Asset Based Lending Canada - Reboot Your Business Credit Needs

Asset Based Lending Canada -  Reboot Your Business Credit Needs

Do Not Pass Go... Do Not Collect $ 200.00 Until You Have Looked At Asset Based Lending

 

YOUR COMPANY IS LOOKING FOR  FINANCING COMPANIES FOR ASSET BASED

LENDING IN CANADA!

THE ASSET BASED FINANCING SOLUTIONS

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

Financing & Cash flow are the  biggest issues facing businesses today

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

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

EMAIL - sprokop@7parkavenuefinancial.com

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

 

Unlocking Capital: Asset-Based Lending Financing Companies in Canada | 7 Park Avenue Financial

 

 

  

ASSET BASED LENDING / LINES OF CREDIT - CANADA  

 

 Table of Contents

    Introduction

    Understanding Asset-Based Lending (ABL)

    Comparing ABL with Traditional Bank Loans

    Asset-Based Lending in Canada: Meeting Diverse Funding Needs

    Assets Used in Asset-Based Financing

    Who Benefits from ABL Solutions?

    Understanding the Costs of Asset-Based Lending

    Lending Criteria and Transitioning Back to Traditional Financing

    Summary of the Benefits of Asset-Based Lending

    Conclusion

    FAQ

 

INTRODUCTION

 

Asset-based lending in Canada offers a wide range of options because when it comes to exploring alternative finance strategies for your business, it's time to 'REBOOT' your thinking.

 

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

 

Asset-based lending is a financial strategy where a business secures a loan using the company's assets, such as accounts receivable, inventory, or equipment and commercial real estate as collateral. In Canada, ABL companies provide loans to businesses based on the value of these assets.

 

Unlike traditional bank loans offering an unsecured loan that heavily relies on credit history, an asset-based loan solution primarily focuses on the quality and value of the assets used as collateral. While credit history may still be considered, it is generally not the sole determining factor for asset based lines of credit, making more flexible funding solutions from asset-based lenders more accessible to businesses with limited credit histories.

 

Consider asset-based lending for the business finance solution you're seeking. Let's dig deeper!

 

DO CANADIAN BANKS MEET YOUR FINANCING NEEDS?

 

Many business owners and financial managers, particularly in the SME sector in Canada,, find that all their financial needs can not always be met by traditional Chartered bank / Credit Union sources. While Canadian banks continue to have virtually unlimited capital to serve business needs in many cases, the borrower can't meet the requirements needed to attain those solutions.

 

So, while public companies and large, well-heeled corporations are borrowing at will, the challenge is much more difficult if you're not in one of those two categories.

 

COMPARING  ASSET BASED FINANCING WITH UNSECURED BANK LOANS

 

Asset-based lending (ABL) and unsecured bank loans are two distinct financing options with different characteristics. Here's a comparison between the two when evaluating business growth opportunities:

 

1. Collateral vs. No Collateral:

    Asset-Based Lending (ABL): An ABL revolving line of credit requires businesses to pledge specific assets, such as accounts receivable, inventory, equipment, or real estate, as collateral to secure the loan. The loan amount is typically based on these assets' value and requires fewer covenants.     Unsecured Bank Loans: Unsecured bank loans do not require collateral. These loans are granted based on the borrower's creditworthiness and financial stability and are not tied to specific assets.

2. Access to Capital:

    ABL: ABL provides quicker access to capital since the focus is on the value of assets, making it a suitable option for businesses that need funds promptly.
    Unsecured Bank Loans: Unsecured bank loans may take longer to obtain due to the rigorous credit evaluation process, making them less suitable for businesses in urgent need of funds.

3. Credit Requirements:

    ABL: ABL is often accessible to businesses with limited credit histories or lower credit scores because the primary consideration is the value of assets used as collateral in the due diligence process
    Unsecured Bank Loans: Unsecured bank loans typically require a strong credit history and a good credit score since they rely heavily on the borrower's creditworthiness.

4. Loan Amounts:

    ABL: The loan amount in ABL is determined by the appraised value of the collateral assets. It can be a percentage of the asset's value.
    Unsecured Bank Loans: Unsecured bank loans may offer higher loan amounts than ABL, but the actual amount depends on the borrower's creditworthiness and financial stability.

5. Interest Rates:

    ABL: Interest rates for ABL can be higher than those for unsecured bank loans due to the perceived risk associated with the collateralized assets.
    Unsecured Bank Loans: Typically, unsecured bank loans offer lower interest rates to borrowers with strong credit profiles.

6. Risk to Assets:

    ABL: Businesses risk losing their collateral assets if they fail to repay an ABL loan, which can impact their operations.
    Unsecured Bank Loans: Unsecured bank loans do not put specific assets at risk; however, defaulting can negatively impact the borrower's credit rating.

7. Use of Funds:

    ABL: ABL funds are often used for specific purposes such as working capital, expansion, or acquisitions, which are related to the assets used as collateral.
    Unsecured Bank Loans: Unsecured bank loans offer more flexibility in using funds, allowing businesses to allocate the capital as needed.

 

ASSET BASED LOANS MEET MANY FUNDING NEEDS

 

Enter... stage right... Asset-based lending in Canada.  Through a variety of, shall we call them ' subsets' of Asset financing your company can achieve the financing structure it needs to either grow your business or in certain cases even acquire a business?

 

WHAT ASSETS ARE PART OF AN ASSET BASED  FINANCING

 

Financing companies providing these solutions don't make it complicated either. They take all or certain of your assets (depending on the amount and type of capital you are looking for) and put them into a collateral pool you can borrow against. They can combine working capital/line of credit solutions or even term loans if that makes sense.

 

The assets in question? They include:

 

Accounts Receivable

Inventory

Equipment

Tax credits

Real estate

Large contracts/orders

 

And here's the good news. You can mix and match -  Classic flexible financing!

 

WHO USES ABL ASSET BASED LENDING SOLUTIONS

 

So who is this type of financing well suited for?  Typical clients we meet tend to be:

 

High growth

Start-Ups

Restructuring

Acquisition oriented

Management buyouts

 

A key attraction in Asset-based lending in Canada is that it requires less equity as the focus is all about those assets.

 

WHAT DOES ASSET BASED LENDING COST

 

In business financing, it's not always a perfect world, so funding typical/interest rate costs offered by financing companies that are in effect, non-bank lenders are going to be higher, one reason being those finance firms borrow the funds they need for you from the banks!  

 

LENDING CRITERIA  AND THE BRIDGE BACK TO TRADITIONAL FINANCING

We point out to our clients that if they can meet typical bank borrowing criteria, an asset-based line of credit will often be both competitive with the banks and, most importantly, give you a lot more borrowing power. The simple reason is that assets are more aggressively 'margined' or ' loaned against'. In many cases, companies that temporarily use Asset financing often migrate back to a traditional bank solution.

 

SUMMARY OF THE BENEFITS OF ASSET BASED LENDING

 

• Improved Liquidity: Asset-based lending provides immediate access to cash, helping businesses address short-term financial needs and improve their cash flow.

• Flexibility: It offers flexible financing solutions tailored to a company's specific requirements, allowing it to use the funds for various purposes, such as expansion, working capital, or debt consolidation.

• Accessibility: Asset-based lending is often more accessible to businesses with limited credit histories or lower credit scores since the focus is on the value of assets used as collateral.

• Quick Approval: The approval process for asset-based lending is typically faster than traditional bank loans, enabling businesses to secure funding promptly.

• Enhanced Borrowing Capacity: It allows businesses to borrow against a wide range of assets, potentially increasing their borrowing capacity compared to conventional financing.

• Asset Preservation: Businesses can retain ownership and use of their assets while using them as collateral, ensuring that operations continue uninterrupted.

• Tailored Financing: Asset-based lending can be customized to match a company's financial needs, providing a financing structure that aligns with its growth and operational goals.

• Potential Cost Savings: In some cases, asset-based lending may offer cost savings compared to other high-interest financing options, such as credit cards or unsecured loans.

• Debt Management: It can help businesses consolidate existing debts, simplifying their debt management and reducing the overall cost of borrowing.

• Seasonal Support: Asset-based lending is well-suited for businesses with seasonal fluctuations, allowing them to access capital during peak demand.

• Collateral Diversification: Businesses can use a mix of different assets as collateral, spreading risk across various asset types.

• Credit Improvement: Successful repayment of asset-based loans can positively impact a company's credit profile and potentially lead to better credit terms in the future.

 

 

 

CONCLUSION

 

Asset-based lending is suitable for businesses with valuable assets but limited credit histories needing quick capital access. On the other hand, unsecured bank loans are better for companies with strong credit profiles that can afford a longer application process and seek more flexible use of funds without collateral requirements. The choice between the two depends on a business's financial situation and its specific financing needs.

 

If your business is looking for innovative solutions for your firm's business assets and sales growth, then call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can assist you with your needs. It's time to ' reboot ' your thinking on the financing solution you require and work with a financial services provider with your interests in mind!

 

FAQ

 

What types of assets can be used as collateral for asset-based loans in Canada?

 

In Canada, businesses can use various assets as collateral for ABL, including accounts receivable, inventory, machinery, equipment, real estate, and even intellectual property. The eligibility of assets may vary depending on the lending company's policies.

 

How do Canadian businesses benefit from asset-based lending compared to traditional bank loans?

 

Asset-based lending in Canada offers more flexibility and quicker capital access than traditional bank loans. It allows businesses with strong asset bases but limited credit histories to secure financing, making it an attractive option for growth and working capital needs.

 

What is the typical eligibility criteria for businesses seeking asset-based lending in Canada?

 

Eligibility criteria can vary among ABL financing companies, but businesses generally need valuable assets for collateral. Lenders may also consider the business's financial stability, industry, and repayment ability.

 

What risks should Canadian businesses be aware of when using asset-based lending?

 

While asset-based lending can provide financing solutions, businesses should be cautious about losing their assets if they cannot repay the loan. Having a clear repayment plan and understanding the ABL agreement's terms and conditions is essential.

 

What are the common industries or sectors that benefit the most from asset-based lending in Canada?

 

Asset-based lending can benefit manufacturing, wholesale distribution, retail, and service-based businesses. It's not limited to specific sectors and can adapt to the unique needs of different companies.

 

Are there any restrictions on how businesses can use the funds obtained through asset-based lending in Canada?

 

Generally, asset-based lending allows businesses flexibility in how they use the funds. Whether it's for working capital, growth initiatives, debt consolidation, or acquisitions, the utilization of the funds is often determined by the business's specific needs.

 

How does evaluating the value of assets for collateral work in asset-based lending in Canada?

 

The process involves a thorough assessment of the assets being offered as collateral. A qualified appraiser or valuation expert may be used to determine the value of assets like equipment, real estate, or accounts receivable. This valuation is crucial in determining the loan amount a business can secure.

 

What is the typical duration of an asset-based lending agreement in Canada, and can it be renewed or extended?

 

The duration of asset-based lending agreements can vary but often ranges from one to three years. These agreements can be renewed or extended based on the lender's policies and the borrower's financial performance. Renewal terms are typically negotiated before the agreement's expiration.

 

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

Getting The Most Out Of Canadian Lease Pricing and Best Lease Rates?

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YOUR COMPANY  IS LOOKING FOR CAPITAL EQUIPMENT LEASING AND THE BEST LEASE RATES AND PRICING!

Secrets of Lease Pricing for Smart Business Financing

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

Financing & Cash flow are the  biggest issues facing businesses today

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

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

EMAIL - sprokop@7parkavenuefinancial.com

 

Lease Pricing Best Rates Capital Equipment Finance  | 7 Park Avenue Financial

 

Understanding Lease Financing: Unlocking the Best Lease Rates in Canada

 

Exploring the Importance of Lease Rates and Terms

 

Leasing equipment and equipment loans are standard in Canada, but do you truly understand its intricacies when you purchase equipment or new technology?

 

Many business owners seek ways to secure the best lease rates for their business equipment and technology needs in Canada while effectively managing capital equipment financing. This article will delve into the significance of comprehending business loan lease pricing and terms, offering valuable insights, tips, and strategies for making informed decisions.

 

 

The Pitfall of Ignorance: End-of-Term Obligations 

 

One of the most significant threats to equipment financing in Canada is the lack of awareness regarding factors that can impact the advantages of a lease, particularly the often-overlooked 'end of term' option.

 

Astonishingly, numerous small and large businesses fail to grasp the importance of understanding and invoking their equipment financing options when their leases expire. Paradoxically, larger corporations often fare worse in this regard, as the complexities of managing numerous equipment leases can lead their systems to 'forget' critical details.

 

But how can an end-of-term option prove costly? Surprisingly, many leases are structured to obligate your firm to continue paying the monthly lease payment if the notice or obligation is not handled correctly. Failure to return, buy, or formally extend a transaction can leave you in a perpetual payment cycle, which is far from ideal.

 

Imagine leasing a $25,000 document copier, paying it off over five years with interest, only to find yourself paying for it again. To compound matters, the asset has depreciated and become outdated due to technological advancements. This situation is far from optimal.

 

Navigating Lease Pricing Options in Canada

 

In the Canadian capital equipment finance industry, lessors offer many pricing options, which can bewilder business owners and financial managers. To simplify the lease pricing process and secure the best rates, it is essential to perform fundamental research into the two primary types of leases: capital (also known as lease to own) and operating (also known as lease to use).

 

 

Choosing the Right Lease Strategy 

 

An operating lease strategy is prudent if your assets depreciate rapidly or require frequent upgrades to stay competitive. This approach, exemplified by computers and computer systems, presents benefits such as lower monthly payments, flexibility in returning and upgrading equipment, and the ability to effortlessly replace outdated technology at the end of the lease term. Operating leases often offer the most favourable lease rates compared to lease-to-own strategies. via a financial institution

 

Streamlining Lease Financing

 

Simple lease finance strategies can further reduce your monthly payment, with options like a bargain purchase at the end of the lease, effectively lowering your ongoing costs. Moreover, your interest rate on lease financing in Canada depends on factors such as your firm's credit quality, the type of asset you lease, and your choice of lessor. Given the segmented nature of the industry, partnering with the right lessor can translate into substantial cost savings throughout your financing relationship.

 

 Conclusion: Harnessing the Power of Lease Financing 

 

In pursuit of the best lease pricing and terms? Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor.

Their expertise can help you leverage the advantages of this potent capital equipment finance strategy, embraced by countless business owners daily. By mastering the nuances of lease financing, you can unlock the key to securing favourable lease rates and ensuring the long-term financial health of your enterprise. Don't leave your leasing fate to chance—make informed decisions and reap the rewards of right lease financing.

 

To achieve the best lease pricing and terms, speak to  7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can help you, the business owner, maximize the benefits of this powerful capital equipment finance strategy used by thousands of business owners every day.

 

 FAQ 

 

Why is understanding lease financing crucial for my business?

 

Understanding leasing equipment financing companies and lease financing helps you secure the best interest rates and terms for equipment purchases, potentially saving thousands of dollars. It empowers you to make informed decisions and effectively manage your needs around new or used equipment financing.

 

What are the risks of neglecting end-of-term obligations in leases?

 

Neglecting end-of-term obligations on a capital lease or fair market value lease can lead to continuous payments even after the lease ends. This costly oversight can leave you paying for outdated equipment, hindering your business's growth.

 

How can I choose the right lease strategy for my business?

 

The choice between capital and operating leases depends on your asset's depreciation and upgrade needs. Capital leases from financial institutions such as a commercial leasing company offer ownership while operating leases provide flexibility and lower monthly payments.

 

What factors affect my interest rate on lease financing in Canada?

 

Your interest rate is influenced by your firm's credit quality,  down payment, the owner's and the business's credit score,  the type of leased asset, and your lessor. Finding the right partner can result in substantial cost savings over the financing term.

 

Why should I consult a Canadian business financing advisor for equipment leasing programs?

 

A reputable advisor can guide you through the complexities of lease financing, helping you maximize its benefits. Their expertise ensures you make the best financial decisions for your business around the best equipment purchases and financing possible.

 

Are there tax benefits associated with lease financing in Canada?

 

Lease financing can offer tax advantages, such as deducting lease payments as business expenses. However, specific tax benefits may vary based on your business and the type of lease.

 

What is residual value, and how does it affect lease terms?

 

Residual value is the leased asset's estimated worth at the lease term's end. It can impact lease payments and terms. A higher residual value typically leads to lower monthly payments.

 

Can I terminate a lease early if my business circumstances change?

 

Early lease termination can be possible, but it often incurs penalties. Review your lease agreement to understand the terms and costs of early termination for leases and business loans when purchasing equipment to finance the asset.

 

Are there industry-specific considerations for lease financing in Canada?

 

Different industries may have unique requirements and considerations for lease financing and loan terms. Tailoring your lease strategy to your specific business needs to finance equipment is essential. Almost any type of asset, from trucks to specialized medical equipment, can be financed.

 

How does lease financing compare to traditional bank loans for acquiring equipment?

 

Lease financing via equipment financing lenders typically requires less upfront capital on the purchase price than an equipment loan and offers flexibility. Bank loans and unsecured business loans involve ownership from the outset and may require substantial down payments. Choosing between the two depends on your financial goals and circumstances. Business owners'  personal credit scores and overall financial health are key to bank loan approvals. In contrast, commercial financing companies and online lenders have less stringent approval criteria to purchase the equipment required.

Companies using lease finance can conserve existing lines of credit. No minimum annual revenue is required when using an asset finance strategy.

 

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

Construction Invoice Financing & Contractor Loans Funding

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YOUR COMPANY IS LOOKING FOR  CONSTRUCTION INVOICE FINANCE!

CONSTRUCTION FACTORING  COMPANIES FOR SUB-CONTRACTORS

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 -  Let's talk or arrange a meeting to discuss your needs

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

 

What Is Construction Invoice Factoring - Your Guide To Contractor Loan And Construction Invoice Financing

 

Construction invoice factoring contractor loans is all about the cash flow of your receivables outstanding from clients. This allows your business to fund payroll and operations successfully and consider working capital for growth projects and new clients while avoiding cash flow problems.

 

THE NEED FOR FUNDING IN CONSTRUCTION CREDIT

 

The construction industry presents unique challenges that can significantly impact a company's cash flow and financial stability.

 

One of these challenges is the complexity of managing subcontractor payments to improve cash flow, which often involves intricate billing structures and timing around invoice value. Additionally, construction firms must contend with the potential threat of mechanics liens.

 

These legal claims can be placed against a property when contractors or subcontractors are not paid promptly, causing disruptions in project timelines and financial setbacks. Furthermore, the industry is subject to various government regulations and compliance requirements that can further complicate financial operations.

 

Construction invoice factoring can be a valuable tool for addressing these challenges by providing immediate cash flow to navigate the intricacies of the construction business while allowing companies to focus on delivering projects efficiently and profitably.

 

Contractions and extraction companies, for example, need steady funds. The challenge is that traditional financing can rarely satisfy the needs of small construction companies due to their size and risk perception around their industry. An excellent example of that is contractor holdbacks and progress billings typically associated with the industry, with those holdbacks, of course, being government law! Naturally, the world done by your firm is also subject to mechanics liens, further complicating the matter.

 

The challenge for a sub-contractor and factoring for construction subcontractors is to ensure you have an experienced Canadian business financing advisor and a construction factoring company who can help you fund construction receivables.

 

Construction companies, large and small, play a key role in the Canadian economy. The industry's ability to secure cash flow and business financing to complete current jobs is key to its long-term success.

 

HOW THE RIGHT FACTORING COMPANY FINANCES CONSTRUCTION RECEIVABLES

 

The effective use of a factor/receivable type construction invoice finance allows a company to eliminate the wait time that otherwise might delay work if cash flow is not secure. Proper invoicing and financing assistance via a factoring agreement from a financing company allow the company to project cash flow needs for current and future projects. The ups and downs of cash inflows' timing is a key challenge to any firm in construction - cash flow might be plentiful today and less so tomorrow.

 

 

 

WHY CONSTRUCTION RECEIVABLE FINANCING WORKS

 

Those cash flow fluctuations, significant in nature, are why construction factoring and factoring construction receivables via construction invoice factoring companies work well for both startups and established firms.  It's safe to say the clients of construction companies big and small would prefer to work with companies such as yours, knowing your firm can meet its obligations.

 

TRADITIONAL FINANCING IS NOT ALWAYS AVAILABLE.

 

The whole issue of subcontractor factoring / factoring construction invoices,  and the type and nature of construction invoices vis a vis work completed, progress billing draws, application for payment, etc., make traditional financing challenging and seemingly inaccessible for many firms trying to get paid promptly while avoiding negative cash flow via a conventional bank loan.

 

  

BANK REQUIREMENTS FOR A/R CONSTRUCTION FUNDING  

 

That perceived risk, real or otherwise, forces many finance firms, banks, etc., to ask for additional collateral and the proverbial ' personal guarantee around a construction company's financing. Sometimes, ' credit insurance ' is one answer to the contractor finance challenge. Different types of firms within the construction industry have needs that vary as they assess the construction funding needed for larger jobs in their construction industry.

 

  

CONSTRUCTION COMPANIES TYPICALLY ELIGIBLE FOR  SALES FINANCING

 

  

Typical contractors eligible for invoice and receivable financing include electrical, floor, roofing, scaffolding, drywall, drainage, flooring, tiling, brick, and carpentry firms.

 

HOW INVOICE FACTORING WORKS?

 

Putting an a/r factoring facility in place for a new project for your business allows your firm to be paid promptly, and for a construction company, that cash advance is critical cash flow. Knowing you have guaranteed cash flow will enable you to complete current projects and consider the next job. Due to the seasonality and timing of cash inflows in the construction business, knowing you have predictable cash flow is the key to success. With good profit margins, businesses can lower their financing costs around factoring company charges.

 

EXAMPLE:

 

Let's consider a factoring cost analysis with an invoice value of $50,000 and an advance of 80%:

You choose a factoring company that provides an advance of 80% of the invoice value, totalling $40,000.

You will receive the $40,000 immediately  -The agreement clearly states a factoring rate of 2% over 30 days as an example

As your client makes the payment within the 30-day timeframe, the factoring company charges a 2% factoring fee of $1,000.

The balance of the invoice, i.e. the 20% holdback, is paid when the client pays the invoice.

 

A construction factoring company typically offers two types of construction invoice factoring:

 

1. Spot Factoring: This option comes into play when a company requires immediate cash and wishes to factor in a single invoice. Spot factoring is suitable for businesses facing a specific cash flow need due to an isolated invoice issue. It's worth noting that spot factoring can be pricier compared to contract factoring.

2. Contract Factoring: Similar to spot factoring, contract factoring involves a more extensive range of invoices. In this arrangement, the factoring company provides cash for each progress payment. Due to the higher volume of invoices involved, contract factoring often comes with more favorable rates.

 

 

IS CONSTRUCTION INVOICE FINANCING A GOOD IDEA?

 

Suppose your firm is in constant need of cash. In that case, you typically invest in accounts receivable that force you to wait for client payment - that's why construction invoice factoring works. By generating immediate cash as soon as you invoice a client, you have eliminated the challenge of cash inflows. Therefore, this type of financing allows you to complete jobs and, importantly, consider positions that might be out of reach from a size perspective. Your firm can't wait for 90 days to collect payment.

 

IS PURCHASE ORDER FINANCING A SOLUTION?

 

At 7 Park Avenue Financial, we always meet clients who require financing to take on larger contracts but need the financing to do so. Sometimes, a PURCHASE ORDER FINANCING facility makes sense, allowing your suppliers to be paid directly for your materials.  Any contractor or construction firm's general needs are typically general corporate functions such as payroll, supplier purchases, and ensuring your fixed costs and loan payments are current.

 

WHAT STAGE IS YOUR BUSINESS IN?

The construction industry is varied - your firm might be in its early stages or, as we have discussed, lacking financing to grow and take on larger clients. The Canadian chartered banks have typically 'underserved ' these firms, leaving them ' debunked. The financial term ' concentration risk ' must also be considered, as some companies tend to have only one client or have most of their work at any time in one client. Commercial lenders view this as 'a concentration risk. '

 

 

HOW DOES CONSTRUCTION FACTORING  WORK? 

 

Certain vital issues must be addressed to make construction invoice factoring and financing for construction subcontracts work. Typically, your invoice will have an advance made to your firm in the 75-80% range. The excellent news with construction finance factoring is that you are not obligated to finance all your receivables, although certainly, you can if you choose.

 

Your clients must pay the lender the full invoice amount, and your business still gets that additional balance owing to lower financing costs.

 

Contractors, sub-contractors, and small construction companies should demonstrate decent gross margins on their pricing to clients to absorb the financing costs.

 

Many firms are under the mistaken impression that this type of financing is a loan, thereby bringing debt to their balance sheet. That is not the case!  These are not contractor loans. You are ' cash flowing ' an asset on your balance sheet already.

 

When considering financing options for their construction business, companies often weigh the advantages of construction invoice factoring against various alternatives.

 

While construction invoice factoring offers quick access to cash based on outstanding invoices, comparing it to traditional financing sources like bank loans, lines of credit, and equity financing is essential. Bank loans and credit lines typically involve a lengthy approval process and stringent credit requirements, making them less accessible, especially for smaller construction firms.

 

Equity financing may require giving up ownership stakes in the company. Factoring, on the other hand, emphasizes the creditworthiness of clients rather than the company itself, making it a viable option for those with less-than-stellar credit or those seeking a faster and more flexible funding solution.

 

Choosing the right financing option depends on a construction company's specific needs and financial situation, making a thorough comparison crucial in making an informed decision.

 

 CONCLUSION  

 

At 7 Park Avenue Financial, we are focused on ensuring construction businesses like yours can release cash flow from their construction projects. We focus on providing you with the capital injections you need on a short and long-term basis. That might also be in acquiring assets to run your construction business. Regarding your unpaid invoices, the right factoring company is job #1 at 7 Park Avenue Financial.

 

The ability to have a partner that understands your business and can react quickly to your invoice discounting. We will consider how you do your work and bill clients, where your clients are located, your specific needs, and what type of sales growth you are currently experiencing and projecting. If necessary, we'll prepare your company's business plan and cash flow projections.

Knowing your estimated funding needs around the seasonality of your work and understanding when you might need additional ' bulge financing ' is the type of financing partner you should be focused on. Sometimes, your work might involve government contracts with unusual terms around completion, etc.

 

At 7 Park Avenue Financial, we will ensure you get the maximum available advance on all your invoicing - in any business, knowing who to work with on business financing is key to your larger jobs. Successful financing needs /Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who will assist you with your contractor invoice financing and other funding needs.

 

FAQ

 

What is construction invoice factoring?

Construction invoice factoring is a financial service where construction companies sell their outstanding invoices or receivables to a factoring company at a discount. In return, the construction company receives immediate cash, which can be used to cover expenses and finance ongoing operations. The factoring company then assumes responsibility for collecting the full invoice amount from the client.

Why would a construction company consider invoice factoring instead of taking a traditional loan?

There are several reasons:

    Speed: Factoring invoices can provide immediate liquidity, often within 24-48 hours, while traditional bank loans might take days or weeks to get approved.

    Credit Requirements: Factoring companies are typically more interested in the creditworthiness of the construction company’s clients than the company itself. This makes factoring a viable option for companies with less-than-stellar credit or relatively new ones.

    Flexibility: Invoice factoring doesn’t create debt on the construction company's balance sheet. The company is simply receiving an advance on money it's already earned.

    Cash Flow Management: Invoice factoring can bridge the gap between completing a project and receiving payment, ensuring uninterrupted operations for businesses with long payment cycles.

Are there any potential downsides or risks associated with construction company factoring?

Yes, there are potential drawbacks to consider:

    Cost: Factoring usually comes at a higher cost than traditional financing. The fees charged by the factoring company might erode profit margins.
    Dependency: Over-reliance on factoring can lead to a cycle where the company always needs advances to cover expenses rather than improving its cash flow management.
    Customer Relations: If the factoring company uses aggressive collection tactics, it might strain the construction company’s relationships with its clients.

How does the factoring company make money in this process?

Factoring companies earn money by charging fees or a percentage of the invoice. When a construction company sells its invoice to a factoring company, it typically receives a significant portion (e.g., 80-90%) of the invoice amount upfront. The remainder, minus the factoring fee, is paid to the construction company once the factoring company fully collects the invoice. The difference between the advanced and collected amounts, minus the reserved amount, is the profit for the factoring company.

Is construction invoice factoring suitable for all types of construction companies?

 While invoice factoring can benefit many construction companies, especially those experiencing cash flow issues or rapid growth, it's not a one-size-fits-all solution. Factors to consider include the company's profit margins, the creditworthiness of its clients, its typical payment terms, and its overall financial health. Before diving into factoring, a company should evaluate all financing options, consult with financial advisors, and carefully review any agreement with a factoring company.

 

 

 

 

 

How To Finance A Franchise In Canada

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FUNDING YOUR NEW FRANCHISE BUSINESS LOAN

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Financing & Cash flow are the  biggest issues facing business today

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

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

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

 

 

Financing Your Franchise in Canada: A Comprehensive Guide 

Introduction

 

Embarking on a franchise venture in Canada? Worried about financing hurdles? It's a common concern for budding entrepreneurs. However, understanding the nuances of financing franchises can turn this daunting task into a manageable one. Here's your essential guide to obtaining a franchise loan in Canada.

Decoding Franchise Financing Options

What’s Available to You?

 

Determining the right kind of franchise finance solution is the first step. Whether you're launching a service-based venture or stepping into the hospitality sector, you need to blend term loans with working capital. Understanding your franchise's cost and associated risks is paramount.

The Importance of Creditworthiness A strong personal credit score not only smoothens your franchise loan approval process but also fetches competitive interest rates. A solid financial plan further elevates your chances of acquiring optimal loan terms.

Franchise Popularity in Canada

 

An interesting insight by Franchise 101 reveals the growing popularity of franchises. With approximately 76,000 outlets and a new one opening every 2 hours, franchises are becoming a mainstream business model in Canada.

Personal Investments: The Equity Component

Your own financial Stake: It's imperative for franchisees to inject personal funds into their venture to demonstrate their own equity position. This showcases commitment to both lenders and franchisors.

For those questioning, "Can I finance a franchise without any money?" the answer is clear: No. A harmonious blend of debt and equity is essential for success. In many cases, financing via multiple lenders might be needed to cobble together a full financing.

 Importance of Business Plans and Cash Flow

Crafting a Viable Repayment Strategy Incorporate your equity investment into your cash flow projections. A comprehensive balance sheet, reflecting both equity and financing, offers a clear snapshot to financial institutions. 7 Park Avenue Financial specializes in creating robust business plans, ensuring they align with lender requirements.

Navigating Franchise Loan Structures

 

Understanding Loan Terms -  Common franchise loans span between 5 to 7 years, enabling you to offset your debt within that timeframe. While considering future needs like asset replacement or working capital, remember that government-guaranteed loans, such as the Canada Small Business Financing Program, offer reliable franchise financing solutions. A notable 2021 amendment even allows financing the franchise fee as a loan component.

 Maintaining Realistic Financial Assumptions

Grounding Your Projections: While optimistic forecasts can be tempting, it's crucial to ground them in reality. This includes factoring in revenue timing, asset costs, growth rates, franchise fees via the franchise agreement, and the need for business lines of credit around day-to-day operations.

Embracing Financial Fundamentals / Beyond Just Sales

 

 

While sales are essential, a deep understanding of repayment structures, profits, cash flow, and fixed costs is equally crucial. Grasping these elements can significantly impact your franchise's success.

 

 

Conclusion 

Conclusion Navigating the franchise financing landscape in Canada might seem overwhelming, but it doesn’t have to be. While external collateral might not always be required, ensuring that your financial projections are sound is vital. Leveraging expertise, especially from trusted Canadian business financing advisors like 7 Park Avenue Financial, can steer you toward your franchising goals with confidence.



    

FAQ: FREQUENTLY ASKED QUESTIONS    

 

 

  

What Is Franchise Financing?

 

  

The franchise business model will typically require a combination of owner down payment, aka personal equity, and external financing.  The capital provided to finance a franchise will be a combination of an acquisition term loan and potential combinations of lines of credit and equipment financing. In certain franchise models, real estate might be a component of financing required.

 

Franchise financing is the funding you need to start or expand a franchise business. In Canada, it's essential because it provides the capital necessary to enter the competitive franchise market and realize your entrepreneurial dreams via small business loans suited to the financing you require.

Generally speaking franchisor financing, i.e. funding from the franchisor, is not available- Franchisors sell franchises, they don't finance them!  The franchise disclosure document provided by franchisors is a key read for prospective franchisees.

 

Do banks give business loans for franchises?

 

Canadian chartered banks and some credit unions provide franchise loans at a good interest rate. Still, the process to complete a  franchise  bank loan might be considered time-consuming because of the need for business financial statements around business credit, and buyer information, - as well as the requirement to provide personal collateral in the form of mortgages, and home equity loans and lines of credit by the franchise owner/business owner backed by a good credit report and personal credit history and  minimum credit score in the 600+ range

 

  

What type of down payment do you have to put down to acquire a franchise?

 

Franchisees looking to fund a franchise will normally be required to put between 20-50% down. The down payment varies based on a number of factors, including the type of financing, loan amount, and creditworthiness of the borrower.

 

 

What types of franchise loans are available in Canada, and how do I choose the right one for my business?
 

Funding for franchise owners via Canadian franchise loans for a franchise purchase comes in various forms, including traditional commercial bank loan funding,  Government Small Business loans, and franchise-specific financing options from non-bank alternative lenders who compete with traditional lenders such as chartered banks and credit unions. Choosing the right one depends on your financial situation and business needs when it comes to franchise businesses.

 

Are there any unique benefits to franchise financing in Canada compared to other countries?
 

Yes, Canada offers stability, a strong franchising ecosystem, and government support programs for small businesses, making it an attractive destination for franchisees. These factors enhance your chances of success.

 

What challenges might I face when seeking franchise financing in Canada, and how can I overcome them?
 

Challenges may include stringent lending requirements and competition for loans. Overcoming them involves thorough business planning, financial preparation, and seeking advice from experts in franchise financing and the franchise brand you have selected. The International Franchise Association is a good source of franchise information.

 

How can franchise financing empower me to achieve long-term success in the Canadian market?

 

Franchise financing provides the necessary capital to launch or grow your franchise, giving you the resources to build a strong brand presence, attract customers, and secure a profitable future in Canada's dynamic business landscape.

 

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

Turning Receivables into Cash: Exploring Debt Factoring

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Oakville, Ontario
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Debt Factoring Financing Via Business Factor Companies | 7 Park Avenue Financial

 

Boost Your Business Cash Flow with Debt Factoring

 

 

Understanding Debt Factoring and Business Factor Companies in Canada

 

Introduction

For Canadian business borrowers looking for financing, understanding the intricacies of debt factoring becomes essential.

 

Often misinterpreted, this financial mechanism provides firms with a seamless way to generate cash flow without accumulating additional debt. Let's dig into the landscape of debt factoring/invoice factoring and financing in Canada and its relevance to businesses.

 

What Is Debt Factoring

 

Debt factoring is a financial tool that empowers businesses to access the cash in their unpaid invoices without waiting for extended credit terms.

 

Here's how it works: Businesses sell their accounts receivable to a third-party entity, known as a factor, at a discounted rate. In return, they receive immediate payment. The traditional a/r financing way this happens is that the finance firm takes responsibility for collecting the invoice when it matures, ultimately paying the seller the remaining balance after deducting fees. NOTE - Under non-notification a/r financing clients and bill and collect their own invoices, while still receiving all the benefits of financing receivables.

 

Debt factoring offers valuable benefits, especially for small and emerging businesses. It helps stabilize cash flow, ensuring they meet their regular financial obligations. This, in turn, enables businesses to maintain their operations smoothly while also establishing and preserving their credibility and reputation in the market.

 

Debt factoring provides businesses with the means to:

 

• Accelerate cash conversion cycles, leading to faster business cycles.
• Streamline receivables management and credit control tasks, reducing time and effort.
• Enhance business planning and forecasting accuracy thanks to consistent and predictable cash flows.

 

Does Factoring Serve as a Cash Flow Lifeline?

Business factor companies in Canada present their services as a cash flow lifeline. But the question remains: Does debt factoring, often called "receivable financing," truly serve its purpose?

Unveiling Debt Factoring

In finance, factoring is a transaction wherein companies receive cash in exchange for their sales invoices. Canadian businesses can expedite cash flow by "selling" these receivables to a factoring company. Whether a one-time transaction or a recurring one, factoring allows firms the flexibility to choose when and what they want to finance, ensuring strict obligations do not bind them.

Debunking the Misconception: Debt Factoring Isn't Debt!

Contrary to its name, factoring isn't a loan. Businesses aren't piling on debt; they're monetizing sales. Most Canadian factoring services operate on a recourse basis, which means that while companies can generate immediate cash, they're still responsible for collecting the owed amount from their customers. Time plays a pivotal role in this, with prompt collection benefiting the business significantly.

Decoding the Cost of Factoring

Understanding the cost structure of factoring is crucial and is often viewed as one of the disadvantages of debt factoring in Canada compared to bank financing  - It is important to understand basic terms such as :

    The Advance Rate - The percentage of the invoice amount financed.
    The Fee - A percentage deducted as the finance company's profit.
    Time - Duration for which the invoice remains outstanding until customers pay

Factoring becomes a formidable financing option for a business with reputable clients and undisputed invoices. Firms typically receive up to 90% of their invoice's value upfront, with the remaining balance (minus the factoring fee) being remitted upon the client's payment.

But remember, the finance company's profit is directly linked to the invoice's outstanding duration. This is why efficient accounts receivable management becomes paramount in invoice management and the focus on improved cash flow - The key is a focus on asset turnover!!

Choosing the Right Facility

For many businesses, a confidential A/R finance facility strikes the right balance. It allows firms to finance their sales while retaining control over billing and collection processes.

 

Confidential Receivable Financing -  Disclosed and non-disclosed A/R Financing

 

Disclosed factoring is commonly known as notified factoring. As the name implies, the seller will notify the buyers about the engagement of the factoring firm and instruct them to pay the invoice directly to the factor on the due date.

 

The seller does not disclose the factor's involvement in non-disclosed factoring arrangements. As a result, it is also known as a confidential factoring deal.

Conclusion

The unparalleled advantage of debt factoring lies in its ability to consistently churn out cash flow as businesses roll out their products and services. Meeting everyday obligations becomes easier, propelling growth without the burden of carrying the investment of heavy accounts receivable.

However, it's imperative to understand the associated costs. With financing fees ranging between .75 -1.5% from invoice factoring companies, businesses need solid gross margins to bear these factoring fees comfortably. Contrary to popular belief, these are fees, not interest rates.

At 7 Park Avenue Financial, we know numerous business owners grapple with cash flow and working capital management.

Debt factoring provides a respite, ensuring day-to-day operations run smoothly. Talk to the 7 Park Avenue Financial team,  seasoned  Canadian business financing advisors ready to bring you the right financial solution. We guide businesses towards effective debt factoring strategies, a bridge to more traditional financing avenues.

 

 FAQ 

 

What is cash flow debt factoring, and how does debt factoring work?

Debt factoring, or accounts receivable factoring, is a financial strategy where a business sells its outstanding invoices to a third-party invoice factoring company (factor) at a discount. This provides immediate cash flow, allowing the business to meet its financial needs via funding from the third party factoring company.

 

What are the benefits of invoice factoring services/invoice discounting for businesses?

Debt factoring offers benefits such as improved cash flow, reduced credit risk, faster access to funds, and the ability to focus on core business operations instead of chasing unpaid invoices.

 

How do business factor companies help with working capital management?

Business factor companies purchase a business's accounts receivables, injecting cash into the company. This cash can be used to pay suppliers, cover operating expenses, and invest in growth opportunities, optimizing working capital.

 

Are there different types of debt factoring?

Yes, there are two primary types of debt factoring: recourse and non-recourse factoring. Recourse factoring requires the business to buy back uncollectible invoices, while non-recourse factoring protects against bad debt.

Recourse Factoring:

• The factor doesn't assume credit risk or customer default risk.
• Customer defaults, factor seeks recourse from the client.
• Factor manages the sales ledger, but the client bears credit risk.

Non-Recourse Factoring:

• The factor takes on credit risk and offers additional services.
• Even if the customer defaults, the factor can't be recovered from the client.
• Higher fees due to bearing the risk of non-payment.

 

• Non-recourse factoring typically has higher pricing when the factoring company assumes the risk

 

How can a business choose the right factor company?

Choosing the right factor company involves evaluating factors like fees, terms, reputation, and industry expertise. Finding a partner that aligns with your business's specific needs and goals is crucial.

 

 

What is the typical cost structure of a factor company's services?

A debt factoring company will charge a fee based on the invoice value and the time it takes to collect payment. These fees can vary, so it's essential to understand the terms before partnering with a commercial factor company.

 

Can factor companies work with businesses in all industries?

While many factor companies serve various industries, some specialize in specific sectors. Finding a factor company familiar with your industry's unique needs is essential. Trucking companies and personnel agencies are two industries that utilize a/r financing solutions.

 

What alternatives are there to debt factoring for business financing?

Alternatives to debt factoring companies include traditional bank loans, lines of credit, venture capital, and angel investors or small business loans that are working capital oriented, such as merchant cash advances. Each option has advantages and disadvantages, depending on the business's circumstances.

 

 

Do factor companies handle debt collection and customer interactions?

Yes, factoring companies often take on the responsibility of collecting customer payments. This can benefit businesses that want to offload the burden of chasing unpaid invoices as the debt factoring company takes control of collection practices

 

Can businesses use debt factoring service as a long-term financing solution?

 

Invoice financing is typically used as a short-term solution to address immediate cash flow needs. Businesses looking for long-term financing may explore options like equity or traditional loans.

 

What Is Supplier Guarantee Factoring?

• Also known as 'drop shipment factoring,' 'vendor guarantee factoring,' or 'supply chain factoring.'
• Involves three parties: the borrower, the factoring company, and the borrower's supplier.
• Factor guarantees payment to the supplier when the borrower's buyer accepts goods.
• Funds from factored invoices go directly to the supplier from the client's future receivables.
• Factor deducts fees, remitting the profit to the client.
• Factor plays a dual role: supplier payment guarantee and factoring service provider.
• Enables businesses to pursue new opportunities by securing credit from suppliers, previously unavailable

Unlocking the Power of Short Term Working Capital Loans for Canadian Businesses

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The New Wave of Financing: How Merchant Cash Advance Companies are Transforming Canadian Business

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Understanding Merchant Cash Advances Financing | 7 Park Avenue Financial

 

 

Understanding Merchant Cash Advances / Short-Term Working Capital Loans

 

For small businesses, retailers, restaurants, and similar entities in Canada, the options for achieving working capital and business financing can sometimes be limited. Enter a new solution, creatively named but referring to the same financing mechanism - The business cash advance.

 

  

What Are Merchant Cash Advances and How Does The Merchant Cash Advance Work?  

 

 

Often going by names like "merchant cash advance," "small business loan," or "credit card advance sales loan," these facilities cater to the short and intermediate-term cash flow and working capital needs of businesses.

The merchant cash advance rose to prominence as businesses, often retail-oriented, noticed the diminishing or non-existent traditional financing sources. Although this financing method is generally pricier than the conventional one, it serves its purpose, offering working capital based on future sales.

It's crucial to understand that this isn't a typical loan that burdens your balance sheet with heavy debt. Instead, it's an 'advance' against upcoming sales. Think of it as an immediate finance against the sales you make, which you repay via a percentage of your future sales.

 

  

A Practical Example  

 

To illustrate, if you're advanced, for instance, $10,000 for your working capital needs, a percentage (usually between 10-30%) of your future sales will go towards repaying that advance.

 

This method is most effective when you have a strong sales revenue model coupled with robust gross margins on your offerings.

 

 

Is It Suitable for Your Business? 

 

 

While it's a relatively new alternative financing form, it often becomes the go-to option when traditional bank financing avenues are no longer viable. Thousands of firms sell and finance their receivables. Essentially, with this method, you're selling and financing a portion of your anticipated sales, which, for many businesses, is a logical step.

 

It's worth noting that this financing is unsecured. The "collateral" here is the future sales, which, while expected, aren't guaranteed. The average monthly sales is reviewed in the context of repayment ability.

 

  

How Long Should You Rely on This Method Of Financing?  

 

 

As a rule of thumb, merchant cash advances are excellent for short and intermediate-term financial strategies. For the long haul, it would be wise to devise a longer-term financing strategy for your business.

 

 

Acquiring a Merchant Cash Advance

 

 

Securing a merchant cash advance or business credit card loan is generally straightforward and based on a short review of your business credit profile. The central requirement is to showcase your sales revenue through bank and/or credit card statements. However, it's common for small business owners to act as guarantors for this kind of unsecured loan financing.

 

  

Conclusion  

 

If you're in a small business and find yourself juggling financial needs daily, call 7 Park Avenue Financial, a trusted and experienced Canadian business financing advisor, about merchant cash flow advance / working capital financing.

 

FAQ

 

What is a Merchant Cash Advance?

 

A Merchant Cash Advance (MCA) is a form of financing where businesses receive an upfront sum of cash in exchange for a percentage of their future credit card sales. It's essentially an advance against your future revenues,  deposited into your business bank account, designed to provide immediate working capital.

 

How is a Merchant Cash Advance different from a traditional loan?

 

Unlike traditional loans, an MCA is not repaid in fixed installments or over a set period. Instead, repayment is based on a percentage of the daily credit card sales. Furthermore, short-term working Capital Loans often don't require collateral in the traditional sense, as future credit card sales serve as the "collateral." They typically have a faster approval process than conventional loans/bank loan-type financing.

 

How do businesses repay a Merchant Cash Advance?

 

 

Businesses repay the MCA through a predetermined percentage of their daily sales, including debit and credit card sales transactions. This percentage is automatically deducted daily or weekly (depending on the agreement) until the advance is fully repaid. This means that during higher sales, more is paid back, and during slower periods, less is paid back.

 

Who can benefit most from a Merchant Cash Advance?

 

Short Term Working Capital Loans are particularly beneficial for businesses with strong credit card sales, such as retailers and restaurants. They're ideal for those needing quick access to capital, especially if traditional banks have turned them down or have exhausted other financing options. It's also suitable for businesses with fluctuating revenues as the repayment aligns with their sales patterns.

 

Are there any downsides to consider with Merchant Cash Advances?

 

While Short Term Working Capital Loans offer quick access to funds, they often come with higher costs than traditional loans. Since repayments are based on a percentage of sales, businesses must maintain healthy sales to manage repayments effectively. It's also crucial to understand the terms thoroughly, as some Short Term Working Capital Loans can have steep fees or less favourable terms than other financing methods. Businesses using business advance loans typically cant qualify for bank loans.

 

 

How are the interest rates or fees determined for a Merchant Cash Advance?

 

 Interest rates or fees for Short Term Working Capital Loans are often not presented as a traditional annual percentage rate (APR) but rather as a factor rate ranging from 1.1 to 1.5 or higher. This rate is multiplied by the advance amount to determine the total amount the business owes. The factor rate is determined based on the business's sales history, the amount of advance, the anticipated repayment time, and the perceived risk associated with the advance.

 

Can a business obtain a Merchant Cash Advance if it doesn't accept credit card payments?

 

While Short Term Working Capital Loans are traditionally designed for businesses that accept credit card payments, some providers offer advances based on overall sales through Automated Clearing House (ACH) withdrawals. In this model, the lender would look at the business's bank account transactions and sales volume to determine eligibility and repayment terms.

 

 

Are there any industries for which a Merchant Cash Advance may not be suitable?

Yes, industries with low credit card transaction volumes or high ticket but low-frequency sales might not be the best fit for an MCA. Examples include B2B companies, manufacturers, or wholesalers. Businesses with slim profit margins must also be careful, as the advance repayment could significantly impact their bottom line.

 

What happens if a business is unable to repay the Merchant Cash Advance?

 

If a business struggles with repayments, the MCA provider might offer to adjust the withholding percentage, extending the repayment term. However, unlike traditional loans, Short Term Working Capital Loans don't have a set maturity date, so there can be additional fees or consequences for prolonged repayment.

 

How quickly can a business access funds through a Merchant Cash Advance?

 One of the significant advantages of Short Term Working Capital Loans via a merchant cash advance company is the speed at which businesses can access funds. Once approved, businesses can receive the advance within 24-48 hours, making it an attractive option for those needing capital. However, the exact time can vary based on the merchant cash advance provider, the specifics of the application and the final formula around merchant cash advance payments.

 

 

 

 

 

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DIY Equipment Finance & Leasing Canada? Best Companies for Asset & Lease Equipment Needs

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Equipment Finance Companies: A Comprehensive Guide for Canadian Business Owners

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Equipment Finance Companies Lease  Solutions |7 Park Avenue Financial

 

 

INTRODUCTION

 In the vibrant economy of Canada, business owners often face a pivotal question: to purchase an asset outright or to delve into the arena of equipment leasing?

 

This seemingly straightforward choice is riddled with layers of complexity, especially given the country's evolving landscape of equipment finance. This guide aims to unravel these complexities, offer insights into equipment leasing, and highlight the importance of making informed decisions or seeking expert advice.

When the Canadian business owner or financial manager looks to lease an asset instead of a purchase, it’s a great time to invest in some knowledge about which companies to approach for equipment finance needs.

 

But can you be expected to be a 'DIY' expert in this broad area of Canadian business financing? We are saying that it will pay you handsomely to either invest some time in understanding some critical fundamentals of equipment finance or work with an expert who can assist you.

 

 

  

Equipment Finance Companies: A Comprehensive Guide for Canadian Business Owners   

 

Why invest some time in this type of business acquisition? The Canadian lease landscape has evolved significantly over the last couple of years. A combination of the economy in Canada, the lease industry players, new accounting rules and a myriad of product offerings can make it seem daunting.

 

By the way, we're quite sure any business owner can work with lease companies and enter somewhat quickly into a lease for an asset, but is it the right lease, and what are the financial implications and benefits or lack of benefits around that transaction? That’s the $50,000 question!

 

The Significance of Equipment Finance in Canada  

 

Because almost 80% of all businesses utilize leasing in Canada - that’s why it sometimes is both easy and misunderstood. Many business owners don't understand the lease product/service offering or fail to recognize the benefits. Yes, it's only one method of financing an asset (you can consider a term loan)... but when a lessor/lease company recognizes that you know what you're talking about, you have increased your chances for success.

 

The Changing Landscape of Equipment Leasing

 

Lease and equipment finance doesn’t bring cash flow and working capital into your company, but it reduces the funds that go out of your firm!  The ownership of the equipment by the lessor for the lease term allows you to structure payments, write off payments as an operating expense, and, more importantly, keep you 'nimble' when it comes to assets and technologies that you finance over short or long terms. (Typical lease terms in Canada range from 3-5 years).

 

The Risks and Rewards: Making the Right Lease Choice 

 

Business owners might want to do the math, but we're pretty sure that if you work the numbers, it makes sense to enter into a couple of short-term equipment finance transactions rather than purchase/buy outright the same assets over several years.

 

 Understanding the Benefits of Lease Over Outright Purchase 

 

If you invest time in understanding some lease finance basics or work with an expert, you'll see that you can determine when it makes sense to upgrade, return, or renew any lease finance transaction.

 

Deciphering Lease Finance Basics: When to Upgrade, Return, or Renew

 

Can our DIY lease financing business owner affect the final credit and structure approval of his or her transaction? The reality is that stricter credit standards have existed since the 2008-2009 global recession and the recent COVID-19 pandemic. Therefore, the industry focuses on creditworthy lessees- but the good news is that some basic structuring around any transaction can still make your deal happen. Issues such as terms, pricing and down payment can be negotiated to the point where it makes sense for the lessor and your firm.

 

The Tax Implications of Equipment Leasing in Canada:

 

Companies considering leasing should consider the tax benefits and considerations when opting for equipment leasing. Explore how leasing can offer tax deductions, the difference between capital and operating leases from a tax perspective, and the impact of taxes on the overall cost of leasing.

 

The Value of Expertise: Working 7 Park Avenue Financial

 

Working with an experienced Canadian business lease financing advisor can ensure you get the best pricing and structure and achieve the benefits you're looking for.

  

CONCLUSION  

 

So, everyone’s talking about 'DIY' these days. Why not invest some time in developing a solid relationship with a lease advisor? Success in asset leasing allows you to grow your company with the assets you require... today!

 

In a world where 'DIY' has become the mantra, understanding equipment financing holds a unique place for Canadian business owners. While leasing can offer numerous benefits regarding flexibility, cash flow, and staying updated with technology, making well-informed choices is imperative. Whether you invest time in mastering the basics or collaborate with a seasoned lease advisor, what's paramount is ensuring that your options align with your business objectives.

Remember, success in asset leasing isn't just about acquiring assets; it's about acquiring them smartly and strategically to fuel your business growth today and tomorrow. Call 7 Park Avenue Financial, a trusted, credible, experienced business financing advisor.

 

FAQ

 

What exactly is equipment finance?

 

Equipment finance refers to securing assets or equipment for business operations through leasing or loans instead of purchasing them outright. It's a financial solution that allows businesses to access essential equipment while preserving cash flow and potentially taking advantage of certain tax benefits.

 

 

Why would a business lease equipment from leasing companies rather than buy it outright? 

 

There are several reasons:

• Cash Flow Conservation: Leasing can allow businesses to conserve cash, as it often requires a smaller initial outlay than purchasing, as well as tailored monthly lease payments for capital lease or fair market value leases that make good business sense
• Tax Benefits: Lease payments can sometimes be written off as operating expenses and business expense under equipment lease financing rules offering tax advantages. Companies should talk to a tax advisor on larger transactions to maximize benefits.
• Flexibility: Leasing can provide businesses the opportunity to upgrade to  new equipment and newer technologies quickly once their lease term ends via customized solutions
• Preserve Credit Lines: Leasing doesn't tie up credit lines, preserving them for other business needs where traditional financing from banks might be more suited to grow your business - New or used equipment can be financed.  A sale leaseback solution can be considered when refinance existing assets to improve cash flow.

 

 

How has the Canadian lease landscape evolved in recent years?

 

Over the past few years, the Canadian lease landscape has witnessed significant changes due to economic shifts in Canada, entrance and exit of lease industry players, changes in accounting rules, and a plethora of product offerings. Moreover, after the 2008-2009 global recession, credit standards became tougher, placing more emphasis on creditworthiness.

 

What's the typical term for equipment leases in Canada?

 

Typical equipment lease terms in Canada range from 3 to 5 years. However, the exact duration can vary based on the type of asset, the leasing company, and the specific needs of the lessee.

 

 How can a business ensure it's getting the best deal when leasing equipment?

 

Businesses can increase their chances of securing the best leasing deal by investing time in understanding lease finance basics. It's also beneficial to work with an experienced lease financing advisor such as 7 Park Avenue Financial , who can provide insights, assist in negotiations, and ensure the lease terms align with the business's objectives.

 

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