Business Franchise Loan ? The Before And After Of Franchising Finance In Canada

When You Finance Your Franchise It Doesn’t Have To Be Gut Wrenching !

OVERVIEW – Information on the business franchise loan in Canada . Franchising finance offers different challenges in Canada prior to and on approval of your business purchase




Business franchise loan challenges. When it comes to financing a franchise in Canada there's some critical ' before and after ' issues that need to be address. When they aren’t addressed properly the situations becomes... shall we say ' gut wrenching'! We'll examine some of those key points. Let's dig in!

Your initial decision to purchase a franchise should always be tempered with the amount of funds that you can personally invest in the business. These day's those funds come from savings, equity lines of credit, and in some cases corporate severances.

Knowing the amount that you can comfortably commit to the business will play a key role in both the size of franchise you buy, as well as the financing you can arrange in this somewhat specialized field. Frankly, in Canada franchise funding comes from the smallest handful of resources - a specialized franchise finance firm, a bank loan, and some ancillary financing services such as equipment finance, leasehold finance, and merchant advances when it comes to working capital needs.

We reference banks, but by far the amount of financing that the Canadian banks deliver is through a vehicle known as the BIL/CSBF loan program. It's the government program that over time has become the de facto vehicle to finance many of the franchises in Canada. Challenge arise when you are purchasing a service franchise as the BIL program is tailored more specifically to assets and leaseholds and real estate on some occasions.

Can the size and quality of the franchisor you are working with affect your business franchise financing success? To a certain degree the jury is always out on that one - suffice to say that some franchises are viewed as a bit more risk or somewhat more or less successful than others .

Also, as a point, when a franchising loan is under consideration in Canada it in fact does not make a real difference if your franchisor is Canadian, U.S. based, or in some cases you might simply be working with a Master Franchisee who has purchased the rights to your overall territory.

Your business plan and cash flow document are critical to finance success. In fact while the business plan is needed before you start your franchising process it can become a key valuable document in benchmarking your success down the road as compared to your original aspirations /projections.

Personal finances are a key part of the overall franchise finance process. You will need good reasonable credit history for your borrowing , and you will want to ensure that in your financial due diligence you assess the fact that your business will generate cash flow and profits that will allow you to draw a decent income based upon your needs .

When it comes to the franchising loan you want to ensure that your finance package addresses both the needs of the lender (i.e. repayment of your loan) as well as your ongoing working capital needs. Financial projections we see from clients are often not realistic, which can create some serious ' start up ' problems when it comes to financing on going operations.

At the end of the day the whole business franchise loan process requires both a ' before and after ' approach. Careful planning and utilizing guidance from your franchisors experience will get you to the goal line.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with franchising finance needs in the Canadian marketplace.



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 10 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 :

7 PARK AVENUE FINANCIAL = BUSINESS FRANCHISE LOAN FINANCING



7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com














Stan Prokop

Business Credit Line ? ABL Revolving Credit Facilities Turn Bank Lines On It’s Side

Attended Business Credit Line School Yet ? Here’s Your Agenda !

OVERVIEW – Information on bank credit facilities in Canada . The ABL revolving line of credit is one alternative to working capital financing for Canadian businesses . Here’s why and how !





Bank credit facilities ? Have you been to business credit line school yet? After talking to clients about their financing challenges it's safe to say they are hoping to attend, and one of those reasons is the revolving ABL line.

Did you know there's an alternative to the commercial bank business line of credit? It is known by various terms, the simpler being the ABL, or asset based line. An old mentor of ours advises that ‘ tuition is very high in the school of experience ‘, so let’s share some key facts and knowledge in this critical area of business finance in Canada.

This borrowing facility, non bank in nature is a solid alternative to those flexible and low cost commercial lines of credit offered by our Canadian banks. The two major differences - they are more expensive but easier to get. In many cases borrowing power can be increased anywhere from 50-100%.

Clients we talk to always focus on the basics - they are ok with an initial explanation to get them started on a business borrowing facility that in most cases they have never even heard of . So the short explanation is that the non bank ABL lender focuses on your assets in the business, versus your cash flow coverage and equity ratios that are of prime importance to lenders in the banking system.

The main similarity in Canadian bank and ABL lines of credit is that they are typically secured by receivables and inventory. The asset based credit revolver often also adds in fixed assets which are treated in a manner similar to A/R and inventories - ie you can borrow against them on an ongoing basis.

Both banks and the ABL lender use standard borrowing base information to determine how much you can borrow at any given time. It's really a function of your balance sheet assets at the end of the month. Very typical ABL advances are 90% on receivables, and anywhere from 30-70% on inventories. Borrowing for working capital for liquidity on equipment, under the ABL scenario, requires an agreed upon valuation of the assets in question.

We forgive the business client looking to understand ABL for always trying to figure out how their normal day to day banking fits in. The simple answer? It's that you keep you regular bank account set up - funds are deposited as you need them under ABL borrowing. Receipts are placed into a separate account that is created at the bank for your business - this account with your receipts offsets your borrowing.


Remember also that neither bank borrowing or monetizing assets via ABL credit lines add debt to your balance sheet. Your firm is simply cash flowing current assets. It is critical to focus on the fact that both bank and ABL lending simply provide you with a quicker access to cash. We can say the Abl facility, as opposed to the bank has no real upside limit - as you grow sales and assets such as A/R your business line of credit grows with you. Banks by their nature and history and practice tend to run these facilities on set limits with annual reviews.

Pricing on bank and ABL lines is always a key topic of focus for the Canadian borrower. While the majority of asset based lines of credit are more expensive it’s important to remember that you use this liquidity from ABL to grow. You are no longer banking your clients - you're using your receivables to achieve a higher return on investment via better asset turnover. And at the risk of being too obvious you are not always going to be approved for the amount you require under a commercial Canadian chartered bank facility - your odds of approval, for liquidity needs, are much better in an asset based line of credit.

Has the ABL credit line turned traditional bank borrowing on its side? There's certainly a case to be made for that. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in differentiating the difference and benefits of various business credit line options.



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 10 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 :

7 PARK AVENUE FINANCIAL – BANK CREDIT AND ABL FACILITIES




7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com















Stan Prokop

Business Cash Flow Financing In Canada . Making The Case For Financing Options

Where’s the Safety Patrol When It Comes To Business Financing In Canada ?


OVERVIEW – .Information on business cash flow and financing options for the Canadian business owner/manager . Timing is … everything!



Business Cash Flow . Confusing sometimes ? It shouldn’t be . The term ' cash flow ' is widely used …. And somewhat widely misinterpreted ! Where’s our safety patrol when we really need one ?!

Its a specialized term in business and has often confusing definitions. The most pure form is the cash flow statement for any firm. At its simplest its a ' cash in' and ' cash out' analysis. Key to this analysis though is the timing of the receipt of funds. Any good business cash flow statement or projection will show projected inflows and outflows over a period of time - usually annually.


We mentioned wide misinterpretation. That is because it is often confused with other accounting terms such as 'profits ', ' income ', and 'revenue'. Naturally real cash is the life blood of an business. We don't pay our bills with ' revenue'!.


So, yes, our firm makes things, we sell them, and eventually we receive payment. During that time we are paying out cash to employees, suppliers, and also waiting to get paid ourselves. We are only able to pay our bills as a business with real cash!
When businesses prepare a cash flow statement they list their monthly expenses, both fixed and estimated, and then focus on anticipating when customers will pay invoices, thereby generating cash.

Naturally there has to be some solid work around any assumptions in that whole process - for example:

Are the projected sales going to be realized?

Will the payments from those sales be made on time?

How much can be drawn out of the business in the meantime?

As most business owners who have borrowed already know this type of document is probably the most important one that the bank or finance company wants to see.
Business owners therefore need to properly understand the total ' cash flow cyccle ' That cycle consists of purchasing inventory, booking receivables around the sales that are made, and then collecting hose receivables. Simply right? Not really, the true challenge is in the following: ' TIMING'!

Many textbooks in finance have been written around the mis-timing of the cash flow cycle - where large and once great companies went bankrupt by misunderstanding the subject of our article.

Most lay people find it very difficult to comprehend that a company that is profitable can go bankrupt. As we have discovered that can absolutely happen as financial managers confuse profits from a sale from receipt of cash from a sale. If the cash pipe is ' blocked ' problems will occur!

In summary, any business owners or financial managers understanding of the business cycle and proper cash flow will add value to the success of the business from a financial perspective.

To seek financing options for the business cash flow challenge seek a trusted, credible and experienced Canadian business financing advisor who can assist your with your working capital needs.


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 10 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 :

7 PARK AVENUE FINANCIAL = CANADIAN BUSINESS FINANCNG



7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com
















Stan Prokop

Restructuring Financing . A Day In The Life Of DIP Debtor In Possession Finance

Anyone for a DIP ? Here’s The Basics On Debtor In Possession Financing


OVERVIEW – .Information on restructuring financing, including Debtor In Possession ‘ DIP ‘ finance to save Canadian troubled companies






Debtor In Possession Financing - aka ‘ DIP ‘ . Many business people and financial managers are not aware of the term 'DIP' Financing .

DIP financing revolves around companies who are in distress and more often than not, in fact almost always, in a bankruptcy proceeding. Why would any firm want to finance a bankrupt company?

The answer is that many firms, especially those that are larger and have significant assets have a strong chance of emerging from bankruptcy, obviously as a stronger company ( less debt of course ) and a more reasonable chance of being successful and profitable again. We say ' less debt 'of course because the original secured lenders of assets,etc are in fact going to take a partial, or in some cases whole loss on their original financing.

DIP is clearly a very specialized area. Lenders who are specialized in this area enjoy the highest level of security over the assets they are temporarily financing.

Naturally the goal of the company while it is in a temporary bankruptcy (U.S. = Chapter 11 - Canada = CCAA ') is to emerge with new financing. The players and leaders in this specialized area of financing tend to be banks and specialized independent finance firms with significant capital and expertise. It is of course ironic that many of the banks that finance firms and take losses also have specialized DIP divisions which provide capital to the bankrupt firm.

The essence of DIP financing is that the DIP lender is given a super priority security on the assets of the firm. It goes without saying that when a company is in a bankruptcy preceding that the interest rates on the financing can in many cases be quite a bit higher than the customer enjoyed in its normal operating business model.

The advantage of a DIP lender are several - many times they are in fact over secured. That is to say, as an example, that a DIP lender may be providing a 5 Million dollar financing for the customer during bankruptcy, while the total assets might be values significantly higher. In many cases DIP financing are very large, and in that case two or in fact a number of lenders, band together to create the temporary working capital financing for the firm as it re - organizes.
In some cases DIP lenders may intend to take a future partial ownership in the post bankrupt firm, as well as of course, their place in line as priority lender over all others.

Many larger institutions actually create large multi million (billion?) funds that focus solely on making investments in DIP financing and partial future ownership of the firm. In general the competition for DIP financing is in fact growing - as ironic as it seems to the lay person and non finance professional, there is money in bankruptcy!

Naturally if a company is in bankruptcy there is still certain, if not a large amount of risk involved in DIP financing and the chances of a final successful emergence and re-financing of a firm. That is where experience comes to play, as seasoned DIP lenders know their industries and work out and re-finance strategies very well.

When a firm does successfully arrange DIP financing most finance professionals take that as a sign though that there is a strong chance that the company will re-emerge. Most importantly, as yet undiscussed, is the fact that DIP financing allows the company to continue on to sell, pay suppliers, employees, etc. Stopping a company in its key operating activities is of course highly risky with respect to a successful re-emergence of the firm.


If your business requires restructuring / DIP financing or requires extreme changes to current financing seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with ‘ the turnaround’!


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 10 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 :


7 PARK AVENUE FINANCIAL = RESTRUCTURING FINANCING







CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com














Stan Prokop

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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 10 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.


7 Park Avenue Financial


South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com

Business Start Up Financing . Basic Rules For Startup Loan Funding

Cracking The Start Up Financing Code In Canada




OVERVIEW – .Information on business start up financing in Canada. How does the entrepreneur achieve the loan funding he or she needs for a new or early stage business



Business start up financing in Canada . Whether it's traditional, alternative, or just plain creative Canadian entrepreneurs want to know some of those ' basic rules' for ' cracking the code' to finance success. Let's explore some of those methods - and by the way some of these solutions can also help you grow an existing company.

It's no secret that that many business owners feel the door has closed on their chances of getting all the financing they need. Is that necessarily the case? It certainly doesn't have to be when it comes to a number of funding sources that allow you to access real world funding when you know what’s available and who to work with.

Canadian banks widely tout their offerings and expertise in business financing. However where the rubber hits the road is when the entrepreneur slowly realizes the capital he or she needs is harder to get and feeling scarcer all the time.

Business owners can of course dip into personal savings and assets to fund their business. This is typically done by tapping into home equity and registered savings plans. That is certainly not optimal, and always against our own preaching to clients relative to separating your business life from your personal finances.

The hard reality of startup funding is also that quite often not one single source of funding will get you all the loan financing you need. It might in fact come from a variety of sources, when, cobbled together, allow you to reach start up nirvana.

That brings up the point of proceeding with your business venture when in fact you don’t have the necessary funds you need. It can certainly be a double edged sword when you are unable to execute on your promised business plan, or vision.

We're primarily talking about debt financing here - equity financing on the other hand might be available from angel investors, friends and family, even that rare breed, the venture capitalist. If there are some basic rules for start up financing they often are somewhat non financial in nature - it’s simply maintaining our patience, flexibility, and the ability to downsize some of those earlier lofty goals.

A fundamental resource for start up success in Canada is in fact the bank, but it’s not what you think. We're talking about the government small business loan, aka the ' SBL ‘. While many SBL applicants may not become some of the largest corporations in Canada they can finance and grow a successful, profitable business in the SME (small to medium enterprise) sector in Canada.

The SBL loan has a lot of appeal to the start up. It includes very attractive rates commensurate with start up credit quality (let’s be honest - that's minimal!), long amortizations, no repayment penalties, and, can you believe it, a personal guarantee that is limited!

You can in fact approach a bank for a traditional (non SBL) bank loan, but be prepared with a solid business plan, demonstrable strong personal credit and collateral, and copies of purchase orders or contracts that make sense to a Canadian chartered bank.

Many entrepreneurs finance some or all of their start up with credit cards, both business and personal. While rates can in fact be attractive a real danger exists when problems arise and a personal credit crisis ensues, often taking years to correct.

There are some creative ways to finance startups - they include royalty agreements, or loans from strategic suppliers. In general suppliers are a valuable part of your start up loan consideration, as their capital via terms they extend is in fact real cash flow. Even SR&ED tax credits can be financed for real cash flow, allowing you to recover early stage R&D expenses.

Other more creative situations include business incubators, and even the new kid on the block - crowd funding.

So, can you crack the code on start up financing? Numerous realistic and viable options are available, as we have shown. Some work great, some work well in connection with others. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your loan and funding needs for any new or early stage venture.



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 10 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 :



7 PARK AVENUE FINANCIAL = CANADIAN BUSINESS START UP FINANCING




CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com



















Stan Prokop

Factoring Is A Threat To Working Capital Problems. Alternative Financing Just Might Work

Factoring Is Easier To Understand Than Klingon!




OVERVIEW – .Information on factoring and working capital finance in Canada. Alternative Financing just might be the solution to cash flow challenges – and its not that alternative!


Everyone is talking about ' factoring ' these days, even the people who don't really understand it! While one could maintain that factoring has been around for a number of years in Canada it is absolutely getting more prominence.


We feel that it is getting that prominence for potentially all the wrong reasons, namely that in the current Canadian economic and banking reality financial, cash flow and working capital facilities from traditional institutions such as the banks have been significantly curtailed.


So lets do a basic primer on factoring, and then discuss how it's similarities and differences from what is offered in other parts of the world, and why it works and when it is problematic. We also have a solution for some of the business owner challenges associated with factoring and receivable financing.

Factoring has been around for hundreds of years (if not longer!). What's the basic premise? It's simple. You sell one, (or a number) of your receivables, and you immediately get cash. In our article we will continually try and point out some of the nuances of factoring that get Canadian firms into trouble - here is the first one - when you sell your receivable make sure you understand whether its recourse or non recourse.


By that we mean that on a recourse deal if your customer never pays, goes bankrupt, etc you are responsible for paying back the finance firm. If you arrange what is known as 'non-recourse' financing the finance firm is responsible for the loss, not you. As you can imagine non recourse factoring is a bit more expensive, as you are eliminating all collection risk.


Let's touch on another relatively unknown point in factoring, and that is that it is a key component of a potential asset based lending strategy. Asset based lines of credit are available to Canadian firms - these facilities are generally not with our Canadian chartered banks and are offered by very specialized firms. Not only can the business owner get financing for its receivables, but inventory and equipment and real estate can be included also. As the business owner knows, inventory and equipment are crucial parts of working capital, inventory more so.

When businesses factor their receivables in Canada, they, for the most part, are no longer involved in the collection function of those receivables. Two very important points come into play here -

1. You have just eliminated cost, personnel, and time involved in collections - ( that's a good thing


2. You have just handed over part of the key customer relationship to a third party with whom your customer has no previous knowledge, dealings - (That we feel, is a bad thing!) Avoid that by utilizing a CONFIDENTIAL RECEIVABLE FINANCING PROGRAM!


In summary, we have touched on a few key basics revolving around factoring and receivable financing in Canada - i.e. the history of factoring and why its growing more popular; and, in addition we have focused on some ' nuts and bolts ' of a factor / receivable financing offering with respect to some positive and negative aspects of such an alternative financing facility.


Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your working capital and cash flow needs.


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 10 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 :


7 PARK AVENUE FINANCIAL = WORKING CAPITAL FINANCING EXPERIENCE


CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com











Stan Prokop