Inventory Finance – Canadian Inventory Financing

Inventory Finance provides often much needed capital as an overall component of your working capital strategy . The challenge in Canada is to ensure you have the right mix of working capital financing for an inventory financing strategy, and that it compliments your other external financing.

In times gone by inventory financing was most often provided by Canadian charted banks as a product of the overall revolving line of credit, which of course usually included receivables also. The ability of a company to free up cash that is tied up in inventory is critical for a firm’s cash flow.

We recall recently reading a line as follows “If you working capital is positive you need cash flow financing ‘. The working capital definition referred to is of course the classic textbook definition of going to your balance sheet and subtracting current liabilities from current assets.

However, most of us operate in the real world, not the textbook world, so you do we financed inventory that we as business owners and financial managers know is good collateral?

What the Canadian business owner and financial manger must realize is that your bank or independent inventory financier is not interested in ever getting back your inventory. That should lead you to focus very strongly on your ability to project your inventory turnover, its overall marketability, and your ability to qualify the inventory into several categories – which include raw materials, work in process, and finished goods.

Success breeds challenges, because when you are turning over your inventory you need to replace it, and quite often the financial investment you have made in inventory is still part of your overall cash conversation cycle – which is of course : inventory, receivable, cash, in that order .

We tell clients that in our opinion the optimal inventory financing facility in Canada is a facility known as an asset based lending facility ; we have also called it a ‘ working capital facility ‘ in addressing these discussions with clients .

These facilities, when combined – i.e. inventory and A/R is powerful working capital drivers –simply because unless bank facilities that are ratio financial statement performance driven, they are in fact collateral and true value driven. So a proper facility, when set up, margins your receivables and inventory to their true agreed upon values .What we are of course saying is that if you have slow moving inventory and uncollectible receivables you will be a poor candidate for an inventory financing facility.
We caution all clients to ensure they seek out expert advice in this somewhat niche area of a Canadian business financing. Inventory finance is clearly a specialize area of the Canada’s business financing landscape.

In order to achieve a proper facility focus on maintaining adequate inventory reports and controls, ultimately a perpetual inventory system is the best method of securing inventory finance because it of course helps focus on the true picture of your inventory movement .

Your firm’s ability to produce valid purchase orders, contracts, and proper inventory accounting are a key plus in successful inventory finance. A solid proposal, prepared with the assistance of a business financing advisor perhaps, will include a financial and executive summary review, inventory records and control documentation, and you ability to show repayment of the inventory loan as well as good fluctuations.

You can also spend a lot of time in Canada searching out for inventory financing that doesn’t exist. It is highly specialized, and the number of firms is in the handful, so focus on working with the right parties so as not to waste your valuable time.
Inventory finance works best when you can clearly demonstrate a need, and the ability to show the inventory financing facility will generate additional sales and profits. If you have good margins that will help offset some of the additional costs of such a facility. Simply your ability to generate more cash from inventory and to purchase smarter should in fact be a new benefit that will reap additional profits.

Typical inventory financing arrangements tend to be on facilities that are 500k and up, but with the right combination of A/R and inventory a smaller facility is possible.

Ultimately, in assessing and inventory finance strategy you should know the costs, as well as the benefits that an inventory financing facility will bring to your business.
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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/inventory_finance_canadian_inventory_financing.html

Film Finances Canada – Monetizing Your Film Tax Credits in Canada Today Via our Secret Strategy!

The reality of film finances in Canada has changed dramatically over the last couple years.Unlike many aspects of business financing though, they have improved, and tax credit financing is a large part of that improvement.

Our information is particularly beneficial to independent owners and producers – it naturally goes without saying that the larger studios and film finance conglomerateshistorically review your production in any of our three entertainment segments,( film / tv, digital animation ), they buy into your concept or production, and then they fund it via their own often substantial resources .

Naturally if your production can get on board that above boat that is truly a perfect world, however the reality is that the majority of production, even larger names one with ‘name actors ‘still struggle to find proper financing. The truth is simply that the financing of a project comes from a variety of solutions that are cobbled together to form a full financing complement for your production.

Film finance is no different than the financing of any business venture – it all comes down to two components, debt and equity.Your job is of course to maximize the right mix of those two essential elements of any type of financing.

Equity financingis your springboard for your venture naturally , however today’s reality in the Canadian marketplace is that the ‘ soft money ‘or non equity portion of yourproduction in film, tv, or digital animation can in fact come from the various tax credit incentives made possible by combined federal and provincial initiatives in Canada .

Want to know a secret? It’s the secret we refer to in our teaser title in this document. Here it is à 99% ofthe entertainment worldmight believe that tax credits for film financing in Canada can only be monetized when they arefiled and certified , using traditional year end accounting guidelines . That is not necessarily the case! You can also, in many circumstances, access film finances via an ‘accrual strategy ‘. In that case we determine your overall sense of eligibility for future credits, and you receive the cash upfront , based on certain per cent ages, allowing you to immediately access the ‘ soft money ‘ that we have previously started to discuss . That’s a solid working capital and cash flow strategy for your production, which at the same time brings valuable cash flow and working capital into your project on an up front basis .

The quick example we can utilize in a film type scenario (it could just as easily be TV or animation) is the proverbial 1 Million dollar budget. If you utilize the right tax credits in Canada, which are non repayable of course, then you can immediately access cash flow in the 400,000- 500,000.00 range for your project. Given that you probably have raised some equity already those funds, plus the tax credits have you probably financed to the 90% of the total project at this point. That simply leaves the ‘gap‘, which all of a sudden is less of a challenge than you, thought.Canada doesn’t have as robust a banking focus on film TV and animation financing, but there are a number of methods to still fill ‘the gap ‘.

Financing for tax credits in Canada is often done on an approximately60-80% loan to value based on the value of the credit. Each situation is a little different only because of the size of the production and resultant credit, as well as the team you bring to the table Vis a Vis proper accounting and financial documentation of your project.

Speak to a credible, trusted and experienced advisor in this area to monetize your film finances in Canada based on your tax credit financing strategy as a key component in overall project success.

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

SR&ED FUNDING - 5 Key SRED Funding Loan Basics!

Canadian business owners who take advantage of Canada’s SR&ED program have one up on their competitors if they not only file a SRED but utilize Sr&Ed funding as part of their overall Sr&Ed company strategy. The program is by far the best program in Canada that incorporates a non repayable grant for your firms R& D work. Many clients hear about ’ government grants and loans ’ and ultimately realize these are not as available as one would think - however SRED is everything you hoped for and more.

The true power of the SR&ED PROGRAM comes when you accelerate your claim and turn it into immediate cash. Most of our clients, as sophisticated as they might be in their sred filings actually also haven’t heard that in certain cases your sred can be considered for financing prior to filing. That whole process is called SR&ED accrual financing.

Let’s examine 5 key basics in our overall sred and Sr&Ed financing strategy that you must know or be aware of - they are:

1. Sred financing is highly specialized - seek and work with a trusted, credible an experienced sred financing consultant

2. The only thing you need to know about financing a claim is that you must have a claim! It is a simple business financing application with supporting back up on your Sr&Ed

3. SRED’s are financing at 70% LTV - More on that below

4. You can finance a claim as soon as it is filed; starting earlier simply accelerates the process

5. We refer to a SRED ‘ loan ’ - the reality is that no additional debt is added to your balance sheet, because the loan is offset by the asset, the claim itself ! You are simply monetizing, or ’ discounting ’ you claim.

As you can see by now the whole process of a sred funding is simply the financing or factoring of your claim. You are selling your right in the receivable now in lieu of cash that you will receive from the government many months from now, in some cases close to a year.

Let’s back track and share more info on our 5 key basics. As we noted Sr&Ed funding is specialized. Work with an expert for two reasons - maximizing the value and finance rate on your transaction, as well as ensuing the whole process goes smoothly. You should not view the sred loan process any differently than you would any other financing, you apply, you provide supporting back up, and you receive your funds after the normal sort of due diligence. The collateral, if we can call it that, is the SR&ED claim itself.

With respect to # 2 simply focus on the fact that you should consider financing the claim if it will generate a reasonable amount of working capital and cash flow that you need today. To be honest most claims that are financed are in the 200k ++ range, but smaller claims can be financed.

Point #3 had us referring to loan to value - you can expect to receive an immediate advance on approx 70% of your claim - the balance should be viewed as a holdback - its still your money, but final financing costs, plus any adjustments the government makes to your claim are accounted for in that 30% buffer that is held back by the sred financier.

“When can be obtaining our funds “is really the meaning of our 4th point. The entire process takes approx 2-3 weeks as it covers your application, review of your sred, normal financial due diligence, and the clarification of any issues raised by your firm or the sred finance firm . And the good news here is that again the term ’ sred funding loan’ is a misnomer, you don’t make any payments, and finance charges simply accrue and are deducted from the final accounting of the claim. That covers our 5th point of course.

So is there a bottom line - of course there is. It is simply that you should be aware of this great program for Canadian business - if you have a claim and require additional cash and working capital consider a sred funding to solve that challenge.

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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/sr_ed_FUNDING_SRED_LOAN.html

SR&ED Tax Credit Financing - 5 Things You Need To Know

As a Canadian business owner or financial manager your company should be taking advantage of Canada’s SR&ED (also pronounced sred) program for tax credits. The most obvious benefit of this program is that monies advanced to your firm are in the form of a non repayable grant. We tell clients you can’t get any closer to the concept of ‘free money’ in Canadian business that the SRED program.

Did you also know that you can turn that ‘grant receivable’ into a sred loan as soon as you file your claim – in fact in some cases with the right consultant you can generate funds even before you file!

Let’s explore 5 Key Things you need to know about SRED Finance

1. it’s a specialized finance – more on that later

2. If you have a claim you can finance a claim – it’s as simple as that

3. You can generate approximately 70% of the total value of your sred claim (combined federal and provincial portions) as immediate cash flow under a Sr&Ed financing or a sred factoring scenario

4. The time to complete a sred financing is usually two to three weeks – the sooner you start and plan the better

5. SR&ED Tax credit financing does not add debt to your balance sheet – your financing is collateralized by the sred itself

Let’s clarify all those additional points in more detail so you can be well equipped and informed to consider a sred financing.
A sred loan is clearly something that anyone outside of the sred environment hasn’t even heard of - and for the portion of Canadian business that does take advantage of sred claims we can assure you a good portion of that business population doesn’t even know you can finance of ‘ discount ‘ your claims . It’s more or less like selling a receivable that is due your firm –you are simply receiving the cash now.

In Point # 1 we talked about sred finance being specialized – you should clearly seek out and speak to a sred business financing advisor. That will allow you to understand the basics, determine how much you can receive based on claim value, and work through a basic application to get your transaction financing. A Sred loan should be really just viewed the same as any other business financing – getting back the usual application forms and our clients quickly understand that the essence of the financing doesn’t necessarily revolve around rations, covenants, outside collateral , etc, but in fact focuses on one item –your Sr&Ed claim itself .

Point # 2 revolves around the financing of your actual claim. Any claim is financeable, but we caution client that this type of financing makes more sense when it involves a claim in excess of $ 200,000.00 – That should not deter smaller recipients, small claims can be filed, but in reality they make less economic sense for the lender .

In Point #3 we referenced 70% as a guideline for most of sred financing in Canada. So what about that other 30% - lets clarify that. Your firm is advance 70% of the claim on filing – the other 30% of course still belongs to you. That amount is more or less viewed as a ‘holdback’ which helps carry some of the financing costs, and also covers off any possible downward adjustments that Ottawa might make on our claim adjudication. As SRED participants know your claim is viewed from both a financial and technological point of view.

Point # 4 involves of course the favorite questions of most clients - how soon can we get the funding?! As we stated, with your full co operation on providing copies of your claim, info on who prepared it, as well as basis business financing application criteria, you can receive funds in two to three weeks. Most firms are pleased to know that sred financing in Canada does not involve ‘payments ‘on the loan. In some ways the term Sr&Ed loan is a misnomer because it is really the factoring or monetization of your Sr&Ed receivable .Therefore you simply receive the funds and financing costs are deducted from the back end when Ottawa processes your claim and cheque.

As we have already stated the sred tax credit financing does not impact your financial statements, other than of course allowing you to put to use valuable cash flow and working capital as a result of the financing.
Consider a sr&ed tax credit financing when it makes sense to access additional working capital and cash flow and when you don’t want to wait for your funds over a long period of time!

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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/SR_ED_Tax_Credit_Financing_canada.html

Franchise Finance – Info You Must Know re: Franchise Financing and a Franchise Loan In Canada

As a Canadian entrepreneur considers a franchise purchase you want franchise financing info re the Canadian environment. When we meet with clients the questions is always very clear –

What do I need to know about franchise financing and how can I get a fast track to franchise loan approval.

Let’s cover off the basics in order that you are well prepared for the full completion of a successful franchise acquisition. That of course includes selecting the right franchise for you ( we leave that up to you !) but lets ensure you are well equipped to cover off franchise financing success on your own or with the assistance of a trusted, credible and experience franchise financing advisor .
Many fundamentals in franchise finance are key, and you should ensure these are in order prior to contemplating a franchise loan for the purchase of a new or existing franchise. (Many of our clients contemplate existing franchises that are being sold for some reason or another – they feel they can better validate chances of success by assessing the business results, location, etc.)

Speaking generally, you should ensure that you have a reasonable credit history and personal credit score. Whether you like it or not the two main credit bureaus in Canada allocate a score to every consumer and borrower in Canada – we can generally say that your personal bureau score should be in the 650+ range to acquire the best, and proper franchise loan approval.
Many clients we talk to believe the ‘franchising fee ‘being charged by the franchisor can be financed. You need to understand that is what people in the finance business call a ‘ soft cost ‘ and you should generally be prepared to use your own working capital for that issue as apart of your total financing plan . Naturally that amount still counts as a part of your overall equity contribution.

We should focus in on that point for a bit – You do not borrow in Canada ‘successfully ‘using the OPM model. OPM stands of course for other people’s money. Business borrowing, whether you are General Motors or an independent franchisee, has to be based on a combination of debt and owner equity. While in some cases you can achieve successful financing in Canada with a 10% deposit, in general the current economic climate calls for a 25- 40% or so owner equity contribution.

Where do clients get this ‘personal equity contribution’ that is a critical part of your franchise plan. In general it comes from savings, the liquidation of investments, or in many cases a collateral mortgage. The one positive feature of a collateral mortgage equity contribution is simply that rates, terms and structures are low and variable. I.E. low rates due to the current rate environment in Canada, and flexible repayment structures, i.e. no pre payment penalties, etc.

The positive advantage of arranging franchise financing for a resale franchise is that you can validate the profit and cash flow potential of the business. We should add that we are always a little bit concerned when a client assures us he or she can over turn the financial position of a failing franchise. Clearly a case of buyer beware we would say.

However, as we have stated, purchasing an existing franchise gives you great insights into the ownership and running of the business – including insights from the owner, i.e. the current franchisee. One can forgive the franchisors for being bullish and optimistic on their business, as their business is of course selling franchises.

We recommend all clients incorporate a business when applying for a franchise loan, if only for the reason that it is prudent to separate your business life from your personal life re liabilities, assets, etc.

So whats our bottom line – it’s simply that franchise finance in Canada is as complicated as you want it to be. Work and seek out a trusted, credible and experienced franchise financing advisor who will assist you in putting together the right franchise loan structure that meets lender and personal needs. That’s a solid financing plan!

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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/franchise_finance_franchise_financing_loan.html

2 Reasons Why Working Capital Financing via a Business Line of Credit is the best Asset Financing for your Business

A business line of credit may or may not be achieved via a bank facility .only. One of the fastest growing trends in Canada revolves around a concept known as an ‘asset based line of credit ‘. Ironically when we meet with many clients they are not even familiar with the term, let alone its benefits!

So what are the two reasons this type of business financing is in fact better than a Canadian chartered bank line of credit. They are as follows:

1. The facility will bring you higher levels of liquidity, cash flow and working capital based on your asset base

2. You qualify much more easily for a facility that is in fact even higher in line of credit requirements

In recent years the term asset based lending had somewhat of a negative effect or perception when it was discussed by business owners. But, guess what – time changes, and nothing changes faster than trends in business. The 2008 and 2009 global economic meltdown forced thousands of businesses, small, medium and even large to re assess their financing. In some cases that was simply because their financier disappeared! This happened less so in Canada, but the ripples of global liquidity clearly touched Canada also!

So let’s get back to our premise #1 which is that utilizing an asset based line of credit brings you greater liquidity. Why is this so? It is simply because the asset based facility focuses solely on the assets. Traditional financing, as you may have so painfully discovered, focuses on balance sheet ratio, profitability, external collateral, and personal guarantees. The reality is that if your firm is selling shoes to WALMART then historically your bank or lender had no sense of what those shoes were worth or what to do with them in a worst case scenario.

Enter asset based lending! Working with a credible, trusted and experienced asset based lending advisor will allow you to truly leverage assets to borrow for more liquidity, working capital and profit growth.

So what are those assets you can leverage – they are as follows:

Receivables
Inventory
Equipment (that is unencumbered)
Real estate

Look at your current working capital and credit facilities – you may have these through a bank, or even more challenging, you might be self financing. If you could leverage tomorrow 90% of your receivables, 50-70% of your inventory, and borrow on a monthly basis against fixed assets would that work for your firm? We have a feeling that in many cases we just doubled and tripled your borrowing power.

Let’s look at our premise # 2- you qualify for more capital with less stringent qualification requirements. This point somewhat dovetails on our point #1 – that is to say that the total focus of an asset based line of credit revolves mostly around one work - the ‘ Asset ‘ ! The values of your assets in fact determine your total operating facility – it is not pre determined by balance sheet ratios, covenants, etc. Most business owners and financial managers use the facility for the primary purpose of providing day to day working capital and liquidity to their firm. Asset based lending has less stringent overall requirements, but we should mention of course that it generally is more expensive than bank financing.

In summary, an asset based line of credit can be used for:

Acquisition of a Competitor
Growth
Turnaround
Asset Purchasing

Speak to an expert in this area and determine if the benefits of a true asset based line or credit or non bank working capital facility work for your firm.

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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/business_line_credit_asset_financing.html

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