Would Your Firm Pay 20$ to Get $1,000? Why An Accounts Receivable Credit Financing Factor Strategy Makes Sense In Canada

Are Your Financing Costs Too Low? Yes, We Said low!


Information on the cost and benefits of accounts receivable credit financing in Canada and why a Cash Flow Factor Strategy Works .



It's an intriguing proposition and our segue today into a logical (we think) financial decision involving accounts receivable credit financing facilities, commonly known as factor finance in Canada. And who wouldn’t pay 20 to get 1000, but more about that a bit later.

Accounts receivable financing facilities are the sale of one, all, or part of your receivables on a one time or ongoing basis. The industry itself in Canada and the U.S. views the pricing around this sale somewhat differently than our clients. How? Simply because the industry thinks of the sale we have just referenced as a discounted price on the object of the transaction, your receivables.

Customers view it the other way of course, symbolized by the 3 most popular words in finance globally ' whats my rate'! The Canadian accounts receivable credit factor industry has evolved over time as a direct offshoot of the U.S. and European industry. It's clearly evolved a lot more slowly here, but in recent years gained significant traction due to pullbacks in traditional lending by Canadian chartered banks and other institutions.

So how does an accounts receivable factor line of credit differ from bank facilities which margin your receivables? In 2 ways really. First the general focus of any financing of this type revolves around the size, quality and geographical nature of your receivable investment you are looking to finance. Unlike banks that bore down into your financials a factor firm 99% of the time focuses only on the general quality and credit worthiness of your A/R base.

And what about that other 1%. That brings us to our recommended manner of accounts receivable finance in Canada, confidential invoice finance. In that type of facility you are allowed to bill and collect your own receivables without any notice or notification to your customer base. So it’s like bank financing from a facility point of view, except the mechanics are a bit different. Main point - your firm is in control, billing and collecting your A/R.

The second reason A/R finance from an independent non bank finance firm is different from bank business lines of credit bring us to our subject headline today. In Canada the general rate on financing your receivables is in the 2% range. (Sometimes higher, sometimes lower, but it’s a good average). Remember also we spoke of accounts receivable factor finance as a sale of your A/R. So if we take out headline example, a 1000.00 dollar receivable costs you 20.00$. (This assumes your customer pays in 30 days).

So the challenge for Canadian business owners and financial mangers then simply becomes as follows: If you had that 980.00 dollars immediately after you generated a sale and invoice (no waiting) what would you do with the funds?

If you are growing quickly it becomes a very easy decision, pay suppliers, buy more products, negotiate better pricing with new found cash, invest in sales and marketing efforts, etc. We think you get the point.

So, bottom line, 20 will get you 980. Does that make sense for every firm in Canada? The reality is that some of the largest corporations in Canada use this financing mechanism. (Their rate is a bit better as you can imagine!) But if your firm is growing, has challenges, or simply cant access bank credit then this financing concept should be very appealing.

Speak to a trusted, credible, and experienced Canadian business financing advisor who can assist you in evaluating costs and benefits in factor financing in Canada.



AUTHOR: Stan Prokop - www.7parkavenuefinancial



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

Capital For Your Business ? What You Need To Know About Business Loan Financing In Canada

Business Financing In Canada Success Tips

Information on what Canadian business owners should know and expect when looking for capital for business loan financing . Use this knowledge to be successful in business finance challenges .


Many first time clients we meet are struggling with how to get capital for their business. Whether it is a loan financing or an asset monetization type strategy it’s really an age old question that Canadian business owners and financial managers struggle with on an ongoing basis.

Let’s uncover some keys to success for business financing that makes sense for your firm.

Trying to get proper business financing without a crisp business plan, executive summary, and financial history or projection is somewhat of a doomed strategy. Many clients we meet though are more ' entrepreneurial' than financial, so they face challenges in the ability to properly present their needs in a realistic and credible fashion. That also might be why they seem to be more focused on growing and running their business, as opposed to financing it!

We meet many business owners who feel that their lender , be it the bank or a commercial financing company simply doesn’t understand their business .While we agree some bankers and finance lenders might be pre disposed to dislike certain industries you cant assume that’s always the case . They do have an emotional attachment to seeing that your loan or financing is repaid though - that’s where your job becomes much easier.

Canadian financing needs are often for different purposes. In some cases you might be focusing on the government small business loan, in other cases it could be equipment financing via a lease finance strategy. Or you could be considering monetizing certain assets such as receivables, inventory and equipment in asset based lines of credit. The bottom line - position your request directly to the type of lender you are working with.

We see many summaries or business plans that are focused on one of two areas - lenders, or investors. If you are focusing on lenders doesn’t it make sense that your focus should be collateral and cash flow - simply speaking, how you’re financing will be repaid. Clients looking for equity capital or strategic partnerships need to address a myriad of other issues - i.e. revenue growth targets, market success and penetration, etc.

In the case of bankers and commercial finance lenders you can expect some solid discussion around ' number relationships' in your financials or projections. Others call them ratios or covenants; we prefer ' relationships.

So while every plan or summary with respect to financing you require has some common characteristics - i.e. owner bios, history of company, market info, etc you should expect that a banker or commercial financing proposal should include key aspects of debt financing .Those include: collateral issues, cash flow and relationship (ratio) analysis, and personal info on owners of the firm.

Is there one solid way to make a ' connection' with the type of lender you are focusing on? In Canada the types of financing available to entrepreneurs can generally be categorized under the following - traditional bank financing, asset based lending, lease financing, working capital financing, and tax credit financing , government loan financing .

Again, its different financial solutions for different financial challenges. So consider this... that the way to ' connect ' with the financing you need might possibly be to connect with a Canadian business financing advisor who has strong credible and proven experience in the type of financing you need.

Bankers and commercial lenders are clearly going to be a bit more receptive to review a transaction with someone who they have worked with already. So find an advisor who has credibility in the area of financing that you need. A referral by a trusted financing advisor is invaluable.

Remember that banks and commercial finance firms are in business to lend you funds- so knowledgeable and prepared Canadian firms will always get access to the financing they needs. And you our suggested ' people link' via a respected advisor to guarantee successful borrowing.



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 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/capital_for_business_loan_financing.html

The 411 On B I L / CSBF – The Real Deal On the Federal Government Small Business Loan – aka ‘ SBL ‘ Loans

Small Business Loan Financing – The SBL

Information on the 5 stages of success for completion of a federal government small business loan . SBL loans have great rates, terms, and structures and are utilized by thousands of businesses in Canada .



Wow. Is today national acronym day or something? 411... BIL... CSBF... SBL ... Can someone explain whats going on here?!

In truth we're talking about the 411... That’s our term today for ' information' today on the federal govenremnt small business loan. The 7441 businesses (yes, that many!) that used the program in 2010, many of whom are your competitors; tend to call the program the SBL program. That’s small business loan! To further confuse things the formal government name for he program is CSBF.

So our point... simply call it whatever you want, but consider using the program! And by the way, whats so ' SMALL ' about 1/2 Million dollars. That’s the formal cap on the program, although most financings are done in the 350k range. Again, it’s probably just us, but that’s not small. Everything’s relative we guess.

Let’s examine the 5 or 6 stages of getting a completed funding under the program. Stage one is of course determining if you qualify. Some basic guidelines are as follows - your first must have revenues, or projected revenues under 5 million dollars. We say ‘projected ' because thousands of firms financed under the program are in fact start ups who might clearly not be able to achieve this level of financing outside the program. Owners of the business must have a respectable personal credit history and be up to date in their personal tax filings. Doesn’t it make sense that you might not get a government loan if you have tax arrears? We certainly think so.

Many of our clients are initially confused as to what can be financed under the program. If there is one big misconception is that federal government small business loans - i.e. the SBL, are cash and working capital type loans. This, unfortunately is not the case, the program only finances equipment, software, leaseholds, and real estate.

Stage 2 - what documentation is needed for the SBL loan? It’s not as bad as you think, as we think many clients seem a bit overwhelmed when they investigate the program on their own. You simply need an executive summary of yourself and the business, financial projects that make sense (key word - make sense!) and some typical back up data that you would need for any other business loan you were applying for.

Stage 3 - Presenting your SBL loan package. Is that to the government? Not really, Industry Canada is the branch of the government that sponsors and adjudicates and mentors the program, but on a day to day basis you deal with your own local bank for the program. The challenge we find is that many clients tell us that they have poor experiences in working with their banker who often is not fully conversant with the program. So speak to a trusted Canadian business financing advisor on how to locate the best bankers that are great at this program.

Stage 4- Its simply a case of presenting your package in person, and answering typical question that might come up on your business, the use of the proceeds, and your own business background and experience . Here again a trusted business advisor can do this for you and with you.

Stage 5- That’s our favorite stage, it’s called the ' Approval '! The program pays 90% of all invoices you submit within your approved balance. You are responsible for the other 10%, that your equity commitment to the loan. Quite modest we think. And, want to hear some more good news; you aren’t even required to guarantee the full balance of the loan.


In 2010 over $ 950,000,000.00 of loans were advanced under the program. Your firm should consider being one of the recipients of the federal government small business loan, aka the SBL. Speak to a credible and experienced advisor on the program that can ensure you qualify and can get approved on a fast track basis.


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 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :

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

Does Canadian Franchise Financing Success Mean Everything To You ? Tips/Info Franchising Company Lenders / Loans

We can pretty safely bet that after you have made a decision to purchase a franchise in Canada that franchise financing becomes, at least temporarily, one of the most important priorities in your life. Let’s examine some tips, info, and strategies allowing you to work through, successfully, the finance company and the various lenders and loans available to yourself.

In speaking to many clients it’s quite clear that the type and style of franchise they wish to purchase is often tied to their perception of their ability to close financing on that purchase. And when we look through the business news these days it seems that all types of businesses, from start up to large corporations have formidable financing challenges.

The reality is though, that if you have priced your franchise purchase properly relative to your own personal situation, which includes your credit history... that you should be in a position to acquire the financing you need.

So what are the ingredients to that success? Some of the key basics are a ' proper' proposal and your ability to commit some capital to the business. Clients are always concerned about how much owner equity they will have to put into the business - In Canada our experience is that typically is in the 10 - 40% range, with 10%being the absolute minimum.

Franchise financing is sold on the basis of your business plan. That document does not have to be as formal as you think, but it should include the essence of what you are trying to achieve. Those basics include info about yourself, your work and career history, your personal financial situation. The document should then cover off details on your franchisor, the business model they operate under, and finally, and perhaps most importantly a credible financial projection.

We're often asked how much detail goes into the financial projection for the franchise financing company or bank. The simple answer to that is that you should be demonstrating in a clear fashion how the loan or loans will be repaid.

We encourage all clients, via vigorous discussion to ensure they are in a position to defend their sales and cash flow projections - and, as importantly, are prepared to answer any questions the lender might have. A clear presenation,backed up by your confidence and experience are key to franchise financing loans that are successful.

Contrary to the beliefs of many franchisees in Canada your franchisor typically doesn’t play a large part in the actual financing of your franchise. In certain cases they possibly might have some sort of program in place with a finance partner, but that somewhat rare in the mainstream of franchises that sell in the 100-350k range.

So how are these financed then? Good question! One or two specialty franchise finance firms provide acquisition loans in the industry. These typically are for the largest brand names and when ticket size of the purchase is quite significant.

The reality is that the government, via the Canadian BIL / CSBF program has evolved into one of the largest financier of this business segment in Canada. The program has been adopted by hundreds, probably thousands of business owners to facilitate franchise financing loans. And for good reason, low financing rates, great terms, structures, and maximum flexibility on repayment.

In many cases financing of your franchise is complemented by specialty equipment financing for certain assets, as well as working capital loans when that is prudent and feasible. We always remind clients think in terms of acquiring the franchise, and then focusing on ensuring it will be financed properly on an ongoing basis. Running out of money right out of the gate is not recommended! That’s where your business plan and financial projections must be realistic.

Don't let the financing of your franchise overwhelm you - speak to a trusted, credible and experienced Canadian business financing advisor on a finance strategy that makes sense for your particular situation.



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 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :

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

Looking For The Silver Bullet In Canadian Business Financing ? Let ABL lending Via Asset Based Lenders Show You How

Why Asset Based Lines Of Credit Are the New Paradigm Shift in Canadian Business Finance Information on ABL lending in Canada and how asset based lenders via specialized business lines of credit financing solve a myriad of Canadian commercial financing challenges . The ‘Silver Bullet ‘. It's always been an interesting term to us, referring of course to something that ‘ cuts through complexity and provides an immediate solution to a problem '. (In the old days it was the actual use of a silver bullet that was the only way believed to kill a werewolf! ) So why do we maintain ABL lending and asset based lenders and the financing they provide are a silver bullet for Canadian business financing? Here's why. Asset based lenders have emerged in Canada as a true alternative to traditional Canadian chartered bank financing. While they are often categorized as a form of ' debt ' in reality these firms simply monetize the left side of your balance sheet - i.e. your assets. These assets, usually both current, but sometimes fixed, are monetized into a revolving business line of credit that accelerates liquidity for Canadian business. We feel that because asset based lenders emerged much later onto the Canadian business financing scene that that’s one of the main reasons there is a lack of understanding and standardization when Canadian business owners and financial managers attempt to understand the finance offering this type of financing provides.. ABL lending is typically ' unregulated' financing services. simply meaning that the majority of firms providing services in this area of Canadian business finance aren’t under the bank act . The irony is that a small handful of the larger ABL firms are in fact divisions of U.S. and even Canadian banks. So why should we care about unregulated financial services, if they are offered by large well capitalized companies who want to do business with your firm. Simply speaking - flexibility! That flexibility comes in the form of higher L T V (loan to value) lending that gives you only two things - more liquidity and cash flow. The simply reason behind that is that it leverages your assets to a much higher level than a typical bank offering. So how and why is ABL lending able to advance such higher amounts when it comes to your firm’s new business line of credit revolving facility? It simply because greater care, valuation, and control and reporting (that reporting is by yourself by the way!) Allows asset based lenders to margin your receivables, inventory, and in some cases fixed assets at rates that can be anywhere from 10-50 % higher on inventory, and as much as 20% more in receivables. Again, we're circling back to flexibility. It is rare that any industry is totally ' out of favor ' with an asset based lender. Why? Because based on their internal expertise and their ability to work with your firm in any stage of your existence (start up, high growth, turnaround, recapitalization, etc) almost every Canadian firm is eligible for an asset based line of credit facility. The greatest flexibility, if we had to name one, is that the facility grows as your firm grows - that certainly is not the case when it comes to more traditional forms of financing, or term debt. And again, the ABL facility is somewhat of a ' catch all' as it works for companies of all size (typical facilities range from 250k to tens of millions of dollars); firms that are both doing well and growing or those that have experienced significant business challenges. Your firm is no longer pressured to perform under ratios, covenants, and other issues that detract from your ability to grow or save your business. If you want to learn more about the new ' SILVER BULLET ' in Canadian business financing consider speaking to a trusted, credible and experienced Canadian business financing advisor who will help you determine the right facility for your company. 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 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details : http://www.7parkavenuefinancial.com/asset_based_lenders_financing_abl_lending.html

When You Can’t Afford Mistakes In Canadian Working Capital Cash Flow Financing - Finance Options and Tools That Work

Need Some Help In Cash Flow Financing & Mgmt?


Information on working capital cash flow financing solutions and management techniques for Canadian business . Finance alternatives that work.



Managing it... and getting it. That’s two different ways of addressing work capital cash flow in the financing of your company. The importance of cash can’t be underestimated in any business, and how to finance and both manage and address the requirements you have is challenging for many Canadian business owners and financial managers.

It certainly doesn’t help that in the current 2011 somewhat volatile economy that the struggle for that cash ' lifeblood' seems as hard as ever. Many clients we meet in the small to medium size sector of Canadian business have the owner or owners of the business spending a little too much time on chasing cash. And borrowing for the liquidity has always remained a challenge.

Business owners realize all to quickly that sales growth demands a lock step in working capital requirements... the bottom line is that your a/r increases, inventory levels rise, and many of those ' variable costs ' increase also .

That’s where it’s all important for Canadian business to spend some time taking a hard look at their particular cash cycles - that’s the time gap for a dollar to flow back into their company from the time you make a sale. That must be balanced of course against your ability to meet your short term obligations.

So how do you protect and sustain that working capital cash flow? There are two types of solutions, internal and external. Internal solutions will drive a lot of more stress out of your business than you think - it’s simply about focusing on managing receivables and your overall credit and collection policy in a better fashion. Naturally you can slow cash outflow by slowing down your payables, but that’s a fine line to walk when you're talking supplier and vendor relationships that are key to your company.

So we guess that takes us over to external. Focus one typically for many business managers and owners is to seek a bank facility that meets all their needs. That is of course pretty well the least costly solution when it comes to external financing in Canada - if... ands its a big IF... your firm can meet Canadian chartered bank borrowing criteria .

When true traditional financing cant be achieved then you should consider alternative strategies that are becoming more mainstream everyday. Take a look at the right left side of your balance sheet. Would you prefer to see 500k of receivables there or 500k of cash?

We think we know your answer... and that is achieved by simply financing your receivables as you generate them. The cost of doing that , between 1-3% of a sale ( assuming your customer is a reasonable payer ) can easily be offset by now putting you in a position to take supplier 2% net 10 day type discounts . Additionally you can now purchase goods and services ' smarter and harder ' with your new found liquidity.


Other external working capital solutions, non bank in nature, include asset bases lines of credit, monetizing your tax credits due your firm, and generating cash via a sale leaseback on some assets.

In summary... it’s a two style challenge, internal and external. If you want some assistance in this regards speak to a trusted, experienced Canadian business financing advisor who can help you on both challenges. Cash flow, not an area that allows you to make mistakes!



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 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :


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

5 Things You Need To Know About Equipment Financing In Canada – Why The Old Rules Don’t Apply Anymore In Heavy Machinery Loans

Forget What You Thought You Knew About Lease Financing After Reading This Information on equipment financing in Canada .

Focus on these 5 issues for lease finance success in heavy machinery loans and leases.



Are the ' old ways' in business always the best ways? We're not always sure about that - let’s examine 5 key areas you need to focus on when arranging equipment financing for heavy machinery loans and leases in Canada in our current economic environment.

When we speak to clients whats the one thing they are always looking for in lease finance for the financing of heavy machinery and other types of assets from business equipment, computers, and plant assets. You guessed it. Approval! Let's drill down on 5 needs to know areas of lease financing in Canada.

In equpment financing its all about approval, our # 1 topic today. Although lease financing is on a tremendous roll in the 2011 Canadian economic environment its safe to say getting approved for the asset financing you need, within rates and terms and structures you feel you deserve is .. Well... let’s say, still a challenge! If you have solid financials and a strong history of cash flow and repayment to a lessor you naturally will have not a large problem.

But what if all of the ' credit boxes ' the lessor puts you in don’t quite match up. The good news is that lease and equpment financing in Canada for heavy machinery loans is often a ' story credit' situation. That might mean you can expect a higher rate inherent in the lease, and the good news is that heavy machinery type assets have significant asset and residual value which will help with a structured approval. That approval might include outside collateral, a shorter term, etc. Bottom line, there is a ' credit box ' for every type of asset and business credit quality in Canada.

Point # 2 today - you've go choices. It's not always about price. Focus instead on the many other parts of the equipment financing decision such as where you will get the fastest approval. The hundreds of lessors in Canada that will provide you with financing are most focused on firms with whom they can build a longer term relationship.

Point # 3 today - Do you consider yourself the best lease equipment financing specialist in Canada. Someone who knows all the players understands current rates and structures, and who knows the in’s and outs of lease finance lingo? It's rare that any Canadian business owner or financial manager can feel 100% comfortable in knowing he or she has made the best financing decision for the asset they are acquiring.

The solution - Consider help and assistance from an experienced Canadian business leasing and financing advisor. That help should be free and the cost of your financing might go down significantly when you have expert assistance in negotiating terms, rates, and types of equipment financing leases and loans that make sense for your firm.

Point # 4 today - Simply put - the devils in the details! In small and medium sized transactions in Canada there isn’t a lot you need to know about standard documentation. However in larger ticket heavy machinery loans pay particular attention to types of leases you enter into, final pricing, and documents that make sense around your obligations, and rights in your transaction.

Item # 5 - In Canada your primary two choices for lease equpment financing are full payout lease to own transactions, known as capital leases, and the more complex operating lease transaction. Operating leases can have a significantly lower cost, but you need to understand end of term issues around extending, buying, upgrading, or returning the asset you have financed. Again, here is where some expert assistance comes in very, very handily.

In Canada there is solid competition for your lease finance business when you're acquiring heavy machinery loans and leases. Take time to understand the players, maximize the benefits, and above all seek the help of an Canadian business financing advisor who is expert in Canadian lease finance to assist you to arrange the best leases 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 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :

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