How to Succeed When buying a franchise store and financing its cost

It's a road you want to go down successfully. We're talking about your decision on buying a franchise in Canada, financing the franchise cost and being successful in the franchise store or business you have chosen.

Clients always ask us if it’s ' risky ' to buy a franchise. Our answer is somewhat facetious, in that if a franchise fails, we prefer to have someone to blame - that's you, the franchisor, or your franchise lender. It's rarely the lender, leaving you and the franchisor.

The reality is quite frankly the same as if you were acquiring any business, namely, Do your homework! And invest some time in solid due diligence. Make a good decision around who you are going to do business with.

After selecting a franchise opportunity the challenge of financing the business becomes even more bewildering to some of our clients. Let’s share some solid tips, info and suggestions around the successful financing of your franchise cost.

We often focus solely around your own financing challenge when buying a franchise ; we should add that its just as important to spend some time on understanding the general financing situation around the partnership you are about to enter into with your franchisor . Disclosure documents these days are fairly heavily weighted towards you as the franchisee understanding that you are entering into business with, so we encourage all clients to take a strong look at your franchisors profitability, its financial management, and any items of public record that might hint or portend of future problems.

Unfortunately many franchisees we talk to about franchise cost and how we will finance the franchise are under the misconception that there is 100% financing available for your new business. In Canada that is pretty well never the case, and you need to make a strong assessment of the maximum amount you can contribute to the venture from a personal equity basis. If you borrow too much and put too little in the financial folks call that being ' over leveraged'- therefore any little bumps in the economy or your ability to generate sales becomes a huge problem if you aren’t properly capitalized.

And we already know you next question, which is ' how much do I have to put in ‘. We would prefer to give you a clear final answer on that one, such as xx %, but the reality is that your own investment is tied to a couple factors... the size of the financing you require, how you will finance it, and whether initial ratio analysis will show that you meet all qualifications .

A ratio is just a ' relationship' of numbers. The two key ratios that you need to focus on in franchise financing are debt to equity, and working capital. Typically you want to have only two times more debt than your personal investment in the business, and from a working capital point of view you want to ensure you have liquid assets to cover at a minimum short term payables.

Do franchisors offer loan assistance - the answer is yes... and no. By that we mean simply that many franchisors have developed relationships with Canadian business financing advisors who assist franchisees in finalizing all aspects of the franchise cost financing - including business plan preparation, negotiations, sourcing debt, etc. You should rarely, if ever, expect the franchisor to supply direct loan financing assistance - they are selling franchises, not building a financial empire.

In Canada typical methods of financing a franchise are a BIL loan, a working capital term loan, and equpment leasing and financing.

Speak to a trusted, credible and experienced business financing advisor who will work with you to successfully finance your franchise store in a minimum amount of time with a maximum mount of success!
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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

One Real Way To Solve business financing challenges - Asset Backed Lending

Something that works. We all want that. And in the new business financing reality of 2010 and 2011 asset backed lending might be your new choice for Canadian business financing.

Asset based line of credit facilities are becoming more popular everyday. It is simply a newer method of lending to Canadian business with a total focus on assets. ‘Assets’. That’s the key word. So which assets are they? ask clients. Typically these include inventory, receivables machinery and equipment in your fixed assets part of the balance sheet, and in some cases real estate. In some very unique cases IP, or intellectual property, a la patents, etc can be financed.

Another new common category is tax credits, such as SR ED (SR&ED) tax credits. Tax credits are in effect receivables, money owing to you from the government that is in the form of a non repayable type grant. So monetizing that asset as soon as you can allows you to employ cash more efficiently in your business.

Our clients typically imagine inventory and receivables as being the only items they could margin for liquidity with their bank. The reality is that even inventory financing is becoming more difficult in the chartered bank environment, certainly for start up, smaller, and medium sized firms. That therefore is the main difference in an asset backed lending and working capital facility; in its simplest form it’s simply the margining of all those other assets to capture maximum liquidity.

So who is actually using these types of cash flow facilities, and why are they a very solid alternative to what is termed ' traditional' bank financing. (We’re not so sure these days that ' traditional' bank financing is as available as it used to be - what do you think?!)

The truth is that this type of Canadian business financing is an alternative to bank financing, its real, its available, and allows you to not having to consider more unpalatable options such as raising new equity and diluting your ownership.

We are all for secured bank lending... if you firm can qualify for all the lending it needs. But if you have had financial challenges then consider asset backed lending as a solid option. What are some of those ' challenges' we speak of that might not allow you get Canadian chartered bank financing... its issues such as a temporary loss, a turnaround, new ownership, balance sheet ratios and covenants that might not work for the bank, etc .
Asset based finance does not really care about all those issues - yes they are discussed, but it always comes back to ' the assets ' - and if you have them you can margin them on a daily basis for working capital and cash flow .

So whats the catch. While we feel the advantages of asset based lines of credit far outweigh the alternatives, the reality is that 95% of the time this type of financing is more expensive. It also requires more reporting on an ongoing basis, although most business owners we talk to will gladly pay more finance charges and are ok with reporting if they in fact have all the cash flow they need to grow and profit in today’s competitive environment. You can also expect a bit more due diligence on your overall asset quality when you set up the facility.

There is always a bottom line in business, and in our case today it's that an asset backed line of credit facility is a new and emerging working capital financing that provides your firm with all the liquidity to grow. Speak to a credible, experienced and trusted Canadian business financing advisor to determine if this type of working capital and credit facility benefits 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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Options on Financing a business via P O Financing and Inventory financing

It's a good news / bad news situation at its classic best. Your firm has the ability to receive orders or contracts but you are challenged with restrictions or unavailability of inventory and PO (purchase order) financing. Financing a business based on assets such as inventory and orders in coming has never been more of a challenge in Canada.

When we speak to clients we advise there is no one method that seems to handle all inventory and po finance challenges. But the good news is that via a variety of effective business financing tools you can employ you are in a position to generate working capital and cash flow from these two asset categories. Let’s examine some real world strategies that have made sense for clients.

The root of the problem is simply, you have orders and contracts, but those will potentially be lost to a competitor. Conventional wisdom is that you go to your bank and ask for financing to support inventory and purchase orders. As you may have experienced, we aren’t big believers in conventional wisdom on that matter!

However, utilizing a convention purchase order funding source does allow you to purchase product and get your suppliers paid, thus facilitating you ability to deliver to your customers.

One of the main benefits that many clients don’t realize is that inventory financing and P O financing don’t necessarily require your firm to have a long or strong credit history; the focus on structuring the transaction is around the inventory being financing and the general credit worthiness of your client, who will be paying yourself or the inventory or P O financing firm

The overall process is fairly simply and easy to understand when it comes to putting the transaction together successfully. On receipt of your confirmed purchase order your supplier is paid via cash or a letter of credit. Your firm of course completes final shipment of the product, which typically involves some additional time on your firms part. On shipment and of course payment from your customer the transaction is in effect settled. In a true pure po financing scenario the P O funder is paid immediately on your invoicing of the product. That is facilitated by your firm selling the receivable via a factoring type transaction as soon as you have generated the invoice.

There are always limitations to this type of financing - so things we look for early in the transaction are the ultimate remarket ability of your product in case there is a transaction risk. Naturally, as we stated, the overall credit worthiness of your customer is key, his receipt of goods and payment in effect closes the transaction.

Inventory financing and PO financing are generally more expensive than traditional financing, due mainly to the significant transaction risk that the lender takes. Therefore we strong recommend that your firm has solid gross margins in the 25% range to cover the associated costs of a po financing, inventory financing transaction that also factors in the time it takes to get paid by your client, as that typically adds 30-60 days on to the whole cycle of the transaction.

If there is one great tip of ' secret' that we share with clients its simply that the best method of ensuring financing in the manner we have outlined is to consider an asset based line of credit . Coupled with a facility that will finance your purchase orders this is the ultimate working capital tool that will allow you to grow business quickly and significantly. This type of facility is generally a non bank facility and is offered by independent finance firms.

Speak to a trusted , credible and experienced Canadian business financing advisor who will assist you putting together a working capital and cash flow solution that works!
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http://www.7parkavenuefinancial.com/p_o_financing_inventory_financing_a_business.html

Avoiding Blunders in working capital financing and Cash flow Financing

Mistakes. As Business owners we all make them. Let's talking about wrong choices in working capital financing and how the right types of cash flow financing can turn adversity into opportunity for growth and profits.

All Canadian businesses need working capital, permanently, and in many cases, on a ' bulge' basis from time to time. In essence you are financing your operating cycle, and most business owners intuitively know their industry has a unique cycle - that being simply the time it takes for a dollar to flow through inventory, A/R, and back to cash.

Larger or established? You probably have a better chance of seeking what people refer to as ' traditional' forms of financing. Quite frankly we're not sure anymore what traditional means, as the lines are getting blurred between what some consider as non traditional working capital financing.

Maybe we're different, but we seem to meet more and more clients that are unable to access capital for growth and development. They seek to enhance working capital in a variety of methods. Those include receivable financing, aka ' factoring', asset based lines of credit, financing for purchase orders ( yes , you can finance a purchase order !) , and even monetizing hard assets into revolving facilities such as a short term bridge loan on equipment, with proceeds used for working capital and cash flow .

The bottom line is your need to focus on liquidity, so if you have positive working capital as calculated by the text books ( current assets - current liabilities ) you must therefore monetize those assets into the ' cash is king ' model .

The harsh reality is that as you textbook calculation of working capital goes up your actual cash flow is negative , given that your investments are simply tied up in inventory and receivables which seem to be collected more slowly every year in our opinion and those of our clients .

Naturally if you are able to be paid in cash at time of sale, of if inventories turn very quickly, and billed customers pay promptly ,, well suffice to say the cash flow financing pressures are eased quite a bit - but reality of business usually does not give us that luxury .

We are often amazed at how many clients we meet who are looking for proverbial ' working capital ' but are in a position of not being able to define the type of financing they think they need

The ultimate cash flow support tool is the Chartered bank operating line of credit. But many business owners who do not qualify for these facilities are moving to either a receivable financing facility or an asset based line of credit. These come at a higher cost, but provide liquidity often 100% greater than might have been achieved previously, had they been bankable.

So whats our take away tip here - simply that you must look beyond the rate and focus on what collateral you are providing to get the liquidity you need.

Ultimately you need to understand your particular need and choose a financing solution that provides you with the cash flow financing to meet your business needs, as well as grow your business. You have options, which many Canadian business owners and financial managers don’t realize. Be they traditional or alternative, one or several of them will work for your firm. Speak to a trusted, credible and experienced Canadian business financing advisor who will put you on a clear path to the solution for working capital financing.
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Stan Prokop is founder 7 Park Avenue Financial ; Originating financing for Canadian companies,specializing: working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies . For info / free consultation on Canadian business financing / contact details see:

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

How to Acquire Equipment Finance Leasing and the Best Leasing Services and Rates

When Canadian business owners and managers are aware of the benefits of equipment finance leasing and leasing services their ability to get rates, terms and structure approvals that makes sense increase dramatically.

Equipment financing in Canada is one of the easiest methods of financing business assets bar none. However, at the same time the complexity of the different types of leasing and who offers lease financing can be a true challenge that you might not want to dedicate all your time toward.

You can obtain the best leasing services and rates by focusing in on what benefits matter to your firm from a priority basis – in many cases its simply the term and rate on the lease financing . Depending on what type of asset you are financing lease terms vary from 2 to 7 years – at the end of the day it depends on the equipments useful economic life, combined with the type of lease you structured. In Canada that is either an equipment finance lease, designating your desire for ownership, or an operating lease, designating your firm’s choice to use an asset, but not ultimately own it.
Leasing is often referred to as a cash flow enhancer – little or no money down, as well as your ability to craft monthly, quarterly, or semi annual payments with can either accelerate or decelerate as you require. That’s true cash flow management.

Equipment lease financing is all about benefits and use, not real pride of ownership. In most situations today assets depreciate... you certainly can’t look at your investment in computers and technology and make the case those assets are rising in value!

With today’s volatile finance markets, inflation, and the somewhat erratic timing of the need for your asset acquisitions isn’t it a safe bet to know that the decision process becomes much easier when leasing services provide you with an effective acquisition tool.

Clients always inevitably ask ‘why is lease financing so popular ‘? The reality is that is a triple threat to your competition. You can effectively stretch your dollars, extend your budgets, and acquire equipment and facilities with the most minimum investment of funds. That is simply because you are matching investment of your funds with the useful economic life of the asset – what else could make more sense.

Equipment finance leasing allows you to generate the payments you need to make for the asset from income produced by the asset – payments are made from current revenue and the equipment and assets you finance are in effect a ‘pay as it earns’ scenario . Today’s costs are paid with tomorrow dollars since lasing involves payment for equipment as it is used. Naturally if you chose to buy the asset outright we can make the statement that you would be using today’s dollars to hand tomorrow expenses, and we advise against that in conversations with clients.

Speak to a trusted, credible, and experienced Canadian business financing and lease advisor on how you can maximize the benefits of equipment lease financing to grow revenues and profits .
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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

You Have Factoring Questions – Tips on Best Factoring Program and Factoring explained

We forgive you, and we are sure everyone else does also... for what...? Simply because you keep asking about the best factoring program out there and quite frankly you have factoring questions on this ‘relatively’ newer form of business financing.

So, factoring explained. Let's cover off some key basics and arm you with data to make an informed decision as to whether his type of Canadian business finance works for you.

Step 1 - understanding what we are talking about. It couldn’t be more simple. As you generate sales and receivables you enter into a ' program' to sell those receivables to a third party. As can be imagined, you receive a discounted price for your receivables , because you are getting cash today for something that would normally be collected 1, 2, and three months out .

The cost of factoring is always a key discussion point with our clients. The industry refers to this as a ' discount fee', and in Canada that fee is quite frankly all over the place. We can make a general statement thought that typically the fee is in the 1- 3% range. We can hear our clients already. ‘We’ll take the 1% please!". The reality is that you do have some control over the pricing in your factoring program, because the key drivers of the pricing are quite simple - the size of you A/R portfolio, the number of customers, where they are located, and their overall credit quality.

While customers tend to always focus on price in this discussion we frankly tell clients that the factoring questions they should be focusing on are more important - how does the program work on a day to day basis and how does it affect my clients and my business processes.

On a day to day basis you are advanced, as you generate invoices, approximately 90% of the invoice value - generally the same day you cut the invoice. Why only 90%. Simply because the finance firm holds back that 10 % as a reserve or buffer and it also covers off the financing cost. Let’s demonstrate a clear example. If you generated an invoice today for $100.00 you would receive via wire transfer 90$ into your bank account today. If you customer paid in 30 days ( you wish!) and the factor firm priced your program at 2% then when your customer paid the invoice you would receive your other 8 dollars back, the 2$ being the finance charge . It's as simple as that.

Its not hard for our clients to see some of the immediate benefits - all of a sudden ' factoring explained ' requests become quite clear - it frees up cash flow instantly for general working capital purposes, suppliers can be paid on time, and you can purchase additional products and services that you need to grow your business on a daily basis .

Factoring , aka ' receivable discounting' is different from banking - it comes at a higher cost , and works on a day to day basis significantly differently than if you were able to facilitate a bank line of operating credit . The harsh reality is that while many banks are pushing back on receivable and inventory facilities for small and medium business the factoring industry has kicked into hyper growth mode, seizing the opportunity to finance the liquidity gap in Canadian business.

Speak to a trusted, credible and experienced Canadian business financing advisor who will guide you through the process for success in Canada's newest mainstream business financing strategy.
on factoring questions raised by Canadian business . How does a factoring program work, what does it costs . Factoring explained from the terms of benefits and daily processes .
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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/factoring_questions_factoring_explained_program.html

Leverage Canadian tax credits for film finance success via film tax credit financing

Is there a better way of leveraging your film, TV or animation project other than utilizing film tax credit financing on Canadian projects? We don’t think so, but we will let you decide.

Canadian tax credits for film continue to grow in popularity and make a strong case for many projects to be shot, produced, or post produced in the Canadian environment.

Difficult to understand? Not really... Canada's stable political and financial environment, coupled with a very generous and straight forward non repayable tax grant system for productions drive new interest to Canada every day.

Naturally Canada competes with major cities and geographies all over the world for its share of media production in film, tv and animation .These days its more often than not about cost , and Canada has a positive statement to make in the area qualified crews, great geographies, and the cost effectiveness . No one area takes Canada over the top, but when you add the aforementioned facts on top of the Canadian film tax credit system you have a strong power play .

Even the strong Canadian dollar, which seems to be approaching par in 2010-2011 is no longer a concern - previously the lower value Canadian ' loonie ' was a weak currency and a key benefit of shooting in Canada was quite simply, the Canadian dollar.

But the real kicker in all this is the Canadian governments film tax credit financing policy which now plays a key part in most decision to film or produce in Canada

Simply speaking Canadian tax credits for film refund to Canadian and foreign owned products a very large portion of their production costs. The ten Canadian provinces augment that program by adding in their own credits, further increasing the generosity of the program.

An interesting historical point is that in recent years may political regimes in the U.S. and elsewhere lobbied hard to compete against the Canadian film tax credit system. In 2003 the federal authorities increased the tax credit, and the provinces jumped on board again.

Certain of the tax credits were even increased in areas of non labour, i.e. your other below the line production expenses.

How could you not want to take advantage of any system that offers in the percentage range of 30-45% as a non repayable refund on your project? It makes no sense to not consider that option. And as long as the Canadian government feels that benefits outweigh cost who are we to disclaim the program - instead simply take advantage of it.

It's more often than not all about cash flow and working capital for your project. so owners of projects should strongly consider monetizing , i.e. financing their tax credits . Your ability to receive financing on a future tax credit receivable can great improve the confidence of your debt and equity investors, and enhance the overall returns on your project.

The entire process can be completed in a manner of weeks and involves a basic financing application, ensuring your tax credits are legitimate and vetted, and requires that you can properly demonstrate good accounting and financial controls re the preparation and filing of financial statements for your project. Naturally this sort of fiscal responsibility makes sense even if you weren’t going to finance your Canadian tax credits for film, TV, and animation.

Speak to a trusted, credible and experienced film tax credit consultant. Monetize or cash flow your claim if it makes sense. That a solid entertainment finance strategy.


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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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