenues, ensuring quick and seamless access to working capital via a streamlined financing process.

3. Debt vs. sale: Traditional financing involves taking on additional debt with interest charges and repayment obligations. Factoring, however, entails selling accounts receivable without incurring debt or interest charges, providing businesses with cash reserves and funds without adding to their debt burden. No debt comes onto the balance sheet!

4. Credit management: With traditional financing, businesses must handle credit and collection processes themselves. Factoring allows businesses to outsource these tasks to the factor, saving time and resources. Past due payments in excess of invoices older than 90 days cant be financed as they infer uncollectibility.

5. Funding limits: Traditional financing options often have funding limits based on collateral or creditworthiness. Factoring provides funding based on the value of accounts receivable, allowing businesses to access a larger amount of capital. As a company grows the factoring facility grows also.

 

 

WHAT ARE COMMON MISCONCEPTIONS ABOUT FACTORING RECEIVABLES?

 

Factoring, despite misconceptions, offers several benefits that debunk common misunderstandings about funding receivables -

1. Factoring is not only for struggling businesses: Factoring is utilized by successful businesses of all sizes as a strategic tool to manage cash flow and support growth. It is suitable for startups as well as well-established companies across various industries. Some of the largest businesses in Canada utilized this method of financing - Larger corporations call it securitization!

2. Factoring is cost-effective: While factoring involves fees for the funding of the unpaid invoice, the value it provides in terms of improved cash flow, working capital access, and outsourced credit management often outweighs the cost. Additionally, factoring can help offset expenses by taking advantage of early payment discounts from suppliers.

3. Control of customer relationships is maintained: When partnering with a factoring company that offers non-notification a/r financing businesses retain control of their customer relationships. The factor acts as a financial partner, not a customer service representative. Businesses can continue to communicate with customers and uphold existing relationships.

4. Factoring is a proactive financing solution: Factoring is not a last resort but a proactive approach to financing. By leveraging accounts receivable, businesses can access the capital in their business bank account at their current financial institutions - no need to change banks! - Allowing the business to capitalize on opportunities and achieve growth objectives. Factoring empowers businesses to take control of their cash flow and drive profits and growth.

 

 

 

WHY A/R FINANCING WORKS!

 

Why does accounts receivable financing, aka ' invoice factoring' work so well then? For one reason it's because your clients are often broadly diversified and represent a good credit risk to the lender in terms of diversification. Firms whose client base includes larger well-known companies find themselves in even better shape when it comes to negotiating receivable finance rates and terms.

 

WHAT IS  THE BEST A/R FINANCING SOLUTION?! - SPOILER ALERT - ITS ' CONFIDENTIAL'

 

Our recommended solution in this whole area? We thought you would never ask! It’s CONFIDENTIAL RECEIVABLE FINANCING – Allowing your firm to bill and collect its own invoices, thereby financing all your sales, with no notification to any supplier, client, etc.! Check it out. The factoring fee is also very competitive.

 

Firms that are ' service ' firms find themselves even in greater need than typical mfg type companies. That's because one of their prime expenses is payroll which creates a high cash flow need, coupled with the fact that they don't have a heavy investment in fixed assets, inventories, or other collateral. In the cases of ' tech ' firms, their assets might in fact often be the intellectual property of intangibles such as software, etc.

 

Even if your clients are overseas/international those receivables can also be financed under a factoring solution by adding a credit insurance component to your borrowing facility as a strong add-on tool for a  small business expanding internationally.

 

  

  

  

 

 WHY DO COMPANIES UTILIZE INVOICE FINANCING?        

 

If there is one reason (among many) that thousands of business owners/financial managers utilize invoice factoring / A/R financing is that it's fast and flexible. In the case of growing companies, the problem is even more basic:

 

Their revenues are growing faster than their access to credit lines!

 

Why does the factoring company itself like your business? Simple! They aren't lenders per se, they don't offer business debt, they are simply purchasing your receivables on an ongoing basis in order to provide your firm with the working capital it needs. No new debt comes on your balance sheet.

 

Unlike our regulated Canadian banking system factor firms don't have any of the legal or regulatory issues that challenge major Canadian financial institutions such as banks and insurance companies.

 

  

CASE STUDIES AND SUCCESS STORIES   

 

At 7 Park Avenue Financial, we've worked with numerous companies that have utilized an a/r financing solution or a full-service asset-based lending line of credit -

 

1. Company A, a manufacturer in the industrial equipment sector, overcame cash flow challenges by utilizing factoring. The immediate cash obtained from factoring invoices allowed them to meet supplier payments and invest in new equipment. With improved cash flow, Company A experienced significant growth, fulfilling larger orders and expanding its customer base.

2. Company B, a transportation company, utilized factoring to address fuel costs and payroll challenges arising from delayed customer payments. Financing receivables allowed the company to secure immediate cash flow and utilized it to maintain its fleet, cover expenses, and hire additional drivers. This improved capacity and cash flow positioned Company B as a reliable and competitive player in the transportation industry.

3. Company C, operating in the staffing industry, faced payroll obligations due to lengthy payment terms from their clients. By partnering with a factoring company, they accessed immediate cash for their invoices, ensuring timely payment to their employees. This improved cash flow allowed Company C to attract more clients, expand its workforce, and diversify service offerings.

 

 

 

The bottom line - any company selling business to business with valid accounts receivables for products or services delivered can benefit from accounts receivables financing.

 

 WHAT INDUSTRIES USE FACTORING AS A WORKING CAPITAL SOLUTION? 

 

Factoring is a versatile financing solution that can benefit businesses across various industries. Here are some examples of industries that can leverage factoring:

 

• Manufacturing: Factoring helps manufacturers bridge cash flow gaps caused by long payment cycles, enabling timely payment to suppliers and investment in production capacity.
•  
• Wholesale: Wholesalers can utilize factoring to access immediate cash for invoices, ensuring a continuous flow of working capital to restock inventory and meet customer demand.
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• Transportation: Factoring assists transportation companies by providing immediate cash for invoices, allowing them to cover expenses, invest in equipment, and expand their operations.
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• Staffing: Factoring supports staffing agencies in meeting payroll obligations by offering immediate cash flow, ensuring timely payment to employees and attracting new clients.
•  
• Construction: Factoring benefits construction companies by providing immediate cash for invoices, ensuring timely payment to subcontractors and suppliers, and facilitating the pursuit of new projects.

 

 FACTORING AS A GROWTH STRATEGY?

 

Factoring offers small businesses a powerful growth strategy by unlocking the value of their accounts receivable. Here are ways in which factoring contributes to the growth of small businesses:

1. Increased working capital: Factoring provides immediate cash flow, enabling small businesses to cover expenses, invest in marketing and sales, and pursue growth opportunities.

2. Improved cash flow management: Factoring bridges the gap between invoicing and customer payments, ensuring a consistent cash flow. This helps small businesses meet financial obligations, pay suppliers on time, and maintain a healthy operation.

3. Ability to seize opportunities: Factoring provides working capital that allows small businesses to seize growth opportunities. This includes investing in equipment, hiring staff, and expanding into new markets.

4. Outsourced credit management: Partnering with a factoring company allows small businesses to outsource credit management tasks. The factoring company handles credit evaluation, payment monitoring, and collections, freeing up resources for core operations and growth strategies.

 

  

 

KEY TAKEAWAYS  

 

Factoring offers several key advantages that make it an attractive financing option for businesses:

1. Improved cash flow: Factoring ensures a steady stream of working capital and cash flow by providing immediate cash for invoices, allowing businesses to meet short-term business needs and financial obligations as well we investing in growth opportunities.

2. Access to working capital: Factoring is accessible to a wide range of businesses, providing them with access to working capital that may be unavailable through traditional financing options.

3. No debt on the balance sheet !: Factoring involves the sale of accounts receivable, not taking on additional debt. This means businesses can access funds without incurring interest charges or repayment obligations.

4. Outsourced credit management: Factoring companies offering traditional a/r factoring handle credit evaluation, payment monitoring, and collections, saving businesses time and resources to focus on core operations.

5. Flexible financing solution: Factoring can be customized to fit the specific needs of each business, offering ongoing working capital or a one-time boost as required.

6. Potential for growth: Factoring unlocks the value of accounts receivable, providing funds for investments in equipment, staffing, and market expansion, fueling business growth.
    

  

  

 

CONCLUSION - RECEIVABLE FACTORING    

 

Factoring is a powerful alternative financing solution that provides numerous benefits to businesses of all sizes and industries.

 

It improves cash flow, offers access to working capital, provides outsourced credit management, and enables growth opportunities. By unlocking the value of accounts receivable, businesses can overcome cash flow challenges, invest in expansion, and achieve growth objectives.

 

It is important for businesses to carefully assess their needs and consider options like factoring, supply chain finance, or PO financing to support their growth and success. The ultimate goal is to choose the financing solution that aligns with their specific requirements.

 

Financing via a factor solution is a strong viable alternative for Canadian businesses that cannot access traditional bank financing. It's a solution that monetizes assets and brings cash, not debt to the balance sheet. The ability to convert sales into cash immediately is a key differentiator of this type of business capital solution.

 

If you’re tired of chasing down financing solutions that make the best sense for your firm and industry call   7 Park Avenue Financial,  a trusted credible and experienced Canadian business financing advisor in alternative funding who can assist you with your cash flow and factoring company needs via a wide array of finance solutions.

 

  

  

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION    

 

What is factoring and how does it work?

Factoring is financial transactions when firms sell their receivables (also known as invoices) to other parties at a discount. Account receivable finance is a definition that describes a type of investment in credit to customers. Factoring is an excellent alternative form of financing to complement your cash flow needs supplied by factoring companies and some factoring loans via online lenders. 

Alternative financing options such as a/r financing provide businesses with funding by allowing a business to sell its outstanding receivables.

It can be especially beneficial for businesses that have not been in business long and may lack business assets and an established credit history with traditional lenders, but still need some way to get paid immediately as a firm generates sales. The application process is typically easy compared to traditional financing via banks, etc.

The personal credit score of the business owners is not a key factor in factoring finance approval for a factoring agreement. Some factoring firms provide online lending solutions for invoice factoring, similar to online loans for short-term working capital. Companies qualify for invoice factoring based on the value of their receivables.

 

The working capital loans differ because they are term loans in structure and are sometimes also known as a merchant cash advance,  which can come with high-interest rates, unlike when a business sells unpaid invoices for factor finance funding according to payment terms provided to their clients for approved invoices.

 

This ongoing access to cash flow via a factoring service is key to the benefits of commercial funding of a/r via invoice factoring companies. Late payments from clients are a negative cash flow factor that factoring solves without long-term contracts. Most startups can also use this method of financing as an alternative to a business loan/bank loan.

 

Factoring companies provide an affordable and flexible alternative to traditional financing for companies that have good gross margins.  Factored invoices allow small businesses without long-established banking records to have the opportunity for working capital. The Commercial Finance Association is the industries trade association for asset-based lending and factoring in the U.S. and Canada.

 

 What is alternative finance? 

 

Alternative finance refers to forms of financing outside the traditional financial system and Fintech is a category in alternative finance improving on these methods. Alternative finance is an ecosystem of companies, technology, and processes that aims to improve traditional methods for financial transactions.

These non-traditional methods are used to fund enterprises with firms that have the software and back-office functions for business funding.  Fintech solutions allow other companies to finance operations successfully when traditional financing may not be available.

 

 What is invoice factoring, and how does it work?

 Invoice factoring is a type of alternative financing where a business sells its outstanding invoices or accounts receivable to a third-party company, known as a factoring company. The factoring company pays the business a significant portion of the invoice amount upfront, providing immediate cash flow. When the factoring company collects the full payment from the customer, it then pays the remaining balance to the business, minus a fee for the service.

 

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

 

 In recourse factoring, the business agrees to buy back any invoices that the factoring company cannot collect payment on. It's the most common type of factoring, as it limits the risk to the factoring company. Non-recourse factoring, on the other hand, means that the factoring company assumes most of the risk from customers who don't pay their invoices. The terms of non-recourse factoring can vary, and not all factoring companies offer this type of factoring due to the increased risk.

 

 What are some benefits of invoice factoring?

 

 Invoice factoring offers several benefits. It provides businesses with immediate access to cash, which is especially beneficial for small businesses that may struggle with cash flow due to long payment terms. It also often comes with easier approval than traditional bank loans, as the factoring company bases its decision primarily on your customers' payment history rather than your credit score. Other benefits include outsourcing accounts receivable activities and maintaining good customer relationships as the factoring company handles collections.

 

What are some disadvantages or risks associated with invoice factoring?

 

 Despite its benefits, invoice factoring comes with potential drawbacks. The cost can be higher than traditional financing, with fees often ranging from 1 to 5% of the total invoice amount. The factoring process also requires the business to depend on the payment habits of its customers, which could affect the cost of factoring. Other challenges include the potential loss of control over customer relationships and the risk of being unable to recoup costs if customers don't pay their invoices (in the case of recourse factoring).

 

 What are some alternatives to invoice factoring?

 

There are several alternatives to invoice factoring, including supply chain financing and purchase order (PO) financing. Supply chain financing allows businesses to assume the credit profile of their customer, often leading to lower interest rates and fees. PO financing provides funding to fulfill specific purchase orders, which can be beneficial for businesses facing cash flow constraints due to large or unexpected orders.

 

 How does factoring work? 

 

The process of factoring is relatively straightforward. Once a business decides to factor its invoices, it enters into an agreement with a factoring company. The business submits its outstanding invoices to the factor, which then evaluates the creditworthiness of the customers and determines the amount it is willing to advance.

Upon approval, the factor typically provides an immediate cash advance of around 80% of the invoice value. The remaining 20% is held in reserve and released to the business once the customer pays the invoice in full, minus the factor's fee. The factor takes on the responsibility of collecting payment from the customers, saving the business time and resources.

Factoring is a flexible financing solution that can be tailored to the needs of each business. Some factors offer recourse factoring, where the business is responsible for buying back any uncollectible invoices. Others offer non-recourse factoring, where the factor assumes the risk of non-payment. This allows businesses to choose the option that best suits their cash flow needs and risk tolerance.

 

What is the role of Fintech in alternative financing in Canada

 

Technological advancements have expanded the options and accessibility of alternative financing for businesses. Some of these ' equity oriented ' solutions include -

1. Peer-to-Peer (P2P) Lending: P2P lending platforms connect lenders directly with borrowers, bypassing traditional financial institutions, and how this form of alternative financing works.

2. Crowdfunding as a Financing Option: Different types of crowdfunding (donation, reward, equity, and debt)  are available and businesses can choose to investigate how these platforms can be used to raise funds for businesses.

3. Venture Capital and Angel Investing: While very few businesses are eligible for this type of equity financing many tech companies are potential candidates if they can demonstrate high growth and traction

4. Understanding Merchant Cash Advances:  a merchant cash advance is a short-term working capital loan on an installment-term loan basis

5.  

 

What is the difference between Invoice Factoring vs. Invoice Financing

 

Although invoice factoring and financing may seem similar, they operate differently. In invoice factoring, the factoring company takes ownership of the invoices and handles the collection.

In contrast, invoice financing provides a business with a cash advance, with the invoices serving as collateral. The business is still responsible for collecting payment. The best option for a business depends on its cash flow needs and its comfort level with handling collections.

 

 

 

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

Unleashing the Power of Business Cash Flow Financing in Growth Finance

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YOUR COMPANY IS LOOKING FOR  GROWTH FINANCING  SOLUTIONS!

Decoding the Cash Flow Financing Conundrum in Business Growth Finance

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?

CONTACT:

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

 

FINANCING BUSINESS GROWTH IN CANADA

 

In the minds of many business owners and financial managers, business cash flow financing often would seem easier to fix with some ' patch ' - that unfortunately probably isn’t available! So it's sometimes necessary to get creative when it comes to cash flow financing and researching your growth finance options for your company's cash needs. Let's dig in.

 

INTRODUCTION

 

Getting the right financing for your business is a challenge, but it's a necessity for business future growth while at the same time managing cash flow issues around the need for more money.

 

 

The Canadian business financing financial landscape can appear complex. That's where skills around growth financing emerge whether it's conventional bank loans for a profitable business from traditional banks to unconventional alternative financing sources.

 

The important thing to remember in business financial growth is that depending on what type of lender you choose for business operations there are, in fact, a lot of both viable and, more importantly, accessible funding possibilities. Getting a business loan from banks might be one option. Another option for financing growth in your business is the world of alternative finance from commercial funding companies.

 

THE CHALLENGE OF GROWING A BUSINESS

 

Businesses can also finance expansion by generating additional sales and leveraging assets. As an organization scales, it might not have the cash flow to pay for these key activities before its products or services are delivered to clients. Growing companies at risk need to think about their cash flow more than ever- ie how much cash they will require.

When cash flow doesn't match what's required by cash-strapped businesses, experts recommend looking into various forms like working capital or lines of credit which are more appropriate for short-term needs while still being beneficial over time if used appropriately to address cash flow problems.

 

HOW DO YOU MANAGE CASH FLOW AND BUSINESS EXPANSION?

 

Business expansion inevitably increases expenses and exerts pressure on routine finances. Taking on too much debt also brings its own unique set of challenges as the business owner focuses on how to generate additional sales via money spent on additional operational expenses.

Securing cash flow resources when growing forces a business to manage every aspect of working capital. This means solid credit management policies, and strategic implementation of working financing solutions - as well as inventory management, is also key.

Formulating practical cash flow forecasts from cash flow statements  will equip a business and identify cash flow gaps

Growing too quickly without ample cash flow or working capital to underpin such expansion is always a risk.  This occurs when a company accepts large orders and contracts or invests heavily in growth on the presumption of future profits,  only to find itself unable to meet its immediate financial commitments. This scenario can lead to cash flow crises, impair supplier relationships, and ultimately, jeopardize the business's survival.

 

One more thing when it comes to financing for business - Are you looking for either debt capital, aka ' loans,’ or would cash flow/asset monetization solutions get you to the goal line? It is all about financing operations from either monetizing your balance sheet assets or taking on the right kind of debt load for either a small business loan for capital expenditure or a cash flow working capital solution to avoid negative cash flow.

 

While it might seem like we constantly preach ' capital solutions ' from the Canadian SME FINANCE marketplace, owners/managers should never forget how to generate internal cash. That’s done by managing your receivables and inventory turnover, and payables to the point where you're collecting A/R promptly, turning inventory, and slowing payables to have enough cash  (without alienating suppliers) in your financing activities.

 

Depending on what industry you are in, you also have the ability to ask clients to prepay or, as effective, get special payment terms from suppliers. That is another often overlooked method of securing financing.

 

Companies with an R&D investment can utilize SR&ED tax credit financing as a bridge loan to cash flow their refundable tax credit.

 

 

FINANCING CASH FLOW  VIA FINANCING OPTIONS

 

Financing solutions come with different interest rates and terms, and structures. Being able to present your financial statements and/or your business plan and cash flow projections is key to obtaining business capital of any type.

 

 

DEBT SOLUTIONS FOR BUSINESS FINANCING 

 

Govt Guaranteed Small Business Loans

 

Term Loans

 

Equipment Loans / Sale leasebacks

 

 

Cash flow solutions

 

A/R financing/factoring

 

Asset-based non-bank business credit lines

 

Inventory Financing

 

Tax credit financing

 

Unsecured Cash Flow Loans

 

Merchant Advances

 

Purchase Order Financing

 

 

BENEFITS OF GROWTH FINANCING 

 

Harnessing growth finance to elevate your business presents numerous advantages. One of the paramount benefits is the availability of capital. Growth finance unlocks funding opportunities that may not be accessible via traditional avenues, such as bank loans or credit lines.

An additional advantage of growth finance is the capability to rapidly scale your enterprise. With appropriate funding, you can infuse money into novel technologies, recruit new personnel, and broaden your reach into fresh markets at a quicker pace than otherwise possible.

Lastly, growth finance can be instrumental in giving you a competitive edge. By pouring resources into new product development and technological advancements, you can set your business apart from competitors and position yourself as a frontrunner in your industry.

 

 

 

 

 

ADVANTAGES OF NON-TRADITIONAL BUSINESS FINANCING  

 

The advantage of many non-traditional financings includes flexibility, the non-dilutive nature of your equity, as well as many prepayment provisions that do not come with traditional bank-type financing.

 

Knowing how much funds you need and what purpose goes a long way toward ensuring you can cover your cash flow and growth finance needs. Here the ability to plan for ' bulge ' needs or fixed asset investment is the key to ensuring the right financing/right time.

 

 

WILL A CASH FLOW LOAN HELP YOUR BUSINESS GROW? 

 

Whether it's a cash flow term loan or an unsecured working capital loan, any type of additional cash flow enhancement to your capital structure will help your company with growth plans. Needless to say, that type of financing will also help with growth projects your firm might have around new products, new customers, out-of-country growth, etc.

 

Don't forget that any cash flow shortfall can be addressed with a working capital solution that increases your overall liquidity.

 

Cash flow loans, sometimes known as working capital loans, can be used to finance growth projects, such as investing in a marketing campaign, product research or hiring salespeople. They can also help businesses tide over cash shortfalls when they’ve maxed out their line of credit due to unexpected challenges related to growth.

Many firms that are capital-intensive and have cash outlays for the purchase of new assets or investments in r&d do not have the additional collateral that a major Canadian chartered bank might require around the need for tangible physical assets.

A term loan or a working capital loan such as a merchant advance typically does not require additional collateral from the borrower. Term loans tend to be 3  to 5 years in length, while the thousands of firms opting for short-term loans are typically required to pay the loan back over a 12-month period. 

 

 

DON'T MAKE THIS BUSINESS FINANCING  MISTAKE! 

 

It's a cardinal rule of corporate financing that you should never acquire long-term assets with short-term cash-flow facilities. For example, long-term assets should be financed via longer-term equipment loans and equipment leases financing/equipment loans.

 

Bottom line? Match the useful life of the asset with the right financing. That leads to the proverbial ' cash flow crunch. '

 

Businesses that can offer proof of incoming cash flows and require funds for general growth and operations without straining access to their current business credit facilities are strong candidates for business loans. Ensure you can provide accurate and up-to-date information around receivables, payables outstanding, and inventory turns if applicable.

 

 

PITFALLS OF GROWTH FINANCE 

Expanding too quickly might originate from circumstances like delayed collections or premature overspending on assets prior to actual sales being realized. Excessive dependence on loans and debt is also a key danger.   The Harvard Business Review has a great article on determining how fast a company can afford to grow - Click here for the article.

 

 HOW TO MANAGE FAST GROWTH RISKS 

 

Businesses can manage high growth via solid cash flow and working capital management. Solid inventory and supply chain controls can help temper the rate of growth - and supplier/vendor relations are key.

 

CONCLUSION 

Understanding growth finance and the crucial function of business cash flow is essential for SME small businesses/firms aiming for expansion. Through preparation and good financial management businesses can successfully steer through growth-related hurdles.

Growth finance is all about the right type of loans and debt and cash flow financing for growth companies looking for transformational change. Debt is a very flexible strategy as an asset class, unlike equity solutions which also dilute ownership. 

 

Rarely will firms in the ' SME ' space be able to boast they have ' too much cash ‘. A more realistic goal that has real value is to ensure you have business credit access when you need it and for the right reason.

 

For proven advisory services seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your business cash flow financing needs to grow organically and take advantage of the right capital growth solution.

 

  

 

  

FAQ: FREQUENTLY ASKED QUESTIONS

 

    

What is growth capital?

 

Growth capital is used by companies for expansion. It's invested in mature businesses that need to expand or restructure their operations, enter new markets, or finance a significant acquisition -Growth capital is a type of private equity investment, usually minority investments in relatively mature companies that are looking for funding to expand or restructure operations.

Understanding financing options is key to growth and expansion. Having the right amount of growth capital helps a company invest in r&d or new markets and ensure headcount matches expansion plans.

 

 How do you create a growth finance plan for a business? 

 

1. Start by evaluating your current financial situation: Analyze your cash flow, revenue, and expenses.

2. Identify growth objectives and the necessary funding for future cash flow needs: This could encompass capital for product development, marketing and advertising, recruiting new staff, or expanding into new markets.

3. Explore financing options: After pinpointing your capital needs, begin examining your financing possibilities. These could include traditional bank loans, as well as many alternative financing solutions such as an asset based loan around tangible assets.

4. Develop a comprehensive plan for funding utilization: Formulate a plan which specifies how the funding will be used. This should incorporate distinct milestones and timelines for attaining your growth objectives which are usually required for approval via traditional financial institutions.

 

 How does cash flow impact business growth? 

 

Cash flow represents the net quantity of capital circulating into and out of an enterprise. It's indispensable for business expansion as it finances daily operations, settles debts, and channels investments into business growth. Sufficient cash flow guarantees that a business can fulfill its commitments and capitalize on opportunities without excessive dependence on external funding. On the other hand, ineffective cash flow management around areas such as accounts receivable can impede growth and even culminate in business insolvency.

 

 What strategies can a business use to manage cash flow during growth?

 

 

There exist numerous tactics that a business can employ positive cash flow amidst expansion. These encompass proficient management of credit, utilization of factoring and invoice discounting and other cash flow lending solutions such as asset based credit lines.

Control over stock and inventory, and competent management of the supply chain are important also, In addition, firms should also devise cash flow projections to foresee business needs and potential financial deficits. Short-term working capital loans such as the merchant cash advance financing solution might be appropriate for smaller businesses.

 

What is sales growth finance? 

Sales growth finance refers to the financial strategies and resources used to fuel an increase in a company's sales. These can include various forms of funding aimed at helping businesses expand their sales operations, boost marketing and promotional activities, enhance product development, or enter new markets to increase their customer base and sales volume.

While growth finance broadly aims at supporting all facets of business growth and the needs for future cash flows, sales growth finance specifically targets initiatives that directly or indirectly stimulate sales. This can include investment in new sales personnel, training for existing sales staff, technology upgrades for better customer service, or more targeted marketing campaigns.

As with all forms of finance, sales growth finance should be managed carefully, with a clear understanding of the potential return on investment, to ensure that the increased sales will generate sufficient profits and operating income and cash flow to cover the cost of the finance and income taxes.

 

 

 

How do you finance future business growth? 

 

Financing future business growth involves a series of steps and considerations:

1. Self-Financing: Start by using your own capital or profits if possible. This is often the simplest form of finance and it doesn't dilute ownership or control of your business while maintaining a positive net cash position for cash generated by the business's current assets.

2. Retained Earnings: Reinvesting the profits back into the business can also finance growth. This strategy requires good profit margins and careful financial management to ensure funds are available when needed.

3. External Financing: There are several options for external financing for  businesses with good credit ratings -

   • Traditional Bank Loans / Unsecured Loans: You could consider a traditional loan or a line of credit from a bank or credit union. These generally require a good credit history, the ability to demonstrate generating cash, profits / net income, and some form of collateral.

   • Equity Financing: This involves selling a stake in your business to investors, often venture capitalists or angel investors. While this can provide a significant cash injection, it does dilute ownership and may involve giving up some control over your business.

   • Crowdfunding: This involves raising small amounts of money from a large number of people, typically via the internet. Crowdfunding can take the form of equity, reward-based, or donation-based funding.

   • Grants and Government Funding: Depending on your location and industry, there may be grants or other funding available from local, state, or federal government agencies as an alternative to debt financing.

4. Strategic Alliances and Partnerships: Forming alliances or partnerships with other businesses can also provide growth finance. This might involve co-investing in projects or sharing resources.

5. Cash Flow Management: Effective cash flow management is essential to finance growth via the company's cash flow around operating expenses. This includes understanding the company's cash flow statement,  efficient credit management, short term investments financing via the use of effective receivable financing, buying equipment only when needed,  robust stock control, and effective supply chain management. Service companies typically require no inventory financing.

6. Financial Forecasting: Preparing accurate financial forecasts can help identify your funding needs and when they will arise as you spend money. It can also help you evaluate potential returns on investment and assess the viability of your growth plans at financing that comes with a reasonable interest rate based on overall creditworthiness. Ensuring positive cash flow and free cash flow means there are more cash inflows coming in while a negative cash flow indicates high spending while at the same time generating sales.

 

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Business Finance Solutions Include Government Loans & SRED Tax Credits

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YOUR COMPANY IS LOOKING FOR  BUSINESS FINANCE SOLUTIONS! 

Fueling Growth: Government Loans in Canada for Small Business Finance For R&D

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?

CONTACT:

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

 

 

  

Empowering Entrepreneurs: Unleashing Potential Via Government Loans & SR&ED Tax Credit Financing   

  

 

The main government loan programs discussed in the article are the Canada Small Business Loan Program and the SR&ED (Scientific Research and Experimental Development) program

 

Business finance solutions in Canada include the Canadian Small Business Government Loan as well as the SR&ED tax credit program. Should you ' tap into ' these two programs (probably about 15,000 other firms do already!) and how is that done? Let's dig in.

 

 

INTRODUCTION

As a Canadian entrepreneur/ business owner have you considered exploring the avenues of government lending and other financing programs? Such lending options have been carefully curated by the Canadian government to assist companies in growing in Canada.

Understanding the vast landscape of government-sponsored loans in Canada can prove daunting.
 

The Canada Small Business Financing Program and the Scientific Research & Experimental Development (SR&ED) program are two of the most popular programs.

 

Although business owners and financial managers in Canada are sometimes reluctant to take on debt (or in fact anything associated with the wheels of government) the reality is that thousands of companies utilize our two aforementioned programs to tap Billions of $ of capital every year.

 

 

THE CANADA SMALL BUSINESS LOAN PROGRAM - THE ' SBL ' - FUELING SME BUSINESS GROWTH IN CANADA 

 

 

The Canada Small Business Financing Program offers financing for small businesses in Canada -Any business under 10 Million dollars is eligible.

The program is intended to bridge the fiscal divide between traditional financial institutions for accessible funding.

To be deemed eligible for the program, businesses need to adhere to specific qualifying criteria. These typically encompass being a profit-oriented venture, operating in Canada, and meeting some key eligibility criteria. Funding is flexible and comes with competitive interest rates.

The eligibility process for the Canada Small Business Financing Program is uncomplicated, generally necessitating basic documentation like financial statements, a business plan, and the ability to demonstrate loan repayment.

Businesses can access government loans via banks and cooperative financial institutions such as credit unions. The program proffers notable benefits, including reduced initial down payment requirements, extended loan repayment durations, and the capability to allocate the funds for diverse objectives such as acquiring assets and technology, commercial real estate, and the funding of leasehold improvements.

The govt SBL program is one of the best initiatives the Canadian government takes in ensuring a certain amount of capital is available to many predominantly younger and growing firms.

 

This includes start-ups, as they and other firms in the small and medium enterprise chunk of the economy generally power Canadian economic success.

 

It's important to realize that only 3 asset categories are financeable under the program:

 

Equipment/fixed assets/technology/application software

 

Leasehold improvements

 

Real Estate

 

In 2022 the government made substantial increases to the program which no include credit lines and working capital.

 

Depending on which asset category or categories you are applying for the loan can be as much as $1,100,000.00.  Want some more good news? Owners are on the hook for only 10% as a personal guarantee component of the loan, the government guarantees the balance.

 

In case you think we at 7 Park Avenue Financial are gushing too much  over such a great program we probably are as other strong selling point of the program include:

 

No prepayment penalty

 

Competitive rates

 

Terms ranging from 2-7+ years

 

Remember, this isn't a government ' grant ' - it's a true term loan that must be justified by a good business plan and hopefully some good mgmt and industry experience. 

 

The government relies on Canadian banks to administer the program and your best bet is to ensure you're working with someone who understands criteria and timelines and the basics of a loan package.  (Those basics are typically a business plan and cash flow that reflects the loan repayment.)

 

 

SR&ED  PROGRAM - FINANCING RESEARCH AND DEVELOPMENT IN CANADA 

The qualification for the SR&ED program investment tax credit hinges on a company's engagement in suitable and eligible r&d activities around scientific and technological uncertainty, like devising new products, procedures, or software, as well as enhancing existing ones.

Expenses eligible for claims under sr ed expenditures might encompass salaries, materials, subcontractor fees, and overhead costs directly associated with R&D undertakings.

The procedure for making a sr ed claim via the  SR&ED program requires comprehensive documentation of the research venture, including technical narratives, project timelines, and financial accounts.  Claims are often prepared by third-party consultants, known as ' sr&ed consultants ".

Businesses can file claims with the Canada Revenue Agency (CRA) for examination and sanction for eligible sr ed r&d. The program provides substantial benefits, such as tax credits, deductions, and even refundable tax credit refunds, allowing businesses to reinvest in additional research and development endeavours.

With its commitment to innovation, Canada has carved a niche for itself as a nexus of creativity and the SR&ED program has played a pivotal role in cultivating r&d in Canada. The program has enabled companies across diverse industries like technology, healthcare, software and manufacturing, to expand and grow around their work in scientific and technological criteria.

For privately owned firms the government makes this tax credit ' refundable'. This credit can then be monetized or cash-flowed as a bridge loan or cash-flow advance. Many early-stage firms use this cash flow loan as a main component of their overall working capital or cash flow strategy. Talk to the 7 Park Avenue Financial team about sr&ed tax credit financing.

 

GOVERNMENT GRANTS AND FUNDING PROGRAMS

 

In addition to loans Canadian federal and provincial governments offer various grants and funding programs to support businesses and individuals financially. Some of the popular funding programs and grants in Canada are:

- Canada Job Grant

- Strategic Innovation Fund

- Canada Summer Jobs

- Scientific Research and Experimental Development Tax Credit

 

KEY TAKEAWAYS

 

Both the Canada Small Business Loan Program and the SR&ED program aim to foster business growth and development in Canada, although each serves a distinct purpose.


    Through comparative analysis and understanding of these initiatives, entrepreneurs and researchers can leverage the advantages provided by each program.

  The Canada Small Business Loan Program is chiefly designed for small businesses seeking financial help. It aids in overcoming fiscal challenges and propelling growth ambitions.

 In contrast, the SR&ED program is centred around supporting research and development endeavours, stimulating businesses to invest in innovative projects and maintain a competitive edge in the global marketplace. SR ED Financing is available to firms who wish to finance their refund in lieu of waiting for the government refund of refundable tax credits.

 Businesses can consider employing both these initiatives in a combined manner to maximize benefits.

  By securing funding through the small business loan program, Canadian companies can bolster their financial stability, thereby enabling investments in research and development initiatives that can reap SR&ED program incentives.
 

  

CONCLUSION  

 

Government-sponsored lending options can serve as a substantial financing solution for SMEs in Canada.

 It's essential to diligently explore your alternatives, collate all required documentation, and engage with a trusted advisor such as 7 Park Avenue Financial.

Canadian government loans, notably the Canada Small Business Financing Program and the Scientific Research & Experimental Development (SR&ED) initiative, have benefited thousands of firms in Canada,

By seizing these opportunities, businesses can accelerate growth and profits.

If you're looking to tap into 2 solid programs that deliver capital and cash to your business call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in navigating either program in a timeline that makes sense for your capital needs.

 

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

  

 
How does the Canada Small Business Loan Program benefit small businesses?  

 

The Canada Small Business Loan Program provides financial assistance to small businesses, offering competitive interest rates, flexible repayment options, and advantages such as lower down payment requirements and longer amortization periods. It enables small businesses to access capital for various purposes like purchasing equipment, expanding operations, or increasing working capital.

What is the Eligibility Criteria for Government Loans

To be eligible for a government loan in Canada, you must meet certain requirements. The eligibility criteria vary depending on the type of loan you are applying for. However, some of the common eligibility criteria for government loans in Canada are:

    - You must be a Canadian citizen or a permanent resident.

    - You must be at least 18 years old.

    - You must have a good credit score.

    - You must have a solid business plan (for business loans).

    - You must be able to demonstrate the ability to repay the loan

 

What Documents are Required for Applying for a Government Loan

 To apply for a government loan in Canada, you will need to provide the following documents:



    - Personal identification (e.g., driver’s license, passport)

    - Proof of income (e.g., pay stubs, tax returns)

    - Business plan (for business loans)

    - Financial statements (for business loans)

    - Credit report

    - Other supporting documents as required

 

What are the Pros and Cons of Government Loans

 While government loans can be an excellent source of financing, they also have their pros and cons. Here are some of the advantages and disadvantages of government loans:

     Pros

    - Lower interest rates compared to traditional bank loans.

    - Longer repayment terms.

    - Access to funding for businesses that are unable to secure traditional financing.

    - Loan forgiveness options for some loan programs.


    Does not require collateral


    Cons

    - Strict eligibility criteria.

    - Lengthy application process.

    - Limited loan amounts for some loan programs.

   

 
What is the purpose of the SR&ED program? 

  The SR&ED program is designed to foster research and development activities in Canada for Canadian controlled private corporations. It provides significant incentives, such as tax credits, deductions, and cash refunds, to businesses engaged in scientific research and experimental development. The program encourages innovation and supports companies in developing new products, processes, or software, as well as improving existing ones. A sr ed tax credit loan helps companies recoup the cash refund prior to filing claims via a sred cash advance loan.

 
 How can businesses qualify for these loan programs? 

 To qualify for the Canada Small Business Loan Program, businesses must meet specific eligibility criteria, including being a for-profit enterprise, operating within Canada, and demonstrating a solid business plan. On the other hand, eligibility for the SR ED TAX INCENTIVES  program is based on a business's involvement in qualifying research and development activities, and expenses directly related to those activities.

 How do these loan programs contribute to the growth of businesses in Canada?

 
These loan programs contribute to the growth of businesses in Canada by providing them with much-needed financial resources. The Canada Small Business Loan Program helps small businesses overcome financial barriers, enabling them to expand, invest in new opportunities, and create jobs. Sr ed tax credits encourage research and development initiatives, allowing companies to innovate, improve their competitiveness, and contribute to economic growth via these tax incentives. SR ED Financing allows companies engaging in r&d to accelerate the cash flow benefits of the program.



 

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Tapping into the Potential of SR&ED Financing: Your Ultimate Guide To Sred Loans ! Blueprint to SRED Financing: Accelerate Your Business Growth

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YOU ARE LOOKING FOR SRED CLAIM FINANCE

 FINANCING YOUR SR&ED IS A GREAT CASH FLOW STRATEGY! 

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 Complete Guide to SR&ED Financing

 

 

INTRODUCTION

As a business owner seeking SR&ED tax incentives in Canada, navigating the sred  financing process can be overwhelming. Let the 7 Park Avenue Financial team show you how easy the process is from start to finish - Leverage our expertise to help fund your r&d activities confidently, and we'll demonstrate the benefits of sr&ed financing.

Companies can also take advantage of  SRED Advance Funding,  an alternative financing option in Canada that can greatly benefit businesses undertaking innovative projects in research and development,

 Your ability to finance your SRED claim (aka ‘SR&ED claim') signifies the cash flowing of your non-repayable refundable investment tax credit. At 7 Park Avenue Financial, we think that anytime you can hasten cash from the government and turn that into immediate cash flow and working capital, that is a good thing.

 

UNDERSTANDING SR&ED FINANCING

 

Financing your SR&ED claim is crucial for accessing Canadian government tax incentives and the cash flow you need to run your business.  The SR&ED program provides substantial cash incentives for companies involved in scientific research and experimental development. These incentives for sr ed expenditures can significantly mitigate the costs of your research activities.

 

SRED credits are of course the funds you received from the Canada Revenue Agency based on the filing of your Scientific Research and Experimental Development (SR&ED) claim.

 

CANADA'S TWO GREAT GOVERNMENT FINANCE PROGRAMS

 

These funds have never been more generous, and many Canadian business owners and financial managers are unaware that the program even exists, let alone their ability to partake in the billions of dollars of non-repayable grants issued by this department. Essentially it is the most significant support for research in Canada.  Many clients always ask us if there are government grants and loans. We think that the two best programs in Canada to finance your firm are the federal BIL/CSBF loan and of course, the SRED program.

 

 

WHAT IS SR&ED ADVANCE FUNDING? 

 

 

SR&ED Advance Funding allows a company not to have to wait until the end of the fiscal year or until the sr red claim is filed. The funding process is straightforward and typically takes only a couple weeks - and revolves around a simple application on the company background, information, etc and key documents relating to accrued sr ed expenses to date.

 

Following some short due diligence, the bridge loan is funded, and the company can choose to schedule when they receive their funding for work accrued to date under the pending sr&ed claim - The sr&e bridge loan funding has no monthly payments ( the interest accrues ). The loan is repaid when CRA  approves and sends the refund.

 

Timing is everything, and you can finance that claim if you want to monetize those funds and get them working inside your firm.  For many early-stage and start-up firms, the ability to finance their SRED claim is often the firm's largest receivable that year. And the beauty of the program is of course that as long as your firm is a private Canadian-controlled private corporation, businesses can participate in the program.

 

DEMYSTIFYING SRED FINANCING  & THE ROLE OF THE SR&ED CONSULTANT

 

As companies and consumers, we generally use an ‘expert' to prepare our taxes and file them. It is no different with SRED, and we recommend using an SR&ED consultant to ensure your claim is prepared correctly.

 

Naturally, using their own expertise or the government's self-assessment tool, you want to be sure you are eligible for the grant, given that it takes time to prepare and file the claim.

 

Naturally, after filing a professionally prepared claim, you are, of course, entitled to wait for your cheque – that timeframe can be anywhere from a couple of months to potentially close to a year depending on some key factors such as your first time filing, and the due diligence that SRED employees do on the technical and financial aspects of your claim.

 

SRED FINANCING - THE HIDDEN GEM IN CANADIAN BUSINESS FINANCING

 

 

So you are eligible for SR&ED.  You have filed a claim. You have been made aware you can finance the claim, but you are not sure how. The banks in Canada don’t finance these sorts of claims – that’s a general statement, but 99% of the time we are pretty sure we are correct in making that comment.

 

Contact  7 Park Avenue Financial, a business financing advisor specializing in SRED finance.  At that point, it’s a relatively simple process, and we encourage clients to view it as they would any business financing, from a lease to a loan arrangement. There is standard application information, and the whole process, up to and including funding, can be completed in weeks.

 

SR&ED CLAIM SIZE - DOES SIZE MATTER?

 

As a general rule, it makes sense to finance claims over 250k in size, but quite frankly, smaller claims can also be funded. There is no challenge to the amount of financing regarding the size of an SRED filing – Claims more than a million dollars can be easily financed.

The critical advantage of financing a claim is that you are not undertaking any debt; you are just discounting a receivable that you have – that receivable being the SRED claim itself.

 

The SR&ED filing itself is the actual collateral for the financing – and if you want more good news, then you should be aware you don’t make payments on SRED claim finance. The funds advanced are netted out from your final cheque from the government. Usually, SRED claims are financed at 75% of their filed value - that leaves a buffer in case part of the claim is downsized when approved.

 

WHAT ARE THE BENEFITS OF SRED FINANCING

 

Financing your SR&ED claim offers several advantages for your business. Companies can access cash flow from one of the best Canadian government tax incentives, which helps reduce research and development costs and facilitates ongoing innovation in product and service research and development. SR ED funding improves cash flow by providing upfront funds, eliminating the need to deplete existing reserves of cash or credit lines, and helping cover research expenses. By leveraging SR&ED claim financing, companies can sustain business growth and financial stability.

 

Companies fast-tracking r&d investments and cash-flowing claims can maintain a competitive edge with the financial stress of funding limitations.

 

SR&ED financing is non-dilutive, businesses do not need to dilute shareholder ownership, and experts know that short-term debt financing is cheaper than equity financing!

 

KEY TAKEAWAYS

 

SR&ED (Scientific Research and Experimental Development) is a tax incentive program by the Canadian government for R&D.

SR&ED financing provides funding for companies engaged in SR&ED activities

SRED Loans improve a business's cash flows  by accessing SR&ED credits in advance for accrued sred research to date - or companies can file an  entire claim at year-end

SRED financing is a loan based on the anticipated value of the SR&ED tax credit

Financing r&d efforts benefits startups and small businesses to finance research activities.

 

Business owners should ensure they  Understand loan terms, including interest rates and fees - sr&ed financing is low cost and competitive compared to other forms of debt and equity financing.

Companies must ensure they meet eligibility requirements and approval of SR&ED claims before taking financing, including documentation for third party payments.

 

 

CONCLUSION 

 

Let the 7 Park Avenue Financial team make funding your sr&ed claim fast and easy. SRED Finance is an alternative source of funding that provides predictable cash flow management and a source of funding that helps growth-oriented companies.

 

Cash flow is king, if you have an SRED claim, be aware that the claim is financeable, and your ability to get those funds working again usually puts you in a more competitive stance within your industry and allows those funds to be used for further research or any general working capital purpose.

 

Call 7 Park Avenue Financial to ensure you know the benefits of SR&ED finance – claim those funds!

   

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

  

 

What do you need to apply for sr&ed loan financing  

For a company to apply for SR&ED tax credit debt facility, the requirements are simple under financing for the sr ed claim process:

•  The business must be a Canada based company, incorporated in Canada
•  Businesses must have reasonable levels of R&D expenditure in areas of scientific or technological advancement
• Qualified expenditure for SR&ED investment tax credits in sr ed projects must demonstrate sr&ed eligibility

 

What is The  Eligibility Criteria for SR&ED Financing

To be eligible for SR&ED financing, your business must engage in scientific research and experimental development activities in areas of scientific or technological uncertainty in their business that qualify for the tax incentives offered by the Canadian government. Research and development activities must meet specific criteria, including being performed in Canada and involving a systematic investigation or search and being able to provide technical drawings, project records, payroll records, purchase invoices etc. Additionally, your activities must be conducted to achieve technological advancement, and you must maintain proper documents to support your claim.

 

  

What are Other types of Financing Options for funding  SR&ED Claims  

There are several financing options available for SR&ED claims, each with its advantages and disadvantages. The most common financing options include traditional loans, lines of credit, and government grants. Traditional loans provide you with a lump sum of money you repay with interest over time. Lines of credit allow you to access funds as needed, but you only pay interest on the amount you use. Government grants provide you with non-repayable funds to support your research and development activities.

 

 What are some tips for a Successful SR&ED Claim Financing Application?

When applying for SR ED  refund claim financing, it is essential to be prepared and organized. Ensure you have all the necessary documentation to support your claim, including financial statements, project descriptions, and supporting documents. Additionally, be prepared to demonstrate how your research and development activities meet the eligibility criteria for the tax incentives offered by the Canadian government for Canadian controlled private corporations in areas of tech, software development, and many other industries. Finally, be prepared to answer questions about your business and your research and development activities.

 

What is the SR&ED Investment Tax Credit (ITC) Program in Canada

SR ED tax credits are a valuable yet slow-to-materialize source of cash for many Canadian companies. For a company to access the payments, it must expend money on R&D within the current financial year and patiently navigate through fiscal year-end, accounts preparation, tax credit claim filing, and finally, the processing and payout of the refund by the CRA. This process can extend from 4-10 weeks. But with an SR&ED tax credit loan, you can access funds for your sr ed tax credit claim within the year the R&D spending happens, much before the CRA refund date.

 

 

 

 

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Need Capital? Discover How Your Business Assets Can Work Harder for You

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YOUR COMPANY IS LOOKING FOR CANADIAN ASSET BASED LINE OF CREDIT FINANCING! 

Leveraging Assets for Growth: An Inside Look at Asset-Based Lines of Credit

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

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Boost Your Business Liquidity with Asset-Based Lines of Credit

 

Your best financing solution in Canada just might be an asset based line of credit facility. These facilities are gradually becoming one of the newer and more popular methods of business financing in Canada.

 

 

INTRODUCTION 

 

Business owners recognize that the right financing contributes to growth and success. Traditional financing comes with challenges and can be complicated and time-consuming. Asset-based financing  ' ABL ' continues to grow in popularity as a solution for financing businesses. Leveraging business assets helps a  business maximize the potential of the business and any business with sales and assets can benefit from cyclical seasonal cash flow gaps in the company.

 

 

WHAT IS AN ASSET BASED LINE OF CREDIT? 

 

 

The asset-based credit line is a type of financing that allows a company to borrow under a revolving credit facility using the sales and business assets as collateral. While traditional financing institutions such as banks focus on companies with strong credit histories ABL financing uses assets as the collateral value of the funding. Financing limits are determined by the actual value of business assets as determined by the asset-based lender.

 

 

WHAT TYPES OF ASSETS ARE USED AS COLLATERAL IN ASSET BASED CREDIT LINES 

 

 

The types of assets that  are the collateral for asset based business credit lines are:

Accounts receivable

Inventory

Fixed assets / Equipment / Rolling Stock

Real estate ( if applicable )

 

WHAT ARE THE DYNAMICS OF BORROWING LIMITS IN THE REVOLVING  ABL FACILITY

 

 

Borrowing limits under asset-based financing credit lines are unique in that they align with the level of your sale and asses - As sales and assets increase the credit line increases also. Borrower should recognize downward levels of sales and assets limited the facility values.

 

WHAT ARE THE BENEFITS OF THE ASSET BASED CREDIT LINE

 

 

The benefits of asset-based credit lines include -

Flexibility -  The business credit lines can be used for day-to-day working capital needs, and purchases of inventory and materials,  and come with the ability to take advantage of short-term opportunities that arise

The approval process for the facility is easier than bank-type financing comes with a number of traditional loan requirements and financial covenants that limit financing

Competitive interest rates - Whiles rates are generally ( but not always ) higher than bank rates pricing is still competitive based on overall credit quality and transaction size

ABL funding helps companies who want more predictable cash flow to manage day-to-day and plan for long-term growth

 

The facility is generally totally focused on what we generally refer to as working capital, or more specifically, short-term working capital. The largest part of the asset-based financing facility tends to be your firm's accounts receivable, but quite frankly in our experience, it can be inventory also, as well as a component of equipment even purchase orders.

 

Turning Assets into Opportunities: The Role of Asset-Based Lines of Credit in Business Growth

 

 

Most business owners are surprised when we tell them they are in a position to quite accurately calculate their own amount of total credit facility. That is because there are some very accepted rules as to how much is advanced and on what.

 

By now the business owner or financial manager of a Canadian business understands that this type of financing is an alternative to a Chartered bank line of credit. The facility ‘in general' works in the same way, but there are some major differences in setting up the facility and in the effects, or rather lack of effects it has on your business.

 

Let’s clarify. If your business has a Chartered bank line of credit there are three things that facility has that don’t apply to an asset based lending facility. They are as follows:

 

• A  facility cap or maximum
• Loan covenants and ratios
• Additional eligible collateral often required, with a heavy emphasis on owner guarantees

 

Asset-based credit facilities, also called ‘ABLs' are generally able to increase to the same extent that your firm can increase its receivables and inventory. The bottom line is that you are not constrained to grow!

 

There are little or no covenants or ratio requirements in an asset-based lending facility, it’s totally based on the number of assets you have

 

In general, the assets financed are the only assets secured

 

One of the few similarities of an asset-based credit agreement is that similar to a bank facility, receivables under 90 days are the only receivables that are financed.

 

So let’s just focus on the receivables portion of our asset-based line of credit for a moment. A quick example would be:

 

Your firm has 500,000.00 in accounts receivable - Under your facility, you can borrow up to 80 or 90% of that amount at any given time. Naturally, the line fluctuates daily, (similar to a bank facility) because you are receiving payments every day and you are invoicing every day.

 

We can say as an across-the-board statement that asset-based lines of credit are less restrictive than bank lines, they also cost more.

 

Customers we meet with regularly though are in a position where they frankly don’t qualify for traditional bank financing – this could be for a variety of reasons. (A net loss in the current year, a high debt/equity ratio, can’t meet bank interest coverage requirements, etc.)  

 

THE COST OF ASSET BASED FINANCING

 

So yes, your firm has a higher cost of borrowing – asset-based credit facilities in Canada have a wide spectrum of pricing, from 8-9% per annum, or in some cases 1-1.5% % per month.

 

But if your firm needs financing for growth or even survival, and you have no access to traditional bank or term credit, asset-based financing via asset based lendiers in many cases will save your company, give you almost unlimited access to working capital based on your sales, and at the same time position you for the next level of growth or a return to traditional financing.

 

Many customers we have dealt with actually decide not to return to traditional bank financing once they realize and calculate the benefits of an asset-based line of credit.

 

  

ALTERNATIVES TO ASSET-BASED LENDING 

 

While asset-based lending can be a great financing option for businesses, there are also alternatives to consider. These include:

 

Traditional loans for companies that qualify for traditional bank and commercial financing

Equity financing alternatives

Invoice Financing / Factoring / Invoice Discounting/ Confidential Receivable Financing

 

When contrasted with other types of business financing like bank loans or accounts receivable financing, the asset based credit facility and ABL lending solutions stand out for their flexibility. While traditional loans rely heavily on credit history, and demonstrable cash flow, profit, balance sheet ratios, etc, asset-based lending emphasizes the value of a company's assets. However, a careful analysis of business needs, market conditions, and asset value is essential to decide on the best financing option.

 

  

CONCLUSION  

 

Asset-based lending provides flexible financing to maximize the potential of the business - the ability to leverage  a borrowing base on sales and assets allows a company to obtain working capital for a variety of purposes and business needs, The combination of meeting operational demands and avoiding financial turbulence  while securing needed capital is a cornerstone of ABL,

In summary, investigate asset-based lines of credit - Call 7 Park Avenue Financial,  a trusted, credible and  experienced advisor in this area of Canadian financing. Weigh the benefits and advantages and you may find this is the business financing solution for credit availability you have never heard of but works for you!

 

  

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

 

How does asset based lending work?  

Asset-based lending works by using your company's assets as collateral for a revolving line of credit. The lender evaluates the assets to determine their value and extends a credit line based on that value. The credit line can be used for working capital, inventory purchases, or other business needs.

The lender will monitor the value of the assets used as collateral and adjust the credit line accordingly. For example, if the value of your inventory decreases, the lender may decrease your credit line to reflect the lower value of the collateral.

The interest rate on an asset-based line of credit is typically lower than other types of financing such as credit cards or merchant cash advances. However, the interest rate will vary depending on the lender and the value of the assets used as collateral and traditional bank loans will usually offer lower interest rates for companies that qualify.

 

  

 

How Do Businesses Qualify for an asset based line of credit  

To qualify for an asset-based line of credit, your company must have physical assets & financial assets that can be used as collateral. The assets can include inventory, accounts receivable, equipment, and real estate.

The lender will evaluate the assets to determine their value and the credit line that can be extended. Business lenders will also consider your company's financial history and creditworthiness before extending a line of credit.

 

What are common mistakes to avoid with asset-based lending 

While asset-based lending can provide many benefits for businesses, there are also some common mistakes to avoid. These include:

Overreliance on ABL: Businesses should not rely solely on ABL for financing. It is important to have a diversified financing portfolio that includes other types of financing, such as equity financing and traditional loans.

Inaccurate asset valuation:  It is important to accurately value your assets before using them as collateral for ABL. Inaccurate valuations can lead to lower credit lines and higher interest rates. In some cases an inventory appraisal or other asset appraisal may be required

 Poor cash flow management: ABL provides businesses with a predictable cash flow, but it is still important to manage cash flow effectively. Businesses should have a plan in place to manage their finances and ensure they have enough cash on hand to cover expenses. 

 

What are the drawbacks of an asset-based line of credit

The potential drawbacks may include rigorous monitoring by lenders, possible limitations on the use of funds, and the risk of losing assets if the business is unable to repay the loan

 

What types of businesses are ideal for an asset-based line of credit?

Businesses with significant financial and physical assets, such as manufacturers, wholesalers, or retail companies, are ideal candidates for an asset-based line of credit. These businesses often have substantial inventory, accounts receivable, or machinery, and often need an immediate cash influx to meet operational needs or seasonal demands of the company's cash flow and borrowing capacity. Companies that cannot meet the financial covenant/covenants required by banks are ideal for ABL lending.

 

How does an asset-based line of credit compare with other financing options?

While traditional loans rely heavily on credit history, asset-based loans emphasize the value of a company's assets in asset rich businesses.  However, a careful analysis of business needs, market conditions, and asset value is essential to decide on the best financing option when understanding if asset based lending will work for a business.

 

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