How To Manage Costs Of Sales Of Receivables Via Factoring – Business Cash Flow Financing Explained!

A Better Alternative – Understanding A/R Financing Costs


Information on how to understand and manage the costs of sales of receivables when utilizing the business cash flow strategy known by most business owners as factoring or invoice financing



When Canadian business owners and financial managers contemplate sales of receivables as a business cash flow strategy often the cost, and understanding the dynamics of that cost is top of mind. In general A/R financing, aka ' factoring' is somewhat understood in the Canadian business financing marketplace. And if it isn’t understood, it certainly is not as well known as to its mechanics, benefits, and how to do it the proper way.


We have often thought that it's simply that when firms are usually entertaining a new cash flow or working capital strategy it's because ' dire straits' have set in, and the company finds itself short of cash or generally unable to meet obligations on both operating expenses and other debt such as equipment leases, etc.

We have often preached that some of those basic problems can be fixed without external financing, i.e. a stricter credit granting policy, better matching payables outflows to A/R inflows.

However, when it’s absolutely certain that a new business financing strategy is required A/R financing is certainly one that thousands of firms are considering everyday. Why? Simply because it brings fast efficient cash flow to your firm through the sales of receivables. The way that A/R finance works couldn’t be more simple- that why we're often dismayed when we learn clients have been misinformed or led astray on pricing and factoring mechanics on day to day operations... simply speaking... how it works!!

If we had to simply one key benefit of factoring pricing it’s simply that you are only paying for the financing you are using. Using a simple (that’s our style by the way!) example of a 100.00 invoice it works as follows. As soon as you generate the invoice and can validate internally that you have shipped or earned the revenue for your product or service you receive a large amount, typically 90%, as an immediate payment for the sale of that invoice.

We can hear you already. ‘What about that other 10%"? The industry terms that the holdback and you get that back, less the financing cost, as soon as your customer pays. And by the way, if you have a number of accounts, and are utilizing an a/r finance strategy doesnt it make common sense to sell, or ' factor' your better paying customers. That’s because, as we have said, you only pay for what you use and your financing costs are decreased with those better paying customers.

Many of the benefits of factoring are overlooked because of the cost factor. We won’t even mention that your company now has the ability to simply survive sometimes, but more importantly, think Sales! Revenue! It's these lost opportunities that no longer are ' lost' since you are now immediately cash flow positive - what an exhilarating feeling that must be. Instead of uncollected A/R the left hand side of your balance sheet now shows ' Cash on hand’!

In Canada the ' fee' to sell a receivable is in the 2-3% range on a monthly basis. The danger is when clients compare this directly to commercial bank interest, which in many ways is the wrong analogy. And remember, there is not debt here, you're monetizing or cash flowing assets on your balance sheet. In many cases we see you now have the ability to double your revenue without taking on additional debt, if in fact that debt was available to you.

Looking for the inside scoop? Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in ensuring that sales of receivables as a business cash flow strategy , if done properly, with the right partner, is a solid path to growth and success.



ABOUT THE AUTHOR - STAN PROKOP

7 PARK AVENUE FINANCIAL

CANADIAN BUSINESS FINANCING


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

It’s 11 O’clock – Do You Know Where Your Canadian Financing & Funding For Production Tax Credits Is? Finance Your Film Tax Incentive Now

Let Film Tax Credit Financing In Canada Get Your Project To The Top Of The Mountain

Information on financing and film funding via monetization of your production tax credit . Finance your film and digital media tax incentive for project cash flow and working capital .



When we speak to producers/owners of film, TV and digital animation projects it always seems to be late. Late in respect to getting the financing they need for their projects. That's why it's never been as important a time as now to consider film funding and financing for TV and digital animation projects via the production tax incentive offered by Canadian provincial and federal governments.

The reality is that the Canadian tax credits available to you are currently some of the best administered and most generous in the world.

Using these credits is of course a solid way to help ' cash flow' your film. And with the right assistance, team and advisors you can creatively even pre-fund the tax incentive prior to final filing; of course eliminating then waiting for your cheque from the government.

And by they way, it’s certainly not a complicated process. We liken it with clients to a simply business financing application, one of course that is supplemented with key info on your production such as a budget that clearly that will be the essence of the tax credit application.

Naturally we spoke of a key advantage of the tax credit which was the ever elusive cash flow required to complete your project. But don’t forget also that its a well worn and proven saying in any business financing that ' debt is cheaper than equity ' so we can safely say that by maximizing your tax credit component you naturally enhance and retain equity , i.e. the ownership in your project . Bottom line, why give up equity when you don’t have to with a solid alternative such as tax credit film funding. And don’t forget that applies to TV and the growing digital media projects also.

Canada seems to continue to view in a very positive manner the impact the genres of film, TV and digital media have on the overall Canadian economy. Issues such as employment and future tax revenues seem to drive the overall thinking.

Canadian tax credit financing is not that fragmented as in the U.S. and other parts of the world. Each of the provinces work closely with the federal government which promotes a solid co operative effort.

Many U.S. and other producers in both digital media and other genres are opening Canadian offices. Gaming and video has become the fastest growing segment of the industry. It used to be mainly because of the Canadian $ exchange rate, that clearly is not longer the reason. Canada, aka ' Hollywood North' has clearly evolved into a major center for film, special effects, and gaming. One studio estimated that it costs 1/5 of the expense to create a VFX Green Room in Vancouver as opposed to L.A...

And don’t forget our subject matter today, which is thanks to a guy named DAVE. Dave is the acronym for the Digital Animation Visual Effects tax credit which provides, as an example a 50% tax incentive credit on labor

Because major Canadian centers such as Toronto, Vancouver and Montreal have great talent pools for the industry that allows the labor portion of the tax credit to be maximized - and that’s a good thing, translating into extra cash and working capital for your projects.

In Ontario for example tax credits are actually an ' online ' process for application, with major effort having gone into streamlining the process and approval times.

To finalize and finance your tax credit you need two critical team members, a tax credit expert who can maximize your claim, as well as an experienced Canadian business financing advisor who can cash flow and finance your tax credit for the obvious benefits we have mentioned.

So, it’s getting late. Do you know where your tax credit and financing is? Speak to a Canadian Expert for film and digital animation financing of your next production.



ABOUT THE AUTHOR - STAN PROKOP

7 PARK AVENUE FINANCIAL

CANADIAN BUSINESS FINANCING

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

Not All Canadian Small Business Financing Is Difficult - Check out the SBL Canada Government Loan Program For Financing Needs

The SBL Loan - A Low Risk/ High Reward Approach To Canadian Business Financing

Information on the Canada government SBL loan . Small Business financing for Canadian firms from start up to established companies with revenues less than 5 Million dollars.



For start up and small business in Canada (In our case today we mean sales under 5 Million dollars) there is one very obvious option to some of the most basic financing challenges, and its the Small Business ' SBL’ Canada government loan .

So what are some of those financing needs we referred to? Clients look to the program for purchasing a business, including franchises by the way, or simply the basic equipment and leasehold needs when they are constructing a building of office. We point out that almost all other types of financing in Canada often, if not always, discourage the financing of leaseholds so the ' SBL ' covers that problem off quite nicely.

A lot of business wants to stay on top (and boy is it hard) of technology, so the Canada Small Business Loan is a perfect way to acquire and finance both technology hardware and software.

And may we again note that it is often a challenge for firms to finance software, which is an intangible, so, you guessed it, the Canada government small business loan again steps up to the plate to take care of that challenge. The software that is financed under the program must be ' application' software. Firms that develop their software and who are looking for financing assistance should consider filing a SR&ED claim to recoup a lot of those funds spent in this area. (By the way, the SRED claim is a non repayable grant, so other then the taxation aspect it’s the closest to free money we can think of!)

But we digress! so lets get back to how some of this financing is done. While clients are often aware that there are thousands of firms who receive Billions of dollars under the program what they are more concerned about are how this financing work does and what timeline is involved.

Let’s examine a couple key aspects of some of those basic financing needs. We'll cover off some info about assets first. In the case of either purchasing an existing business or buying a used piece of equipment the SBL Canada government Small Business Loan requires a proper value of the asset. That is very easily covered off by obtaining an appraisal which comes at a relatively low cost. That appraisal becomes the financing value under the SBL small business loan. Mission accomplished!

By the way, when it comes down to actual numbers the Canada government loan program finances 90% of all eligible assets and leaseholds. The additional ten per cent is in effect your down payment or owner equity into the transaction.

Clients often are under the misapprehension that the program is difficult from a paperwork and timeline point of view. We take exception strongly to that because either on your own or with an SBL expert you can easily put together a basic documentation and business plan that meets all the criteria of the program. The reality is that this can all be done and submitted for approval in a manner of days. This is where working with an expert pays off because they are familiar with the small handful of technical aspects of making the application look good - which include a business plan and cash flow and ensuring certain cash flow and liquidity ratios work. It's not as hard as you think.

So, is the SBL loan program difficult? It certainly is if you have no idea what you are doing and don't know what can be financed or how to prepare a basic proposal. Consider perhaps utilizing the services of a trusted, credible and experienced Canadian business financing advisor who can assist you to take the word ' difficult' out of the equation, and replace it with that other word... Easy!



ABOUT THE AUTHOR: STAN PROKOP
FOUNDER OF 7 PARK AVENUE FINANCIAL

CANADIAN BUSINESS FINANCING

WE FINANCE THE LITTLE GUY .. P.S. WE FINANCE THE BIG GUYS TOO!



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

Need Some Help ? How to Buy And Finance A Franchise - Canadian Franchising Funding & Lending For The Loan You Need

Here’s A Solid Foundation For Financing Your Franchising Dream In Canada

Information on how to buy and finance a franchise in Canada . What type of franchising loan is available for entrepreneurs and how does this lending and funding work ?




It's not an uncommon question from clients: ' Where Can I get help on how to buy a franchise ‘... and equally as important what type of financing lending and funding is available under a franchise loan scenario.

By that time the entrepreneur has already gone through those pros and cons of buying a business under the franchise model. The benefits can be significant, and of course no business model is risk free so there are cons and consequences do making the wrong decisions.

In general it’s safe to say you need less capital when you ' buy ' a franchise. Other businesses not under the franchise model might come with significantly higher costs, especially if they are established, profitable, and have assets and cash flow. These businesses are often sold on what the finance folks call ' multiples ‘. Those are basically increased weighting applies to things like cash flow and profit or goodwill.

As a quick example if a business is earning for example 100k per year and the owner is selling it a typical valuation for that industry might be a 5x multiple of income . So your purchase price now becomes a half million dollars. That’s ashen a franchise purchase and the ability to get funding for it becomes a lot more attractive.

Naturally if your franchisor is doing well you're looking at buying, hopefully at a reasonable price, a proven business model, and a well known brand that is growing in popularity.

Ironically, and we certainly don’t think it has to be the case, but financing and funding for a franchise loan often becomes a huge challenge for clients we talk to . Why? For some simple reasons, a lot of them simply human nature. Buyers of a franchise don’t understand the qualifications, and they come with pre conceived notions that the banks and other commercial finance companies wont want to and don’t finance this type of business.

The reality is that franchise lending is in fact alive and well in Canada, with most lenders recognizing the huge part that franchising plays in the Canadian economy.

So how do you identify a ' favorable' financial lending solution for financing your new business? Certainly we tell clients that they shouldn’t expect a lot of help from their franchisor, whose job it is to sell franchises, not finance them with their own capital.

The majority of franchises under 350K in Canada are financed by the BIL/CSBF program, which is a government loan that is guaranteed in large part to the lenders who participate; in most cases this is Canadian chartered banks . The terms are very favorable - we repeat very favorable. They include long amortizations, great rates (we think) and minimal personal guarantees.

The challenge for the prospective franchisee is simple locating a bank or franchise financing expert who has the knowledge to package a transaction that meets the criteria of the program. Many clients tell us they were declined initially simply because their package was poorly or incorrectly prepared, and we can assure you, it not rocket science.

Not all banks and BIL/CSBF lenders are the same. So seek and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with how to buy a franchise, and finance it with a loan that makes perfect funding sense.





ABOUT THE AUTHOR -

STAN PROKOP - 7 PARK AVENUE FINANCIAL

CANADIAN BUSINESS FINANCING

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

Discuss Among Yourselves - Financing SR ED ( SR&ED) Tax Credits Turns Your Claim Into Business Cash Flow Loan - SRED Claims Finance

Financing Your SR&ED Claim Is Still A Great Cash Strategy


Information on SRED ( SR&ED ) tax credit financing in Canada . A SR ED loan or the financing/discounting of your SRED Credits and claims monetizes your claim into valuable working capital .





So, the excitement continues to build, SR ED tax credits are a large part of the focus on what the government of Canada should be doing to help Canadian firms with their research and development. SR&ED claims total in the billions of dollars and have come to the attention of a lot of players in the private and government sectors. It's a pretty basic discussion, revolving around the question ' Is the SRED tax credit still working for government and business.

Let's highlight some of those issues, and key info on the program, but, most importantly, lets re enforce one key point - if you have a SR&ED claim you can still finance it , all the turmoil around the program notwithstanding ! And we'll show you how.

We hate weighing in on all those debates on the program, quite simply ours is to finance! But we guess it’s important that some of the key issues should be highlighted, and of course any major changes to the program will in fact probably affect how claims are financed.

So what the problem? Simply speaking it's that prudent people want to ensure that the tax system and the innovation around things such as tax credits work.

A lot of the discussion seems to revolve around what happens after Canadian business owners file their SRED claim. Simply speaking, the discussion is all about ' commercialization ' of the work and funds that go into those SR&ED credit claims. Currently the actual credits are primarily only available to private companies and there seems to be some discussion about moving the program into the public company sector. That seems to make sense because it would seem some early stage companies actually don’t go public via an IPO or RTO simply because of the fact they would lose their valuable SR ED claim status, and the non repayable cash flow that come from that program.

A number of current factors make the up calculation of the total combined provincial and federal tax credit SRED claim. Under the current guidelines companies can receive up to 1/2 to 3/4 of all they spend on key documentable Sred.

So it’s an interesting time for the SR ED tax credit. To the many hundreds of sred consultants out there who prepare claims we can only imagine where their heads are at these days.

But as we said, the one constant of SR&ED is that you can still continue to cash flow and monetize your claim via a SRED Loan. In fact the industry has gotten more creative and many financings are now done prior to the actual filing of the claim. This concept is called accrual financing and it simply means you recoup your expenses as you spend. Now that’s a true financing benefit for firm who can use the SR ED claim cash flow to survive and grow. (And we guess hopefully commercialize their products also!)

The financing couldn’t be simpler. be prepared to document your SR&ED work through your consultant or internal team. Claims are typically financed at 70% of total value, and no payments are made during the loan outstanding period.

Consider talking to a trusted, credible and experienced Canadian business financing advisor on monetizing your tax credit for critical cash flow.





AUTHOR - STAN PROKOP

7 PARK AVENUE FINANCIAL

CANADIAN BUSINESS FINANCING !

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

Want To Offer Customer Financing Programs? 3 Things You Need To Consider A Vendor Equipment Program

Use This Powerful Sales and Marketing Finance Tool !


Information on why Canadian firms should consider and offer customer financing programs via a vendor leasing initiative . Increase sales, cash flow and reduce your sales cycle with a customer finance offering.



We're all for an ' edge ' in Canadian business, that’s why we're quite sure that clients that offer customer financing programs via vendor leasing to their customers are probably doing better .. than you! Let's examine why, and how you too can get the sales edge via a vendor finance program. Oh and by the way, total cost = zero! That’s our kind of pricing!

If you speak to sales people they are the first ones to tell you that the sales cycle on many products can be a long one. But what if your firm could offer a tool that allows your potential customers to acquire your products and services in a way that removes a very large obstacle: you’re pricing! And doesn’t it go without saying that if you could in fact shorten that lead time in the sales cycle you would be closing in on the competition a lot more? We thing so, and lets examine 3 basic areas that you need to consider to set up a customer financing program.

So, consideration # 1. Have you got what it takes? If you firm are medium size to larger then you actually might want to give consideration to setting up an internal vendor finance division. Naturally that takes management expertise, as well an implied investment in operations and infrastructure. Have we forgotten anything? Oh yes, capital! As we said you can set up and offer a customer financing program for a lot of cost, or no cost. The reality is that this type of offering needs to be thought out in terms of what your customers are looking for. Things like the overall credit quality of your customer base are important.

Consideration # 2- If you choose not to develop of invest in a major program such as this what in fact are your options. I guess if we had to be totally honest (that’s our preference by the way) we can safely say that you retain most control if you set up and fund your own program. However, that just isn’t possible for thousands of firms who want to offer vendor leasing and finance, but don’t have the resources. By working with a select partner or Canadian business finance and lease advisor you can very easily ' outsource ' the program, all the while developing it for your own needs. You benefit from professional input, marketing assistance, and, oh yes, all the capital you need without any cost to your firm.

Consideration # 3 - You need to determine at the outset what you want to achieve from the program. Some key points to consider are simply how you will achieve the maximum benefits of the program from a short sales cycle, customer satisfaction, and positive cash flow. That positive cash flow is of course your benefit, as in all vendor financing your firm is paid 100% up front as soon as the customer signs off on your product as received, installed, accepted, etc.

So whats our bottom line. It’s pretty simple today, yet quite powerful. If you choose to offer customer financing there are significant benefits to be achieved. Examine the reasons you want to offer vendor leasing and finance, and then speak to a trusted, credible and experienced Canadian business financing advisor on how you can achieve these benefits to enhance your sales and cash flow. It’s as simple as a phone call away.

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.parkavenuefinancial.com/offer_customer_financing_programs_vendor_leasing.html

Balancing the Cost of Canadian Receivable Financing With The Benefits . Making Sense Of Factor Rates And The Cost Of Factoring

Make the Cost Of A/R Financing in Canada Work For You – Not Against You !



Information on receivable financing and the cost of factoring cost associated with this method of financing . How do business owners in Canada measure factor rates with the benefits of this type of cash flow and working capital financing .





It's not that hard of a business question... ‘Would you pay more for something if you thought the benefits far exceeded the cost?’ That's the ' balancing act' we refer to when we talk to clients about receivable financing, and the factor rates that are associated with that type of financing.


Most business owners today have either heard about or perhaps even looked into factoring cost when they have investigated Canada's newest form of working capital and cash flow financing.

So they already understand the basics, simply that it’s a financing mechanism that allows you to efficiently sell your receivables, aka ' your sales' as you generate that revenue. You sell them at a discount (the ' discount ‘is what we are talking about today ) to obtain operating cash flow.

So it's clear that the actual amount and size of your receivables is key to the transaction, not necessarily your overall financial health. And again, as we explain to clients, this financing is not a loan; it’s a simple monetization of your current asset, the receivable.



Typically you can reduce and stay on top of financing cost when you are able to prepare regular monthly financials, understand your cash flow ins and outs, and have a sense of what financial projections are relative to cash flow planning.

So, let’s get into the essence of our subject, factoring cost. We'll start by simply outlining the basics, which is knowing what your total A/R is, how much you wish to finance, and how this financing cost is tabulated.

The receivable financing industry in Canada calls the cost of this business a ' discount fee'. Customers tend to think of this as ' the rate '.

So how does this ' cost ' or ' rate' if you will, work? You are advanced a certain percentage of your invoices as you generate them. Typically in Canada this amount is 90%. Any invoices under 90 days old can be financed, and you should know that you can finance them whenever you want.

In Canada the rates for this type of financing run between 2-3%. A more typical rate for any deal in the 250k /mo area is 2%. Remember, that’s a discount that you sell your A/R under. In the simplest of terms you get cash today for 98% of your sale. Business owners can see that it sure is better to have a decent gross margin if you are going to give up that 2% in profits to generate cash flow.

Factors that affect your actual pricing are typically the ones that confuse clients the most. They include the ' holdback' rate we spoke of, i.e. the 10% that is held back on each invoice and remitted back to you when your client pays.

The largest factor in receivable financing factoring cost is the time it takes your customer to pay. Ensure that you fully understand the ' per diem' or daily cost of every day your client doesn’t pay. A great strategy is to finance your quicker paying customers if you can.

Miscellaneous fees are levied by many of the factoring firms in Canada. This has been a real ' bugaboo ' with us, as these fees can add up and increase you’re financing cost. Make sure you know what they are, and try and negotiate them down or out of your agreement.

Our recommended facility is the confidential invoice financing working capital facility. It allows you to bill and collect your own receivables without any notice to clients, suppliers, etc. And the cost of that? It should be the same if you are dealing with the right firm and advisor.

Daily mechanics, who you are dealing with, and reading the fine print tend to be a challenge for the business owner or financial manager that simply wants to run their business. Speak to a trusted, credible and experienced Canadian business financing advisor for assistance in understanding receivable finance costs.




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/receivable_financing_factor_cost_factoring_rates.html