Business Line Of Credit Needs : ABL Ends Your Search For A Cash Flow Solution Alternative

Business Line Of Credit Needs – We’ve Got A Solution & That’s No Fake News!

OVERVIEW – Information on business line of credit needs in Canada. ‘ABL’ aka ‘Asset Based Lending’ is a true cash flow solution – Here’s why

Business line of credit needs are often challenging when owners/financial mgrs are trying to run... and oh yes ' grow ' their company. That’s why ABL , the acronym for asset based lending operating facilities can deliver on a solution for almost every business - with only 1 pre requisite - assets such as receivables, inventories, equipment, or even real estate . Let's dig in.

So why is ABL becoming one of the fastest ways to get your business financing going? The answer - This business line of credit is a working capital facility, similar to a bank facility that provides working capital on a regular basis against inventory, receivables, and in many cases equipment and real estate if that is applicable.

One can argue the case forever on whether Canadian banks are providing the right amount of financing and support for small , medium, and yes even large businesses in Canada - we don’t think we’ll get full closure on that discussion although most top experts and studies say that that SME COMMERCIAL FINANCE needs are certainly not fully delivered by traditional banking institutions as it relates to new firms, high growth firms, or businesses with any kind of financial challenge on their balance sheets and income statements.

So assume you either can’t qualify for a chartered bank business line of credit or that you perhaps do, but the facility doesn’t meet your needs. That’s where an ABL, or asset based line of credit comes in.

How does ABL work then? It’s a simple, no nonsense form of financing provided by non bank type firms - typically commercial finance companies. Many call it 'alternative financing', but we can assure you this form of ‘business financing ‘is becoming more mainstream and popular every day.

Because the chartered banks focus on traditional metrics such as your overall financial performance, outside collateral, personal guarantees, etc you will find the overall ABL process much simpler and common sense. It’s simply a case of borrowing against your real assets, with little or no reliance on the issues we outlined above relative to a bank type facility.


The specialty of an asset based line of credit provider is simply their strong knowledge of your industry and assets, so because of that your ability to generate almost unlimited working capital becomes very obvious very early on in the picture.

What do we mean by that? Simply that if you have receivables, assets and equipment you can always borrow against them on an ongoing basis so typically you can draw down on 90% of receivables, 40-70% of your inventory values, and pre agreed upon amounts on the appraised value of unencumbered equipment .

Typically companies that are the best prospects for this type of financing are firms with fast growth and in some case a limited track record i.e. a start up, etc.

In some cases this type of business line of credit could possibly be complimentary to your existing bank facility, but more often than not if replaces it totally.

How are ' ABL'S priced? While there are a number of key advantages to an asset based line of credit they do normally cost more than bank facilities. Depending on the size of the facility and the overall nature of your firm, its industry, and other challenges you might be facing the final pricing will reflect a realization of those issues.

So yes, it will cost more, but those costs can be significantly offset by increased cash flows via inventory turns, ability to purchase smarter with that cash, and to convert receivables immediately into cash for additional sales efforts.

Don't forget though that you have in effect just negotiated unlimited working capital, and have the ability to turn assets more quickly and generate increased cash flow, revenues and profits. That’s a true business financing triple threat! If you're looking for more good news understand also that asset based operating credit lines are suitable for pretty well every industry in Canada - Again, it's always about the assets.

Speak to a trusted, credible and experienced advisor in this area to ensure that you determine if you can benefit from such a business financing arrangement.


Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com


7 Park Avenue Financial

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

Direct Line = 416 319 5769

Office = 905 829 2653


Email

= sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '


ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

How To Qualify For Franchise Financing In Canada – A Franchising Finance Business Loan That Makes Sense!

The GOOGLE fellow tells us that 2,687 people have read the following post we did in 2011


Posts
Entry Pageviews

How To Qualify For Franchise Financing In Canada –...

May 6, 2011,

2687


Here's The Post :

 http://businessfinancingcanada.blogspot.ca/2011/05/how-to-qualify-for-franchise-financing.html

Why You Should Utilize Asset Based Lenders for a Revolver Line of Credit Facility

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Information on why a line of credit known as a ' revolver' might be a solid business financing solution via non bank asset based lenders in Canada. How these facilities work and what they cost

Some Canadian business owners and financial managers aren't familiar with the term ' revolver line of credit '. So for clarity purposes it's simply terminology for a business operating line of credit. It revolves, or goes up and down everyday, as your firm collects receivables, pays bills, buys inventory, makes loan payments, etc.

Naturally clients can be forgiven for asking '' What is the difference then for asking why asset based lenders offer a unique, and we think better revolving line of credit than perhaps their Canadian chartered bank can offer.

We're going to cover off the basics of a revolver line of credit via an asset based lending solution with a focus on ' why ' you should this type of business line of credit.

The reality is that asset based lenders are playing a more important role everyday in Canadian business - that's simply because most business owners and financial managers agree that it is more challenging than every to meet their day to day financing needs with bank facilities. That is because banks place more focus on external collateral, operating results that meet their guidelines, and a lack of desire to finance items such as inventories, purchase orders, etc.

The key main reason why you should consider an asset based line of credit is simply that the firms that provide this type of financing specialize in exactly what you need - maximum financing for receivables, inventory, and equipment.

Very typical margining of these current assets in an asset based line of credit with a non bank is 90% of receivables, 50%or more for inventory, and full appraised value of equipment and other fixed assets. We have seen real examples where a revolver line of credit has tripled a firms borrowing power, even at better rates on occasion.

So clients start seeing very quickly why they should be utilizing this type of financing, they just don't know with ' who '. There's where it does get a little tricky, as firms offering this facility are less known than the banks, and are often independent finance firms of subsidiaries of U.S. banks that operate here in Canada. There is when its best to seek the services of a trusted, credible and experienced business financing advisor to match your needs with the right asset based financing solution.

Let's summarize some key points that focus on the real issue we are talking about - why you should consider asset based lenders for your day to day operating needs.

First of all, size doesn't matter in the asset based finance world. Facilities from 100k to many millions of dollars are available. We'll quickly add that some of Canada's largest corporations are financed by this method, we just don't hear about it!

Other reasons why you should consider this type of Canadian business financing are as follows: you are in a turnaround situation, you can't get equipment and inventory financing that you need to generate sales and profit. Other reasons include your growth - in some bank environments you are punished for growing too quickly, but asset based lenders raise your facility as you grow, with their only concern being the assets you have to cover the facility.

Make sense? We think it does, so speak to an expert business financing advisor on what the merits of a revolver line of credit are, and find out why asset based lenders may be your business finance savior in the current business financing environment.

Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com

7 Park Avenue Financial

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

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com


'

Canadian Business Financing with the intelligent use of experience '


ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop












Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698

Article Source: http://EzineArticles.com/5849612

Financing A Business In Canada : Solving Working Capital & Funding Needs

Time For Some Self Driving Financing ? Here’s How To Finance Your Funding Needs

OVERVIEW – Information on financing a business in Canada. Knowing your working capital & funding solutions & costs enhance business probability for success

Financing a business always seems to come back to that tried and true (cliché?) term of cash flow being the lifeblood of a business. No matter how overused the term might be most business owners and financial mgrs would not dispute the need for the right amount, and type of business funding. Let's dig in.


The downside of not having, or being able to arrange cash flow and working capital financing is simply that you have a lesser ability to grow sales, maximize profits and take advantage of new opportunities .

So what in fact are the working capital and financing issues that are raised on an ongoing basis for your business?

Key is understanding how your receivables, inventory, and other assets come together to drive working capital and cash flow. And, to our point, how do you finance those assets and those needs?

What are the real drivers in funding need - typically it's growing revenues, expanding, and in some cases buying or merging with another business.

Although most business owners/financial mgrs can't imagine having too much capital for their business that over abundance would actually mean you are not using capital properly! The bottom line, as experienced by most business folks, is that financing a business is actually a balance act.


One of the main things you should focus on is your ability to pay your current debt - On the balance sheet your accountant shows that as ' current portion of long term debt ' - You always want to be in a position to meet these obligations as failure to do that means you are bordering on insolvency . All of that snowballs into major issues with your bank, your suppliers, and other creditors such as leasing or finance firms.


So as we have said, you need to be able to calculate, or measure working capital, and then address how you will satisfy the need that comes out of those numbers. There are some easy calculations you can perform in measuring your overall cash flow - it's really simply understanding your inventory and A/R turns, as well as having a handle on your accounts payable days outstanding.

If it was a perfect world you could raise all the working capital you need internally. How would that work?! Well, using an extreme example if you collected your receivables in 45 days, and turned your inventory in 45 days, and were able to pay your payables every 90 days you would be very self financing. Sounds great, except you can hear your suppliers and creditors now I bet... Also, the profits that you generate out of your business obviously become a new additional part of the working capital component and would even further benefit your overall position.


But let's get back to the real world, which states that if you have more current assets than current liabilities you 99% of the time need external working capital.

Canadian business owners achieve that additional working capital in a number of ways - the most beneficial is bank lines of credit, or in some cases, if your firm meets the criteria, a cash flow working capital loan. If you are unable to meet bank criteria, and are still in a challenged or growing position then we advise clients to consider a non bank working capital or asset based lending facility.

If receivables tend to be your main current asset than a factoring or invoice discounting facility makes the most sense. Most Canadian business owners don't fully understand how factoring in Canada works, and are often confused by the costs and process.

So what’s our bottom line recap - it’s simple -

Understand how much financing you need - that means ' measuring' your needs, as well as what type of funding suits that need.


Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com

7 Park Avenue Financial

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

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Accounts Receivable Financing In Canada : Inside The Factoring Cash Flow Solution

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Business Cash Flow Pain ? Here’s Some Solutions

OVERVIEW – Information on accounts receivable financing in Canada. Factoring and other cash flow solutions can enhance your chances of business success when traditional financing is not unlimited!

Accounts receivable financing just might be one of the fastest growing ways to generate cash flow and working capital for your business. Thousands of firms in Canada utilize this strategy as a primary method of funding their business. Why? Simply because when traditional bank financing can't or won't get you there cash flow factoring solutions deliver. Here's why and how - so let's dig in.

Let’s examine why this business financing strategy works and how you can best assess if a factoring receivable solution is the best choice for your firm.

We also point out to clients that the Canadian landscape for this type of financing is somewhat different from the U.S. models of this type of financing, and one of the most important decisions you can make after choosing to enter into such a strategy is simply picking the best partner for your particular needs .

Almost every business study or report you read this days has business owners and financial mgr's bemoaning the lack of business financing and funding for their business .


Business prospects have clearly improved, but business access to capital has been very slow to catch up. Most Canadian business owners and financial managers turn to those banks when they need financing; However if your firm doesn’t have very decent financials, or isn't generating profits and operating cash flow your chances of getting the funding you need to run and grow the business is low .


So we come full circle to how does factoring work and why are it a potential solution for your firm. It works in a very simply manner - you sell you invoices, either one at a time, all at once, or regular periodically at your choice . The key word is selling. When you sell something you get cash, and factoring receivables is your method of obtaining immediate cash.

The complexity of factoring, if we can call it that, is simply how it works on a day to day basis within your own business model, and more importantly, how it affects your customer base. Using traditional factoring as our explanation your firm issues an invoice, you are advanced immediately approx. 90% of the funds, i.e. almost the same day!, and when your customer pays you get the rest of our funds immediately, less a financing charge .

That aforementioned financing charge becomes the most important point of focus for many of our clients given that factoring rates in Canada on a monthly basis range from 1-3% per month.

When clients address that issue of cost we point out to them that if they have solid gross margins, can turn over receivables, and have the ability to purchase more effectively with the new cash that the cost of factoring inevitably becomes somewhat of a non event, based on the fact that this facility provides you ‘unlimited’ working capital on a long term basis.

KEY POINT - We strongly recommend Confidential Receivable Financing/Factoring for firms that want to bill and collect their own receivables and manage their cash flow needs.

In Canada the challenge becomes finding the firm that works best for you with respect to the receivable strategy we have outlined. Many of the small nuances around how factoring is marketed, explained, and works on a daily basis becomes the bone of contention for our customers.

Other short term cash flow and working capital solutions are also available inside the world of asset based financing, where ' factoring' resides. These include:

Merchant advances for retailers

SR&ED Tax Credit Loans

Non bank asset based credit lines which combine borrowing power around your total A/R, inventory and equipment


Seek out a trusted, credible, and experienced business financing advisor who can guide you through the factoring maze relative to price, size of facility, and most importantly, how the facility works on a daily basis to augment your cash flow and working capital.

Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com

7 Park Avenue Financial

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

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

SR ED Financing Via Sred Loans : A SR&ED Tax Credit Loan Monetization Strategy That Works

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Is Your Company Taking Advantage Of SR&ED Loan Financing? Consider This ..

OVERVIEW – Information on SRED loans in Canada. SR ED financing via a tax credit loan is the logical way to monetize your r&d capital credits for cash flow purposes

SR ED financing is the most efficient way to accelerate and monetize your investment in R&D capital. A SR&ED tax credit loan allows you to take maximum advantage of this most famous and used govt refundable tax credit. Why do SRED loans make sense for your firm then? Let's dig in.

Of course the actual ' formal ' name for the program is the Scientific Research & Experimental Development refundable tax credit .By the way , we've never been one for name calling , so whether you call it ' sred ' ' shred' or anything else for that matter only the importance of the program is key to us!

Canadian business owners and financial managers in a variety of industries have the ability to of course file sred claims, and at the same time, if they choose, they can finance their claim and generate immediate cash flow and working capital from this valuable government grant program. Again, to be clear, those funds are non repayable.

Safe to say that the only thing that prevents you from financing a claim is if you do not file a claim, so understanding the basics around a claim, as well as the characteristics that claim needs to be financed is valuable information for Canadian business owners and financial managers. The govt refunds billions of dollars every year under this program , and many owners/mgr choose to finance their claims.

Claims are filed and substantiated under the normal program guidelines. One of the misconceptions around the program is that your R&D has to be successful in nature, and that's actually NOT correct, you just have to be in a position to document what you did and how you did or tried it.

Although claims prepared by owners and management can be considered for financing, the reality is that if you are applying for sr&ed financing it makes a lot more sense to have your claim prepared by one of two parties, either your accountant , or what is known as a ' Sred Consultant '.

Claims have never been easier to file, as the govt has very much streamlined the program - but total care is needed to adhere to current filing guidelines - that's where those SRED consultants come in.

With the information we are sharing here we want to be able to ensure you understand how the quality and size of your claim affect its overall financeability. SRED claims are applied for in all sorts of amounts, we have seen clients file as low as 20,000 - 30,000$ per annum, and as high as 1.5 million dollars, and we are sure there have been higher claims.

The actual claim preparation has an effect on your claims financeability - as your goal, should you need the cash flow and working capital, is to monetize that claim into a short term sred loan - with the sred itself being the collateral for the loan.

When you choose to finance a claim the general advance is made at 70% - so let's do some rough arithmetic around a sample claim and it's financing.

We're told that in business timing is everything - As a business owner you can wait anywhere from 1-12 months to get your cheque in from the government, which is reimbursed at the federal and provincial levels. Or, if you choose to utilize those funds now under a sred loan, you can get an immediate loan of 70% of that claim.

What do clients do with their SRED Loan proceeds? Funds are typically used for working capital purposes, equipment purchases, or even more ongoing sred activity! Looking for more good news? No payments are made on your sred loan; financing costs are calculated at the back end of the claim when you receive your funds, including the previously mentioned 30% that was held back on the financing.

Furthermore, if you have successfully financed sred claims in the past you could be very eligible for sred accrual financing - which is a special program that reimburses you for your sred expenses as you go along during the year.

Traditional financing institutions such as banks and business credit unions are poorly equipped to understand and finance sred tax credits .As a result we recommend you work with a trusted and credible business financing advisor to ensure your claim can be financed quickly and with a modest amount of preparation.

A bottom line on SRED Loans? If you in fact utilize the SR&ED program consider cash flowing your claim to accelerate the monetization of your claim. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in financing your R&D capital refund.


Stan Prokop - founder of 7 Park Avenue Financial –

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 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 & Contact Details :


http://www.7parkavenuefinancial.com

7 Park Avenue Financial

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

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Business Financing Sources In Canada : Perils Of Not Understanding Cost Of Loans & Available Cash Flow Solutions

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Everything You Should Know About Business Financing Sources & Costs In Canada

OVERVIEW – Information on business financing sources in Canada. Loans and other cash flow monetization strategies can make or break your business success

Business financing sources in Canada come with a variety of solutions and different costs associated with these loans and cash flow monetization strategies. Is it important to understand these costs and alternatives? We think so! Let's dig in.

Typically (in a perfect world - and we know it's not) business owners & financing mgrs want to know that can access cash and loans on an ongoing basis. It's critical to know, and understand the costs and benefits associated with those different types of financing.

Working capital needs are often the main driver in the search for supplemental financing - When you understand what working capital is you are obviously in better position to source it!

You therefore need to know how to measure working capital in terms of your overall business needs. That’s part of the problem and challenge, because when we sit down and work with clients on working capital and cash flow needs we quickly determine that working capital and cash flow mean different things to different business owners .

The problem usually starts with the business owner assessing his working capital needs by looking at the cash available in the company bank account. That amount doesn’t of course reflect the ' near cash ' that is tied up in receivables, inventory, prepaid, etc.

We can go to the text book definition also ( not our favorite way of doing things ) and finding out that working capital is simply current assets minus current liabilities, calculated by a quick look at your balance sheet . We are not a big fan of that calculation, simply because it doesn’t give you a true sense of the turnover of those critical balance sheet accounts such as A/R and inventory. Cash flow is all about asset turnover!

By the way , don't assume bigger is better in your total working capital amount - in fact the more funds you have tied up in A/R and inventories will simply place a larger stress on your cash flow needs . That's where constant asset turnover helps - turning inventories and collecting receivables. You should regularly, at least monthly be calculation your days sales outstanding and inventory turns.


By the way, even effective payables mgmt will increase cash flow - much to the chagrin of your suppliers! Don't over manage and ruin vendor relationships which are key to a successful business. Deterioration in supplier / creditor relations is one of the worst things that can happen to your business.

So now you have a better handle on working capital, what next? Well you clearly recognize that cash on hand and growing inventory and A/R isn’t helping your cash flow at all - you need external financing. You achieve external financing by the profits you generate from your business, plus working capital facilities via a bank or independent finance company. Your needs might be seasonal, or ongoing, depending on what industry you are in.



Other more traditional alternatives are bank operating lines of credit, these come with the best rates, current in the 4-5% range in early 2010 in Canada. The only problem? Great rates but difficult financing to achieve as Canadian chartered banks demand solid financials when they are granting this type of facility. A better way to achieve full liquidity via this method is to consider a factoring or asset based facility.

Rates in Canada range for 9% / annum to 1-2% per month based on your overall financial position and size of facility. But, they offer you 100% working capital for all your business financing needs, so that’s a good trade off. 99% of the time you will have increased your available credit availability by 100% as your receivables are margined at 90% and inventory financing is also a key part of a non bank business credit line.

So back to our sources of financing and the costs associated with those sources. You of course have the option of either generating a working capital term loan, or, if it’s a larger facility, it might be called a Sub debt or mezzanine loan. Essentially they are unsecured cash flow loans with rates in Canada ranging from 10-15% - they are traditionally on a fixed term, fixed rate basis - 5 years is common.

You also have the option of putting more permanent equity into your business via an equity injection of bringing in a new shareholder. We are perfectly clear with clients that this is the most expensive form of financing, because you are giving up future ownership.

Other miscellaneous sources of business financing come with various costs but significant upside to your funding chances. These include:

Sale leasebacks

A/R Factoring / Confidential receivable financing

Bridge loans

SR&ED Tax credit loans

Merchant advances for retailers

Equipment financing for new and used assets

Understand what sources of financing are available to your firm, knowing their costs, and executing on facilities or solutions that make sense for your business is the true working capital and cash flow solution for Canadian business. Speak to a trusted, credible, and experienced business financing advisor to guide you to the right business financing decision.


Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 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 & Contact Details :

http://www.7parkavenuefinancial.com



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

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop