WELCOME !

Thanks for dropping in for some hopefully great business info and on occasion some hopefully not too sarcastic comments on the state of Business Financing in Canada and what we are doing about it !

In 2004 I founded 7 PARK AVENUE FINANCIAL. At that time I had spent all my working life, at that time - Over 30 years in Commercial credit and lending and Canadian business financing. I believe the commercial lending landscape has drastically changed in Canada. I believe a void exists for business owners and finance managers for companies, large and small who want service, creativity, and alternatives.

Every day we strive to consistently deliver business financing that you feel meets the needs of your business. If you believe as we do that financing solutions and alternatives exist for your firm we want to talk to you. Our purpose is simple: we want to deliver the best business finance solutions for your company.



Tuesday, June 16, 2020

Buyouts And Your Formula For Management Buyout And Successful Acquisition Funding In Canada Funding For A Management Buyout










Management buyout financing and acquisition funding are all about successfully engineering and executing on the finance solution - and we can pretty well guarantee our clients that ' one size doesn't fit all '! Let's dig in.

WHAT IS A BUYOUT? HOW DO BUYOUTS WORK?





These opportunities also aren't always coming up so the ability to buy a firm you're associated with or to capitalize on a business opportunity is often associated with the right timing. Funding for a management buyout is  one of the more common methods of owners exiting a business. Never have the words ' skilled management team ' meant more when it comes to the management buyout and purchase of a business. Both the resources of the company and capitalizing on leverage in a positive manner, allows you to use company assets as a portion of the collateral. Seller financing and external funding will often complete the transaction.


Most of the time, the management team takes full control and ownership, using their expertise to grow the business. An MBO/LMBO acquisition, which can be sizable, is usually funded by a mix of personal investors, external financiers and the seller, thereby completing this financing for control by management.

Lenders are often very comfortable with management buyouts " MBO's " given current management is experienced and understands the true operations of the company. An ' MBI ' (management buy-in )is not dissimilar, its simply the purchase of a company, often by external managers in the same industry.



Buyouts done well should be focused on a smooth transition to the new owner/owners. Numerous advantages come out of management buy outs, even when they are leveraged, as clearly new owners have already managed the company - that clearly reduces risk and the risk of employee departure would seem to be significantly reduced. In most cases the buyout can be a low key manner with less risk of being a concern to suppliers, unsecured lenders, and, most importantly, customers!


There should be careful planning around a logical process to move forward with the sale. First and foremost a proper business valuation must be considered and agreed upon in the context of a new shareholder agreement if there is more than one buyer. Now is the time to be thinking about and assessing who a logical ' senior lender ' might be on your transaction. It is essential to know your business financing and new capital structure will not impede growth plans in the newly acquired entity. Knowing you will have financial support on the transaction is obviously key.

A proper timeline should also be established, as in some cases there is an earn-out agreement between the owner and the new buyers. Whether non-financial business folks like it or not there has to be consideration given to issues such as taxes and related succession issues.

New buyers, having been management or closely aligned to the firm should be able to determine future profit generation and what type of financing will be needed for working capital and cash flow needs in the company buyout . This may well be the time to consider some form of downsizing of employees, assets, etc., as regrettable as those latter two issues might be. It is easy for your deal to get ' stuck ' on a myriad of non-financial matters relating to staff, clients, go-forward strategies, and of course the ever-important ' valuation '.

BUSINESS VALUATION / WHAT IS THE BUSINESS WORTH?


Purchasers need expert help if they are not qualified to come up with a problem valuation on the management buyout. Suffice to say that business owners always have a figure on what they think their business is worth! They tend to have some ideas on the value of your company target in the business valuation process.

Valuing the business can be explained as a combination of art and science as many experts say, let alone the human nature aspect of optimism of current owners. There are several ways in which you can tackle the job of addressing the value and the financing of that value - here also is the time to consider a help of an experienced Canadian business financing advisor . Formal business valuations can also be purchased - they are costly but certainly might make sense on larger transactions.

Business valuations will always take into consideration some basic issues - they might include profit generation, future growth potential, and the overall asset mix on the balance sheet.

Different outcomes arise based on the method of value you are looking at. If the business is currently generating good profits and solid return on equity those value measures are on top of the level of actual fixed assets. Your cash flow forecast as it relates to past results should be fundamental in your analysis. Having access to historical financial statements is key, as that allows for a ' smoothing ' of sales and earnings. In business, the past is not always predictive of the future.

The concept of using ' multiples ' is another reliable way of determining value. Key financial areas such as ' EBITDA ', sales, and cash flow can all be analyzed to determine a range in which a final cost can be substantiated.

EXAMPLE - Some industries are valued based on a multiple of sales - that number might be 2 . So a company doing 3 Million in revenue might include a value of 6 Million in its final valuation assessment. The key is to ensure you are comparing business multiples in the same industry! Here publicly available date may be very beneficial.

Hard assets play a key value in the final valuation summary. Many industries, as opposed to service industries, are very capital intensive. Businesses with high asset values sometimes generate lower returns on equity due to the nature of the company. In some cases appraisals might well be undertaken to determine actual market and liquidation value, and there will sometimes be major differences in these two numbers.



Every business based on its financing structure can handle only so much debt - a typical rule of thumb in many industries is that a debt to equity ratio of 2:1 is optimal. Still, every industry is different as some might be very capital intensive. The amount of debt your firm carries as well as how it finances cash flow will ultimately affect sales volume growth and the potential for the firm to grow substantially.

As initial planning of the takeover proceeds a business plan should be developed, which has uses for both the owners from a planning perspective, but more so for lenders. Cash flow growth should be realistic and conservative - this is not a marketing document of the time for a ' hockey stick' growth curve for sales projections.

At 7 Park Avenue Financial our business plans for clients include management overview, industry overviews, cash flow projections, and many other vital aspects of what lenders are looking for in a plan. Those details ensure acquisition funding success.

In some cases in a shareholder buyout  the owner might agree to a seller financing aspect to the transaction - this is usually well received by lenders who now know the seller has confidence in the management team to take the company forward successfully.



In some cases you might be looking at purchasing a franchise directly from the franchisor, or perhaps a current owner who wishes to sell. The Canadian franchise industry can only be called explosive and it plays a vital role in the economy of Canada. The ability to 'partner' with a franchisor successfully helps guarantee a good acquisition. Some very specialized financing can help complete such a purchase.



Let's examine some practical tips and strategies for getting ' unstuck ' on a transaction such as this.



Obtaining seller financials is key to any sort of management buy out or leveraged buyout. Key point: Many alternative finance solutions are available to buy a business, but they rely on a decent level of financial transparency on how the company is doing, what the actual value of assets is, etc. The ability to distinguish between internal and external financials, as well as obtaining current interim financials is critical. At 7 Park Avenue Financial we have seen examples whereby senior lenders insisted on seller financing as a part of the owner exit strategy  to show all parties have a commitment to the deal.


Purchasers and your financiers will want a proper representation of specific assets and liabilities on the balance sheet. Great care should be taken in qualifying key assets such as accounts receivable... from a simple point... are they collectible?!



Naturally there is no guarantee that any existing or future A/R item will in fact be collectible, and no one is going to guarantee that for you. Some reliable credit checks on the quality of the A/R base is highly in order, as well as looking at historical payment trends of the client base. You also want to ensure there is no right of set off against the receivables, and it is certainly not uncommon for us to see the A/R as often the most significant asset on the balance sheet.



An excellent strategy for Purchasers contemplating a leveraged management buyout funding is to make some sort of agreement on the ability to ' rejig ' the final price subject to A/R collectability. Naturally, owners of the company might be reluctant to do that.



Is there anything trickier than ' inventory ' with respect to classifying quality and the actual value of inventory, which might, of course, be raw materials, work in process, or finished goods. Make a solid effort to quantify the quality of the inventory you are purchasing for issues such as obsolescence.



Plant and equipment should always be appraised in some manner on funding a management buy in. This quite frankly protects all parties, and we urge clients to complete an appraisal that includes some component of fair market value, orderly liquidation value, and forced liquidation. Those numbers will vary significantly in any appraisal and play a key role in the way in which assets are financing in a real management buyout. It goes without saying of course that the purchaser should ultimately be comfortable with the quality and condition of the fixed assets on the balance sheet they are contemplating financing.



Don't forget also to look at any leases or contracts that might be in place via the current business owner. You will want to make sure these are assignable to yourself in the event of a completed sale.



How Then Is Acquisition Finance Most Commonly Achieved in Canada? Financing Management Requires Specialized Financing Expertise



Purchasers have a variety of options to consider for successful management buy outs. They should be expected to also ensure there is a personal equity component in the transaction, which typically might be in the 20% range, although that percentage varies greatly, especially when the deal presumes high leverage. That personal investment is viewed positively by your lenders, hence the popular saying ' skin in the game '. Some owners might well consider refinancing or selling some personal assets to augment the owner equity.

Naturally bank loans are very commonly the first ' go to ' by many purchasers, but alternative financing solutions are becoming extremely popular, given the rise of non-bank asset based lending solutions in Canada. Banks of course have the lowest cost financing re interest rates, which are at historic lows. In smaller transactions one key lender might be involved while on larger deals financing might need to be 'cobbled together ' with more than 1 funding source.

We have previously referenced vendor take backs, ' VTB's'. This ' seller finance ' strategy is highly flexible and can often be structured creatively re payback terms, rates, etc. The essence of seller financing is its ability to reduce the cost purchasers must pay for the business. Depending on how the deal is structured it also gives the seller some input until the VTB is terminated via final payout.

ESOP'S
, namely employee ownership plans might also be a financing consideration for more sophisticated sales on larger firms.

Mezzanine financing
is a natural complement to any senior lending facility and can bridge the financing gap. If a business can demonstrate good cash flow mezzanine debt finance should always be considered.The key benefit of mezzanine funding is that it will allow your other external lenders to consider more financing participation in your deal, especially when it comes to lbo financing where leverage is higher .

Some companies may wish to look at public market financing,or as an alternative, private equity but purchasers should recognize that these methods are time consuming and dilute ownership.


If there is a bottom line in management buyouts it's merely to ensure you consider all aspects of commercial business financing that might be available. It is critical for management to assess how operations will be funded on an ongoing daily basis.



HOW TO FINANCE A MANAGEMENT BUYOUT



Govt guaranteed loans - The Candian Government Small Business Loan program is an excellent way for smaller firms to be acquired, including franchise finance opportunities.



Asset Based Lenders - (' ABL ' ) These commercial finance firms offer day to day funding for operations and are non-bank in nature. Solutions include a/r financing to address the working capital financing component of the collection of your receivables. Solutions could consist of traditional ' factoring ', but at 7 Park Avenue Financial our recommended solutions include Confidential Receivable Financing, allowing you to bill and collect your accounts without a third party intrusion.  'ABL' is excellent when it comes to a  leveraged management buyout. Business worth is not always the same as asset worth, and ABL expertise has a high value.

Inventories can also be financed as a part of an asset based line of credit solution that allows your firm to combine the financing power of a/r, inventory, and equipment into one borrowing facility. In almost all cases this delivers more cash flow than a bank facility, but is more expensive.

Purchase Order Financing has risen in popularity as more firms experiencing large new orders and contracts that otherwise might not be financeable is now possible. Direct payment to your suppliers is facilitated through this process.


Private Equity Funding- Private Equity funds typically raise money from large investors and acquire stakes in firms with a focus on improving operations through cost cutting and effective management. In Canada private equity deals tend to be for substantial transactions outside the normal MBO process


Canadian Commercial Chartered Banks - Banks are the ' go to ' for many businesses due to their attractive rates and tremendous capability in financial offerings. Many firms are unable to access bank financing because the banks have precise requirements around collateral and overall business qualifications required to get funding, including personal guarantees, outside collateral, and solid personal credit history.


Business Development Corporation Term Loans - The Government Of Canada's Crown Corporation non - bricks and mortar bank provides term loan financing for business acquisitions. Their subordinate financing solutions are very complementary to a deal.



SUMMARY OF BUSINESS FINANCE SOLUTIONS FOR A MANAGEMENT BUYOUT



At the end of the day funding for the purchase by management will depend on size of your deal, the reputation of the company in its industry, as well as the assets and cash flow that will propel the company forward.


Buyouts are becoming more popular these days due to generational succession. The current management of many firms is a logical way to ensure a company's history and reputation will continue. Even a leveraged buyout where a large portion of the company assets can be collateral when financed properly can guarantee the business moving forward.

Well executed mgmt. buyouts have a focus on future profitability and ensuring the right amount of financial leverage is being used. If financing costs will eat up all the cash flow productivity and sales growth might be impaired. Otherwise major cost-cutting will have to be initiated, never a good sign. Doing the right amount of financial analysis and utilizing outside help on cash and debt financing needs is vital.

Companies that are distressed or financially challenged can still be financed, but they are often only able to achieve financing via alternative finance means. Whether the company is doing well or is not still requires the new owners to ensure that too much debt is not taken on and operating financing on a day to day basis is fully available.



An excellent transaction occurs when you have a company that is both profitable and has key assets that are financeable, i.e. the receivables, inventory, and equipment we highlighted earlier. That isn't always the case, and as we noted, every business and industry is different. Speak to a trusted, credible, and experienced Canadian business financing advisor for assistance in funding the purchase and successfully completing your buy-in via leveraged funding.





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.







7 Park Avenue Financial/Copyright/2020






















































































Buyouts And Your Formula For Management Buyout And Successful Acquisition Funding In Canada



Management Buyout And Acquistion Financing

Sunday, June 14, 2020

How To Achieve Acquisition Financing Successfully In Canada











How To Finance A Business Acquisition in Canada


While the terms m&a financing and capital acquisitions conjures up visions of having to be a Bay Street / Wall Street heavyweight when it comes to sophisticated financial knowledge the reality is that financing to buy a business in the small to medium-sized sector of the Canadian business landscape actually requires a healthy element of ' do it yourself ' when it comes to acquisitions of competitors, synergistic companies, etc. The proper source of financing may often mean a number of appropriate solutions must be analyzed and investigated.

Companies consider financing a business acquisition because they want to increase revenues non organically or in some cases penetrate new geographical markets. So the right capital to fund a purchase and then operate the business is key.


Very few business owners can complete an all-cash deal, even in a good economic environment, much less a pandemic! Therefore financing buying a business with the proper and right type of debt allows you to not give up equity - that equity often called the most expensive form of financing. So if you have a good target company with understandable profit, sales and cash flow generation ability acquisition financing through borrowing is a recommended strategy.


Don't however underemphasize the importance of a solid external team to assist you with the expertise you need. Let's examine some solid ' need to know ' info that will help the Canadian business owner and financial manager address any acquisition successfully.

The goal of your purchase from a finance viewpoint is to ensure you have what is known as a ' capital structure ' in place that allows for a smooth takeover and continued growth of your target company. So from a business finance viewpoint, you want to focus on the right mix of debt and equity in the final structure that allows a firm to both operate and grow. The ' cobbling together ' of that right mix of finance leads to successful business acquisitions. In some cases you are integrating a business into the new business, which is even more of a challenge.

The value you are placing on the target acquisition is critical. It's that buying price that ensures you are paying for true value and worth. There are many different measures relating to a final valuation and financing an acquisition - typically revolving around sales, earnings, levels of depreciation, and a final calculation of what valuators call 'normalization' of the current earnings. This ' normalization process' takes out any expenses that won't incur in the future again, therefore providing a true ' earning power '.

Typical Acquisition Finance Structure / Financing The Purchase Of An Existing Business



Those measures of valuation we described are typically calculated as ' multiples' of the valuation points in question . Note that multiples vary in each industry allowing the purchaser to make an 'apples to apples' comparison of what he or she is buying. For example a company in a certain industry's sale price might be expressed as a ' 5 times multiple ' of current earnings before items such as depreciation which is a non-cash expense.

Business Acquisition Loans In Canada / Types Of Business Acquisition Lenders


A sample capital structure for financing acquisitions might look as follows:

Senior Lender
Selling Financing component
Cash Flow Loan
Owner equity component

As a buyer you need to determine what the potential earning power and sales revenues might be in future years, therefore allowing you to arrive at that ' multiple ' we have discussed. It is important to understand that lenders will always look very carefully at the ratio of debt and seller financing and owner equity to ensure they are in line with lender requirements.


Naturally the more a borrower puts in the less he or she has to borrow, which underwriters view as a buyer's commitment, or, in the language of the people 'skin in the game'!

The debt you incur in a transaction is usually a combination of senior debt which covers the main assets of the business and typically will include operating facilities for accounts receivable and inventory that arise out of future sales.

Today many business people consider asset-based lending, also known as asset-backed financing as a solid alternative to traditional Canadian chartered bank financing. By lending aggressively against equipment, receivables, inventory and real estate a transaction can often be completed to the approval of the purchaser.

Subsets of asset-based lending such as accounts receivable finance and inventory loans are key solutions to a final lending mix. The right a/r finance and inventory finance will ensure you have a handle on your ' cash conversion cycle ', namely the amount of time it takes a dollar to flow through your business, and we can assure you that timeline varies within different industries.



Revolving inventory loans, based on the value of the inventory, provide the cash to pay your suppliers. It takes time to convert the inventory into sales, use the value of this asset to help speed the process. Available in conjunction with accounts receivable financing or as a standalone retail inventory loan.




In some cases, even in a management buyout scenario a bank or commercial finance firm will consider a leveraged buyout, essentially used the assets of the target company as security for a loan/loan. Naturally, in these cases, assets must be strong, and there should be solid evidence of historical cash flow to support the much higher than usual leverage ratios.


Financing from a senior lender, either a bank or a commercial alternative finance firm, will bring you, the purchaser, into the world of ratios, covenants, and personal guarantees. A shorter-term loan will be less restrictive in nature. Lenders will typically investigate personal credit history and credit scores of the buyer to help them feel owners run their personal financial lives in a reasonable fashion.

At 7 Park Avenue Financial, we will always tend to investigate the ability to identify ' seller financing ' as a part of the acquisition finance strategy. The strategy can often make or break a deal, and is typically viewed positively by lenders. It is simply the sellers agreement to e apid a percentage of the acquisition price at a future point in time. The bottom line? Less borrowing is required. Structures of the seller finance, also known as ' VTB ' or vendor take-back can vary but often are in the 10-20% range and have various forms of creativity around payment terms. You might also hear this term is called ' earn out '. Three different ways to say the same thing!

There might be conditions tied to the earn-out, so in most cases a lower rate of interest that current market lending rates. It is the epitome of a ' motivated seller '. In many of the transactions we see at 7 Park Avenue Financial seller owner and or management stays on for an agreed upon amount of time to ensure a smooth transition.




The amount of proper financing that you can generate, internally and externally (mostly externally!) will ultimately play a large part in the size of the company with whom you might be acquiring, or merging. Here is where valuations come into play and anywhere from 30 - 50% of the final price that you agree on might in fact have to represent a cash type scenario.

In some cases there is a shortage of the total term loan to get a transaction approved and closed, so some for of ' mezzanine financing ' will have to be considered. That financing will cover the gap created between borrowing power, equity, and the sale price. Mezzanine financing is often unsecured, relying solely on future cash flow generation, so interest rates on cash flow loans are more expensive, but, again, similar to seller financing, can make or break a deal.

For smaller transactions in Canada many companies consider the Government of Canada Small Business Loan program as one of the methods of financing acquisitions.



Naturally there are a thousand stories in the naked city, as many firms are acquired simply for the reason that they are not profitable for the current ownership. This does bring up a very key point though, which is that if you are looking at acquiring a firm that is in trouble, losing money, losing market share/sales etc then in fact a lot less cash is required for the transaction. However at that point you'll obviously have other challenges to address.


If there is a solid piece of advice we can give to the Canadian business owner and financial manager it’s to start a financing strategy around your acquisition early on. That final capitalization of the proper amount of debt and equity is critical.


When contemplating bank financing for business acquisition financing in Canada a solid, realistic and succinct business plan is required. We see many plans from clients that are far less than ' succinct ' and therefore raise more questions than answers.


So what does one in fact have to demonstrate to the bank? A good start is how your firm will operate the business - so a good examination of the financials and any key issues around the seasonality of sales and cash flows, customer concentration, production, and credit terms are key.


If the business you are acquiring does in fact have challenges it's clearly a good time to demonstrate how you will implement controls and changes around those challenges.

At 7 Park Avenue Financial our due diligence process spends a good amount of time on assuming proper levels of sales and cash flow, often in conjunction with a business plan we prepare to support your transaction. Spending valuable time on structuring financing your an acquisition will lead to optimal performance going forward. The right amount of flexibility in your finance may be well required down the road.


Spend a lot of time considering the amount of leverage you will ultimately have when acquisitions are completed. It's tempting, of course, to become highly leverage but this is the classic double-edged sword of business financing, and don’t think that high leverage will guarantee higher returns to shareholders, as that debt you are now carrying can, in fact, become a day to day nightmare down the road if not managed or financed properly.


Business acquisition financing in Canada is about finding a solid opportunity, analyzing your transaction carefully, and closing with the best financing possible based on your industry profile of debt and overall capitalization. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with acquisitions that make sense- financially!





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.






7 Park Avenue Financial/Copyright/2020






















How To Achieve Acquisition Financing Successfully In Canada


















Your Most Complete Guide to SR&ED Financing & SR&ED Loan Success In Canada













 










SR&ED refundable tax credits and financing r&d   are in the news a lot these days. Things seem to be always changing, sometimes in a big way, sometimes less. The one constant? SR&ED Financing! It's always there - always available. Let's dig in.



 What is The SRED CREDIT?

 

Sometimes called ' Shred  Credits ' they are one of Canada's most accessible, popular, and widely used incentive programs under the auspices of Canada Revenue Agency, allowing you to claim for either a cash grant or in some cases a deduction against income taxes owing. R&D capital investments use up cash flow resources, so collateralizing your sr&ed claim makes a lot of sense when other traditional  sources of financing are not available.



Corporations that are in need of liquidity cannot afford to wait until the end of the fiscal year to receive payment of refundable tax credits. For this reason, lenders offer sred funding, an advance (or loan) to eligible corporations, while using the future receipt of the SR&ED refundable tax credits as collateral.

 

In the majority of cases, you are eligible for amounts in the 35-40% range of your total expenditures. The amount of that refund can go over 5O% when your Sred Consultant and accountant, typically working in combination, take advantage of both the federal and provincial parts of the program. 

 

At 7 Park Avenue Financial we can't overemphasize the role of ensuring your have an experienced and reputable sr&ed consultant preparing your claim . Their track records and reputations are invaluable both in the financing process as well as the CRA audit process for sred.

The formal name of the program is ' Scientific Research and Experimental Development ' , hence ' SR&ED ' ! It is one of the most popular government programs vie encouraging firms to conduct r&d in Canada, as well as providing refundable tax credits for those investments made by your firm.

 

Why a Sred  Loan ? SR&ED Debt Finance

 

 

Simply because its a method of allowing you to use your refund owing, which is essentially an account receivable, as a source of operating cash in the same manner in which any company would finance their receivables via either a bank or a commercial a/r financing firm. It's a good example of  ' specialty financing '. Note that this does not involve government grants, or grant financing - that's a whole different category of accessing funding from the government.

 Essentially you are unlocking the value of your tax credit, which is, in fact, a real asset on your balance sheet, although many companies we have worked with sometimes do not book that as a receivable. 

 

Companies using the Sred program tend to always be looking for business growth capital. Most but not all are early stage companies looking to commercialize their products and services. Just the ability to finance their r&d prior to their claim filing is appealing to firms who are always looking to generate cash. Many firms are in new or emerging sectors such as digital medial , environment, biotech, etc but firms in every industry utilize SR&ED. Accessing traditional financing is very challenging for many of the firms involved in SRED, and going the equity raise route is both time consuming and even moreso, costly!

 


 Claimants under the program may be surprised to know that if your firm has ongoing multi-year activity in research you can set up a Sred Line Of Credit, allowing you to accrue and then finance ongoing work. Here is where a track record in' Shred ', as well as a good consultant, is important.  Also, your claim can be financed before filing with the proper level of due diligence around claim content.

 

 

 We can make the case that SR&ED finance is really  SRED factoring, namely the factoring of your sred receivable. And as we have mentioned elsewhere, owners should consider sred accrual financing allowing you to accelerate cash flow.



The challenge around receivables of course is ' waiting for payment '! Historically the timing around SRED REFUNDS has been a major point of discussion and is one of the reasons why a  SR&ED FINANCING COMPANY is often utilized to monetize your tax credit. Depending on the size of your claim, the technical aspects around it a firm can easily wait for  many months to receive their refund.

 

 

 Another issue around the timing of claims is that your claim is filed by your accountant and Sr&ed consultant, typically working together, at the time of your year-end tax filing. You can see that it could add a further delay to payment by the government to your firm. 

 

 

KEY POINT: A  SRED CLAIM  can often be financed and funded in just a few weeks if you are working with expert help and someone who has a track record of financing success in the tax credit area.

 

Although many business people use the term ' loan ' when it comes to this type of debt facility,  SR&ED financing brings no debt to the balance sheet, you are just monetizing your claim as a manner of advanced funding.


 Utilizing SRED TAX CREDITS is simply an additional source of funding for many companies, many of which are new, emerging, and even startups. Although many firms are technology companies almost every industry is eligible for SRED CREDITS based on their commitment to r&d.  It's all about growing their business.

 

 New clients at 7 Park Avenue Financial always want to know if they are in fact eligible for SRED CREDITS.  If your business is what is known as  CCPC,  essentially meaning a private, not public company and you are doing qualified experimental research to develop your products you are eligible.

 


Industry statistics around SR&ED tell us that in the last 7 years payouts on SR&ED claims have reduced by over 5 Billion dollars - suffice to say billions are still being paid on thousands of current claims. The government seems to be asking anyone with interest to provide guidance on the future of the program.  Canada Revenue Agency provides great information on the CRA website on both the qualifications around your claim and overall eligibility. 

 

All of that  information essentially comes down to 3 issues - Is your firm investing in r&d capital to advance technologically, are their uncertainties in your research, and has the research become a process whereby technical challenges are overcome



Talk about uncertainty! Business owners hate uncertainty. Who doesn’t? The one constant in SRED? Cash Flowing Your Claim!


SR & ED (SR ED) factoring is a viable consideration for any Canadian company that files SR ED claims and is looking for additional working capital. Not all Canadian business owners and financial managers are aware that SR ED claims can be monetized (financed!).


For an overview of SR ED financing, it’s important for us to validate some of the basics -


-Have you filed an SR ED CLAIM?


-How much was the dollar amount of the claim?


-Who prepared the claim?


-What amount of cash or working capital do you need in conjunction with the claim filed?


If you are looking for cash flow with respect to your Canadian SR ED claim you either have working capital financing in place now with your bank or finance firm (a factoring company perhaps) or your firm is self-financing and you are looking for the SR ED to supplement additional cash flow. Risk capital /equity capital and Canadian venture capital is challenging to raise in Canada . Financing r&d makes a lot of sense.


Canadian business owners and financial managers are aware that when they finance their receivables and inventory these 'current assets' are 'margined'. By margining we of course mean the amount of funds you can borrow against these assets.


In SR ED financing you are generally financed 70% of your claim, and that is the combined total of the Federal and Provincial claim.


So if you have filed an SR ED claim, of say, for example, $350,000.00 you are eligible for 70% of that amount, or $245,000.00


Funds can be advanced as soon as you have filed the claim, but not before. Naturally, it is somewhat important to ensure your claim was filed by a qualified party - usually an accounting firm or consultant. It's these consultants that are in the field daily on the program, wresting with all sorts of changes around Form 4088! ... Defining and backing up your project.


SR ED financing is outside your normal current financing arrangements. The SR ED is collateralized separately - it is, in essence, a short term working capital loan that is repaid when the government sends you your cheque. Most Canadian business owners do not want to wait, 3, 6, 12 months or more for a cheque for a substantial amount that is in effect a non-repayable grant from the government. The Canadian government continues to pour well in excess of a billion dollars into the program, and if your firm qualifies for an SR ED claim -


1. Why wouldn’t you use the program?

2. Why wouldn’t you accelerate the cash flow from the grant by financing your SR ED claim?


SR ED financing is a boutique small industry in Canada - business owners are cautioned to work with a qualified, credible, and experience party who will ensure they are maximizing financing capabilities under the program. Naturally, any firm can wait for its refund , but using the cash from financing your claim allows you to move on to new opportunities in your business, including even more investments in r&d. 

 

Typically companies investing in research are in highly competitive industries, and rather than considering external equity this type of financing is simply one way of increasing value and time to market without the dilution of additional ownership to your company. Utilizing internal cash resources in the early stage of growth allows you to increase the value of your firm at a later point.

Companies financing their r&d claims use funds for a variety of reasons - that might include further research, general working capital purposes, marketing, new employee hires, or geographical expansion.

 

How Does The SR&ED Financing Application Process Work

 

 Business owners and their financial mgr's should view the financing process as the most simple of loan applications. A minimum amount of the claim is typically $100,000.00. With a client's full cooperation we have had clients financing in plays in a week or two, sometimes sooner. Typical loan amounts are in the 70% range based on your total claim. Simple business application information applies, ie years in business, articles of incorporation, etc,

No payments are made for the duration of the financing! The loan interest accrues and is deducted from the final payment by the government of your claim . Your current lender security stays in place, and significantly less emphasis is paid to typical bank focus on personal guarantees, net worth of principals, etc. A track record in previous SR&ED claims is helpful, but not necessary, and firm time claimants may apply to fund their claims.

It should not come as a surprise that certain other refundable tax credit programs can also be financed, they include:

 

 

Digital Multimedia Tax Credits

E-Business Development

Multimedia Gaming

Film Tax Credits in Many Canadian Provinces


In summary, Canadian firms that are eligible to file an SR ED claim should do so. What firm would not want to receive a cash non-repayable cheque from Ottawa! If you can wait for the funding, and don’t need additional cash flow, great. That's why sred tax credit loans make sense.

 

If you wish to arrange interim financing for your claim enlist the services of a trusted and credible SR ED financier. In a matter of a couple of weeks, your working capital and cash flow will be augmented vis a vis your SR ED financing. SR ED Financing and factoring - a great Canadian alternative financing strategy



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.







7 Park Avenue Financial/Copyright/2020


















































Your Most Complete Guide to SR&ED Financing & SR&ED Loan Success In Canada



Saturday, June 13, 2020

Need Turnaround Financing Or A Restructuring Loan ?















Turnaround financing and business refinance
solutions are often required when your company has been on the rise... and then, unfortunately, a fall situation. Turnaround finance typically requires restructuring loan, or loans, of some type, in combination with performance changes in your business. It's all about fixing a business! Let's dig in.

Well managed companies that have a proper business plan and cash flow forecasts are rarely caught totally off guard in a liquidity crisis ( pandemics excluded ! ) and often can reverse very negative financial results. If your management team is not seasoned your company has to get help on how to survive a potential insolvency crisis.

The ability to successfully complete your business turnaround via restructuring and turnaround financing will put your firm back on solid ground. Financial recovery is ' time-sensitive ' to say the least so our ability to select and work with the right firm is ' job 1 '! Every industry has unique financing needs and you need a firm with a track record of business financial success to deliver on restructuring loans that will work to your benefit.

Leading experts such as KPMG, world-renowned for turnaround advise that turnaround and restructuring is really a 3 step or 3 phased approach for the restructuring of a company - addressing the strategic crisis, addressing the sales and profit crisis, and then the fix on your liquidity crunch for funding a business.


Challenges in the turn around abound, especially since in a turn around .especially when it comes to SME COMMERCIAL FINANCE needs, new equity/owner capital is often difficult if not impossible to acquire. So that lack of money must come from operating assets and sales. The ability to maintain sales and increase profits is of course also key to your cash flow problems.



Safe to say that owners/mgrs have to recognize the issues that arose prior to a turnaround need - they include issues such as costs in the business, mgmt/employee performance, or lower sales. Naturally, those types of issues, combined with a poor asset and sales finance strategy are typically the key issues.



Key signs of a poor finance strategy being in place are your inability to buy new needed assets , inability to meet fixed cost commitments, and loan and lease default scenarios.

Typically owners and management will notice trends in costs and sales revenue that require some sort of corrective action. In many cases, timely attention to those areas will save any sort of formal insolvency steps being taken.

This is when a hard look at your business needs to taken, and quickly. That's a look at the overall structure of the company, and that typically involves your vendors, all owners, and any other stakeholders such as key employees and of course your current lenders. You are looking for ' the fix ' and may possibly need outside help.

A good management team can often take informal internal steps to save a good business, but as we have stated, outside help should probably be considered. The ability to have time to restructure your firm on your own is always less costly and allows you to have maximum flexibility in negotiation with third parties such as banks, etc.



Implementing a Restructuring Plan and a Corporate Restructuring 

 


During this time owners and financial managers must address all the operating issues within the business, such as accounting, administration, and the management of working capital. Never has the role of financial and administrative staff been so crucial as the ability to provide financial results and cash flow forecasts for owners and lenders.



There has never been a more critical time to accelerate collection of receivables and taking a hard look at inventory turns, and the overall value of inventory, which in many cases can be in various stages of production. This entire process in well run or financially distressed companies is called the ' cash conversion cycle ' and measures the travel of money as it flows through your firm. Solving cash flow problems and timing of asset conversion to cash is key.

If a company is managing the turnaround internally on its own outside lending has to be evaluated, either through existing lenders or new sources of business capital. One of the quickest methods to accelerate cash is considering an accounts receivable financing facility, sometimes known as factoring, although the word ' FACTORING' has many versions. At 7 Park Avenue Financial we recommend CONFIDENTIAL RECEIVABLE FINANCING, allow your firm to bill and collect your own receivables while generating immediate cash flow on all sales.

An internal focus on fixing the problem allows your company to avoid formal restructuring, especially when a bank has put your account into the ' special loans ' category, often requiring a forbearance agreement to give you the much needed time we have been talking about. Those formal proceedings such as CCAA, RECEIVERSHIP, PROPOSAL TO CREDITORS, DEBTOR IN POSSESSION, etc. all involve very costly and time-consuming measures. It goes without saying, but we will say it, that negotiating financing during formal types of insolvency is highly difficult!




In some cases companies that have made an investment in r&d capital should consider factoring their SR&ED claim. Another solid strategy we've implemented is the sale-leaseback finance process, allowing you to generate cash flow from owned assets while at the same time retaining the use of those assets. Cash conservation should be a key management focus, evaluating all possible options.



Many businesses get to the ' crisis ' situation without ever having prepared a proper business plan and cash flow plan. Suffice to say that now is the time to do that! That financial forecast and plan will determine where turnaround finance is needed and how it could be achieved. Those types of efforts will determine where cash will come from and how and when it will be used.



There is a great story around a fellow named Henry Frick - In 1871 he borrowed through good and bad times to acquire and grow businesses. His secret? It might well come from the actual bank notes from Thomas Mellon of Mellon bank - a bank U.S. money center bank. Those notes? They read ' land is good ... the ovens are well built, manager on the job all day... keeps books in the evening... knows his business’!



There often emerges a clear ' pecking order ' in who or what needs to be paid and addressed in a business refinancing. That list of key players is pretty short - government obligations, key suppliers, and utilities/rent!



For those customers with bank facilities in place, they are of course forced to address the turnaround when a demand loan is called. An asset loan is often the solution that ' takes out ' the bank and provides an interim financing solution. At the end of the day it's all about being able to leverage assets via asset based lending type solutions that will allow you to put an operating plan in place while still retaining some balance sheet strength.

Asset based lending facilities which typically come from non bank lenders allow your refinance assets and move to recovery. ABL financing works in all scenarios, whether a firm is restructuring or not , and provides your firm with maximum liquidity for all assets as well as the ability to monetize sales.


SUMMARY OF TURNAROUND FINANCING SOLUTIONS :


Turnaround finance Solutions that are available are diverse - They include:



Asset based bridge loan on assets



Asset-based revolving credit facility - combines A/R, inventory and equipment and real estate into one business credit line



Tax credit finance



A/R financing


Purchase Order Financing
/ Contract Finance



Sale leaseback lease/loan on unencumbered assets



Sales/Royalty finance



Restructuring Advisor Assistance


At 7 Park Avenue Financial, we focus on the turnaround task at hand, helping you plan and facilitate a restructuring that works for all vested parties. That might include cash flow planning and financing, negotiating with current senior lenders and other secured lenders, as well as vendors/suppliers. Raising business capital and funding through this process requires experience and the ability to move quickly when your firm needs it most. Many firms and industries have different needs and circumstances.

At the end of the day it's all about the preservation of the true value in your company and it's future, ensuring the company transformation process works. That comes from your work on implementing costs and sales analysis, as well as ensuring you have a financing partner in place to optimize cash flow and working capital. Your ability to take action in turnaround planning to address lower sales or cash flow generation is key to the turnaround.



If your business is facing operating losses and other issues requiring business refinancing seek out and speak to a trusted, credible and experienced Canadian business financing advisor and restructuring consultant for help in asset loan and cash flow needs. Welcome to the turnaround 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. 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.







7 Park Avenue Financial/Copyright/2020































Need Turnaround Financing Or A Restructuring Loan ?






Need Turnaround Financing Or A Restructuring Loan

























































































Wednesday, June 10, 2020

Purchase Order Financing In Canada











THE PURCHASE ORDER FINANCE SOLUTION :



Purchase Order financing, as well as inventory financing, is two relatively new alternative financing solutions in the Canadian business environment. These two solutions provide additional flexibility when combined with traditional financing sources provided by your Canadian chartered bank or independent finance firm. Think of P O Financing as a short term finance options, allowing you to access capital to pay vendors and suppliers when you have a verifiable purchase order or contract.


WHAT IS PURCHASE ORDER FINANCING




It's a unique source of capital without giving up  equity. In P O Finance its all about the transaction specifically, providing you with the liquidity to grow your company without taking on additional debt. New clients at 7 Park Avenue Financial have quickly found that their current banking and funding arrangements formula are well beyond what they need in immediate financing. Let’s dig in.



P O Financing works very well in work-out situations, where the borrower’s existing bank/s do not want to finance all the purchase of the inventory as it goes beyond the borrowing formula set by the bank.



Traditional business and bank lending in Canada typically is unable to meet the SME need for financing of large purchase orders and contracts, and most clients we meet can't satisfy the bank requirements of collateral, strong financial statements, external guarantees, etc. Industry experts say that a significant percentage of all businesses requiring SME COMMERCIAL FINANCE solutions are constantly worrying about their cash flow, let alone the cash flowing of large new orders. Enter the P O FINANCE solution.


Who Uses Purchase Order Lending Facilities?


Growing and smaller and medium-sized businesses that have access to revenues otherwise not financeable utilize PO Finance - Your firm might not be able to generate the cash flow investment in a/r and inventory that comes with larger orders and contracts. The types of firms that use P O FINANCE are manufacturers, and distributors, as well as those firms that have an import/export business model. Typical clients looking for this type of creative financing have large bulges in incoming orders or some seasonality attached to their business.


Traditional business financing in the context of working capital and cash flow revolves of course around the traditional current assets of receivable and inventory. Even if your firm is well-financed and has a traditional bank line of operating credit you may have challenges in fulfilling large orders and contracts. This challenge becomes equally daunting when you don’t have traditional financing, so the ability to generate cash to fulfill larger orders and contracts becomes seemingly impossible. Utilizing P O Finance allows you to take on larger orders without the commitment of a debt financing/loan solution.


Purchase order financing/purchase order loans can provide you with the capital to fill those large orders and contracts, and, if properly put in place; can be very complimentary to your current financing.


As we have noted the concept of purchase order financing, aka ‘P.O. Financing ‘is a relatively speaking, new phenomenon in Canada.


HOW DOES P O FINANCING WORK?




So how do P O Loans work? Simply speaking financing is put in place to cover your material costs and direct labour costs, which are of course a significant part of your order or contract. We can safely say in many businesses that is 60-70% of the total order or contract based on most gross margins in any industry.

The purchase order funding process begins on your acceptance of an order from a verifiable customer. In the majority of these cases, clients of 7 PARK AVENUE FINANCIAL require financing because our client's supplier requires payment in advance. The working capital cycle has now kicked in! Most clients know that full payment from their client won't be received for probably another 60-90  days. Business owners of course do not want to lose the order and are typically unable to obtain Canadian chartered bank financing based on whatever their current financial position is.

The verified purchase order represents opportunity and value though - it simply requires accelerated funding. So in the P O FINANCE process your supplier is paid either by direct cash or in some cases a letter of credit with conditions related to your purchase order re-delivery, amount, pricing, etc. Key to P O Finance approval is your ability to present your company and management experience. It's safe to say the complexity of this type of financing is why it is more costly - there are a number of moving parts: timeline around the order and delivery, credit risk, etc.




Purchase order lenders distinguish themselves by being experts in the area of alternative finance. They have the expertise and ability to look at the entire order cycle, including the creditworthiness and legitimacy of your supplier/suppliers.

What Does The P O FINANCE Company Look For In Your Transaction? Applying For Purchase Order Financing



As we have mentioned P O FINANCE is a more expensive form of financing so your firm must be able to sustain the gross profit margins that satisfy your profits and the financing cost in the transaction. You should be able to provide the following at the commencement of your purchase order finance financing request:

Supplier Invoicing

Your firm's sample invoice to the customer

General business information such as financials, legal name of your company, etc



Your firm, therefore, now has the working capital to finance your production and fund purchase orders. What’s left of course is essentially the profit on your P.O. or contract.


While it sounds relatively simple and easy we would point out some key critical issues that will allow the Canadian business owner and financial manager to determine if his or her firm qualifies for such financing. We can first of all say there has to be sufficient proof that your purchase order or contract is with a valid, creditworthy party. Naturally, if there is any doubt that your order might not get paid, or that the customer is not creditworthy that precludes the successful completion of any purchase order financing.


You should also not view the purchase order financing as a long term financing solution, it is not that. The funds are generally repaid immediately when you have completed your order/contract.

PURCHASE ORDER FINANCING VS. FACTORING


There are also some technical issues that need to be addressed if you have secured financing arrangements in place already. For example, if your firm has a bank line of credit they would be required to acknowledge the security that is taken in the Purchase order and resulting receivables that you create out of that order.


In our own experience Purchase order financing frankly works best when there is not a secured lender in place already, but that’s just our firm’s observation. Additionally, on occasion, certain other collateral or personal guarantees might be required. We would hasten to add that if you have already provided guarantees to the bank or other firms it would seem logical that you would provide them on the purchase order financing, which is somewhat of a riskier transaction for the lender.

Most clients at 7 Park Avenue Financial realize that purchase order finance companies are really providing a one-stop funding that takes you all the way from the order to the collection of the receivable. Note that P O loans that allow you to fund purchase orders is often very well received by suppliers who know they are going to be paid. Also government purchase order financing is also available.


Another very critical point is the whole issue of gross margin. The issues are that you need good gross margins to complete purchase order financing! A firm that is in low margin very commodity-oriented business is not a strong candidate for P.O. Financing, because the combination of cost of goods, labour, overhead costs, and financing costs of the financing leaves very little for the business owner. So categorically good gross margins make a much better P.O. Financing deal. Costs in P O FINANCE tend to be different for each transaction based on a number of factors including the cost of capital, time to complete the order, etc. International purchase order financing may also bring new complexities to your transaction regarding sovereign risk.

So for the business owner and financial manager looking at purchase order financing lenders it is important to weigh the costs and benefits of your transaction. In many cases larger P O 's and contracts are a key part of company growth plans so they are prepared to forgo some profit to achieve sales goals. In many cases traditional financing simply can't react quickly enough to satisfy the timelines of your order. So alternative finance solutions such as P O Finance, Inventory Financing and A/R financing solve your financing need.. quickly.


So why has this type of financing become popular – that’s fairly easy to understand. First of all the current Canadian business financing environment is challenging – therefore any alternative financing vehicle has a strong chance of being embraced and becoming more popular. After that it simply makes sense that p.o. financing can be very successful for your firm if it gives your company working capital you didn’t have, , it allows you to grow and profit at greater levels, and overall improves your competitive positioning within your industry.


We strongly recommend that if you consider Purchase order financing that you enlist the services of a trusted, credible and experienced Canadian Business Financing Advisor with a track record of business finance success who can assist in maximizing your cash flow and working capital with this unique innovative type of financing.






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.







7 Park Avenue Financial/Copyright/2020




















Purchase Order Financing In Canada