Small Business Loans in Ontario for Working Capital – 3 Solutions!

Small business loans for working capital in Ontario and the rest of Canada for that matter are similar to shoes - they come in various sizes and styles! Let’s explore what you as a business owner are looking for when you discuss working capital needs.
Part of the problem we tell clients is simply the terminology. Working capital means different things to different business owners. What it means to you, clients ask.

If we want to keep things simply working capital can be achieved successfully, and in a fairly timely fashion in the following three manners:

1. A cash working capital term loan that injects permanent working capital into your firm and is paid back over a specific period at a fixed rate

2. Monetizing your current asset accounts – i.e. advance high levels of margin against your receivables and inventory

3. Receivable Discounting – otherwise known as factoring your receivables for immediate working capital and cash flow

Those are the three main ways in which we advise clients on achieving working capital fulfillment for their business. We would point out that there are a couple of spin offs of variations of the above strategies – one is so simple that you probably know it intuitively but haven’t focused on it. So what is that strategy?

We will call it our internal strategy – You can increase your working capital tomorrow at no cost – we repeat, no cost by doing the following:

- Collecting your receivables more quickly
- Turning your Inventory over faster
- Slowing down your accounts payable

All of those require management skills and a greater level of customer intrusion – which is to say you do so at the risk of potentially offending suppliers and valued customers. But it is the perfect way to achieve working capital nirvana... trust us on that.

The current business environment makes it very challenging for you as a business owner to achieve any level of working capital via a loan or monetization of your current assets.

Canadian chartered banks are among the most respected in the world, but business owners know that it is extremely difficult to achieve working capital via traditional bank financing. As a business owner you need two things – reliable financing, and financing to grow your business. If you have bank financing and are unable to replace it the situations becomes of course even more challenging, because you become ‘self financing ‘at a good point.

Key Business Point – If your firm has positive working capital (subtract current liabilities from your current assets) you need external financing. For a starter you are essentially stopping or at a minimum hindering your growth when you are self financing or have financing challenges with traditional institutions.

One of the best pieces of advise we feel we give business owners is to not focus on one solution only as the ‘ holy grail ‘ to their working capital challenges . The reality, in our experience is that the solution to cash flow challenges will come from a variety of different sources, certainly two at a minimum that will allow you to achieve working capital and cash flow piece of mind.
We have discussed simply better internal controls around working capital accounts to self achieve better cash flow. There is a finance expression we recall – we believe its along the lines of ‘ assets in the barn ‘ – what that simply means is that your firm might have unencumbered assets ( the best examples are equipment , machinery, real estate ) that can effectively be monetized into a bridge loan or working capital loan .

Most alternative financing structures come with high rates than traditional banking. We address this issue with clients by saying that in some cases these solutions will actually save your firm from extinction, but on a more positive note, they can, despite their costs, help you grow sales and profits, thereby offsetting much of the perceived higher costs.

Factoring is a good example of that, as we have shown many clients that this can be an effective way to borrow capital at almost no cost if they use the tool effectively and enter into the right type of facility. That is just one example.

Don’t be afraid to consider new or alternative working capital sources, it might be the best business financing decision you ever made.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/small_business_loans_working_capital_solutions.html

Leasing Construction Equipment New and Used

Leasing construction equipment new and used is a huge part of Canada’s equipment financing industry. The fact that used equipment can be financed at satisfactory rates terms and structures is sometimes news to Canadian business owners and financial managers.

The reality is that this type of financing is a somewhat specialized area of finance and we urge clients to seek a trusted, credible and experienced lease and financing consultant or advisor in this area of Canadian business financing.
Used equipment, particularly in the construction industry, (but in reality a variety of other industries) is financed to the tune of hundreds of millions of dollars annually.

The equipment plays itself out in a variety of different ways – Companies grow, the acquire other firms, some firms go unfortunately, out of business , yet at the same time the values of equipment hold up significantly due to the quality and nature of the products .

Naturally we have just gone through one of the most difficult times in the global economy ever, and , as such , for some of the aforementioned reasons there is a variety of equipment for sale and for re financing .
We would point out to clients that it is very prudent to liken the acquisition of used construction and heavy equipment to renewing your mortgage. By knowing you are pre approved at certain rates and structures gives you significant purchase leverage when negotiating a final price. Even though some industries and sectors, geographic and otherwise are in a slump there is still a deal to be made on a variety of heavy equipment.

When you are acquiring used equipment, construction or otherwise, you should be looking for the same type of leases that you would entertain for other business equipment financing. You have, as always, two options – lease to own, known as a capital lease, or a ‘lease to use’, more commonly known as an operating lease. Given the high dollar values of some of the larger equipment it clearly might make sense to entertain an operating lease if that type of lease can be negotiated satisfactorily. That comes of course with off balance sheet flexibility, and, as importantly, the ability to purchase, upgrade or renew at the end of the lease; and that’s your decision at the time, not the lessors!

Just look at the benefits of such financing. If you can derive both productivity and profits from a piece of used equipment, and get financing in place that is satisfactory in overall pricing, terms and structure you have saved many thousands of dollars in purchase price .

All of the traditional flexibility that is associated with lease financing accrues towards used equipment financing also – they include better cash flow management, the ability to control obsolescence, and the ability to put ‘good debt ‘on your balance sheet – i.e. assets that will be used for production and profits. You should also remember that you can negotiate to include soft costs in your used construction equipment financing – they might include warranty, maintenance, delivery and installation.
Years ago the American firm CIT did a study on why contractors and firms leased equipment – the results were very interesting:

- Many firms leased because they saw a limited need for the asset – i.e. not a permanent need

- Unexpected need for equipment often came up as a driver in lease financing

- Interestingly enough cost was never really the major driver in the lease or purchase decision – as you thought it might be of course

- Continually upgrading leases was also cited, given the need to stay current and competitive

So whats our bottom line – simply that you should consider the used equipment construction market for asset acquisition when it makes sense – and by working with an expert lease partner you should be able to maximize the benefits of your acquisition from both a financing and productivity viewpoint . That’s solid Canadian business financing sense!

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/leasing_construction_equipment_new_and_used.html

Computer Equipment Leasing in Canada – 3 Things You Need to Know

Business Equipment Financing, including computer leasing, telecom equipment etc is the method by which some of the most sophisticated and largest companies in the world use to acquire technology.

If you are an informed business owner or financial manager you can use some of those sophisticated options for your acquisition needs.

Let’s cover off three critical things you need to know to give you the edge on computer and technology financing. These are:

1. The type of lease you choose can dramatically affect the financial and technological aspects of your acquisition

2. Software and soft cost can be included and financed!

3. Your end of term options choices need critical evaluation – now

Today’s rapid changes in computers, telecom equipment and other technologies require of course that you stay ‘leading edge ‘. Naturally there is a cost to acquiring the newest and the best. In our first point we ironically are encouraging you to immediately start thinking about the ultimate use and benefit and value of the equipment. To do this you need to have the basics on two types of leases. What are those two types? They are ‘Capital’ and ‘Operating ‘.

How can we more clearly define how you should think of those two types of leases? It is simple – As a Canadian business owner or financial manager you want to ask yourself two questions - Do I want to use this asset and return it when it’s reached its useful life, or do I want to own it at the end of the term of my lease. The industry puts many technological, financial, and marketing spins on these two choices, and this is where business people get confused, so simply focus on two words, use or ownership.

If you wish to own the assets – i.e. computers, telecom equipment, high tech business equipment for your production, printing presses, etc, then you should focus on a capital lease. At the end of the term of that lease you will own the asset. The reality though is that technology changes rapidly – our most obvious example is computers. As such you want to seriously consider returning the equipment at the end of the lease. That will more often than not lower your cost, and in some cases have huge financial benefits around your balance sheet and operating expenses and taxes.

Our second point, i.e. our critical tip # 2 is that you should full understand that most soft costs, example – software – can be included in your purchase. Software can be financing, which many business owners and financial managers either didn’t know or didn’t consider. In today’s environment hardware assets tend to be more of a commodity and it’s the soft costs and software that are the true drivers of technology. The costs of software and other related items to our business equipment acquisition can be staggering, so consider bundling the soft costs into your total solution.

Lets move on to our final point – which is putting some solid care and decision making into what will happen to your asset at the end of the term of your lease . When we say term we simply mean that is the amount that you desire or agree on to financed the equipment acquisition. Typical terms are 3-5 years – however terms for 2-7 years can sometimes be negotiated depending on the dollar value of the asset, the type of technology you are financing, and your firms overall credit quality .

If you choose the more ‘ sophisticated ‘ approach to technology financing – i.e. our operating lease option, then you have automatically given yourself 3 choices for end of term decisions . And it is you, not the lessor that makes those choices, thereby empowering you to drive the true value of the acquisition. Those choices are return the equipment, upgrade the equipment, or purchase it for fair market value if you still fee it has a useful economic life.

Speak to a trusted, credible, and experienced lease financing advisor to determine which options most suits yourself, and you will also get assistance in walking your firm confidently through the sometimes turbulent technology financing maze.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/computer_equipment_leasing_business_equipment.html

Factoring Receivables – Factoring Companies That Don’t Charge Interest in Canada

More and more Canadian business owners and financial managers are considering factoring as a viable alternative financing solution. Everyone seems to tell you that ‘factoring is expensive ‘. If that’s the case why would you want to choose this financing solution? Even moreso, is it even remotely possible to achieve interest free factoring or factoring at zero cost? Let’s show you why that premise is defensible and we will let you decide.

If you are a small or medium sized business you know the true value of financial serenity when you have positive working capital and cash flow. Actually, cash flow is great, if you have positive working capital that simply means that you have a major investment in accounts receivable and inventory, and that isn’t necessarily great, especially if your balance sheet accounts such as receivables aren’t turning over every 30 days.

Does anyone ever pay in 30 days anymore? We don’t think so, that’s for sure.

When your firm is able to more efficiently used cash flow generated from accounts receivable you have easier ability to grow your business. In fact as a business owner you quickly realize that the single largest asset on your books is often accounts receivable. In the current economic environment it takes easily one, often two, and sometimes 3 months to collect the average receivable. When you delay payments to suppliers you are increasing your cash flow from operations, when you grant credit to your customers you are decreasing that same cash flow – it’s a daily battle that plays out every day.

Factoring, or receivable financing allows you to collect and immediately invest those funds back into your business.
A quick example offered by a firm called the Receivables Exchange (U.S. based) is as follows –

Let’s say your firm earns 20% on the money it invests in itself, therefore in 44 days your firm can earn a 2.2% return.
Now let’s get to the root of our premise. Factoring companies don’t charge ‘interest ‘per se, because you are not borrowing funds. You are simply monetizing your receivables at a discount for immediate cash today. Let’s use a typical factoring discount rate of 2%, which is certainly not uncommon. That’s a 30 day rate. There is better pricing, and there is higher pricing.
But look at what we are saying – if you can immediately, on the same day you generate an invoice get cash , re invest in your business , and earn a profit, ( we will use our example of 2.2% return in 44 days ) haven’t you in effect achieved zero interest charges on your working capital financing .

Let’s make a more clear and dramatic point – Use our example again of a 2% discount fee for 30 days. What if your receivables for the month were $ 300,000 and you were factoring them at our 2% discount rate. If you have immediate cash for that $ 300,000.00 do you think you could pay major suppliers immediately and subtract 2% for their stated net 30 day payment terms. Also, do you think you could meet with your major and valued suppliers, advice them you were in a position to pay cash on the basis of getting better pricing, and would they accept!

We hear the saying ‘cash in king ‘everyday in business – after the 2008 economic meltdown Cash ruled supreme. By offering to pay your suppliers more promptly and buy in greater quantities we have had many clients tell us they have achieved as much as a 5% saving in some cases.

Let’s recap the premise of our information. It’s simpler that it may sound:

**Factoring offers you immediate working capital, and purchases your invoices at a discount – it is incorrect to view these funds as a loan, or an interest rate per annum.

** If you got the typical fee of 2% as a discount charged on factoring by your factoring company and had unlimited cash flow and working capital could you purchase more effectively and pay suppliers more promptly, taking a discount all along the way . Yes we believe you could.

You will never get a letter from a factor firm that states you are being charge no finance charges – but we have effectively shown that the cost of that financing, balanced against carrying your customers and being able to take supplier discounts and purchase more effectively can add thousands of dollars to your bottom line . And at the same time you have removed the business person oft greatest worry – lack of working capital.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/factoring_receivables_factoring_companies.html

Business Inventory and Purchase Order Financing Canada

Many Canadian business owners and financial managers are not fully aware of the availability and benefits of business inventory and purchase order financing .. These types of financing are very ‘niche ‘and are specialized areas of business financing in Canada.

The reality of these two financings is that they can be arranged individually, but quite often are sought by business owners as a combination as they are inherently linked by their very nature. That is say that your firm receives a purchase order (p.o.) or contract, and as a result required working capital and additional cash flow to buy the inventory required to fulfill those customer needs.

Business owners want to ‘unlock ‘the cash and working capital that they have in inventory. If your firm qualifies for traditional bank financing you will be margined against the inventory, in much the same manner as a bank would margin receivables. The challenge in the current financial environment is that banks, which have traditionally not enjoyed financing inventory, are even somewhat more reluctant to embrace this type of financing these days.

So are there solutions. Yes there are. In Canada you need to seek out and explore the services of a trusted and credible business financing advisor who can guide you through the inventory and po... financing maze.The basic solution to the business inventory finance challenge is a collateralized loan against inventory. What has to be addressed though is the relationship of that loan or working capital advanceto the security you might currently have in place against your business vis a vis receivables , etc . That requires somewhat of a skill in order to satisfy all secured parties and give you the working capital you need in a manner that makes sense.

The exercise of obtaining this type of financing is worth if when you have a significant investment in inventory and your inventory asset can be collateralized and liquidated in some manner .We say this , because, as most business owners know inventory come sin three forms,raw materials, work in process, and finished goods. So care must be given in the analysis of what type of inventory you maintain and what are those three different levels within your working capital cycle.

Ultimately you should explore business inventory and purchase order financing ( In p.o. financing your suppliers are paid directly by the purchase order finance firm) if you are always short of cash flow and working capital, or have seasonality in your business cycle – i.e. huge amounts of product required for the Xmas season would be a good example.

Your firm is a candidate for business inventory financing if you can demonstrate the ultimate salability of the inventory, as it of course becomes the main collateral. If you are unable to demonstrate the marketability of your inventory as collateral you will have a major challenge in obtaining this type of financing.

If your firm identifies inventory as a major working capital component and you have solid gross margins (inventory financing can be more expensive than traditional financing) you should explore the benefits of such business financing.

http://www.7parkavenuefinancial.com/business_inventory_financing_purchase_order.html

- Film Financing via Tax Credits - Two Critical Necessities for Independent Film Financing

IndependentFilm financing via tax credits is a significant component of an independent production in film , well as televison anddigital animation, those latter two gaining significant traction .

There are two critical necessities for the financing of your film:

1. Your ability to ensure you pre qualify for tax credits

2. Your access to capital as an additional resource for cash flow via the tax credit

Provincial and Federal tax credit programs in Canada have never become been more generous and accessible.We have met with a number of industry players, both individuals and corporations who have U.S. vested interests and have expressed a sincere desire to access financing for their productions and ensuring they qualify under appropriate certifications.

It goes without saying that major studios in the U.S. and Canada generally have the wherewithal to finance their own productions via their own resources, which are often quite significant. But if you are an independent production, or a smaller player in the scheme of things then you should view the tax credit financing as a key part of your overall financing strategy.It certainly is cheaper and often less time consuming considering the amount of time we have heard you might be spending on raising ‘ equity ‘ for your productions .

We recently ran into a situation where a major U.S... Movie which was produced in Canada and qualified in the various areas re Canadian content was financed critically under the monetization of the tax credit. It was interesting that the actual tax credit was being pitched to private high net worth individuals who were being promised a 15% return based on the validity of the actual credit and the funds that were due under that claim.

Using film and tv as our prime examplescapital for projects tends to be raised by owner equity, international distribution, and tax credits that can very easily be in the 30-40% range for the entire production‘ below the line’ budget .

Its perhaps a larger example in terms of dollar value, but what we are of course saying is that if you have a$10,000,000.00 budget and have a proper legal entity, ownership, and accounting in place you can easily qualify for a3 to 4 Million dollar non repayable tax credit .

More importantly many clients don’trealize their claim is financeable, so they‘ wait’ for the cheque which is dependant on the review and auditing of their filing, as well as the timelines that might come from waiting many months after the initial filing .

Is there an alternative. There certainly is. If you are working with a credible, experienced, and trusted advisor in this area you can generate funds for your tax credit as soon as it’s filed! Does it get any better than that – Actually it does. In the right circumstances, if you have a credible, experienced management team, solid industry representation re an accountant or lawyer, you can actually apply to get the funds prior to even filing the final claim. That is true cash flow and working capital generation.

The overall growth in DVD, home downloads, and cross marketing with other players allows Canadian productions to benefit significantly, even if the content is on a much smaller scale than large studio productions.

From a pure financial risk and reward point of view, the fact that a large part of your production is in effect guaranteed via the production tax credit , and that fact that you can monetize that claim any time you want ( if you qualify ) significantly enhances the overall financialreturn on investment .

As an example, we’re working with one Canadian production that will use the concept of accrual tax credit financing to in effect start production on the project. We can’t over emphasize the importance of proper and realistic budgets, your ability to show some industry experience in this area, as well as aligning yourself with credible parties.

Structuring your project properly via legal and accounting mechanisms, maximizing your leverage regarding tax credits that are available, and monetizing those tax credits into real money for the current or next production ensure a very viable chance of financial success for film, television and digital animation projects in Canada.

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http://www.7parkavenuefinancial.com/film_financing_tax_credit_independent_film_finance.html

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SR&ED Tax Credit Financing - 2 Things You Must Know

Many of our clients can be easily forgiven for being confused and mis-informed on CanadasSR&ED program, aka‘ SRED ‘, as most people callit . They can be even more forgiven for not know the basics about SRED finance .

We try and simplify that discussion into two very basic things you need to know :

-If you have a sred claim its financeable for cash and working capital now

-To finance a claim you need to have filed a claim, but not always!!

Your ability to monetize or cash flow a claim is in fact a superior way of generating additional working capital and cash flow now based on the value of your filing . We will add one technical point here, in that claims are generally financed at70% LTV . LTV means ‘ loan to value ‘ , so we are simply saying that for everyone hundred thousand dollars of sred claim filing you can generateseventy thousand dollars via a short term sred loan .We can expand on that point a bit to ensure you arewell informed . After filing a claim it is clear you are in a‘waiting mode ‘ for your claim to be analyzed, potentially audited , and then of course waiting for the proverbial government cheque – we are of course all familiar with the expression ‘ it’s in the mail ‘ – With Ottawa backing your non repayable cheque you of course have the assurance funds will come, but you just don’t know when !

We recommend that if you have filed a claim that you investigate the ability to finance that claim now . If the cheque under the program is a non payable grant( other than paying tax on the income that’s as close to free money as we can get in Canada from the government !)Why wouldn’t you consider a financing option to accelerate cash flow and start using those funds now?

Uses of funds under SR&ED financing are totally within your control. We see clients utilize sred financing to further invest in even more R&D, i.e. next years claim! or you can choose to reduce payables, invest in additional equipment or business assets, etc .

In a small handful of cases we meet with firms who have a tax liability to Ottawa or the province re source deductions, GST/PST back remittances, etc. If you work with a trusted, credible, and experienced sred financing Sr&Ed consultant you can structure your financing to ensure that you’re past due remittances are taken care of during the sred financing process. No firm wants to be in the governments bad books re past due government super priority issues.

The actual SR&ED financing process should be treated by yourself as any other business financing – we try and actually make the case its easier in some cases, because the actual asset behind the sred loan is the sred claim itself, so even if you think your firm might not qualify for financing for other forms of traditional borrowing your probably qualify for the sred – why?? Because you have a sred claim as an asset that’s verifiable!

Ensure you are aware of this great program within Canada that generates billions of dollars in working capital and cash for Canadian corporations .Yes you can wait for funds, which may take a couple months or the better part of a year – if you cant wait consider financing your Sr&Ed claim via a short term sred loan which is collateralized against your filing. We strongly recommend you have a professional filing prepared, by your accountant or sred consultant (there are many) – this will significantly positively impact your ability to finance your claim.

It’s a great cash flow and working capital strategy, and no debt is on your balance sheet, as it is offset by your sred asset that is in fact a monetizable account receivable.