Receivable Funding In Canada . High Noon Issues In Business Financing For A/R

One Of The Greatest Business Financing Inventions ?

OVERVIEW – .Information on receivable funding and A/R management in Canada. Business financing works when you’ve properly addressed this important current asset of your business




Receivable funding in Canada. While A/R business financing may perhaps not be the all time greatest invention ever in business in certain ranks up there. But when it comes to the finance of receivables, or even just its management, are there some ' HIGH NOON '

issues you need to both know and keep top of mind. We think so, let's dig in!

The essence of A/R finance couldn’t be simpler. It's simply a bridge to allow you to receive cash/working capital prior to payment from clients. The world of accounting allows you to classify this as a ' current asset ' , which simply means you have to collect it within a year, which, unfortunately is the same timeframe that your clients seem hell bent on paying you in!!


When you're financing your accounts one of the key factors to keep in mind in discussions with your banker or your commercial finance firm is the idea of revenue recognition. You need to remember that you must be able to clearly demonstrate that the product or service you have delivered is in fact ' recognized' and that there is an assurance that the customer has an obligation to pay you. So selling on consignment or on a contract type basis with milestone payments presents real problems when it comes to financing your accounts.

We do work with many businesses who do in fact sell on a ' contract ' type basis, and we would add that if the milestones are clearly defined. And that you've delivered on your commitment to the client, you are still in a position
to finance AR.

Receivable financing fast become one of the most popular methods of business finance. Using a 10k invoice as an example the Canadian business owner / manager receives approx 9.8k immediately on invoicing, with the 200 dollars considered a discounting or carrying charge. It's as simple as that if you're dealing with the right party.

Whether you finance your A/R or you don’t the issues of cash discounts is an important one. They are not a reduction of your price offered to your clients; they are simply an incentive for the client to pay you earlier. If you are financing your A/R a huge amount, if not all of the cost of financing your business can be reduced by using cash flow from AR financing to take discounts with your own key suppliers.

Understandably, (because it’s a cruel world)

many of your clients will try and take as long to pay as possible. Major corporations in Canada use their size and buying power clout to their advantage by paying smaller firms in either 60 to 90 days. That enhances their own cash flow in a big way. The financing of your A/R via a bank facility, or a commercial invoice discounting facility allows you to fight that battle, and if you have priced your products and service with that delay in mind you'll be a strong competitor in your marketplace and industry.

These then are some key issues that affect your management and financing of A/R. There are others which we will cover off in the future, but seek the advice and services of a trusted, credible and experienced Canadian business financing advisor who can assist you with your business funding needs. You’ll then be a formidable competitor when HIGH NOON rolls around.





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 Receivable Funding Expertise



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

How To Get Government Loans In Canada . The Small Business Loan Demystified

What’s So Top Secret About Gov’t Business Loans ?


OVERVIEW – Information on government loans in Canada . How does the business owner and entrepreneur secure a Small Business Loan – aka the ‘ SBL’



Government Loans in Canada? The Canada Small Business loan program is an ongoing major initiative by the Canadian Federal government to provide capital financing to new and existing businesses that meet the criteria of the program.


The program is very popular in Canada, primarily because it a business loan that the business owner may not have been able to achieve elsewhere.


Many business owners and financial managers either aren't aware of the program, or, as is more often the case, don't understand the requirements of the program and how to ensure a proper approval in a timely manner. Naturally, rightfully or wrongfully so, there exists a perception that any government type funding program is extremely paperwork and administratively burdening to the business.


There are several key basics that allow a business to ensure that they are in fact qualified to pursue the program. Those basics are as follows:



1. The company must be a private corporation - public firms are not eligible


2. The company must be under 5 Million dollars in revenue


3. The loan must ' flow through' a registered administrator of the program - In Canada this is typically a chartered bank - this is one of the key perceptions of the program, in that the banks ' administer ' the program, but they don't own it


4. Only three major asset classes are covered under financing in the program - they are as follows: Equipment, Leaseholds, and Real Estate

The government, as we have shown, doesn't lend the funds, but it guarantees the funds to the bank


Almost every type of business in Canada can qualify for the loan program.The challenge of course, as always, is ' How does my firm get approved?!'

If a business owner or manager feels they are not capable of providing a proper submission to the bank it is highly recommended that they used the services of a trusted financing advisor or intermediary.


We cannot overemphasis that the key to dealing with the government and the bank is that it is critically important to have all the necessary paperwork in a properly submitted and, hopefully, professional package.


What does that ' paperwork ' include? Companies should ensure the package reflects the current financial position of the company, ( START UPS WELCOME !) a proper business plan and or executive summary, and miscellaneous personal data surrounding the bank and government requirements - i.e. statement of net worth, proof of no tax arrears, etc.


Most importantly is the need to position a proper purpose of the loan re dollars, timing, use of funds, etc


Most business owners don't realize the true benefit of doing everything once, the right way! In lending and loan approval that is important. You can re- submit and renegotiate, but that is not an optimal strategy for business financing success.


In summary, the bottom line is ' do it once, right '. Looking for expertise and assistance? Seek a trusted, credible and experienced business financing advisor with credentials in this area.




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 = Government Small Business Loan Expertise





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

Working Capital And Term Loans In Canada. Which Cash Flow Solutions Guarantee Happiness And Success ( In Your Company)

Long For The Golden Age Of Financing Choices?


OVERVIEW – Information on cash flow solutions for Canadian business. What are key differences between term loans and working capital options




Term Loans . Cash Flow Solutions for working capital . Business owners and financials managers focus on working capital whilst sometimes not determining whether the business financing solution is a longer term focus.

We first need to point out the differences between a business term loan and a receivable financing / working capital type financing solution.

Business loans of a term loan nature tend to be fixed payments. They will bring what we will call permanent working capital into your business. The nature of these loans is that they tend to be 'fixed' in term, payments, and rates. Your business can acquire a working capital business loan in a couple of different ways. The transaction can be facilitated purely on a 'cash flow 'basis. If the lender feels your firm has the cash flow to support the loan a loan will be created around that belief. Your historical and current financial statements (as well as your projections) should validate that your cash flow can meet the payment requirements of the loan.

The cash flow term loan can also be achieved in two other ways; it can be structured around what is known as a mezzanine or subordinated debt basis, or via a sale and leaseback of your assets or real estate. Some business owners feel it feasible to consider a 2nd commercial mortgage on their property, as an alternative to not having to sell the real estate to bring cash back into the firm.


We've covered the term loans portion of a cash injection into your firm. Another popular alternative is a 'factoring ( aka ' A/R FINANCE' ) solution'. This solution is becoming increasing popular in Canada. We point out that the factoring solution should generally be viewed as an interim solution - our experience is that a firm factors their receivables for a year or so prior to regaining a traditional financing status with the bank for a true margined operating line of credit.

To any Canadian business owner that currently factors their assets it is abundantly clear that the costs and processes are significantly more burdensome than a Canadian chartered bank facility - however, they do work, and they work for your firm now!, when you need it.


Canadian business considers Receivable Financing solutions when they have capital and debt ratio issues in their business. In many occasions the customer has a bank relationship and you need to simply augment that relationship with a factoring scenario for additional capital. The essence of this issue is that you are in fact 'maxed out 'at the bank, notwithstanding your good relationship with them.

Business owners quickly find out that banks have limits! Many people don't understand that a properly constructed factor/AR facility can compliment, and not necessarily replace a bank facility. You should seek the advice of a trusted, credible, and experienced financial advisor or intermediary in this regard. Our preferred solution for our clients is in fact a CONFIDENTIAL A/R FINANCING that allows you to bill and collect your own receivables, financing them only when you need to .

A/R Financing is a much better solution for new and start up businesses, and if your firm is not in a 'death spiral ',but simply experiencing temporary financial losses or one time set backs then factoring is a solid solution.
In summary, business loans for working capital are either fixed / term scenarios or working capital facilities based on current assets such as receivables and inventory. The


Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your options on the correct type of financing for your 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 = CASH FLOW , TERM LOAN AND WORKING CAPITAL FINANCE EXPERTISE!





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

Surviving A Bank Financing Approval For Business Credit In Canada . Working Capital And Term Loans Need To Make Sense For Your Firm

Looking For A Lifetime Warranty On Business Financing? There's No Guarantee of course but here's a good start

Information on business credit in Canada. Whether its term loans or working capital what information do you need to successfully access funding?





Business Credit and bank loans in Canada . When business owners and financial managers have successfully negotiated working capital facilities or term loans it should not be the end of the story – It needs to be credit and working capital that works for you, not just for the bank .

By that we mean that the business person needs to continually focus on what the bank or other financial institution requires, and more importantly, how they view the customer from a control point of view - i.e. are they in control or able to exert control on your business.


The balance sheet must be a top focus for the business owner - once a firm is over leveraged, i.e. borrowing too heavily, the bank generally starts positioning around their overall security or your ability to de-leverage.


Borrowers must be comfortable and knowledgeable about the use of 'triggers '.

Triggers are the implied actions the bank or institution will take when things aren't working out. This can include everything from general poor financial performance to very specific pre agreed upon financial ratios. And the business owner must remember that he or she agreed to and concurred with these ratios.


Banks want to see cash flow ' flowing ' - flowing to repay their debt - so there many be triggers put in place by the bank to ensure that minimum cash flow standards are kept, and also that owners and shareholders do not withdraw excess funds.

Over time business owners will probably find, in our experience, that the bank restrictions either tighten up or loosen, depending of course on the overall comfort level the bank has with the firm. Clearly firms that seem temporarily challenged in profits and balance sheet quality will receive much more scrutiny.


Business owners can do some very solid and valuable preparatory work in negotiation of bank triggers. If they have a solid long term history of earnings this should be a very strong negotiating point with the institution. Simply by self introspection of the firm can the owner or financial manager focus on what is going to go wrong re sales, pricing, forex, etc. The owner needs to be able to talk to these issues and show how he could address them.


For a start calculate your own key operating ratios, if they are going to be discussion points with your bank or institution you might as well know your numbers now. Using 'what if 'scenarios help immensely and will position yourself as knowledgeable about your business.


Discussions with your bank need not be absolute and immediate on any time of loan negotiation - you can get a great informal sense of what the bank is thinking and work from that point forward. Try and read between the lines as to what is hot, and what a Vis is not with the bank vis a vis their perception of your firm, industry, etc.

In summary, business owners need to show maximum flexibility on working capital and loan negotiations.

Negotiations should be from strength, accentuating the positive. Example - strong forecast sales and profits and potentially offset a weaker balance sheet. Trade-offs with the bank is also encouraged- and fewer triggers and covenants are better than more!


And yes, there is more than one bank in the world, although business owners should be cautioned that shopping around is not optimal at all times, and can in fact backfire, particularly a small business. Business owner beware!

Seek out and speak to a trusted credible and experienced Canadian business financing advisor for optimal solutions to bank credit and business capital in Canada .



Stan Prokop - founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 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 Credit And Loan Expertise




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 Loans In Canada Require Cash Flow . Simple As That And Here’s Why

Are Business Loans And Cash Flow Needs More Difficult Than Inventing A Cronut?



OVERVIEW – Information on cash flow and business loans in Canada. They are related in more ways than one when it comes to Canadian business financing



Business Loans In Canada. It’s as if they are harder to get and figure out than inventing your own CRONUT . ( latest trend = cross between a croissant and a donut – spreading all over the world!) When owners and financial managers contemplate additional borrowing for their firm they must think it terms of whether the business does, or will have, enough cash flow to make the debt repayments. We can further assure business owners that the bank or lending institution is thinking the same way!


When businesses enter into bank loans or other institutional loans the payments are, 99% of the time fixed and specified. The business owner and financial manager must ensure those payments can be made. If the company has over relied on debt it is viewed as highly leveraged by the lender.


So how can a business owner determine if the company has the cash flow to support the debt? More importantly how does the lender do that calculation?


The calculation that banks and other term lenders focus on is called 'Times Interest Earned '. The business owner (and the banker) can calculate that formula very simply.

The Times Interest formula is calculated as follows:

Net profit before taxes, plus interest expense / divided by interest expense


The calculation becomes an absolute number. If the number is in fact '1 'that means that the company has in act made just enough to pay the exact interest expense for the year. We would point out that this calculation is always usually done on an annual basis.
So is '1' the magic number? The answer is no, and the answer should be intuitive to the business owner. That is because a times interest of 1 means there is absolutely no cushion for anything going wrong, and all business owners know about Murphy's Law!


So if earnings decline or if the company takes on additional debt our ' times interest earned ' number become unsatisfactory - that is to say that we have determined there is not sufficient cash flow to service the debt.


We have determined '1' is not a great number then, well what is? The answer, as in many facets of business, is of course 'that depends '. Many industries differ and there is not really any specific number that is viewed as the Holy Grail by lenders. What we have found though that higher is better than lower. When the number is hovering around 1 both the business owner and the lender, should and will, respectively, have some concern.


We point out also that income, as a key component in our calculation varies between companies in final calculation re tax rate and other accounting adjustments. Some lenders and business owners also add deprecation to the profit because it is not a real cash expense.


Another quick calculation business people can perform is to calculate the cash flow number as a per cent age of debt. This calculation is often done by lenders to ensure long term debt is not being mis-used. If a company has a high percentage of total debt to cash flow it should be a strong indicator to the company owners that growth will be constrained, as all cash is going to debt, not growth. Therefore new equipment, inventory, receivables, etc will suffer in terms of growth.


In summary, business owners, by doing actual current calculations, as well as projections, can easily calculate their 'times interest earned' and cash flow as % of debt. This will allow the business to position loan repayments positively with their lenders, at the same time providing them with insights into how the bank or other lender will view payment capability.


Seek out a trusted, credible and experienced Canadian business financing advisor with a track Record To Ensure your firm qualified for the right business loans in Canada, traditional or alternative.



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 Loans Expertise












Stan Prokop

Business Credit Lines In Canada . Eliminate The Crash Landing Aspects Of Funding Your Company

Don’t Let An Ouija Board Decide Your Business Financing Alternatives


OVERVIEW – Information on business credit lines in Canada. When it comes to funding your revolving borrowing facilities what choices are available and what works best – for your firm?


Business credit lines in Canada. We sometimes think it’s a lot like ' sensible shoes '.

You suddenly realize how important they are! So when it comes to working capital funding in Canada the business owner quickly realizes the importance and value.

But is the Business ' LOC’ something that only the Ouija board can discern as to what's best for your firm? Not really of course, it just takes some drilling down into what is available and what's best.

If there is one solid use for biz credit lines it’s simply their ability to finance your business as you move along in growth. If you're not self financing and don't have a huge equity position (coupled with slow paying clients) the corporate credit line gives you cash flow.

Don't forget also, as we've been known to preach that solid a/r and inventory balances can even be used to partially finance acquisitions - all the better if the firm you're acquiring has those same type of current assets.

In Canada you have 2 Choices for access to business revolving credit. One is the ' go to ' - our Canadian chartered banks. Interest costs with banks are of course low, and these days they actually couldn't be much lower. Bank requirements for business credit lines might be viewed as 'strict' by many borrowers. Quite frankly we have never felt they were unnecessarily strict - its just that we must assume if the bank is lending unlimited amounts at low rates that they can be easily forgiven for asking for companies with good financials, profits, positive cash flows, external collateral, and good personal credit history of owners, including of course the proverbial ' PG ' - the dreaded personal guarantee.

When your firm can't access bank credit for revolving facilities your other choice is in fact a lot more accessible. It's the ' ABL ' - The asset based business line of credit. Although 98% of the time asset based credit facilities are more expensive they are easier to access from an approval perspective. Facility sizes run on the small size to the 250k range - and large facilities run to the tens of millions of dollars, usually funded by independent commercial finance companies.

An interesting thing about ABL credit is that it's offered by the Canadian banks, but they don't run many TV commercials on that one. We won’t get into why we think that’s the case, but give us a call anytime and we'll tell you why we think that way!

Surely most business owners know they can't really access business credit line facilities if they don’t sell on commercial credit terms. From the occasional call we get we're never quite sure they do in fact realize that. However, an interesting point is that ABL lending has subsets of inventory and equipment financing, so you in theory could have an ABL line that simply margins inventory and equipment. A good example might be a retail chain.

Our banks are very trusting when it comes to letting you run your business on a credit line. They in some cases only do an annual review of your financials, in certain cases you might be reporting monthly on some basic business metrics.

Asset based lenders offering credit lines are more giving, but less trusting. So be prepared to do a bit more reporting and expect the odd personal visit here and there! We meet many business owners who wonder what their bank looks like! But of course there are a lot of great bankers in Canada who know their clients business.

Don't feel that accessing a business credit line puts you in ' crash landing' mode.

Understand your needs, alternatives, and seek out a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding 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 = Business Credit Line Expertise






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

Financing Receivables In Canada . Get Out Of The Shallow Side Of The Pool When It Comes To Business Funding.

Is Your Firm Ready For A Better Alternative business financing solution?


OVERVIEW – Information on financing receivables in Canada for working capital and business funding and Cash flow solutions. It might be time to fully test this method of business capital





Business funding in Canada. When it comes to financing receivables clients we talk to seem somewhat hesitant sometimes to be ready to grasp all the basic aspects of this method of financing cash flow needs. And that goes from CFO's of mid market type firms all the way down to early stage companies that are just starting to generate profits. Let's dig in.

Why then is the business owner/financial manager reluctant to get out of the shallow side of the pool

and step into the deep waters of factor funding in Canada? At the end of the day is just one additional way to generate instant cash flow when your company is selling its products and services. It’s, quite simply a way to beat your clients at the waiting game when it comes to collecting your accounts.

Did you know there are two basic kinds of receivable finance in Canada? One is what we can call ' traditional/old school ' whereby your A/R is co managed by the finance partner. The other is a Confidential A/R financing solution which allows you to bill and collect your own accounts, while all the while achieving all the benefits of this finance method.

While each has its own advantages and issues we certain prefer Confidential A/R financing because it's more business as usual. At the end of the day each of the two methods are simply ways in which your finance partner assesses risk and manages their business.

99% of the confusion (in our humble opinion) around business funding for A/R in Canada revolves around some of the semantics. Essentially we're talking about the difference between how a bank finances your A/R versus alternative A/R finance - aka ' factoring’. The bank simply creates a legal document around their ability to hold the collateral of your receivables as an ongoing borrowing. So from an accounting perspective its business as usual since your AR stays on your balance sheet and you simply utilize a line of credit to borrow against 75% of your receivable base.

75% is the standard borrowing base you get when financing your sales via a Canadian chartered bank facility. ( By the way factor funding allows you to borrow against 90% of you’re a/r base, so you’ve got instant 15% additional borrowing power!

On the other hand is the traditional or confidential method of financing the same asset. In this case the paperwork/legal docs of your finance partner show that you've in effect ' sold ' your A/R and are receiving immediate cash draw on that borrowing base.

We see little difference in the paperwork; however we see a lot of difference, as we have said in how the facility operates on a daily basis. That's where the confusion lies with clients. That's when, as Ricky Ricardo said, we’ve got a ' lot of splaining ' to do!!

If you're looking for the straight goods on business funding in Canada take some time to understand just a handful of basics. Step out of the shallow side of the pool and wade in! Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing 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 Receivables Funding Expertise





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