OVERVIEW – Information on business finance options in Canada. Financing sales via the right operating financing solutions is a winning business strategy
Business finance options
in Canada often involve focus and need to increase sales revenues. There is a limited number of ‘ Operating financing’ options but the selective use of one or a combination of these creates a ‘ win win’ strategy for sales and profits. Let’s DIG IN.
More often than not it’s the inconsistency of sales growth that drives financing needs. These ‘ spikes’ in revenues often place demands on other parts of the business such as asset acquisition requirements, payrolls, etc.
The full blown solution to this challenge is a business line of credit that covers operating financing needs. The ability to borrow against existing receivables and inventory in times of sales growth is critical ; inability to finance your working capital needs leads to the proverbial business ‘ cash flow crunch ‘.
Financing receivables and inventory is accomplished via bank credit lines, invoice financing, and a combo of these to via an asset based non bank business line of credit.
This latter solution is called an ‘ ABL ‘ – the industry’s acronym for asset based lending. In fact the true asset working capital facility actually can include your equipment / fixed assets as borrowing collateral. In the last few years this type of lending in Canada has seen at least double digit growth, and has become a very competitive niche lending business in Canada.
In terms of borrowing power Canadian banks typically use a 75% borrowing margin – asset based lenders more often than not are comfortable with 90% borrowing. Simply speaking, using the ABL solution as an example , a 10,000 invoice for example allows borrowers to access 9000$ in cash flow / borrowing power as soon as the invoice is created and the sale is made.
While Cdn banks take a floating charge over all the assets of your business asset based lenders price these transactions differently. While pricing is a key issue in asset based credit vs. the bank ( bank pricing is much less ) often the key factor in choosing such a non bank facility is the access to capital, given stringent bank requirements and borrowing caps.
(Note that generally speaking asset credit lines are often unlimited inn size- capped only by your sales levels, given those sales create ongoing receivables borrowing power) Simply speaking – banks have credit limits on operating facilities, asset based financiers don’t.
Traditional non bank A/R financing, typically called ‘ factoring’ often has a requirement that your clients be notified about the financing. The way around this is to consider a CONFIDENTIAL RECEIVABLE FINANCE solution, which empowers your firm to bill, collect (and borrow!) against all or some of your receivables generated by sales. The ability to access the right facility and not get ‘ locked in’ is also important. Here advisory expertise is recommended.
While certainly industries are touted as being the perfect candidates for A/R finance the reality is that every type of business and industry that generates commercial (“B2B”) sales qualified for financing.
If you’re looking for the most sensible option to increase operating financing requirements seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
who can assist you with your cash flow needs.
Stan Prokop – founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years – Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info & Contact Details :
7 PARK AVENUE FINANCIAL = CANADIAN OPERATING FINANCING EXPERTISE
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Office = 905 829 2653
‘ 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.
7 Park Avenue Financial
Canadian Business Financing