Yesterdays big news story in busienss revolved around findings by third parties that the government stimulus money did little to aid the recovery . Most Canadian small, medium, and probably somelarge business owners also knew this all along . I think I saw numbers saying that when the current govt came into power they had a 10B surplus and now its a 50B dollar defecit, so we will be crawling out of this one for another ten years I would think . Unlike purchasing something , paying for it, and now owning it somehow I dont feel I got what I paid for .
Most business owners probably agree .
See Fianncial Post - STIMULUS DID LITTLE TO AID RECOVERY STUDY FINDS' BY John Morrissy.
http://www.nationalpost.com/news/story.html?id=2718674
Stan
Our blog highlights Canadian Business Financing solutions via receivable finance , equipment finance, working capital financing, asset based lending, business acquisition financing,franchise finance, and tax credit monetization via SRED and Film Tax Credits. Our goal is to educate and assist Canadian businesses with their financing needs. You Are Looking For Canadian Business Financing! Welcome to 7 Park Avenue Financial Call Now ! - Direct Line - 416 319 5769
Wednesday, March 24, 2010
Tuesday, March 16, 2010
RATINGS AGENCIES and me ..
I haven't railed against much recently and got my adrenaline going today - article on BNET.COM about rating agencies, a la Moody's, S&P, etc ..
The article is below - it somehow got lost in the shuffle but the whole world wide debt/liquidity crisis has in part been attributed to the ratings agencies who failed to call our fiascos that were underlying to all the stuff they were recommending and rating as ' investment grade ' - So the world implodes, partly because of them, and then they now issue a downgrade on the world .. or U.S. - or whatever ..
Bottom line, what a joke, dont get me started ..
STAN
Asleep During Debt Crisis, Moody's Wakes Up and Threatens to Downgrade U.S. Rating
Moody’s, which was asleep at the switch when the U.S. debt crisis was brewing, seems to have finally woken up. And the debt that it’s sounding a warning on, unfortunately for us, is that of the United States government. The U.S., Germany, Britain, France and Spain are all “substantially” closer to losing their top-notch debt ratings, a Moody’s report warned recently.
Until 2007, Moody’s, along with fellow debt-rating agency, Standard & Poor’s, was guilty of - at the very least - monumental stupidity. The two firms routinely rated packages of sub-prime mortgages “Triple A” when they should have been called worthless. Or toxic. Or worse than junk.
It was the debt market’s misplaced reliance on their flawed ratings that caused AIG and others to buy trillions of dollars of the stuff. This brought down the giant insurer, helped send the country into a recession and now, according to Moody’s, could threaten the bond rating of the entire country. That, in turn, means U.S. debt would cost taxpayers more to service, in the form of higher interest rates.
Moody’s and Standard & Poors have expressed regret for their role in the creation of the financial crisis, but they continue to conduct business the same way: In effect, they are are paid by the companies whose products they evaluate. As Michael Lewis, author of The Big Short, put it on 60 Minutes, the rating agencies were “incentivized” not to see the looming problems. Only a few debt raters, such as Egan-Jones, rely on investors rather than companies to pay them.
Insurers, who were badly burned during the debt crisis, have gone outside the rating agencies purview and are having Pimco rate many of their mortgage bonds in a move approved by the National Council of Insurance Commissioners. With a giant portfolio of bonds, Pimco is not conflict-free, but it’s a step in the right direction, because it’s not beholden to the debt issuers.
No one can deny that U.S. debt is burgeoning. The Congressional Budget Office estimates the national debt will be $13.8 trillion by the end of this year, or close to 90% of GDP. Moody’s, in fact, could be right this time: growth alone won’t get the U.S., or any of the other developed nations, out of their long-term debt problems.
But it’s still galling to hear the bad news from this particular messenger.
The article is below - it somehow got lost in the shuffle but the whole world wide debt/liquidity crisis has in part been attributed to the ratings agencies who failed to call our fiascos that were underlying to all the stuff they were recommending and rating as ' investment grade ' - So the world implodes, partly because of them, and then they now issue a downgrade on the world .. or U.S. - or whatever ..
Bottom line, what a joke, dont get me started ..
STAN
Asleep During Debt Crisis, Moody's Wakes Up and Threatens to Downgrade U.S. Rating
Moody’s, which was asleep at the switch when the U.S. debt crisis was brewing, seems to have finally woken up. And the debt that it’s sounding a warning on, unfortunately for us, is that of the United States government. The U.S., Germany, Britain, France and Spain are all “substantially” closer to losing their top-notch debt ratings, a Moody’s report warned recently.
Until 2007, Moody’s, along with fellow debt-rating agency, Standard & Poor’s, was guilty of - at the very least - monumental stupidity. The two firms routinely rated packages of sub-prime mortgages “Triple A” when they should have been called worthless. Or toxic. Or worse than junk.
It was the debt market’s misplaced reliance on their flawed ratings that caused AIG and others to buy trillions of dollars of the stuff. This brought down the giant insurer, helped send the country into a recession and now, according to Moody’s, could threaten the bond rating of the entire country. That, in turn, means U.S. debt would cost taxpayers more to service, in the form of higher interest rates.
Moody’s and Standard & Poors have expressed regret for their role in the creation of the financial crisis, but they continue to conduct business the same way: In effect, they are are paid by the companies whose products they evaluate. As Michael Lewis, author of The Big Short, put it on 60 Minutes, the rating agencies were “incentivized” not to see the looming problems. Only a few debt raters, such as Egan-Jones, rely on investors rather than companies to pay them.
Insurers, who were badly burned during the debt crisis, have gone outside the rating agencies purview and are having Pimco rate many of their mortgage bonds in a move approved by the National Council of Insurance Commissioners. With a giant portfolio of bonds, Pimco is not conflict-free, but it’s a step in the right direction, because it’s not beholden to the debt issuers.
No one can deny that U.S. debt is burgeoning. The Congressional Budget Office estimates the national debt will be $13.8 trillion by the end of this year, or close to 90% of GDP. Moody’s, in fact, could be right this time: growth alone won’t get the U.S., or any of the other developed nations, out of their long-term debt problems.
But it’s still galling to hear the bad news from this particular messenger.
Sunday, March 14, 2010
Where's the Funding, and Me ..
Globe and Mail, March 13 - a great article about equity and private equity financing in Canada - one of the bylines of the article is ' Wheres the Funding ' - Some great info on the tech / dot com meltdown, and the current state of VC Capital and private equity in Canada . We work with some private equity firms and more often than not the U.S firms exhibit a more aggressive attitude in funding Canadian deals .
Private equity deals in Canada seem much more rate, and of course smaller . Once again the Americans have us beat, so let's catch up, with or without the help of the government . ( The article highlights Canadian equity capital players wanting more government involvement .
Stan
Private equity deals in Canada seem much more rate, and of course smaller . Once again the Americans have us beat, so let's catch up, with or without the help of the government . ( The article highlights Canadian equity capital players wanting more government involvement .
Stan
Wednesday, March 3, 2010
MICROCREDIT, and me ..
The Globe and Mail had a great article written by Anna Paperny today on ' MICROCREDIT ' - I have been hearing about this term for a couple of years now, a lot of times the term seems to be used in connection with third world countries . The premise is very simple, and unbelievably, seems to be a powerful winner . It is simply the process of providing small , ( very small ) loans to small business owners and underprivileged people who utilize the loans to become self sufficient in a small business . The great news is that it's not some community bank or something like that, but its ROYAL BANK OF CANADA - RBC , behind the program in Toronto's ' tough' Regent Park area.
I continually write about small business financing, but this is ' small ' at it's best .
Stan
I continually write about small business financing, but this is ' small ' at it's best .
Stan
Thursday, February 25, 2010
Shooting from the hip, and Me..
On Feb 22 the National Post ran a story from NY TIMES about a fellow named George Cloutier, an mgmt consultant. Cloutier maintains :
1.People use the recession as an excuse for poor performance
2.Businesses should pay their vendors on time
3.Business owners shouldn't be likeable
4.Fear of mgmt. is a great motivator
I guess I agree with 1, and maybe 3, although I kind of like working with people I like rather than not like
When I worked in corporate for 25 years a few Executive here and there ruled by fear, and in hindsight I can never agree that was a good thing.
1.People use the recession as an excuse for poor performance
2.Businesses should pay their vendors on time
3.Business owners shouldn't be likeable
4.Fear of mgmt. is a great motivator
I guess I agree with 1, and maybe 3, although I kind of like working with people I like rather than not like
When I worked in corporate for 25 years a few Executive here and there ruled by fear, and in hindsight I can never agree that was a good thing.
Wednesday, February 24, 2010
Asset Based Lending Grows in Popularity in Canada
When one of my firm’s customers has their loan called by a Canadian chartered bank recently the firm was placed into the ‘special loans ‘division of the bank. When a firm goes into special loans the bank has to make a decision whether to liquidate the firm or continue supporting the company financially, albeit on a more structured ( and probably smaller! basis . Many Canadian business owners may, or may not, be surprised that my customer, who was a large commercial bakery, was profitable and had a relatively clean balance sheet.
So what was the problem – well the major issue was that the firm was ‘off covenant ‘on some of the key bank ratios that supported the loan.
We migrated this customer to an ‘Asset Based Lending ‘arrangement. This type of facility is, relatively speaking, new in Canada and had its origins primarily in the U.S. asset based financing industry.
More and more firms are migrating to this type of financing facility. We believe it is growing popular because of several factors, primarily two in nature.
1. Many firms are in high growth mode and can’t support traditional bank based financing which is focused on a more ‘ steady as you go ‘ approach
2. The current economic downturn of 2008-2009 has significantly restricted bank and other facilities – customer look for alternatives – Asset based lending is a popular alternative
So what’s ‘ABL ‘(Acronym for ‘asset based lending’) about? It’s all about one word ‘collateral ‘. It’s your assets that are financed, not your ratios! So firms that are service based are generally not the best candidates, other than their receivables, which in fact are one of the key aspects of an ABL facility. Traditionally was being financed is:
Receivables
Inventory
Equipment
Real Estate
Sounds great so far, right? The reality is that an ABL facility is a popular method of financing, but it is clearly 99% of the time more expensive than bank financing. We can as a general statement say that larger and better deals get better rates. The popularity that we speak of in our article in part revolves around the fact that the ABL facility works even for companies that are losing money or have some key problems.
In general some fairly standard metrics are applied to what is financed, and that is all of your receivables, a significant amount of inventory, and the liquidation value of your equipment. We can’t stress that those are general comments with respect to how much is financed in each asset category.
Asset based financing rates in Canada range from 9% per annum to sometimes 2% per month; it really depends on the size of the facility and the overall credit quality of the Canadian firm.
So again, why gaining in popularity. Well we spoke of those bank covenants, and they don’t exist in our ABL facilities, we simply finance assets. Also, asset based lenders, the good ones, are very experienced in cyclical industries, they understand seasonality, and are usually exceptionally experienced in the different asset categories we spoke of.
We spoke of some of the negative attributes of this type of financing – and in general they are:
Higher rates
ABL lenders can be more aggressive when terminating a facility they do not like
ABL is gaining in popularity and is no longer considered a ‘last resort ‘option – We would also note that some of Canada’s well known names in business are financed in this manner. Quite frankly some firms just don’t want to spend all their time talking to traditional financiers with whom they might not be successful, the premium paid can be worth the time alone.
Many companies migrate to an asset based lending facility, and when their financials improve they are once again, believe it or not, wooed by the banks that shunned them previously.
In our overview of ABL popularity we won’t cover who the players are in the Canadian industry, other than commenting they range from some well known corporate names to smaller boutique firms that are privately funded.
So whether your Canadian business is troubled or challenged, or if you have a unique merger or acquisition opportunity that is asset based you should clearly be talking to an asset based lending expert familiar with the Canadian marketplace .
Oh, and what happened to my customer who was in special loans, went to an asset based lending facility.. Well they were courted by another Canadian chartered bank and its business as usual!
So what was the problem – well the major issue was that the firm was ‘off covenant ‘on some of the key bank ratios that supported the loan.
We migrated this customer to an ‘Asset Based Lending ‘arrangement. This type of facility is, relatively speaking, new in Canada and had its origins primarily in the U.S. asset based financing industry.
More and more firms are migrating to this type of financing facility. We believe it is growing popular because of several factors, primarily two in nature.
1. Many firms are in high growth mode and can’t support traditional bank based financing which is focused on a more ‘ steady as you go ‘ approach
2. The current economic downturn of 2008-2009 has significantly restricted bank and other facilities – customer look for alternatives – Asset based lending is a popular alternative
So what’s ‘ABL ‘(Acronym for ‘asset based lending’) about? It’s all about one word ‘collateral ‘. It’s your assets that are financed, not your ratios! So firms that are service based are generally not the best candidates, other than their receivables, which in fact are one of the key aspects of an ABL facility. Traditionally was being financed is:
Receivables
Inventory
Equipment
Real Estate
Sounds great so far, right? The reality is that an ABL facility is a popular method of financing, but it is clearly 99% of the time more expensive than bank financing. We can as a general statement say that larger and better deals get better rates. The popularity that we speak of in our article in part revolves around the fact that the ABL facility works even for companies that are losing money or have some key problems.
In general some fairly standard metrics are applied to what is financed, and that is all of your receivables, a significant amount of inventory, and the liquidation value of your equipment. We can’t stress that those are general comments with respect to how much is financed in each asset category.
Asset based financing rates in Canada range from 9% per annum to sometimes 2% per month; it really depends on the size of the facility and the overall credit quality of the Canadian firm.
So again, why gaining in popularity. Well we spoke of those bank covenants, and they don’t exist in our ABL facilities, we simply finance assets. Also, asset based lenders, the good ones, are very experienced in cyclical industries, they understand seasonality, and are usually exceptionally experienced in the different asset categories we spoke of.
We spoke of some of the negative attributes of this type of financing – and in general they are:
Higher rates
ABL lenders can be more aggressive when terminating a facility they do not like
ABL is gaining in popularity and is no longer considered a ‘last resort ‘option – We would also note that some of Canada’s well known names in business are financed in this manner. Quite frankly some firms just don’t want to spend all their time talking to traditional financiers with whom they might not be successful, the premium paid can be worth the time alone.
Many companies migrate to an asset based lending facility, and when their financials improve they are once again, believe it or not, wooed by the banks that shunned them previously.
In our overview of ABL popularity we won’t cover who the players are in the Canadian industry, other than commenting they range from some well known corporate names to smaller boutique firms that are privately funded.
So whether your Canadian business is troubled or challenged, or if you have a unique merger or acquisition opportunity that is asset based you should clearly be talking to an asset based lending expert familiar with the Canadian marketplace .
Oh, and what happened to my customer who was in special loans, went to an asset based lending facility.. Well they were courted by another Canadian chartered bank and its business as usual!
CASH FLOW, You are forgiven for mis-understanding the term
We find that the term, or concept ' cash flow ' is widely misunderstood - having different meanings to different parties.
There are at least 7, if not more, methods in which the term is utilized in a number of areas of finance.
First of all the term is of course just a general term used in finance literature and textbooks relating to investments, etc.
When we see a company financial reports in the press there are often references to cash flow in the financial reports of the firm.
Getting even more specific, there are three parts to any financial statement, the balance sheet, the income statement, and the Cash flow statement. In older times this cash flow statement was called the Sources and Uses statement - simply indicating where a company got the money, and where they spent the money.
Some financial analysts refer to a company's ' funds statement ' and designate the total funds provided by operations as ' cash flow '.
Confused? We're not there yet. Financial managers and business owners use various types of analysis when making long term investments for the company. They use sophisticated financial analysis known as rate of return, payback analysis, and, guess what ' discounted cash flow ' analysis.
When a business owner is planning he will often prepare, and refer to, his ' cash flow ' budgeting.
And finally, business owners and financial mangers refer to; cash flow;
controls as they monitor the flow of funds and the control of those funds inside any company, small or large.
What becomes clear is that ' cash flow ' has become somewhat of a ' catch all ' wording and is somewhat confusing as more often than not it does not reference actual ' cash ' on hand, or evens the flow!!
Most financial people would probably agree the purest form of ' cash flow ' is in fact one of the items we have mentioned above - that is to say its the cash referred to in the company's CASH FLOW STATEMENT - we referred to it as one of the three pillars of any financial statement. The common calculation of this number is the net income of the company, plus the depreciation, which was not an actual cash outlay.
In summary, we have seen that the term cash flow means a lot of different things to different people - Business owners, and financial managers should know what method of cash flow they are utilizing, its uses, and how it will be interpreted by lenders, financial analysts, shareholders, etc.
And yes, you are forgiven for misunderstanding the term!
There are at least 7, if not more, methods in which the term is utilized in a number of areas of finance.
First of all the term is of course just a general term used in finance literature and textbooks relating to investments, etc.
When we see a company financial reports in the press there are often references to cash flow in the financial reports of the firm.
Getting even more specific, there are three parts to any financial statement, the balance sheet, the income statement, and the Cash flow statement. In older times this cash flow statement was called the Sources and Uses statement - simply indicating where a company got the money, and where they spent the money.
Some financial analysts refer to a company's ' funds statement ' and designate the total funds provided by operations as ' cash flow '.
Confused? We're not there yet. Financial managers and business owners use various types of analysis when making long term investments for the company. They use sophisticated financial analysis known as rate of return, payback analysis, and, guess what ' discounted cash flow ' analysis.
When a business owner is planning he will often prepare, and refer to, his ' cash flow ' budgeting.
And finally, business owners and financial mangers refer to; cash flow;
controls as they monitor the flow of funds and the control of those funds inside any company, small or large.
What becomes clear is that ' cash flow ' has become somewhat of a ' catch all ' wording and is somewhat confusing as more often than not it does not reference actual ' cash ' on hand, or evens the flow!!
Most financial people would probably agree the purest form of ' cash flow ' is in fact one of the items we have mentioned above - that is to say its the cash referred to in the company's CASH FLOW STATEMENT - we referred to it as one of the three pillars of any financial statement. The common calculation of this number is the net income of the company, plus the depreciation, which was not an actual cash outlay.
In summary, we have seen that the term cash flow means a lot of different things to different people - Business owners, and financial managers should know what method of cash flow they are utilizing, its uses, and how it will be interpreted by lenders, financial analysts, shareholders, etc.
And yes, you are forgiven for misunderstanding the term!
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