Purchase Order Financing Canada 101 ! P O Financing & Inventory Finance Solutions

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Generating profits Via Inventory & Finance Solutions

Purchase Order Financing Canada 101 ! P O Financing & Inventory Finance Solutions

What is Purchase Order Financing?

The need for P O Financing is often viewed as a good news / bad news scenario Your firm has the ability to receive  customer orders or contracts but you are challenged with restrictions or unavailability of inventory and PO (purchase order) financing. Growing your business and financing a business based on assets such as inventory and orders in coming in has never been more of a challenge in Canada.

Benefits of P O Finance

The key benefit of purchase order contract is your ability to fulfill orders that might not have been made given finance limitations . That allows a business to grow and generate additional profits. The ability to fill your client order with no serious cash flow implications to your day to day operations is key .


When we speak to clients we advise there is no one method that seems to handle all inventory and po finance challenges. But the good news is that via a variety of effective business financing tools you can employ you are in a position to generate working capital and cash flow from these two asset categories. Let’s examine some real world strategies that have made sense for clients.
The attractiveness of this type of business finance is that it can be accessed quickly, typically in days, not months !

The root of the problem is simple, you have orders and contracts, but those will potentially be lost to a competitor. Conventional wisdom is that you go to your bank and ask for financing to support inventory and purchase orders. As you may have experienced, we aren’t big believers in conventional wisdom on that matter!

However, utilizing a conventional purchase order funding source does allow you to purchase a product and get your suppliers paid, thus facilitating your ability to deliver to your customers. In some cases more established firms may wish to consider EDC financing via the Government crown corporation, typically for international sales .

One of the main benefits that many clients don’t realize in purchase order finance is that inventory financing and purchase order contract financing doesn't necessarily require your firm to have a long or strong credit history; the focus on structuring the transaction is around the inventory being financing and the general creditworthiness of your client, who will be paying yourself or the inventory or P O financing firm

How Does Purchase Order Financing Work

The overall process is fairly simple and easy to understand when it comes to putting the transaction together successfully. On receipt of your confirmed purchase order your supplier is paid via cash or a letter of credit. Your firm of course completes the final shipment of the product, which typically involves some additional time on your firms part.

To qualify your firm must be able to prove you have a credit worthy supplier and customer . Because Purchase Order Finance is a more expensive form of financing you should ensure you have healthy gross margins in order to absorb the financing cost ; that should typically be at least in the 15-20% range . Tranasaction should always be a B2B ( Business to Business ) sale . Goverment purchase orders and contracts can be financed also ! It is safe to say that goods must be tangible in nature.

On shipment and of course payment from your customer the transaction is in effect settled. In a true pure PO financing scenario the P O funder is paid immediately on your invoicing of the product. That is facilitated by your firm selling the receivable via a factoring type transaction as soon as you have generated the invoice.

This type of financing works best when it can assist a smaller firm to increase revenues when normal cash flows can’t finance these sales . Smaller businesses obtaining large orders get immediate access to working capital

Many fast-growing businesses come to a point where sales outpace incoming revenues, leaving them without enough cash flow on hand to cover operating expenses or new orders. PO financing and invoice factoring help small businesses stabilize their cash flows and gain access to working capital.

There are always limitations to this type of financing - so things we look for early in the transaction are the ultimate remarket ability of your product in case there is a transaction risk. Naturally, as we stated, the overall creditworthiness of your customer is key, his receipt of goods and payment in effect closes the transaction.

Inventory financing and PO financing are generally more expensive than traditional financing, due mainly to the significant transaction risk that the lender takes. Therefore we strongly recommend that your firm has solid gross margins in the 25% range to cover the associated costs of a PO financing, inventory financing transaction that also factors in the time it takes to get paid by your client, as that typically adds 30-60 days on to the whole cycle of the transaction.

What Comes First? Invoice or Purchase Order

There is a key difference between purchase order financing and invoice factoring/invoice discounting , but both have the same goal in site, ensure you can cash flow your business revenues . Financing the receivable happens after you have sold your goods, the P O process is of course prior to the sale .


One of the best ways to ensure the maximum financing of your sales, p o’s and contracts is to consider an asset based line of credit for cash flow needs . Coupled with a facility that will finance your purchase orders this is the ultimate working capital tool that will allow you to grow business quickly and significantly. This type of facility is generally a non bank facility and is offered by independent finance firms.

Speak to a trusted, credible and experienced Canadian business financing advisor and financing company  with a track record of finance success  who will assist you putting together a working capital and cash flow solution that works!







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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



Business financing for Canadian firms, specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance. Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations.

' 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. He is an experienced

business financing consultant

.

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 financing 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 Credit Needs ? Working Capital Via Alternative Financing Sources

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Business Financing Alternatives In Canada

Business credit requirements involve securing external additional business capital for your company. That involves working capital as well as appropriate finance for a business that might come from traditional Canadian chartered bank financing or alternative lending solutions.

No secret that every business, even larger corporations, eventually finds itself in a situation where it needs to secure additional capital. It doesn’t matter if it’s a startup trying to get itself off the ground or an established company looking to cover a cash flow gap. The point is that having reliable access to working capital is crucial to your business and its success.

Solutions might come from working capital loans or for larger businesses term loans can mezzanine type cash flow loans. Another key focus for many growing companies is to monetize current assets, typically a/r and inventory, that will allow you to cash flow your sales as you grow revenues.

Entrepreneurs , Business owners and their financial mgrs looked to alternative lending sources when a traditional banking solution won't deliver on your ' cash flow gap '. That is whey alternate lenders have become increasingly popular in times of crisis or economic uncertainty.

Business credit needs are anything if not... consistent! In many cases the access to capital/ loans/ financing is one of the biggest obstacles to growth for a large section of companies constantly searching for SME COMMERCIAL FINANCE solutions. So how does the owner/mgmt ensure they access to commercial financing needed to grow the company. Let's dig in.

When new clients at 7 Park Avenue Financial discuss their financing needs they typically have three questions :



What are our financing alternatives?


Which are the best financing options


Can we finance working capital without a loan or taking on external term debt

What is working capital?

Let's discuss some potential solutions? When we're talking to clients we discuss the need first, not the solution! Thankfully those needs can be nicely broken down into several categories as follows: day to day operating capital, immediate growth needs for new opportunities, equipment and asset acquisition, hard asset refinancing.



Business Credit Lines - These facilities aren't necessary emergency facilities, they should be sought after and used by every business. Whether it's business credit cards for smaller businesses or business line of credit canada revolving facilities or non bank asset based lines of credit it's all about a day to day operating facility that works for your company. Approval lead times for these facilities are much shorter than when your firm contemplates longer-term loans from a senior lender.

In smaller companies a lot of the approval focus on these facilities hinges on the personal credit of the owner as it relates to credit scores, etc.

Receivable Financing - The ability to finance your invoices as you generate sales is a very attractive option for most SME firms in Canada, There is literally a renaissance of a/r financing solutions that allow you to cash flow sales as you generate revenue. Typical advances against your sales are in the 90% range. At 7 Park Avenue Financial we recommend Confidential Receivable Financing as the most effective solution.

Short Term Working Capital Loans - These loans have exploded onto the Canadian marketplace and are a popular borrowing option. The loans are typically in the range of 10-20% of your firm's annual sales and are repaid according to your business cash inflows, so that might be weekly or monthly as an example. These are unsecured loans with no external collateral required, although the lender might choose to register a financing statement against your business under Canada's PPSA laws. Important to note also that this type of business finance should not be considered if your firm is in a downward sales spiral .

Unsecured Cash Flow Loans / Mezzanine Financing - This funding option requires no external collateral or pledging of business assets. Naturally, your company must demonstrate it has a history of solid cash flow performance, with the loans typically tied to a 3-5 year maturity.

The common ' go to ' solution in the eyes of ownership/mgmt is to solicit chartered bank financing in Canada. If your firm has a strong balance sheet, profits, established history and additional collateral etc you'll find all the financing you need from our chartered banks who have virtually unlimited financing potential.

That's easy for us to say, but the majority of clients we meet simply can't qualify for all business credit and working capital they need to survive and grow. Typically they have some traditional financing but not enough, or, in a more severe case, do not qualify for traditional bank lending in the Canadian landscape. So what's the plan

When the going gets tough, the tough get going goes the expression, so it is a case of getting somewhat ' creative' in your search for working capital. If your firm has assets and growth prospects we firmly believe you can get most, if not all the financing you need.

Alternative Lending Solutions - Risk / Reward

Alternate financing for many firms in Canada, particularly in times of economic or industry crisis may provide the only business capital for your company. It's accessible, comes with a larger level of flexibility, and almost always comes with faster approval times when compared to traditional bank financing.

However, interest ratesand other terms should always be considered when looking for the best business financing option.

Asset based and cash flow monetization strategies can be achieved in a number of ways. This includes monetizing your current assets via a working capital facility for receivables and inventory. Properly set up you should congratulate yourself - You just negotiated unlimited working capital! The reason? These facilities allow you to borrow on an ongoing basis relative to the size of your current asset investment in accounts receivable and inventory.

We referred to the generalization of terms such as cash flow, working capital , etc - the lending we have just described is best known as asset based lending, and in many cases can cover off purchase orders and new contract financing also.

What about acquiring new assets for your business? Equipment financing and sale-leaseback financing for either new or owned/unencumbered equipment are great solutions to acquire or refinance capital acquisitions. In Canada lease financing is available for all asset and credit qualities for any amount, from small amounts to transactions in the millions of dollars.

Although the majority of clients we discuss working capital needs with are private firms your firm might be public, as a result, you might be in a position to consider an equity line of credit, with the equity questions being your stock.

If your firm has revenues under 5 Million dollars and is privately owned you should consider the best financing available in Canada - it's the government BIL/CSBF loan that is underwritten by our good friends in Ottawa., Industry Canada. This program is the Canadian equivalent of the U.S. ' SBA' loan program.

Note that these Government loans are available for hard assets such as equipment, leaseholds, real estate, etc. You can even be a start-up and qualify. The financing rate is incredibly attractive, guarantees are limited, and terms and structure flexible. This program is one of the great secrets in Canadian business financing.

It’s always about the bottom line, so what’s our bottom line today? Focus on what type of financing you need, determine if you qualify for traditional financing and if you don't get creative with a multitude of solutions available in alternative business solutions for business credit and working capital.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a financing track record of success.




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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



Business financing for Canadian firms, specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance. Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations.

' 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. He is an experienced

business financing consultant

.

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 financing 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

Financing A Business And Solving Working Capital & Funding Needs

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When  Is  A  Working Capital Loan is Right for Your Company! Financing A Business For Your  Working Capital And Funding Needs

 

Many business owners turn to working capital loans any time they need to get their hands on some quick cash. The truth is that this type of loan is better used when you need to stay afloat, cover general operating expenses, and pay bills with invoice financing. These products essentially buy you some time so you can come up with new ways to generate revenue based on your existing assets and resources.

Financing a business always seems to come back to that tried and true (cliché?) term of cash flow to finance the daily needs of your business. So when it comes to loans for businesses in Canada it is no surprise that cash flow is often called the lifeblood of your company day to day operations.

What Is A Working Capital Loan Used For?

It's all about your day to day operations, not long term financial commitments such as leases for equipment financing, term debt, etc. The most common day to day cash needs include payables, the financing of accounts receivable, salaries, and fixed costs such as rent, utilities, etc.



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 . That involves taking a hard look at your balance sheet and reviewing the relationship of the current ratio items, namely your short term assets such as a/r and inventory, as well as obligations such as payables, loan payments, etc. That current ratio drives your working capital and cash flow loan needs.



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?

Factors To Consider When Financing A 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 overabundance 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 balancing act when business capital is sought.



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.

How To Get A Working Capital Loan

Numerous new solutions in financing a business have emerged in Canada. That includes cash advance merchant lenders as well as common subsets of what is known as alternative financing. Those subsets, actual real world solutions include a/r financing, working capital term loans, tax credit financing, inventory finance, and mezzanine cash flow loans for more established firms.

When it comes to the merchant advance lenders the focus is on typical business credit optics such as how long your company has been in business, what your annual revenues are, and the overall turnover of current asset categories such as receivables and inventory.

Depending on the size of the transaction the personal credit history of the owner/owners is also a subject point in the overall decision. As far as ' working capital loan repayment ' works the formula is actually quite simple - a short term loan based on approx 10-20% of your annual sales that is repaid monthly, or sometimes weekly based on a review of your cash inflows.



If those receivables we discussed 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. At 7 Park Avenue Financial our recommended funding solution in this area is Confidential Receivable Financing. This is not a receivables loan but a true sales based cash flow financing facility.

It is critical to ensure that you are matching your business financing needs against either a long term or short term solution. When your company needs new equipment, real estate, etc the business owner and financial manager must explore options such as equipment loans or commercial mortgages where payments are fixed and amortized over longer terms.

When it comes to an ' operating loan ' solutions for your company include a traditional bank revolving credit facility or in some cases an alternative lending solution such as a non bank asset based lending facility.



The Canada Small Business Loan financing program, unfortunately, does not cover working capital needs, although the government's crown corporation non bricks and morter entity does offer long term working capital loans that come with prerequisites of profits and a reasonable balance sheet.



Export Development Corporation ( EDC Direct Lending ) and the somewhat related financing of refundable tax credits are solutions, but these facilities take a significant amount of time to set up. When exploring government loans or related financings it is strongly recommended that you use the services of a business financing consultant with expertise in this area.

Alternative lending Canada based solutions are continuing to dominate Canadian business financing needs and compete regularly with traditional business offerings provided by Canadian chartered banks and are truly an advanced alternative lending solution when traditional financing doesn't solve your business capital needs.

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. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a financing track record of success.






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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



Business financing for Canadian firms, specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance. Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations.

' 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. He is an experienced

business financing consultant

.

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 financing 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

Financing A Business Purchase In Canada - Acquisition Loans

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How To Purchase a Business With The Right Financing

Buying A Business ? Ways To Finance A Business Acquisition

Buying a business in Canada often provides a large opportunity for success. While many owners and financial managers may prefer the strategy of organic growth for sales/revenue and profit potential the attractiveness of not having to start a business cannot be discounted.


But financing the business purchase capital, i.e. putting your transaction together is another story. There are numerous options available to the entrepreneur/business person when seeking a business acquisition loan, In some cases your transaction may be a management buyout or the focus on financing a takeover.

Acquisition Finance Solutions

Ways You Can Finance The Purchase Of A Business

Bank loans (Secured and unsecured) - In some cases the actual cash flows of the business can be used to finance the entire business purchase. This can be augmented with either a fixed asset/equipment loan as well as a revolving business credit line.

The importance of financing ongoing operations post the acquisition can't be overemphasized. If new owners are unable to finance through their reserves then options such as a business operating line, a non bank business credit line, or simply a/r invoice financing should be considered. We recommend Confidential Receivable Financing as the optimum method of financing sales when traditional bank credit can't do the job.


Franchise loans - The booming franchise industry, which supports a huge part of the economy has niche finance programs available to acquire both 'new' and 'existing' franchises. Corporate stores owned by the franchisor can be financed, as well as existing franchisees that have chosen to sell.

Tip: Find out why they are selling. Financing the purchase of an existing business is very common in the world of franchise financing.


Asset based Loans - These ' ABL ' loans cover the financing of assets as well as cash flow needs, including the often required credit line. These loans are ' non bank ' in nature and often provide higher ' loan to value ' financing when typically required loan and debt ratios don't work. The asset based lender in effect becomes the equivalent of your senior lender, in the same manner as would Canadian chartered banks.

Asset based lenders certainly help when the transaction makes sense to have a higher leverage based on the quality and size of the asset base. Main asset categories are receivables, inventory, equipment and real estate.

Most business owners wish to maximize the leverage and therefore enhance their return on investment but many times don't consider the dangers of over leveraging when it comes to debt.

While traditional Canadian bank financing might be the obvious or ' go to ' choice for many buyers it should be no surprise that they place significant emphasis on personal guarantees, potential outside collateral, and are usually focus on firms with very strong cash flows, balance sheets, etc. Naturally the Canadian banks can offer the lowest interest rates but financing an acquisition might often be a challenge. Also it should be known that banks aren't proponents of 100% financing - they demand, and desire the proverbial ' skin in the game '!

Government Small Business Loans - aka the ' Canada Small Business Loan '. This is the quintessential small business loan in Canada, One great way to acquire a business if your business fits some basic criteria - i.e. financing required for equipment and leaseholds. Acquisition loan rates, as well as other terms and conditions, are very favourable under the Canadian ' SBL ' program, not to be confused with the U.S. equivalent, the ' SBA ' program from which the Canadian program was modelled.  Crown corporations also can potentially assist in your purchase .

While not necessarily a 'creative' strategy, Government guaranteed business loans have solid 'traditional' type rates, no penalty for prepayment options, terms and structures, as well as.. wait for it ... a very limited personal guarantee! Finally, some help from Ottawa, but we digress....

It comes as a surprise to many people that the government does not lend money directly under our Canadian small business financing program - instead it charters the banks to fund the deals under the bank's guidelines. The government provides a guarantee to the banks. Many clients of 7 Park Avenue Financial advise us they have seen the banks interpret those guidelines as they saw fitting.


We can’t over-emphasize the importance of ensuring you understand the financial position of the business you are looking to purchase/acquire. If the seller's motivation is not 100% clear in initial negotiations it may well become clearer when the financial position of the company is understood.

In some cases owners may be willing to provide a ' VTB ' - aka the vendor take back. They may often make or break the financing as long as the seller is willing to take a 2nd position to your financing, and, more importantly, that your lenders don't view the VTB as more ' debt '. Negotiations around the actual amount of the vendor take-back will often dramatically change the nature of the selling price - upward or downward. Seller financing, that vendor participation we are talking about is powerful because it gives you the leverage to minimize owner equity if there are challenges in that area, and sellers are often willing to participate in some creative structuring of the ' take back '.


It removes some of the challenges of conventional financing, and sellers are many times 'motivated' to get the transaction done. There is no real stated percentage of what a typical seller finance percentage might look like, it varies with respect to the circumstances around your transaction so don't forget also that 'seller financing' can be a key part of any successful transaction.


'Goodwill' is difficult to finance part of any transaction, and the easiest financings in business acquisition tend to be ' asset ' oriented, not ' share sale ' focused when you are looking for a loan to buy a business in Canada. That concept of ' goodwill ' is a key part of understanding business loan requirements and what is required to often cobble a transaction together with different types of finance. Buyers should understand that in many cases a ' cobbling together ' of sorts, i.e using multiple sources of financing will often make a transaction work successfully. That is where external expertise can be of great assistance.



Buying and financing that business purchase via a well thought out and executed finance strategy is a solid way to become a Canadian entrepreneur. Speak to a trusted, credible, and experienced Canadian business financing advisor to kick start your business purchase.





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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



Business financing for Canadian firms, specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance. Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations.

' 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

Demand Loan Called ? Forbearance Agreement ? Refinancing Is On The Way !

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Must Know Steps To Take If Your Demand Loan Has Been Called By The Bank

When a business demand loan has been called by the bank there has never been more of a time when a ' perfect ' solution is needed, in a timely manner. That ' forbearance letter ' is a call to action like no other. You need the help and ability to restore your company to a more financially healthy state.

What then are the steps required to ensure survival in the demand loans and callable loan scenario when your company has entered into a forbearance agreement. The definition of that is when the lender, typically a bank, but not always, allows your business to amend the original payments and covenants.  Your goal: avoiding receivership/bankruptcy and litigation, and guide your business into a more healthy state with the right traditional or alternative lender.

The Bank Wants You To Sign a Forbearance Agreement? How Does A Forbearance Agreement Work?

The key to the meaning of a forbearance agreement in Canada is the lender's agreement with your company to a specific date. That allows your firm, the borrower, to focus on a refinancing plan.

We've got some solutions, and refinancing commercial loans might not be as difficult as you think.

Not all business owners or their financial mgrs will always understand why a bank has called their commercial loans - why would they forsake interest income and put your company in a very difficult position. In many cases your firm might have even not missed a payment!

Difference Between Loan Modification & Forbearance 

 

 

 

   

However, when you are in the ' special loans' category at the bank there is only one immediate goal -  Where can the funds come from to settle the bank's outstanding loan/ loans? Ensuring business survival becomes job 1! 

Timing is everything if your firm has been placed in, or notified under a  ' special loans' scenario. An agreed upon new repayment schedule must be considered, and companies should note that typically higher fees and miscellaneous charges such as appraisals may also be requested by the bank/lender.

Every business and industry typically have different issues around what caused the loan to be called. More sophisticated lenders such as banks and mortgage companies may have concerns around the ratios and covenants your firm originally agreed to. They might also have a concern around the position of other lenders your firm may have entered into for additional financing.

One of the most severe scenarios under a callable loan scenario is when monies are owed to the Canada Revenue Agency under payroll taxes or HST.   Is there any good news?! Borrowers will be glad to know that under many refinancing arrangements the' deemed trust ' position of the government can be paid out under new financing arrangements, typically via an alternative finance lender.

That challenge, unfortunately, comes with short time frames and the pressures on the business can be intense as the company's future is in doubt.

On its part the bank has rules around the timelines on called loans and their ability to ensure their capital and liquidity. So they are always looking at their commercial loans to determine in their minds what might be signs of financial distress. In other words, they are monitoring what might be potential ' bad debts.' By ' calling loans '  banks are in effect increasing their liquidity.

Initial steps in refinancing your business will revolve around ensuring banks are behaving properly, perhaps negotiating new deadlines, or negotiating settlement proposals. These actions are often best served when you are working with a trusted, credible, and experienced Canadian business financing advisor with a track record of success.


 In many cases, ratios and covenants can be renegotiated, and some firms may on their own be able to bring in new capital. Don't forget that callable loans are a  costly process for the bank also, so a mutual solution is often very desirable. Business owners are well cautioned to ensure they understand the ' call provision' in their loan documents. Bank doc's can always be a bit overwhelming.

Developing a professional reputation with the workout mgr at your bank in this time period is critical. They are experienced in dealing with challenging credit situations, from simple to complex.

So what about the 'real world ' solutions to refinancing your business in a special loan scenario.

 Basic Solutions  To Refinancing Your Company

A typical refinancing of your business under forbearance/demand loan scenarios will involve a new operating line of credit, typically asset based and focused on current and long term assets as your total borrowing base.  At 7 Park Avenue Financial we work with businesses to ensure a new and solid business plan and cash flow projection is put in place.

Where necessary a reappraisal of critical assets will also suggest possibilities for new financing, for example a sale-leaseback.

Unfortunately in some situations staff reductions and sales of assets may also have to be considered by the owners.

Asset-based lending solutions are often the best way to solve the challenge of new financing options when a demand loan has been called.

Solutions depend on the loan amount and can  include:

Asset based non bank business credit lines

A/R Financing

Sale Leasebacks

Cash flow loans

Asset sales

Inventory Financing

Term Loan / Loans

When considering refinancing strategies  most experts recommend external expertise that allows you to receive and view the right recommendation around a new lender/ lenders.

Seek out and speak to business finance experts with specialized knowledge in business downsizing/refinancing and recapitalization under a forbearance plan.



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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



Business financing for Canadian firms , specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' 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

Working Capital Financing & Most Effective Business Finance Solutions

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And Now For Something Completely Different - Solutions for SME Business Finance

What is Working Capital Financing ?

Working Capital Financing – Canadian business owners want to maximize the utilization of their receivables, inventory and incoming orders and contracts to leverage working capital.

The goals are very clear, grow business revenues and profit with the right combination of internal growth, borrowing from banks and others, and achieving the best blend of working capital and cash flow by leverage those current assets.

Long term debt or additional new equity is not often the business owner’s choice in arranging more working capital and cash flow for the business.

We meet with many business owners who tell us they have the opportunity to significantly increase sales. They are looking for a financial strategy to grow those profits and equity while at the same time minimizing loan interest and any other external financing costs.


When a business gets its hand on a proper working capital loan solution it has the potential to reduce or minimize debt, and increase bottom line equity or value in the business. It is all about achieving the optimal working capital ratio which quite often is industry specific as the cash conversion cycle for many industries is vastly different


Our point is simply that if your business can absorb a reduction in your gross margin – (the cost of working capital associated with receivable, inventory and PO financing) then you can avoid debt and equity scenarios and still grow your business.

Looking For An Example Of Working Capital Loan Types

It is cash flow solutions such as factoring, invoice financing, and our recommended favourite -' Confidential Receivable Financing ' that are most often associated with cash flow financing, It is important to note that inventory financing, a subset of asset based lending also can provide substantial day to day operating capital.

True asset based lending facilities that encompass the finance of inventory, receivables, equipment, and even allow borrowing power against owner real estate provide a real, shall we call it ' holistic' approach to Canadian business finance. Even purchase orders can be financed as a subset of asset based financed.

The Canadian business owner and financial manager's challenge is to grow the business and understand the cost of growing the business under various financing methods.

Clients are often surprised to learn how much their business can change by a simple analysis of their working capital financing choices.

Using factoring or inventory financing as a cash flow supercharger is many times the best strategy for working capital enhancement. Most non financial business owners do not appreciate that power that working capital turnover and are focused on repayment meaning.

There are all sorts of tools that your business can very easily use to monitor your working capital needs. One is simple - you need to monitor your working capital to sales ratio.

What Is Working Capital?

How do we calculate the working capital to sales ratio? It’s easy. Working capital is essentially your current assets minus your current liabilities. Take that number form the balance sheet and divide it by sales. If you have a low ration then your ability to generate cash flow is stronger.

The solution for Canadian business owners is to maximize the turnover of those current assets such as receivables and inventory via working capital facilities. If those facilities can’t be arranged with a bank then you have the option of working capital lines of credit and asset based lines of credit that will cover receivables, inventory and even under many circumstances bulges for new contracts and purchase orders

Working capital facilities via asset based lending business credit lines, factoring or inventory financing or purchase order financing maximizes your cash flow – they also cost more and many Canadian businesses simply focus on the cost.

But they fail to measure the cost of carrying those receivables and the cost of not turning over that inventory efficiently. These two costs alone have the ability to completely in some cases erase your cost of financing under a working capital and cash flow facility.

How does a business compute its cost of credit? The formula relates to your firm not taking credit and payment terms extended by suppliers. Your supplier gives you terms that specify a payment date the amount of the discount if you pay early, and of course the due date. The cost of NOT taking that discount is huge! Most owners don’t realize that. If your firm can negotiate better prices by utilizing working capital financing strategies such as factoring and inventory financing and purchase order financing you have just become the best comparison shopper in business!

In summary, the cost of not taking trade credit discounts is very significant when your business has the ability to take those discounts via aggressively financing your receivables and inventory. Utilize great working capital strategies, you will find that the cost of paying in full is higher than the cost of a working capital facility to cash flow those receivables and inventory!

What is The Cost Associated with Working Capital Finance Solutions?

Non bank, non regulated commercial finance companies that offer cash flow solutions in Canada have traditionally been somewhat cumbersome for the Canadian borrower and often mirror the Canadian chartered bank borrowing experience.

The banks focus on long term loans is often not what the client is looking for. That is changing rapidly with the rise of online finance/peer to peer lending. The types of working capital provided by banks often involve lengthy application processes and solutions such as long term loans. That forces the business owner to assess the difference between working capital loan vs. line of credit. Online providers utilize slick software solutions that are focused on speedy approvals, albeit at much higher costs.


We recommend utilizing a business finance expert to determine which online solution, if any, is recommended for your firm. Also, it's important to note that typically working capital provides have no geographic boundaries, and operates throughout Canada.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance experience who can assist you with loan and cash flow needs.






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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



Business financing for Canadian firms , specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' 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