Factoring In Canada – Invoice to Cash Conversion – Benefit of Alternative Financing

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Instant Cash Flow Solutions: Understanding Factoring Financing in Canada

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Receivable Financing in Canada: The Ultimate Strategy for Business Growth 

 

Introduction -  Understanding Factoring Financing for Accounts Receivable in Canada

 

In today's economic climate, Canadian business owners and financial managers are constantly exploring alternative financing options.

 

Factoring in Canada, known as receivable financing or discounting, stands out as an increasingly popular strategy. This guide will help you understand how it works and its many benefits tailored to the Canadian market.

 

The Emergence of Factoring in Canada

 

Factoring/invoice financing may seem like a recent trend, but it's a method that's been around for a century in Canada.

 

With the constant need for innovative cash flow and working capital solutions, businesses of all sizes have started to embrace this form of financing to cash flow unpaid invoices for a ' factoring fee', versus unsecured bank financing. Banks do not offer factoring services - as they finance receivables under bank business lines of credit.

 

Debunking Myths and Understanding the Process

 

At 7 Park Avenue Financial, we feel the mysterious aura around factoring needs to be dispelled. It's time to focus on the actual merits of this strategy for business owners, especially in the context of an immediate working capital solution and cash flow financing.

 

 

 Traditional Financing Options 

 

Canadian businesses can choose from various asset financing solutions, such as working capital term loans. However, these often can lead to increased debt levels and can negatively affect the balance sheet and overall leverage.

 

 

 Equity Financing: A Double-Edged Sword 

 

Another alternative is injecting additional equity into the company, which may dilute ownership. This option is usually less attractive to many Canadian business owners.

 

  

  

 Factoring as a Win-Win Solution    

 

Factoring is a unique solution that doesn't increase debt or dilute ownership. Financing current assets like receivables allows you to maintain control over your business while enhancing cash flow.

 

 Factoring as an Alternative Financing Mechanism

 

Factoring is the immediate sale of accounts receivable invoices, offering a flexible and customized approach. Business owners can factor in one,  several invoices or all, retaining complete control over their operations.

 

  

Benefits of Factoring  

 

This method provides immediate cash flow, enabling businesses to pay suppliers, buy more inventory, and generate sales and profits without additional debt.

 

 Determining if factoring financing is right for your business depends on your specific needs and financial situation. Factoring may be an excellent solution if you have outstanding accounts receivable and need immediate cash flow.

 

Consider factors like your cash flow needs, your industry, and the terms you usually have with clients. Consultation with a financial advisor or a factoring specialist in Canada can provide tailored insights based on your unique situation around different factoring companies and their financing solutions.

 

• Debt-Free Funding: Since invoice factoring is not a loan, it provides funding without adding debt.
• Non-Dilutive Capital: It doesn't dilute ownership or control over the business.
• Unlimited Access to Capital: There's no ceiling on the amount that can be obtained through factoring.
• Faster Turnaround Time: Compared to bank financing, factoring offers quicker access to funds.
• Saves Time on Accounts Receivable: Factoring helps manage accounts receivable, saving time that might be spent chasing unpaid invoices.

 

  

 Choosing the Right Factoring Partner in Canada  

 

The challenge is not factoring itself but selecting a trustworthy and experienced partner. Competitive rates, control over the process, and maintaining customer relationships are essential. Missteps in these areas could lead to undesirable consequences. Talk to the 7 Park Avenue Financial team!

 

 Pricing and Expert Guidance

 

Pricing is a critical aspect in Canada. Without guidance from a credible business financing advisor, setting up a non-optimal facility at a non-competitive price is risky.

 

 

 Conclusion:  Factoring in the Canadian Business Landscape

 

 

For owners and financial managers of small and medium sized companies  Canadian business borrowers seeking to thrive in a competitive market, factoring could be the key to unlocking untapped potential.

 

Factoring allows businesses to fill cash flow gaps without committing to a long-term loan, enabling them to cover recurring expenses like payroll, rent, and utilities while waiting for clients to pay their invoices.

 

Additionally, it offers the financial flexibility to fund growth strategies, invest in new equipment, and make other significant purchases that promise strong returns on investment. It also provides an opportunity to capitalize on seasonal business trends, such as buying inventory in bulk, thus leveraging timely market opportunities.

 

In conclusion, factoring remains a vital and popular financing strategy in Canada. It is a flexible solution that allows business owners to liquidate accounts receivables within the balance sheet's current assets as needed. Funds are available instantly, enhancing the potential for growth in sales and profits.

 

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can provide you with all your business financing needs.

 

 

  

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 What Is Factoring Financing, and How Does It Work in Canada?

Factoring financing is selling accounts receivable invoices to a third party, called a factor. It provides immediate cash flow to Canadian businesses, enabling them to pay suppliers and invest in growth without additional debt.

 

How Can Factoring Help My Canadian Business Grow?

Factoring services allow your company to convert unpaid invoices/receivables into instant cash, providing liquidity that can be invested back into the business. This enables Canadian companies to buy inventory, pay suppliers promptly, and take advantage of growth opportunities without waiting for clients to pay invoices.

 

Are There Risks Associated with Factoring Financing in Canada?

 

 Like all financing options, non-bank accounts receivable financing has its risks, such as selecting the wrong factoring partner. Working with a reputable and experienced partner such as 7 Park Avenue Financial, a leading finance company,  can mitigate these risks and ensure that you secure a competitive rate without damaging customer relationships.

 

The business owner/ and financial manager should also clearly understand factoring fees, as the lender price is a fee, not an interest rate per se.

 

If an invoice remains unpaid, the company is still responsible for the invoice if they have not chosen a non-recourse factoring solution.

 

• Customer Contact Required: Invoices must be verified, which may require contacting customers. This could potentially affect relationships with customers. At 7 Park Avenue Financial, we recommend Confidential Receivable Financing as the optimal solution - allowing clients to bill and collect their own invoices while retaining all the benefits of receivable finance.
• Complicated Bookkeeping: Factoring can be complex to record in accounting, adding a layer to financial management.
• Potential Hidden Fees: Some factoring companies may charge hidden fees like service fees or minimum volume fees, though it's noted that not all companies, such as FundThrough, have these fees.

 

If an invoice remains unpaid the company is still responsible for the invoice if they have not chosen a non-recourse factoring solution.

 

Does Factoring Financing Bring Debt to My Business?

No, receivable factoring financing is not considered debt. Instead, you are selling your receivables at a discount to a factoring company, converting assets into liquid cash without adding liabilities to your balance sheet.

 

How Can I Find the Right Factoring Partner in Canada?

 

 Finding the right invoice factoring companies for your business requires due diligence. Look for a reputable firm with a business financing reputation. and experience in your industry, competitive rates, and transparency in their process.

Seeking guidance from a credible business financing advisor in Canada can also help you identify the best fit for your needs regarding factoring companies in Canada.

 

 What Types of Businesses Can Benefit from Factoring Financing in Canada?

Factoring financing can benefit various businesses in Canada, from start-ups to established enterprises. Industries that deal with extended payment terms or seasonal fluctuations in cash flow often find factoring companies particularly helpful. It's a versatile financing option tailored to suit different business needs and sectors under a factoring contract / factoring agreement.

 

Are There Any Specific Legal Regulations for Factoring in Canada?

 

Yes, invoice factoring is subject to various legal regulations in Canada, and it's essential to comply with these laws. Engaging with a factoring partner who understands the legal landscape, such as licensing, consumer protection, and privacy laws, ensures a smooth and lawful process. It's advisable to consult with a legal or financial professional familiar with Canadian regulations to navigate the complexities.

 

How does factoring Work?

 

1. Selection of a Factor: Many independent and bank-affiliated factoring companies specialize in different business sizes, volumes, or industries (e.g., textiles).
2. Review Process: The chosen factor will assess the client's creditworthiness and your past success with invoice collection.
3. Negotiation: If approved, you will negotiate with the factor to sell your invoices. Typical arrangements might include paying 85% to 90% of the invoice's face amount and advancing a percentage based on factors such as client creditworthiness.
4. Fees and Charges: Expect to pay fees ranging from .8% to 1.5% of the total invoice amount for every 30-day unpaid period after factoring. These fees might be negotiable and can vary between factors.
5. Payment Process: Payments are usually advanced within one to three days. The factor then collects the total invoice value from your client, and once paid, they will pay the remaining balance to you, minus any fees.

 

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

From Startups to Corporates: A Canadian Guide to Equipment & Technology Financing

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Navigating Equipment Financing: What Every Canadian Entrepreneur Needs to Know

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Finding the Right Lease: Equipment Financing Strategies for Canadian Firms  

 

Introduction: Understanding Equipment Financing in Canada

 

Canadian entrepreneurs and financial managers should be well-informed about essential factors when considering an equipment financing and leasing transaction for an equipment purchase within the Canadian marketplace.

 

Without adequate knowledge and insights into these crucial aspects, one might be unprepared for a leasing strategy. In this guide, we will explore the types of leases available in Canada, their advantages and disadvantages, and how to make an informed decision tailored to your needs at the most competitive interest rates.

 

 

Types of Equipment Leases in Canada / Capital Leases vs. Operating Leases: What’s the Difference? 

 

The Canadian market has two primary lease categories for funding equipment purchases: capital leases and operating leases.

 

Your choice between them depends on whether you aim to own the equipment eventually or merely utilize it. The choice significantly influences the pricing and financial structure of the transaction.

 

• Capital Lease: This option allows you to make fixed payments over time, ultimately resulting in equipment ownership. The payments cover the equipment's cost and financing charges, allowing you to retain ownership at the end of the lease.

• Operating Lease: Typically lasting around three years, an operating lease enables you to pay for equipment used over a specified term. It’s especially suitable for technology equipment like computers and offers significant cash flow and balance sheet benefits.

  

 

Advantages of Equipment Leasing for Canadian Businesses  

Key Benefits and Considerations

 

Leasing equipment offers various obvious advantages to Canadian businesses, which include:

 

• Cash Flow and Working Capital Preservation: Helps maintain liquidity.

 

• Higher Loan-to-Value Financing: Usually requires only a nominal down payment. 100% financing is often available

 

• Credit Facility Preservation: Long-term asset acquisition is matched with a long-term lease, preserving other credit facilities.

 

• Collateral Considerations: In most cases, the financed asset is the only collateral needed.

 

• Tax and Write-off Benefits: Consult your accountant to maximize your transaction using tax incentives and investment credits.

 

 Potential Disadvantages and Risks of Equipment Financing 

 

No single financing strategy fits all firms.

 

Leasing might have perceived or real higher costs. If undertaking a  sale-leaseback financing and the asset's value is below the sale price, you might face a capital gain tax. Understanding insurance, installation, purchase options, and potential restrictive covenants is essential.

 

Key Takeaways :

 

1. What is equipment financing?

   • A flexible business loan or lease to acquire equipment.
   • Payments made over time  to match the term of the lease with asset useful life
   • Avoids the need for hefty upfront costs and a down payment

2. What types of equipment can be financed?

   • Technology, machinery, vehicles, and more.
   • Includes office technology, medical equipment, and heavy construction machinery.

3. How does the equipment financing process work?

   • Efficient approval processes
   • The simple application process, prompt evaluation.
   • Funding is often disbursed within a day.

4. What credit score do I need to qualify for equipment financing?

   • Determined by multiple factors, not just credit score. The focus is on the asset

5. Can any industry get equipment financing?

   • Suitable for most industries, including healthcare, heavy equipment financing construction, IT, etc.
   • Tailored solutions are available for lease and loan repayment terms

6. What are the benefits of equipment financing for new or used equipment?

   • Preserves capital, increases cash flow, offers fixed low rates and flexible terms.
   • Potential tax deductions, no large down payments needed - allowing preservation of existing credit facilities

7. What is the difference between equipment leasing and equipment financing?

   • Leasing: pay to use without ownership.
   • Financing: purchase and own while repaying over time.

8. Can used equipment be financed?

   • Financing options for new and pre-owned equipment. Used assets must be commercial transactions at arm's length

9. What are the tax benefits of equipment financing?

   • May provide tax benefits under CICA accounting rules
   • Deductions for the full purchase price of qualifying equipment.

10. Can I pay off my equipment financing loan early?

• Early payoff allowed; specifics depend on the agreement terms of each lease

11. What types of payment plans are available for equipment financing?

• Tailored to business needs, including monthly, quarterly, and seasonal payments.

12. Why should I choose 7 Park Avenue Financial for equipment financing?

• Decades of experience, and quick approvals.

13. What happens at the end of an equipment financing term?

• Typically, ownership of the equipment and specifics varies by agreement.

 

  

Conclusion:   

 

Leasing remains a vital source of long-term working capital for Canadian businesses.

 

A careful understanding of the types, benefits, and potential downsides can guide you in making an informed equipment financing decision. Don’t overlook this significant option, but use the insights provided to tailor a lease financing strategy that aligns with your firm’s unique requirements.

 

At 7 Park Avenue Financial, our core competency lies in financing solutions for business equipment and technology, furnishing small and medium-sized businesses with the equipment, vehicle, and software financing they require at competitive rates, all while cutting out the frustrations typically associated with traditional bank loans or another conventional financial institution.

 

Our clients enjoy the simplicity of filling out a straightforward application without requiring tax returns and financial statements to finance equipment when not necessary-  receiving a decision promptly.

 

7 Park Avenue Financial provides customized solutions and extensive equipment finance solutions for rolling stock, furniture, and software lease and loan agreements at competitive interest rates ( fixed or variable ) unaffected by inflation. We make the process of getting started as uncomplicated as possible - whether its traditional financing or non-bank finance alternatives.

 

7 Park Avenue Financial has provided financing solutions for Canadian businesses for over 17 years by consistently delivering business financing solutions in areas such as business equipment financing and leasing solutions and cash flow financing funding that businesses like yours demand.

 

 

  

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION  

 

What is equipment financing, and why is it important?  

 

Equipment financing for business funding of assets allows businesses to lease or purchase equipment without paying the full cost upfront. It helps conserve cash flow via structured monthly payments to match payments to cash flow, maintain credit lines, and enable growth. Often miscellaneous soft costs can also be bundled into the transaction. 

 

What's the difference between a capital lease and an operating lease?  

 

A capital lease leads to equipment ownership around equipment needs , while an operating lease/ fair market value lease is more like renting, allowing use without ownership. Both have different financial implications.  

Are there any tax benefits to leasing equipment in Canada?

 

Yes, leasing equipment can provide tax write-offs and investment credits, maximizing the financial benefits of your transaction.

 

What are the potential drawbacks of equipment leasing?

  

 

Drawbacks might include perceived higher costs or potential capital gain taxes in some sale-leaseback scenarios. It's essential to understand the specific terms and covenants.  

 

How does equipment financing affect my cash flow?  

Equipment financing lenders allow the company to conserve cash flow by spreading payments over time, which can be crucial for liquidity and financial stability.

 

  

Is equipment financing suitable for small businesses or startups?

  

 Equipment loans and leases can be tailored to suit businesses of all sizes, including small businesses and startups, providing flexibility in growth and operations. For small ticket transactions often only a one page credit application is required - Credit scores of owners do not significantly impact approvals in this method of asset financing and there is no minimum annual revenue requirement.

 

  

How can I determine the right lease type for my business?

  

 Evaluate your long-term goals, such as whether you want to own or use the equipment. Consulting with a financial expert such as 7 Park Avenue Financial for equipment financing needs can help tailor a strategy to your needs. Small transactions can often be approved same day or in just a few hours. 

 

What kind of equipment can I finance?

  

From technology like computers to heavy machinery/ construction equipment, a  wide range of equipment or technology for any business use can be financed through capital or operating leases.

 

  

How can I ensure I get the best equipment financing deal?  

 

Thoroughly understanding the types of leases, benefits, and potential downsides and consulting with a financial advisor can ensure that you choose the best financing strategy for your business.

 

Is equipment the only collateral required in leasing deals?

 

In most cases, yes. The   financed asset in the lease/loan agreement via equipment financing companies in Canada is typically the only collateral needed, making it a less risky option for many businesses.

 

 

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

Understanding Cash Flow For Business and Why Receivable Factoring Just Might Be The Solution

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Understanding the Financing Needs of Canadian Businesses

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Receivable Financing: A Viable  Trade Finance Cash Flow Solution for Canadian Businesses  

 

 

Choices.  Alternatives.  Robert Johnson, an old blues legend, wrote of being at the 'crossroads' and had choices.

 

Canadian businesses, small and medium-sized enterprises (SMEs), constantly seek reliable options within the Canadian business financing marketplace. Whether small players or large corporations, the need for cash flow & working capital solutions for business growth remains constant.

 

 Alternative Financing through Accounts  Receivable Factoring

 

For those facing challenges obtaining sufficient working capital financing from traditional banks, receivable factoring emerges as a viable solution. Unlike banks, which often consider the overall financial picture, receivable factoring focuses solely on the asset.

 

If your company can secure complete financing from a Canadian chartered bank, you likely have the ultimate cash flow protection. Yet, very few businesses fit into this category after the global business financial downturn of 2008-2009 and the COVID epidemic.

 

Receivable factoring might be more costly in certain instances, but it enables you to operate your business differently.

 

Understanding  Receivable Financing – A Useful Tool for Business Growth

 

Receivable financing, also known as factoring, has long existed as a financing tool. However, it has remained somewhat under the radar in Canadian business financing, often viewed as an alternative method of business financing option.

 

How Does Receivable Factoring Work?

 

In essence, receivable factoring is the sale of your receivables to a third party, either as a one-time transaction or on an ongoing basis. You receive funds almost immediately, focusing solely on the value of your receivable. It doesn't create additional debt for your balance sheet and provides control over your receivables, monetizing them to the extent you desire.

 

Control and Usage of Funds in Business Operations

 

The key advantage is control. You decide how much to borrow, when, and how to utilize the funds. Generally, our clients invest these funds to foster more growth and profits in their businesses.

7 Park Avenue Financial recommends Confidential Receivable Financing, allowing businesses to bill and collect their own receivables while at the same time achieving all the cash flow benefits of a non-bank receivable finance solution.

 

Perceptions and Reality of Receivable Financing Costs

 

While the perception is that receivable factoring as a cash flow solution is expensive, the reality may differ. Typical costs of a factoring fee range from .8 - 1.25%  per month, but the benefits include unlimited sales and profit growth, the ability to take supplier discounts, enhance supplier relationships, purchase smarter, and increase A/R and inventory turns.

 

Conclusion - Is Receivable Financing Right for Your Business?

 

Only you can determine if receivable financing and factoring is the working capital solution your business needs. The availability of choices and alternatives you may not have previously considered makes this a viable option.

 

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you in choosing the best financing path when you find yourself at a crossroads.

 

  

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What Is Receivable Factoring, and How Does It Work?

Receivable factoring is a financial transaction where a business sells its receivables (invoices) to a third party (called a factor) at a discount. This provides immediate cash flow for the business without waiting for clients to pay their invoices to payment terms. The factor takes on the responsibility of collecting the payment, allowing the company to focus on growth and operations.

 

Why Would a Business Choose Receivable Factoring Over Traditional Bank Financing?

 

Traditional bank financing via traditional financing institutions often considers the overall financial health of a business and may have strict requirements. Receivable factoring focuses solely on the quality of the receivables and doesn't add debt to the balance sheet. This makes it more accessible for businesses not qualifying for traditional bank loans, with many factoring companies providing a quicker and more flexible cash flow solution.

 

 Is Receivable Factoring Expensive, and How Are the Costs Calculated?

The cost of receivable factoring typically ranges between 8% / annum to 1.25% per month for factoring fees, depending on the agreement with the factoring company. While invoice factoring for commercial or government clients might seem more expensive than a line of credit via traditional loans or a merchant cash advance,  the benefits like unlimited sales growth, the ability to take supplier discounts, and increased inventory turns often outweigh the costs of a factoring agreement.

 

What Are the Benefits of Receivable Factoring for Canadian Businesses, Particularly Small and Medium-Sized Enterprises (SMEs)?

 

 Receivable factoring offers numerous benefits for Canadian SMEs, including immediate access to cash as the factoring company pays the firm immediately - often same day, enhanced control over finances and cash flow issues,  and the ability to grow without the constraints of slow-paying clients. It also allows businesses to operate without taking on additional debt, making it a strategic tool for the financial management of operating expenses as well as business expansion.

 

How Can a Business in Canada Get Started with Receivable Factoring, and What Should They Consider?

 

A business interested in receivable factoring can start by contacting a reputable Canadian factoring company or financial advisor experienced in this area.

Considerations include understanding the terms of the agreement, the receivable factoring cost involved, and ensuring that the chosen accounts receivable factoring company partner aligns with the business's unique needs and goals. Speaking with a credible Canadian business financing advisor can help navigate these considerations and ensure a successful implementation of an invoice financing strategy.

 

How Does Factoring Affect Cash Flow?

 Factoring positively affects cash flow by providing immediate access to funds that would otherwise be tied up in accounts receivable. By selling invoices to factoring companies, a business can quickly convert outstanding invoices into cash, thus improving liquidity and enabling more flexibility in managing expenses, investments, and growth opportunities.

 Is Factoring an Operating Cash Flow?

Yes,  debt factoring/accounts receivable financing, is considered an operating cash flow for short term financing. It's part of a business's daily operations, converting sales made on credit terms into immediate cash. Factoring accounts receivable enhances the operating cash flow, reflecting the cash generated from the core business activities.

 

 How Do You Account for Factoring Receivables? Factoring Receivables Accounting

 Accounting for factoring receivables depends on whether it's a sale of receivables (without recourse) or a loan (with recourse).

• Without Recourse: In non recourse factoring, the receivables are removed from the balance sheet, eliminating payment risk and the cash received, along with any fees, is recorded. Any loss or gain from the transaction is recognized in the income statement as the factoring company takes responsibility for credit risk.

 

• With Recourse: In recourse factoring, receivables may remain on the balance sheet, and the cash received is recorded as a liability. The fees and interest are recorded as expenses. The exact accounting treatment can vary, so consultation with an accountant or financial professional familiar with the applicable accounting standards is recommended. The factoring company assumes no risk for bad debt when the company is selling unpaid invoices.

 

What Happens to the Cash Flow If the Account Receivables Increase?

 

  

If accounts receivable increase without a corresponding increase in cash collections, it may indicate that more funds are tied up in unpaid customer invoices until the customer pays the invoice - as measured by the days sales outstanding formula.

This could lead to a decrease in available cash flow. Factoring accounts receivables / unpaid invoices can counteract this effect by converting those increased receivables into immediate cash, thereby maintaining or even enhancing the cash flow.

 

Without account receivable factoring or other financing strategies, a significant increase in accounts receivable might strain the company's liquidity and hamper its ability to meet short-term obligations and invest in growth opportunities.  

 

Citations - Mian, S., & Smith, C. (1992). Accounts Receivable Management Policy: Theory and Evidence. Journal of Finance, 47, 169-200. https://doi.org/10.1111/J.1540-6261.1992.TB03982.X.

Sopranzetti, B. (1998). The economics of factoring accounts receivable. Journal of Economics and Business, 50, 339-359. https://doi.org/10.1016/S0148-6195(98)00008-3.

 

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

Important Things You Need to Know About Equipment Financing

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Innovative Solutions from Equipment Financing Specialists: A Canadian Perspective For Business Borrowing To Finance Assets

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Equipment Financing in Canada: A Comprehensive Guide 

 

Introduction to Equipment Financing and Leasing in Canada

 

Equipment Financing in Canada is a specialized category within business financing. With origins going back hundreds of years, lease financing has become a mainstream tool for major Canadian firms. But why not smaller businesses? From manufacturing to technology, equipment leasing can be a versatile solution for companies of all sizes.

 

 

Types of Equipment Covered 

 

 

Lease financing in Canada encompasses various types of equipment, including production tools, transportation equipment, heavy machinery, computers, and more. Heavy equipment financing is a prominent field applicable to new and used assets. Notably, most traditional banks in Canada don't offer lease financing, except for a few chartered ones with strict credit requirements.

 

 

The Simplicity of Leasing 

 

Canadian business owners should consider leasing due to its straightforward structure. It involves a three-way agreement between you, your vendor, and the lessor. Though different from U.S. practices, leasing in Canada is far from complex. Understanding why it's popular can provide significant benefits to Canadian businesses.

 

  

Unveiling Equipment Leasing and Financing Options

Capital vs. Operating Leases  

 

Canadian business owners have two fundamental options: capital and operating leases. Operating leases usually come from manufacturers or vendors and often bundle maintenance and insurance. However, consulting an Equipment Financing Specialist is wise to ensure an operating lease aligns with your goals.

 

 Operating Lease

The essence of an operating lease is that it's used for temporary possession, not ownership. These leases can improve balance sheets and lower payments if ownership isn't the ultimate goal.

Capital or Financial Lease

This alternative lease denotes ownership and might suit those who eventually own the equipment.

 

 Working with 7 Park Avenue Financial, a Lease Financing Specialist

Navigating this specialized area of Canadian financing requires a trusted, experienced advisor. An Equipment Financing Specialist can help your business acquire the necessary assets and guide you through rates, terms, and structures based on your credit quality and assets.

  

 

The Benefits Of  Lease Financing  

Equipment, whether new or used, can be acquired through lease financing. Engaging with a proficient lease financing specialist can help you tap into various benefits:

• Better working capital utilization
• Cash savings, often eliminating down payments
• Often more affordable than term loans
• Efficient re-application processes
• No hindrance to existing banking arrangements
• Flexible payment options
• Pre-tax savings rather than after-tax profits
• Financing leverage to keep regular bank lines untouched
• No ownership dilution
• Fixed-rate financing in a low-interest-rate environment

 

Conclusion

 

In any industry, specialists provide invaluable insights and advantages. For equipment financing needs in equipment acquisition and technology acquisition in Canada, call 7 Park Avenue Financial, a lease financing expert.

 

Connect with the 7 Park Avenue Financial team, trusted,  credible, and experienced Canadian Business Financing Advisors with a proven success record in business finance. They can assist in fulfilling your capital requirements and help your business thrive.

 

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

 

 

What is Equipment Financing, and How Do Equipment Financing Specialists in Canada Help Businesses?

 

Equipment financing is a specialized lease or loan to purchase business-related equipment such as machinery, technology, or transportation assets. In Canada, Equipment Financing Specialists offer expert guidance in choosing between capital and operating leases, ensuring alignment with the company's goals, and maximizing benefits such as flexible payment options, fixed-rate financing, and balance sheet improvement.

 

How Do Capital and Operating Leases Differ in Equipment Financing?   

  

Capital and operating leases are two main categories in equipment financing. Capital leases, or financial leases, aim toward eventual equipment ownership. On the other hand, operating leases are designed for temporary possession without an intention to own. Equipment Financing Specialists in Canada can provide insights into which option best fits the business’s needs, considering factors like working capital utilization, asset quality, and credit requirements.  

  

 

 Are Equipment Financing Options Available for Both New and Used Equipment?

Yes, equipment financing in Canada covers new and used assets for customized financing solutions - Whether it's production tools, heavy machinery, or technology equipment, leasing options are available. Equipment Financing Specialists can guide businesses in making informed decisions, balancing the benefits, and understanding the rate, term, and structure suitable for their specific situation.

 

 How Does Equipment Leasing Affect My Business's Balance Sheet and Tax Position?

 Equipment leasing can significantly impact a business's financial statements and tax position. With an operating lease, the lease is not shown as debt on the balance sheet, providing some improvement in financial ratios. Payments may be considered operational expenses, leading to potential tax benefits. Equipment Financing Specialists can offer tailored advice and customized solutions on the best leasing solutions and structures for a company's financial and tax scenario.

 

 What Should I Look for in an Equipment Financing Specialist in Canada?

When seeking an Equipment Financing Specialist in Canada, look for credibility, experience, and a proven track record in business finance success. An expert in this field will assist with asset acquisition needs, answer questions about flexible terms and the proper rate, term, and structure, and help maximize the advantages of lease financing via an easy process.

Connecting with a trusted and credible equipment finance specialist ensures that your firm receives the best financing solution, support, and expertise it deserves in this specialized area of financing.

 

 

 

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The Art.. and Science of Buying a Distressed Company In Canada

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YOU ARE LOOKING AT BUYING A DISTRESSED BUSINESS IN CANADA! 

Buying Distressed Businesses in Canada: Risks, Rewards, and Financial Strategies

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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 Guide to Acquiring a Distressed Business in Canada: Insights and Financing Strategies

 

 

Introduction 

 

In Canada's dynamic business environment, investment opportunities in private company distressed businesses are ever-present.

 

Acquiring a distressed business may seem daunting for entrepreneurial individuals as prospective buyers or existing business owners.

 

But it can be profitable with the right strategy, guidance, and financing. This article will explore the essential factors to consider, the challenges to navigate, and the financing options available to support purchasing a distressed business in Canada.

 

Potential Rewards of Buying an Existing Business in Canada

 

Distressed businesses can represent a golden opportunity for determined entrepreneurs in Canada. With the economic struggles caused by events like the Covid Pandemic, businesses seek rescue or acquisition.

 

Financial institutions are lending again, paving the way for potential gains. Rigorous due diligence is imperative, as entering a bad transaction post-agreement can lead to unexpected challenges.

 

STARTUPS VERSUS ACQUIRING A DISTRESSED BUSINESS

 

Many startups stumble not because of incompetence but due to insurmountable obstacles that deter their success path. By focusing on acquiring distressed businesses, entrepreneurs can leverage existing momentum at a discounted price while working towards profitability, mitigating some of the risks associated with starting anew.

 

The Complexity of Buying a Troubled Business

 

The failure rate for new businesses can be overwhelming. The alternative of purchasing distressed companies across various sectors and turning them around can alleviate this fear and has it's own advantages. While the venture is still high-risk, the potential rewards are often worth the gamble.

 

Negotiations with Lenders and Creditors 

 

Generally speaking, when taking over a distressed company, liaising with creditors and devising a strategic, operational plan is crucial. A well-thought-out approach ensures that necessary improvements are made without drastically impacting cash flow. The ability to search public records for judgment liens etc is essential.

 

  

Your Due Diligence Process - The Essential First Step  

 

The world of distressed business acquisitions is rarely perfect. Understanding the "buyer beware" principle is vital in finalizing or negotiating a purchase price adjustment.

 

A thorough due diligence investigation is crucial when acquiring a distressed business, as there may be limited recourse after the purchase. This investigation must rigorously analyze why the company is struggling, including factors like debt, significant liabilities, loss of key management, or poor execution. Only after understanding these issues can the buyer and their team develop an effective strategy for the acquisition

 

Conducting diligent investigations before the purchase, including considerations for legal aspects, intellectual property, contracts, and patents, is crucial to protect oneself from unforeseen liabilities while evaluating potential distressed assets.

 

  

Managing Debt and Assessing Growth Finance Options  

 

Evaluating the level of debt when considering a distressed business for acquisition is a key factor. Proper business financing and a sound financial restructuring process will determine whether the company represents good value or just a cheap price.

Understanding why a distressed business fails is vital. Analyzing past management decisions and operational failures helps devise a solid plan to turn the business around. Has the company lost key management is a crucial question to investigate.

 

 Key Takeaways: 

 

Evaluating Your Opportunity:

 

1. Valuation and Potential Upside:

   • Is the valuation low enough to compensate for the risks?
   • Is the potential upside high enough?
   • Note: The price is the most attractive element of buying distressed companies.

2. Expertise Alignment:

   • Does the business fall within your area of expertise?
   • Caution is advised if you are not familiar with the market sector.

3. Potential for Turnaround:

   • What resources or plans can you provide that the owner didn’t have?
   • Identify the problems causing distress, and act like a doctor for the business.
   • Consider the quality of the post-transaction team, technology, automation, and customer stabilization.

Finding and Acquiring the Distressed Business: 4. Finding the Business:

• Via a broker specializing in distressed company transactions.
• Through word of mouth, business information sites, or online bankruptcy court filings.

5. Assembling a Team:

   • Consider hiring a lawyer specializing in distressed business transactions.

6. Types of Acquisition:

   • Through bankruptcy or a non-bankruptcy 'fire sale'.

7. Performing Due Diligence:

   • Talk with the company's employees to understand the internal state.
   • Retain the best workers and align their interests.

8. Understanding Customer Perspectives:

   • Speak with customers if the business is service-based.
   • Be aware of customer goodwill and potential problems during bankruptcy.

9. Benefits and Risks:

   • Acquiring distressed companies can grow the customer base and revenues cost-efficiently.
   • Carefully assess unique risks and rewards and assemble the right team for success.

 

Conclusion

 

Buying a distressed business should only be done if you understand the issues and plan to turn it around with a clear exit strategy.

 

The idea that purchasing a troubled business is a bargain is misleading, and such investments should be approached like any other, with careful research and due diligence. If the business is part of an industry with declining demand, making a reasonable profit might be unfeasible, and investing in a distressed company requires selecting one with a future demand for its product or service.

 

Still, Acquiring a distressed business in Canada is a complex yet potentially rewarding venture. Entrepreneurs can capitalize on these unique opportunities with careful planning, astute financing, and expert guidance, such as from 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with business acquisition requirements.

 

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK

 

What is Due Diligence?

Due diligence is a comprehensive investigation conducted before an asset acquisition to determine the value and purchase of assets. Thorough due diligence is vital for ensuring a fair and transparent transaction. It is a critical component in the buying process for businesses and ensuring you avoid unseen potential significant liabilities.

 

 What is a Stalking Horse Bid?

This term refers to a strategic bidding process where a potential buyer makes an initial offer before other interested parties or waits for others to bid to determine their position. This tactic is commonly used in distressed business acquisitions.

 

What is a distressed business?


A distressed business is a company struggling financially and unable to meet its obligations. It often needs urgent restructuring or acquisition to avoid bankruptcy and move toward a favourable transaction structure under fair consideration.


How can buying a distressed business be profitable?


Acquiring a distressed business at a discounted price and implementing the right turnaround strategy can generate significant profits as the company recovers and grows.


What are the risks of acquiring a distressed business in Canada?


Risks of a distressed target include potential hidden liabilities, extensive debt, operational challenges, and the possibility of failing to turn the business around, resulting in a bankruptcy process.


How can I finance the acquisition of a distressed business?


Financing options include bank loans, commercial finance companies, or seeking guidance from financial advisors specialized in acquisition finance like 7 Park Avenue Financial.


What is due diligence, and why is it essential?


Due diligence for prospective buyers of the seller's business is a thorough investigation of all aspects of the company, such as assets, liabilities, and potential risks, to ensure a fair and transparent transaction.


What's the difference between asset purchase and share purchase?

When acquiring a private company, the ability to purchase assets rather than shares/equity is generally preferable for two main reasons: obtaining a stepped-up tax basis in the assets and minimizing unwanted liabilities.

 

In the case of a severely distressed company, there may not be tax benefits to an asset deal. Still, it remains the wiser option to reduce liability/risk due to potential undisclosed liabilities or issues like potential tax liabilities and fraudulent activities. Each deal must be unique and negotiated with professional guidance, including tax counsel.

Asset purchase involves buying specific assets and liabilities, while share purchase involves buying the entire company's ownership. Asset sales often reduce risks and liabilities around any potential fraudulent transfer of assets of seller's creditors, for example, or successor liability claims.


How does management assessment help in buying a distressed business?


Assessing past key management decisions and operations helps identify the root causes of failure, guiding your strategy for turning the business around. Accessing key information in the target's business is critical to understanding past day-to-day operations and business dealings.

Assessing past key management decisions and operations helps identify the root causes of failure, guiding your strategy for turning the business around.

Accessing essential information about the target's business is critical to understanding past day-to-day operations and business dealings. It is necessary to build the best possible case that "fair consideration" or "reasonably equivalent value" will be paid for the business.



Can distressed businesses be found in all industries?


Yes, distressed businesses can be found across various sectors, each offering unique opportunities and challenges for potential buyers in a distressed asset sale under a competitive bidding process when other buyers are involved.

 

Several businesses for sale in all industries may be financially distressed, prompting management to seek a sale, even within entire troubled sectors. Specialist intermediaries with turnaround expertise can be helpful, especially if the buyer has proven to be decisive and efficient. Investors should be ready to sort through many poor opportunities and be aware that good ones may have competitive bidding, making the actual value of a distressed company hard to determine.


How can 7 Park Avenue Financial assist in acquiring a distressed business?


7 Park Avenue Financial offers expertise in acquisition finance, providing insights, advice, and support in acquiring distressed companies in Canada.

 

 

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

Why Do Companies Factor Receivables ? Cash Flow !

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YOUR COMPANY IS LOOKING FOR CANADIAN FACTORING FINANCING!

Cash Flow Revolution: How Factoring Receivables Could Be Your Business's Secret Weapon

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

 

 

Revolutionizing Canadian Business Financing: Unveiling the Power of Receivables Factoring

 

 

INTRODUCTION 

 

Receivables invoice factoring has a rich history in Canada, spanning over four decades. However, the surprising reality is that numerous business owners and financial managers remain unfamiliar with this potent financing tool and its mechanism of pledging receivables. This article delves into the factoring world, highlighting its dynamics/benefits.

 

 

SOME BACKGROUND ON FACTORING RECEIVABLES FOR CASH FLOW 

 

Interestingly, the origins of A/R factoring can be traced back to the fashion and garments industry. It's a peculiar twist of fate that factoring itself is now in vogue across various sectors. This section explores the evolution of factoring, highlighting its diverse applications and growing significance.

 

FACTORING VERSUS TRADITIONAL BANK LOANS - THE NEW SHIFT IN FINANCING

 

While many companies lean towards pledging receivables to secure a line of credit from traditional banks, the harsh reality is that numerous firms fail to meet the stringent criteria set by Canadian chartered banks.

 

As a result, alternative financing solutions like factoring and invoice discounting come into play, offering similar cash flow solutions albeit at a higher cost. This section compares the merits of factoring against traditional bank loans, emphasizing the accessibility and flexibility of factoring for businesses.

 

 

HOW DOES FACTORING WORK? 

 

For most Canadian business owners and financial managers, the limitations of a capped line of credit are well-known.

 

The borrowing facility is often tethered to personal guarantees, collateral, and loan covenants that curtail business operations. This segment uncovers the intricacies of factoring, detailing its function as an avenue to unlock immediate advances against accounts receivable. The constraints of traditional credit lines are contrasted against the advantages of factoring, highlighting its potential to accelerate growth.

 

 

DIFFERENT TYPES OF FINANCING TAILORED TO YOUR BUSINESS NEEDS 

 

In the realm of factoring, diversity thrives. Various options cater to different business requirements, from full notification invoice discounting to asset-based lending.

 

This section delves into the different facets of factoring, elucidating the nuances of each type. Traditional vs. non-notification facilities are explored, emphasizing how Confidential Receivable Financing empowers businesses to retain control over credit relationships and operational decisions.

 

 LET THE 7 PARK AVENUE FINANCIAL TEAM DISPEL FACTORING MISCONCEPTIONS 

 

 

Factoring in Canada is defying stereotypes that associate it solely with distressed companies. Contrary to these assumptions, many prominent corporations in Canada leverage factoring through asset-based lending arrangements. This segment challenges common misconceptions and underscores factoring is a strategic tool that drives growth and profit enhancement.

 

  

EMBRACE NON-NOTIFICATION FACTORING  

 

The path to optimal factoring involves collaborating with a seasoned business financing advisor with a proven track record. By gaining expert insights, businesses can harness the advantages of a proper non-notification working capital factoring facility. This section emphasizes seeking guidance to make informed decisions that amplify growth and financial success.

 

  

 KEY TAKEAWAYS  

 

  

 Unlock Your Business's Capital: Invoice Factoring Is Fast and Flexible Funding for Small Business Owners

 Invoice factoring cash flows tied-up capital from outstanding receivables.

 A/R Financing is a reliable funding option for predictable cash flow. Numerous factoring companies cater to new, growing, and established Canadian businesses.
  The Process of Factoring: From Submission to Cash in Your Bank Account

   Businesses submit invoices for funding.

   Business owner receives cash minus a fee.

  The customer pays the factoring company as per invoice terms.

   Exploring Factoring Types: Tailoring Financing Solutions to Your Business

   Whole turnover, selective, and spot factoring options for small businesses

   Recourse and non-recourse factoring structures.

   Pros of Factoring: Debt-Free Funding and Quick Access to Capital

   Debt-free and non-dilutive financing.

   Faster turnaround compared to traditional bank loans.

   Unlimited capital access and time-saving benefits.

   Cons of Factoring: Considerations and Drawbacks to Keep in Mind

    Verification of invoices may require customer contact for companies not using Confidential  Receivable Financings.

    Understanding Factoring Costs: Funding rates are 9% / annum - 1.125% / mo range.
    Factoring applies to businesses of all sizes and industries.

    A common practice for commercial clients in staffing, oil and gas, freight factoring / trucking companies, and other manufacturing and distribution sectors 

 

CONCLUSION  

 

Factoring receivables is more than a financial transaction; it catalyzes transformation. As Canadian business owners embrace the diverse benefits of factoring, they pave the way for innovation, expansion, and sustainable growth. Want to work with a leading financing company/business advisor who wants to be a business partner?

 

Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor helping reshape Canadian companies' business financing landscape.

 

 

  

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

 

What exactly is receivables factoring, and how does it differ from traditional bank loans?

 

Receivables factoring is a financing solution where a business sells its accounts receivable to a third-party (factor) at a discounted rate in exchange for immediate cash. This contrasts with traditional bank loans that involve borrowing money and repaying it over time with interest. Factoring provides quicker access to funds without incurring debt.

 

 How does factoring help businesses overcome the limitations of capped lines of credit?

Traditional credit lines often come with restrictions like personal guarantees, collateral, and covenants. Factoring eliminates these constraints by converting outstanding invoices into cash, allowing businesses to maintain a healthy cash flow and fuel growth without relying solely on credit limits.

 

What are the different types of factoring available for Canadian businesses?

 Factoring comes in various forms, including full notification invoice discounting, asset-based lending, and non-notification facilities. Full notification involves managing credit and collections, while non-notification options like Confidential Receivable Financing let businesses maintain control over customer relationships and credit decisions.

 

Is factoring mainly for struggling companies, or can successful businesses also benefit?

 Factoring is not just for distressed companies. Many thriving businesses, including some of Canada's largest corporations, use factoring to optimize their working capital and enhance cash flow. Factoring can act as a strategic tool for growth and profitability.

 

 How can I ensure I'm making the right decision with factoring?

Seeking guidance from experienced business financing advisors such as 7 Park Avenue Financial is crucial. They can help you understand the nuances of factoring, tailor a solution to your business needs, and ensure you leverage the advantages of a non-notification working capital factoring facility for sustained growth and financial success while providing competitive factoring fees.

 

Is cross-border factoring available?

Yes, cross-border factoring is available from most firms who offer factoring services - Cross-border factoring involves companies from different countries engaging in factoring transactions. However, it can be more complex due to variations in legal and business practices between countries.

 

Is factoring available for startups also?

 

Yes, factoring can be available for startups from different factoring companies, although it might depend on the specific circumstances of the startup. Some factoring companies might require a certain level of operational history for smaller or a minimum volume of receivables from medium sized businesses before providing financing.

 

How does Receivable Financing / Factoring impact the balance sheet?

 

Factoring involves selling accounts receivable to a third party (the factor) at a discount. This transaction affects the balance sheet by increasing cash (or reducing accounts receivable) and increasing liabilities. The sale of receivables generates immediate cash but also creates a liability to the factor.

 

How Can Factoring Help With Business Expansion?

 

Canada Invoice Factoring /invoice financing can help business expansion for SME / Mediumsized companies by providing immediate cash flow from unpaid invoices. This cash can be reinvested into the business for various expansion activities such as purchasing inventory, hiring new employees, expanding marketing efforts, or entering new markets.

 

Is credit insurance available when factoring receivables?

 

Credit insurance is often available for receivable factoring from many of the best factoring companies as an add-on to factoring services. It protects the business against the risk of non-payment by customers if an invoice remains unpaid for goods and services delivered. This can be especially important when dealing with high-value invoices or customers with uncertain creditworthiness.

 

How does factoring a/r compare to traditional financing?

 

Factoring and traditional financing (like bank loans) differ in several ways. Factoring companies in Canada provide quick cash for immediate working capital based on outstanding invoices for a factoring fee. Traditional loans and bank financing involve borrowing a lump sum with periodic repayments. Factoring is often easier to qualify for and is linked to a business's receivables, while loans may require collateral and a strong credit history.

 

How is factoring a tool for working capital and cash flow management?

 

Factoring/accounts receivable financing via an invoice factoring company improves working capital and cash flow by converting unpaid invoices into immediate cash. Instead of waiting for customers to pay their invoices, a business can receive a significant portion of the invoice value upfront from invoice factoring companies via invoice factoring services that can help to cover operational expenses, meet payroll, invest in growth initiatives and meet their cash flow needs.

 

How do you qualify for factoring?

 

Companies with commercial clients selling on trade credit terms to generally credit-worthy customers are eligible for factoring finance solutions. Typically, companies do not qualify for traditional bank financing and are incorporated in Canada with reasonable sales revenues.

 

Do businesses need good credit for factoring?

 

Companies that do not have solid financial or good business credit are still eligible for factoring finance solutions. Financing is based on the credit quality of the clients of the business.

 

What documents do factoring companies need?

The requirements from a factoring company include the following:

Copies of invoices that are to be financed showing proof of goods and services delivered

General business application

Aged accounts receivable listing - invoices older than 90 days are not eligible for financing

Business bank account information

Articles of Incorporation / Ownership details / Business I.D. #

 

 

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