Expert advice is always a good thing – so wouldn’t it be great to get some solid advice on one of the larger decisions you’ll make in your business life – buying and financing a franchise in Canada. Franchise business financing is specialized and you want to ensure you have the proper ammunition to make the acquisition of your business successful. And that means of coruse a new turnkey franchise, or, in some cases, the purchase of a franchise from an existing seller or franchisor.
Let’s explore 5 key tips that should ensure your business financing success – they are as follows –
Pick the right franchise finance partner
Ensure the type of financing offered meets your needs
Don’t count or rely on the franchisor itself for financing – that rarely if ever happens
Understand franchise lending criteria in advance, and then ensure you can qualify for those criteria
Ensure your franchise is financed for purchase as well as ongoing needs
Let’s walk through some of the key points in those 5 tips – allowing you to feel more comfortable about the franchise financing process.
In Canada franchise financing is broadly available and at the same time very boutique and specialized in nature. What do we mean by that statement? Well the majority of franchises in Canada are financed under a special government program called the BIL or CSBF program. It is underwritten and supported by the government, but in case you haven’t seen a government franchise financing office on your corner, here’s the deal on that! The program is administered by Canadian banks, but under the government auspices. We tell clients that only a limited number of Canadian bankers understand the program, can move through it efficiently, and get you approved.
We mentioned a key point in our Tips that indicated you must understand the criteria for both the above mentioned program, as well as other financing available. We advise clients that general criteria for a franchise loan are as follows : decent personal credit history , a respectable down payment ( more about that later ) , some industry experience in the type of franchise you are purchasing, and you must be a Canadian citizen or landed immigrant – bottom line – can you legally borrow in Canada . Broadly speaking satisfying those criteria should allow you to get out of the gate quickly and commence your franchise financing process.
That brings us to another tip we noted, who exactly is your franchise finance partner. For a starter, given the unique nature of franchise financing we recommend you work with a trusted, credible and experienced franchise financing consultant. He or she will guide you through the finance maze and make you aware of all issues and conditions on an up front basis.
Secondly, don’t count on your franchisor to provide financing – they like selling franchises, not borrowing on their own account to get you started. Having said that a good franchisor will give you guidance on their own chains experience in how their franchisees are typically financed. Alternative to the bank franchise finance program sponsored by the government are a handful of specialized financed companies. We also have actively recommended working with equipment financing firms to finance some of the hard assets in your new business. That rounds out the strategy quite nicely.
Purchasing the right franchise and getting it financed is job 1. Job 2 should be ensuring that you have ongoing financing needs covered for things such as working capital, additional equipment or assets that might be needed down the road, staff and sales expansion, etc. You can address this most properly by carefully tuning your initial business plan to ensure that ongoing sales and costs can be financed properly.
Make sure the business can support any debt that you take on at a future point in time.
If you cover off carefully our 5 ‘Tips’ you are well on your way to entrepreneurial success in franchise financing in Canada.
--
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_business_financing.html
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
Friday, September 24, 2010
Thursday, September 23, 2010
Why A Business Asset Based Loan Financing Is The Perfect Solution For Cash Flow In Canada
You are a Canadian business owner and financial manager looking for info and guidance on a business asset based loan. What is asset based loan financing, sometimes called cash flow factoring - how does it work, and why could it be the best solution for your firm’s working capital challenges.
Let’s cover off the basics and find out how you can benefit form this relatively speaking new form of asset financing in Canada.
A good start is to always understand and cover off some basics around what this type of financing is. Simply speaking the facility is a loan arrangement that is drawn down and repaid regularly based on your receivables, inventory, and, if required, equipment and real estate should your firm possess those assets also.
By collateralizing your assets you in effect create an ongoing borrowing base for all your assets - this feasibility then fluctuate on a daily basis based on invoices you generate, inventory you move, and cash you collect from customers. When you need more working capital you simply draw down on initial funds as covered under your asset base.
Your probably can already see the advantage, which is simply that if you have assets you have cash. Your receivables and inventory, as they grow, in effect provide you with unlimited financing.
Unlike a Canadian chartered bank financing your business asset based loan financing in effect has no cap. The alternative facility for this type of working capital financing is of course a Canadian chartered bank line of credit - that facility always comes with a cap and stringent requirements re your balance sheet and income statement quality and ratios, as well as performance covenants and personal guarantees and outside collateral . So there is a big difference in the non bank financing we have table for your consideration.
Your asset based lender works with you to manage the facility - and you are required to regularly report on your levels of A/R and inventory, which are the prime underpinnings of the financing.
Smaller firms use a particular subset of this financing, often called factoring or cash flow factoring. This specific type of financing is less transparent to your customers, as the cash flow factor might insist on verifying your invoices with customers, etc. A true asset based loan financing is usually transparent to your customers, which is the way you want it to be - You bill and collect our own invoices.
If our facility provides you with unlimited working capital then why have you potentially not heard of it and why aren’t your competitors using it. Our clients always can be forgiven for asking that question. The reality is that in the U.S. this type of financing is a multi Billion dollar industry, it has gained traction in Canada, even moreso after the financial meltdown of 2008.Some of Canada's largest corporations use the financing. And if your firm has working capital assets anywhere from 250k and up you are a candidate. Larger facilities are of course in the many millions of dollars.
The Canadian asset based financing market is very fragmented and has a combo of U.S., international and Canadian asset finance lenders. They have varying appetites for deal size, how the facility works on a daily basis, and pricing, which can be competitive to banks or significantly higher.
Speak to a trusted, credible and experienced business financing advisor and determine if the advantages of business asset based loan financing work for your firm. They have the potential of accelerating cash flow , giving you cash all the time when you need it ( assuming you have assets ) and essentially liquefying and monetizing your current assets to provide constant cash flow, and that's what its all about .
--
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_asset_based_loan_financing.html
Let’s cover off the basics and find out how you can benefit form this relatively speaking new form of asset financing in Canada.
A good start is to always understand and cover off some basics around what this type of financing is. Simply speaking the facility is a loan arrangement that is drawn down and repaid regularly based on your receivables, inventory, and, if required, equipment and real estate should your firm possess those assets also.
By collateralizing your assets you in effect create an ongoing borrowing base for all your assets - this feasibility then fluctuate on a daily basis based on invoices you generate, inventory you move, and cash you collect from customers. When you need more working capital you simply draw down on initial funds as covered under your asset base.
Your probably can already see the advantage, which is simply that if you have assets you have cash. Your receivables and inventory, as they grow, in effect provide you with unlimited financing.
Unlike a Canadian chartered bank financing your business asset based loan financing in effect has no cap. The alternative facility for this type of working capital financing is of course a Canadian chartered bank line of credit - that facility always comes with a cap and stringent requirements re your balance sheet and income statement quality and ratios, as well as performance covenants and personal guarantees and outside collateral . So there is a big difference in the non bank financing we have table for your consideration.
Your asset based lender works with you to manage the facility - and you are required to regularly report on your levels of A/R and inventory, which are the prime underpinnings of the financing.
Smaller firms use a particular subset of this financing, often called factoring or cash flow factoring. This specific type of financing is less transparent to your customers, as the cash flow factor might insist on verifying your invoices with customers, etc. A true asset based loan financing is usually transparent to your customers, which is the way you want it to be - You bill and collect our own invoices.
If our facility provides you with unlimited working capital then why have you potentially not heard of it and why aren’t your competitors using it. Our clients always can be forgiven for asking that question. The reality is that in the U.S. this type of financing is a multi Billion dollar industry, it has gained traction in Canada, even moreso after the financial meltdown of 2008.Some of Canada's largest corporations use the financing. And if your firm has working capital assets anywhere from 250k and up you are a candidate. Larger facilities are of course in the many millions of dollars.
The Canadian asset based financing market is very fragmented and has a combo of U.S., international and Canadian asset finance lenders. They have varying appetites for deal size, how the facility works on a daily basis, and pricing, which can be competitive to banks or significantly higher.
Speak to a trusted, credible and experienced business financing advisor and determine if the advantages of business asset based loan financing work for your firm. They have the potential of accelerating cash flow , giving you cash all the time when you need it ( assuming you have assets ) and essentially liquefying and monetizing your current assets to provide constant cash flow, and that's what its all about .
--
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_asset_based_loan_financing.html
Wednesday, September 22, 2010
Choose Your Sources of Working Capital Finance for Business Credit
You have choices in sources of working capital finance and in business credit solutions.
It is all about understanding the problem and knowing where to go for the solution, so let’s look at those two key issues. Understanding the problem is not something you have to read about, as a business owner and financial manager in Canada you live the working capital ‘ crunch ‘ or ‘ challenge ‘ every day .
Working capital is best understood as your operating capital, and you have investments in receivables, inventory, that’s where your investment currently lies, and your goal is to monetize those assets in the best manner possible.
The textbook definition doesn’t really help us out – our accountants and analysts tell us to go to the balance sheet, subtract current liabilities from current assets, and , voila! That’s working capital!
One of the biggest contradictions in working capital that you need to understand is the issues of assets, profit, liquidity and turnover. Once you have a handle of those the concept of working capital and, more importantly, the solutions start making more sense.
We hate those textbook definitions we referred to, but we will agree that the calculation we shared needs to be positive – you do need more inventory and receivables combined as measured against payables and other short term liabilities. How you manage those short term assets of A/R and inventory is what working capital is about.
Many business owners quickly realize that one of their liabilities, i.e. payables, is actually a large asset in measuring working capital and managing it. That is because if you can continue to convert inventory into A/R into cash, and slow down payables you are achieving working capital progress.
Is there a perfect way to measure your working capital needs and progress? One of those methods is to check into the ‘cash conversion cycle ‘– It’s a tool you can use to measure how low a dollar takes to flow through your company. It simply takes your inventory and receivable days outstanding, subtracts your payables days outstanding, and there is your final number. It’s a great long tool to understand your working capital progress over long periods of time.
In order to achieve solid working capital you need to increase turnover – that can be done by accelerating cash flow by borrowing against receivables, or selling receivables via a factoring process.
Your working capital solutions in Canada are limited, but they are very focused and real. Your can increase working capital today with no ones assistance simply by accelerating turnover of your assets such as receivables and inventory. If you feel your challenge is more of a long term nature a working capital term loan (if larger these loans are called subordinated debt) is the solution.
You can also generate unlimited working capital by entering into an asset based lending or working capital facility with a non bank finance firm. Don’t forget that term loans for working capital add debt and obligations to your balance sheet, so we often suggest to clients that the best solution is in fact monetizing your assets, not borrowing more – that where asset based lines of credit work best.
So whats working capital all about – it’s a case of understanding what it is, looking at how your firm performs in key metric areas of turnover, etc, and then choosing a solution that works best for your firm, whether that is long term in nature, or a bulge type facility that augments your daily cash needs. Speak to a trusted, credible and experience working capital business financing advisor to determine what choice is best for your firm.
--
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/sources_working_capital_finance_business_credit.html
It is all about understanding the problem and knowing where to go for the solution, so let’s look at those two key issues. Understanding the problem is not something you have to read about, as a business owner and financial manager in Canada you live the working capital ‘ crunch ‘ or ‘ challenge ‘ every day .
Working capital is best understood as your operating capital, and you have investments in receivables, inventory, that’s where your investment currently lies, and your goal is to monetize those assets in the best manner possible.
The textbook definition doesn’t really help us out – our accountants and analysts tell us to go to the balance sheet, subtract current liabilities from current assets, and , voila! That’s working capital!
One of the biggest contradictions in working capital that you need to understand is the issues of assets, profit, liquidity and turnover. Once you have a handle of those the concept of working capital and, more importantly, the solutions start making more sense.
We hate those textbook definitions we referred to, but we will agree that the calculation we shared needs to be positive – you do need more inventory and receivables combined as measured against payables and other short term liabilities. How you manage those short term assets of A/R and inventory is what working capital is about.
Many business owners quickly realize that one of their liabilities, i.e. payables, is actually a large asset in measuring working capital and managing it. That is because if you can continue to convert inventory into A/R into cash, and slow down payables you are achieving working capital progress.
Is there a perfect way to measure your working capital needs and progress? One of those methods is to check into the ‘cash conversion cycle ‘– It’s a tool you can use to measure how low a dollar takes to flow through your company. It simply takes your inventory and receivable days outstanding, subtracts your payables days outstanding, and there is your final number. It’s a great long tool to understand your working capital progress over long periods of time.
In order to achieve solid working capital you need to increase turnover – that can be done by accelerating cash flow by borrowing against receivables, or selling receivables via a factoring process.
Your working capital solutions in Canada are limited, but they are very focused and real. Your can increase working capital today with no ones assistance simply by accelerating turnover of your assets such as receivables and inventory. If you feel your challenge is more of a long term nature a working capital term loan (if larger these loans are called subordinated debt) is the solution.
You can also generate unlimited working capital by entering into an asset based lending or working capital facility with a non bank finance firm. Don’t forget that term loans for working capital add debt and obligations to your balance sheet, so we often suggest to clients that the best solution is in fact monetizing your assets, not borrowing more – that where asset based lines of credit work best.
So whats working capital all about – it’s a case of understanding what it is, looking at how your firm performs in key metric areas of turnover, etc, and then choosing a solution that works best for your firm, whether that is long term in nature, or a bulge type facility that augments your daily cash needs. Speak to a trusted, credible and experience working capital business financing advisor to determine what choice is best for your firm.
--
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/sources_working_capital_finance_business_credit.html
Tuesday, September 21, 2010
Business Leasing and Equipment Financing in Canada
Your firm is growing, and guess who else is? Equipment leasing in Canada gets bigger every day. Doesn't it make sense that you have a basic understanding of equipment financing and who to turn to when you want to utilize this great asset acquisition technique? The reality is that almost 80% of all companies in Canada utilize lease financing when acquiring assets, from computers to plant equipment to specialized equipment.
There must be a reason businesses choose this type of business financing - ' ADVANTAGE'! When you utilize lease financing you are sharing the risks of asset ownership with the lessor and depending on which type of lease you actually choose - there are two types - you can actually use the equipment for the agreed upon term and return the asset . This type of financing, known as an operating lease, also lowers your overall financing expense. The other key advantage of course is simply lowering your cash outlays - allowing you to use your borrowing facilities for other purposes.
When we meet with clients exploring the leasing option a large part of the discussion is on rate and credit - that is what drives leasing approvals! You need to be able to understand, in advance, the financial requirements of a lease approval, and ensure you have positioned your company in the best manner possible.
The best news about equipment financing in Canada is that it covers all asset categories - even intangibles such as software when it comes to technology financing.
In Canada you can obtain lease financing via a couple of the chartered banks, independent finance firms, and captive lessors tied to manufacturers.
We recommend to the majority of clients in pursuing and independent finance company lease partner - credit conditions are more lenient, they are specialized, and highly motivated to do the one thing they do best, approve and write leases! Your most valuable partner in this industry is a trusted, credible , and experienced lease financing business advisor who can guide you very efficiently through the maze of firms in the industry . That relationship can be a very valuable one.
Business owners should never forget that when they adopt a long term leasing philosophy they are making their firm more competitive, because assets acquired to run the business can be easily upgraded and replaced, allowing that equipment to generate optimum revenues and cash flow . When you think about it almost all the assets you purchase depreciate, so why would you tie yourself to a depreciating asset. The Canadian Equipment leasing industry doesn’t want you to do that - the days are long gone re ' pride of ownership ' in assets, now its all about outsourcing, lower cost, newest model, etc . Probably the best example of this is computing and software, all of which can and should be leased.
Speak to a trusted, credible and experience business leasing advisor who can assist you in maximizing your knowledge of the Canadian asset finance industry, allowing you to use this valuable tool to grow sales and profits.
---
http://www.7parkavenuefinancial..com/business_leasing_equipment_financing.html
There must be a reason businesses choose this type of business financing - ' ADVANTAGE'! When you utilize lease financing you are sharing the risks of asset ownership with the lessor and depending on which type of lease you actually choose - there are two types - you can actually use the equipment for the agreed upon term and return the asset . This type of financing, known as an operating lease, also lowers your overall financing expense. The other key advantage of course is simply lowering your cash outlays - allowing you to use your borrowing facilities for other purposes.
When we meet with clients exploring the leasing option a large part of the discussion is on rate and credit - that is what drives leasing approvals! You need to be able to understand, in advance, the financial requirements of a lease approval, and ensure you have positioned your company in the best manner possible.
The best news about equipment financing in Canada is that it covers all asset categories - even intangibles such as software when it comes to technology financing.
In Canada you can obtain lease financing via a couple of the chartered banks, independent finance firms, and captive lessors tied to manufacturers.
We recommend to the majority of clients in pursuing and independent finance company lease partner - credit conditions are more lenient, they are specialized, and highly motivated to do the one thing they do best, approve and write leases! Your most valuable partner in this industry is a trusted, credible , and experienced lease financing business advisor who can guide you very efficiently through the maze of firms in the industry . That relationship can be a very valuable one.
Business owners should never forget that when they adopt a long term leasing philosophy they are making their firm more competitive, because assets acquired to run the business can be easily upgraded and replaced, allowing that equipment to generate optimum revenues and cash flow . When you think about it almost all the assets you purchase depreciate, so why would you tie yourself to a depreciating asset. The Canadian Equipment leasing industry doesn’t want you to do that - the days are long gone re ' pride of ownership ' in assets, now its all about outsourcing, lower cost, newest model, etc . Probably the best example of this is computing and software, all of which can and should be leased.
Speak to a trusted, credible and experience business leasing advisor who can assist you in maximizing your knowledge of the Canadian asset finance industry, allowing you to use this valuable tool to grow sales and profits.
---
http://www.7parkavenuefinancial..com/business_leasing_equipment_financing.html
Purchase Order Financing Tips and Secrets for Canadian Firms Seeking Trade Finance
Your worst business nightmare just occurred. You got the order/contract! Now what?!
Purchase order financing is a great tool for firms that have unusual purchase order and contract sales financing needs but are potentially unable to access traditional financing via banks or their own capital resources within their firm. How does trade finance P O financing work, does your firm qualify, what are the costs, and how does it work? Great questions, now let’s explore some answers!
Typically Canadian firms looking for this type of financing are distributors, manufacturers, or perhaps wholesalers. A variety of industries in Canada have access to this type of financing, but those certainly tend to be the typical firms needing assistance.
Your need for purchase order financing arises out of what we call the classic working capital gap. What do we mean by that? It’s a case of your suppliers requiring payment either up front or within 30 days, with your firm unable to generate those funds for payment and therefore unable to fill large purchase order and contracts in your favor . Your supplier is asking your for payment in advance or 30 days, and you wont receive payment for at least 60-90 days, perhaps more depending on your build cycle, etc.
Naturally you don’t want to turn down orders or lose competitive market position.
The obvious solution for low cost large amounts of funds are Canadian chartered banks, but our observation is that many firms simply cant satisfy the banks requirements for this type of financing to occur. If your firm is growing, profitable, has a clean balance sheet and strong historical cash flows and history you of course have a solid chance of meeting bank requirements, however that typically is not the case, certainly in the amount of clients we talk to who are looking for alternatives to their growth challenge !
When you access p o financing you can have comfort that your suppliers will be paid, and at the same time you generally have access to all the funds you need. Typical purchase order financing applications take anywhere from 2-4 weeks to complete and involve basic financial due diligence on your firms ability to fulfill the order, who your customer is (they must be credit worthy), and your proper supplier sources must be identified and vetted. It’s as simple as that.
So what are the basic pre requisites for a solid P.O. Financing deal? Naturally your company must be in possession of a contract or order that is not cancelable by your client. The P O finance firm arranges to pay your suppliers directly, that alleviates all you cash flow and working capital concerns. The transaction is completed when you ship the goods and your receivables are generated on the sale. It is at this time the purchase order finance firm expects to be paid, and this is traditionally handled by your firms monetizing of its receivable via a bank or factoring facility. Factoring facilities are great partners to the P O financing strategy, because use of them guarantees payment to your P O firm.
Let’s cover off a couple tips and secrets around the cost of purchase order financing – It generally is in the 2-3% per month range in Canada, and that means you have to have solid gross profit margins in order to be able to sustain the finance charges. But let’s be honest, let’s say your firm has been doing 750k of revenue for the last couple years and you finally get the large order from a major customer for 1 Million dollars. Wouldn’t you give up 2-3 % of your profit margin in order to make one sale which is the equivalent of your entire year’s business? We think you should positively consider that! Clearly the higher cost of this type of financing covers off the complexity and risk that the P O finance firm takes in paying for goods , waiting to get paid, and having the belief that your firm will fulfill the contract order .
It has been our observation with certain clients that your successful completion of a purchase order finance deal typically significantly enhances your relationship with your major suppliers and of course customers, that’s a secret benefit that is intangible but invaluable at the same time.
Is P O financing for everyone. Maybe not. Could it be possibly the solution to major working capital needs if your business is growing and can’t be financed traditionally – we certainly think so? Speak to a trusted, credible and experienced purchase order finance expert to explore your options.
--
http://www.7parkavenuefinancial.com/purchase_order_financing_trade_finance.html
Purchase order financing is a great tool for firms that have unusual purchase order and contract sales financing needs but are potentially unable to access traditional financing via banks or their own capital resources within their firm. How does trade finance P O financing work, does your firm qualify, what are the costs, and how does it work? Great questions, now let’s explore some answers!
Typically Canadian firms looking for this type of financing are distributors, manufacturers, or perhaps wholesalers. A variety of industries in Canada have access to this type of financing, but those certainly tend to be the typical firms needing assistance.
Your need for purchase order financing arises out of what we call the classic working capital gap. What do we mean by that? It’s a case of your suppliers requiring payment either up front or within 30 days, with your firm unable to generate those funds for payment and therefore unable to fill large purchase order and contracts in your favor . Your supplier is asking your for payment in advance or 30 days, and you wont receive payment for at least 60-90 days, perhaps more depending on your build cycle, etc.
Naturally you don’t want to turn down orders or lose competitive market position.
The obvious solution for low cost large amounts of funds are Canadian chartered banks, but our observation is that many firms simply cant satisfy the banks requirements for this type of financing to occur. If your firm is growing, profitable, has a clean balance sheet and strong historical cash flows and history you of course have a solid chance of meeting bank requirements, however that typically is not the case, certainly in the amount of clients we talk to who are looking for alternatives to their growth challenge !
When you access p o financing you can have comfort that your suppliers will be paid, and at the same time you generally have access to all the funds you need. Typical purchase order financing applications take anywhere from 2-4 weeks to complete and involve basic financial due diligence on your firms ability to fulfill the order, who your customer is (they must be credit worthy), and your proper supplier sources must be identified and vetted. It’s as simple as that.
So what are the basic pre requisites for a solid P.O. Financing deal? Naturally your company must be in possession of a contract or order that is not cancelable by your client. The P O finance firm arranges to pay your suppliers directly, that alleviates all you cash flow and working capital concerns. The transaction is completed when you ship the goods and your receivables are generated on the sale. It is at this time the purchase order finance firm expects to be paid, and this is traditionally handled by your firms monetizing of its receivable via a bank or factoring facility. Factoring facilities are great partners to the P O financing strategy, because use of them guarantees payment to your P O firm.
Let’s cover off a couple tips and secrets around the cost of purchase order financing – It generally is in the 2-3% per month range in Canada, and that means you have to have solid gross profit margins in order to be able to sustain the finance charges. But let’s be honest, let’s say your firm has been doing 750k of revenue for the last couple years and you finally get the large order from a major customer for 1 Million dollars. Wouldn’t you give up 2-3 % of your profit margin in order to make one sale which is the equivalent of your entire year’s business? We think you should positively consider that! Clearly the higher cost of this type of financing covers off the complexity and risk that the P O finance firm takes in paying for goods , waiting to get paid, and having the belief that your firm will fulfill the contract order .
It has been our observation with certain clients that your successful completion of a purchase order finance deal typically significantly enhances your relationship with your major suppliers and of course customers, that’s a secret benefit that is intangible but invaluable at the same time.
Is P O financing for everyone. Maybe not. Could it be possibly the solution to major working capital needs if your business is growing and can’t be financed traditionally – we certainly think so? Speak to a trusted, credible and experienced purchase order finance expert to explore your options.
--
http://www.7parkavenuefinancial.com/purchase_order_financing_trade_finance.html
How to Assess Prices for Equipment Leasing And Other Benefits with Equipment Leasing Providers
As a Canadian business owner and financial manager you want to ensure you can obtain best prices for equipment leasing, and at the same time maximize other benefits under the entire lease financing proves. How do you address these issues with equipment leasing providers, and who are these firms and how do you locate them?
There are a number of considerations when you choose to acquire assets through the lease financing process. There are consequences to each decision with the business equipment finance process. And then there are those benefits we mentioned – what are they and which ones should be maximized by your firm. Let’s explore some basics on these critical financing points.
We have of coruse assumed you have made the decision to enter into an equipment financing arrangement. We should say however that hopefully you have also evaluated the alternatives, such as a bank loan or term loan, and, dare we say it, paying cash for the asset. While lease financing is often deemed a bit more expensive than those two options in the long run at the same time it is in many ways the ultimate cash flow conservations strategy when acquiring new assets for your firm, so any perceived or real additional cost has to be factored against that point .
That analysis we referred to above can be performed by yourself, or your accountant or business financing advisor with a simply template known as a ‘lease versus buy ‘template. It takes into account key aspects of the lease such as the term of the transaction, i.e. how many years you want the lease for, the interest rate, and also factors in as an example what you could do with funds based on the return on equity that you traditionally achieve for your firm .
You also want to carefully consider the type of lease that you require – there are two key asset financing strategies, and the ultimate answer to each is simply achieved by asking yourself on key question – is your focus owing the asset or using the asset . If you want to focus on using the asset then look at what is known as an operating lease. This gives you maximum flexibility, and quite frankly usually has the best cash flow analysis because the lessor retains ownership of the equipment. However, at the end of the lease operating leases give you some great flexibility – those flexibilities include returning the asset, buying it for an agreed upon fair market value, or simply extending the lease, which usually also has a lower monthly payment at that time.
The key really to all pricing for equipment leasing is to ensure you have a competitive rate, and one that affects your overall credit quality. The beauty of equipment financing in Canada is that financing is available for all credit types and asset categories. Your overall credit quality as perceived by the lessor dictates your price, with other key factors being the size the transaction, the asset quality and remarket ability , and , unbeknownst to many business owners, the ownership and structure of the lease provider you are dealing with . Lease financing firms have different asset appetites, some prefer small leases, some only do multi million dollar leases, and they in turn have their own funding and capital structures which dictate pricing to you.
We tell clients that as a general rule they should expect the best pricing when they are established businesses, are profitable, and have positive cash flows and clean balance sheets and income statements. Unfortunately not all our clients fall into that category, but as we said, the good news is still that equipment leasing providers for all credit quality and asset types and deal sizes exist in Canada .
Speak to a trusted , credible, and experienced lease financing advisor who will guide you thought the process of how the lease marketplace works, which firm is the best partner for your specific financing needs, what economic advantages you can hope to achieve, and how do you do a true benefits assessment for this valuable type of business financing in Canada .
--
http://www.7parkavenuefinancial.com/prices_equipment_leasing_equipt_leasing_providers.html
__________________________________________________________________________
There are a number of considerations when you choose to acquire assets through the lease financing process. There are consequences to each decision with the business equipment finance process. And then there are those benefits we mentioned – what are they and which ones should be maximized by your firm. Let’s explore some basics on these critical financing points.
We have of coruse assumed you have made the decision to enter into an equipment financing arrangement. We should say however that hopefully you have also evaluated the alternatives, such as a bank loan or term loan, and, dare we say it, paying cash for the asset. While lease financing is often deemed a bit more expensive than those two options in the long run at the same time it is in many ways the ultimate cash flow conservations strategy when acquiring new assets for your firm, so any perceived or real additional cost has to be factored against that point .
That analysis we referred to above can be performed by yourself, or your accountant or business financing advisor with a simply template known as a ‘lease versus buy ‘template. It takes into account key aspects of the lease such as the term of the transaction, i.e. how many years you want the lease for, the interest rate, and also factors in as an example what you could do with funds based on the return on equity that you traditionally achieve for your firm .
You also want to carefully consider the type of lease that you require – there are two key asset financing strategies, and the ultimate answer to each is simply achieved by asking yourself on key question – is your focus owing the asset or using the asset . If you want to focus on using the asset then look at what is known as an operating lease. This gives you maximum flexibility, and quite frankly usually has the best cash flow analysis because the lessor retains ownership of the equipment. However, at the end of the lease operating leases give you some great flexibility – those flexibilities include returning the asset, buying it for an agreed upon fair market value, or simply extending the lease, which usually also has a lower monthly payment at that time.
The key really to all pricing for equipment leasing is to ensure you have a competitive rate, and one that affects your overall credit quality. The beauty of equipment financing in Canada is that financing is available for all credit types and asset categories. Your overall credit quality as perceived by the lessor dictates your price, with other key factors being the size the transaction, the asset quality and remarket ability , and , unbeknownst to many business owners, the ownership and structure of the lease provider you are dealing with . Lease financing firms have different asset appetites, some prefer small leases, some only do multi million dollar leases, and they in turn have their own funding and capital structures which dictate pricing to you.
We tell clients that as a general rule they should expect the best pricing when they are established businesses, are profitable, and have positive cash flows and clean balance sheets and income statements. Unfortunately not all our clients fall into that category, but as we said, the good news is still that equipment leasing providers for all credit quality and asset types and deal sizes exist in Canada .
Speak to a trusted , credible, and experienced lease financing advisor who will guide you thought the process of how the lease marketplace works, which firm is the best partner for your specific financing needs, what economic advantages you can hope to achieve, and how do you do a true benefits assessment for this valuable type of business financing in Canada .
--
http://www.7parkavenuefinancial.com/prices_equipment_leasing_equipt_leasing_providers.html
__________________________________________________________________________
How Commercial Factoring works in Canada -Receivable factoring Costs and Benefits
Commercial factoring in Canada addresses some of the major issue your firm faces everyday in cash flow and working capital challenges. You know the drill – customers have always been slow to pay, they seem even slower these days. Your cash flow requirements change daily as you address working capital needed to finance inventory and receivables, and at the same time manage your investments in ongoing operations, debt payments, commitment to suppliers, etc.
Is there a solution to those challenges, we think there is. Is it as expensive as you may have heard, we are pretty sure it is not.
Commercial factoring is the ongoing sale of your receivables for instant cash. For many customers it always comes down to the rates and pricing they have heard about this type of financing. In Canada those costs range from anywhere from 9% per annum to 1-2% per month. So let’s address that cost issue a bit. When many customers calculate their ‘all in ‘cost of borrowing from banks it is often in the 11% range as an example. So it is important not to get ‘seduced ‘by your low rate expectations around traditional Canadian bank financing. Furthermore most clients we meet with simply can’t meet the requirements, (the banks call them covenants) for borrowing on a revolving ongoing basis for working capital, particularly receivables and inventory. So the conversation around pricing becomes somewhat moot.
Instead of worrying b about the cost of factoring consider the following – If you have money tied up in accounts receivable for , as an example, 60 days, then you are losing the opportunity to receive payment and re invest in your business and increase your overall return on equity . The more quickly you can get paid allows you to reinvest in further sales for your firm, those sales create more profits.
If you complete a receivable factoring agreement you have successfully negotiated a great coup – what is that coup? You have in essence provided your firm with unlimited working capital, because as your receivables and customer backlog of orders grow your cash flow from commercial factoring works lock step with that same growth. The bottom line is that most business owners view cash flow as unpredictable, and commercial factoring removes that unpredictability – you in effect control the cash flow valve – financing all or a part of your receivables when you chose.
Receivable financing is growing all over the world, North American no exception, and certainly in Canada it has been on the rise also. Many clients are in industries which might be viewed by others as ‘out of favor ‘. In general factoring doesn’t discriminate – if you have a receivable you can generate cash flow from that A/R – today!
Some of Canada’s largest corporations use this type of financing – when it comes to larger corporations fancier finance terms like ‘ securitization ‘ are used . Bottom line, General Motors factors, why you shouldn’t. That brings up a further point , which is that we do acknowledge that firms that have particular, unusual, or one of challenges are often the mainstream candidates for receivable financing . So your firm may have had some financial losses, be in a turnaround situation, etc – you are still a solid candidate for this type of business financing.
Factoring is the ultimate in off balance sheet financing – you are simply monetizing your receivables and generating cash instantly. The secret of factoring costs, or their perceived costs, is your utilization of those funds. You can use cash flow generated from receivables sales to pay invoices from suppliers and take a discount, or negotiate better terms and pricing for your products .
When you have additional working capital you can grow sales and revenue and increase profits – that financial flexibility is what this type of financing is all about. Sometimes it is a ‘bridge ‘solution, in certain cases it can easily become your long term ongoing working capital solution.
So whats our bottom line? Simply that you do have choices in working capital solutions. Commercial factoring is one of them. Understanding the true cost of the financing, how it works, and utilizing that cash for the right reasons just might be your best alternative for cash flow longevity.
Speak to a trusted, credible and experienced working capital advisor to ensure you understand the benefits of this unique type of business financing in Canada.
---
http://www.7parkavenuefinancial.com/commercial_factoring_receivable_factoring.html
Is there a solution to those challenges, we think there is. Is it as expensive as you may have heard, we are pretty sure it is not.
Commercial factoring is the ongoing sale of your receivables for instant cash. For many customers it always comes down to the rates and pricing they have heard about this type of financing. In Canada those costs range from anywhere from 9% per annum to 1-2% per month. So let’s address that cost issue a bit. When many customers calculate their ‘all in ‘cost of borrowing from banks it is often in the 11% range as an example. So it is important not to get ‘seduced ‘by your low rate expectations around traditional Canadian bank financing. Furthermore most clients we meet with simply can’t meet the requirements, (the banks call them covenants) for borrowing on a revolving ongoing basis for working capital, particularly receivables and inventory. So the conversation around pricing becomes somewhat moot.
Instead of worrying b about the cost of factoring consider the following – If you have money tied up in accounts receivable for , as an example, 60 days, then you are losing the opportunity to receive payment and re invest in your business and increase your overall return on equity . The more quickly you can get paid allows you to reinvest in further sales for your firm, those sales create more profits.
If you complete a receivable factoring agreement you have successfully negotiated a great coup – what is that coup? You have in essence provided your firm with unlimited working capital, because as your receivables and customer backlog of orders grow your cash flow from commercial factoring works lock step with that same growth. The bottom line is that most business owners view cash flow as unpredictable, and commercial factoring removes that unpredictability – you in effect control the cash flow valve – financing all or a part of your receivables when you chose.
Receivable financing is growing all over the world, North American no exception, and certainly in Canada it has been on the rise also. Many clients are in industries which might be viewed by others as ‘out of favor ‘. In general factoring doesn’t discriminate – if you have a receivable you can generate cash flow from that A/R – today!
Some of Canada’s largest corporations use this type of financing – when it comes to larger corporations fancier finance terms like ‘ securitization ‘ are used . Bottom line, General Motors factors, why you shouldn’t. That brings up a further point , which is that we do acknowledge that firms that have particular, unusual, or one of challenges are often the mainstream candidates for receivable financing . So your firm may have had some financial losses, be in a turnaround situation, etc – you are still a solid candidate for this type of business financing.
Factoring is the ultimate in off balance sheet financing – you are simply monetizing your receivables and generating cash instantly. The secret of factoring costs, or their perceived costs, is your utilization of those funds. You can use cash flow generated from receivables sales to pay invoices from suppliers and take a discount, or negotiate better terms and pricing for your products .
When you have additional working capital you can grow sales and revenue and increase profits – that financial flexibility is what this type of financing is all about. Sometimes it is a ‘bridge ‘solution, in certain cases it can easily become your long term ongoing working capital solution.
So whats our bottom line? Simply that you do have choices in working capital solutions. Commercial factoring is one of them. Understanding the true cost of the financing, how it works, and utilizing that cash for the right reasons just might be your best alternative for cash flow longevity.
Speak to a trusted, credible and experienced working capital advisor to ensure you understand the benefits of this unique type of business financing in Canada.
---
http://www.7parkavenuefinancial.com/commercial_factoring_receivable_factoring.html
Subscribe to:
Posts (Atom)