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Purchase Order financing ( aka PO financing)

PO financing can be a fantastic tool...for some businesses. PO financing is a short term loan. It's a loan from a funder who acquires goods on behalf ofa company who has obtained a Purchase Order that they cannot themselves afford to buy. The PO funder agrees to buy the goods on a company's behalf and retains ownership of the product until it's delivered. At the point of delivery, either the short term loan is discounted per the fee's and interest and the remainder is paid to the initial borrower. OR...credit is extended to the originator of the PO for another short term - another invoice is created and the funder, not the borrower, takes ownership of the this credit receivable. In this case, based on the terms of the receivable the funder will pay to the primary borrower ( recipient of the PO ) a percentage of the total funds to the borrower. When the final AR credit invoice is paid by the purchase order owner, the remainder of the funds are transmitted to the borrower less the AR fee's and interest. So, in this later case a borrower has engaged in two financing facility's ( combined they are referred to supply chain financing ) where the PO was financed and the AR was financed too. PO financing isn't necessarily seasonal either however, the situation may be seasonal for your company – in fact this is an excellent example of when to utilize a PO facility - ebbs and flows in your Sales cycle; What are the risks and how are they managed by the PO funder. The answer lies with the ‘trade’ quality or retail strength behind the PO. The PO issuer is often only one half of the equation …but sometimes they're all that matters interestingly enough. So, you can be forgiven if you thought it has to do with the quality of the ‘borrower’ - often they are marginally equated in an arrangement. Sometimes, more important than the borower is the value and resale of the inventory - is it easily marketable’? Alternatively, the borrower may be very important in the equation if they have to apply value-add to the inventory. For example, If a manufacturer is acquiring raw materials to the PO financing need, both borrower and buyer are equally assessed. Let me explain....If the borrower ( PO finance requester ) is buying materials to complete a finished marketable product, the funder needs to assess the entire supply chain including the borrower ensuring the ‘project’ is feasible and the borrower has the financial strength and skill sets to complete the manufacture/assembly of the project in order to fully comply and execute the PO. Scenario: Your business is a wholesaler and you’ve made trades over the last year of $1M. current stock is level is, say 45 days….bam! a retailer likes your new niche product and wants it bad – aren’t you lucky!!! Retailer extends a blanket PO for 12 months of 10MM dollars. This is the ideal scenario ( but the PO can be a straight one-time transaction also ). What are some of the keys to this project? Answer, strength of the PO issuer. If they are strong, what else matters in this scenario where you basically order the finished product and cross-dock it ( if at all as you may just ship from mfg-to-customer and avoid extra handling and freight costs). Answer, what are the terms of the deal AND what is the marketability of the product if the project fails beyond control after the inventory has been paid for? Let’s assume the product is marketable…the terms of the deal ( the PO Issuer says 60 days terms ) what do you do? Answer – accept it! Why…the PO finance company will factor that account receivable so that you have cash flows to keep the business operating after the inventory has been delivered to the buyer – the originator of the PO. Costs? PO financing is more risky than Accounts Receivable financing so you can expect the costs to be different. This may sound surprising since it’s the same company financing the ‘supply chain’ however, each borrowing need has a different risk rating hence cost variance. Simply, expect PO financing to be 1.5 - 3 %/monthly which is more than the cost of the Accounts Receivable. The AR may be 1-2%. So, to conclude, it’s imperative the wholesaler ( borrower ) has material margins in the Sales price. If a PO supply chain order costs 10 – 20% of the order ( a complete Sales cycle may be 120 days plus ), your prepared in advance to price your product under this scenario. Of course this is a wide open example…always trust a written offer before pricing your product. As you may have questioned, can a blanket PO been financed multiple times over the year…the likely answer is YES and 3 or 4 times over the year also so you can expect financing on the $1MM order example discussed earlier as such. But not for 20 times over the year causes the minimum funding amount per transaction to be too small for most PO funders and would be declined. While I’m thinking of it another important note to be clear about on PO financing is that you can have multiple origins per PO so don’t discard your Sale until you’ve asked us if your situation is applicable to a PO financing offer. Often it is. There are limitless scenario’s …regardless of country of origin. Contact me about your PO or inventory needs to see how we can help with your cash flow needs, often they can be financed. Greg LaBella is business financing advisor and debt originator

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Beta factor and financing

Where does your company sit on the risk volatility barometer? In short...does your business nominally change when the market does or, inversely, is your business significantly affected with changes in your market. The answer may not matter when your cash flow is poised to be negative in the foreseeable future so alternate debt/equity financing is necessary now. If however, your company, for instance, moves with the market and you see a material market move upwards in the next several quarters...you ought to be seeking financing now also, but for different reasons. First to market always takes the prize – elevated margins. Two, optimum rates/terms/conditions etc. are extended to the healthiest balance sheets...that’s the time to retain credit. Company’s typically don’t request financing unless they have a need; either pro or reactive. If you are pro to market growth, your lending opportunity is inherently tied to both your assets and your forecast. If you are reactive, it’s time to get to work now and head it off when lenders regard your financials as opposed to borrowers who are either ‘at or underwater’ – too late and no appetite. Small business owners/managers need to focus on the business, while a trusted and experienced financing advisor looks after your funding needs. Seek a debt financing specialist while you’re still in control and retain your margins while the cycles play themselves out - you will be positioned for the changes accordingly. Inevitably, all sectors are hilly; that cannot change however, being positioned per your short/mid term forecast can give you more control over your competition then themselves. During downturns, liquidity allows for takeovers thus increasing your market share via undervalued assets – be poised for that takeover, regardless of whether you were planning for it...the competition often looks for ‘saviors / bailouts’ when they mis-read and fail to prepare for change. Beta Factor : 1. Now you’re in control greg@7parkavenuefinancial.com 905 302 4171 or 905 829 2653

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Builders mortgage – Commercial or Residential Financing.  Compilation

Looking for mortgage funding between $500k - $10mm for your residential or commercial building project? Raising the capital for your project is a specialty that can only be trusted to the few financers who are skilled at packaging. Packaging is only part of the plan; equally important are the relationships we’ve built with our underwriters; quick action and commitments with limited conditions, a borrowers dream. Here are the criteria; History – either you’ve successfully completed a project before or you have the builder who will complete the project on your behalf. After that, it’s your investment. Full story and what’s been acquired and the entire project cost layout – timelines, drawings, approvals/permits and local map illustrating infrastructure if any. Are you marketing your resales or building for your own? Be prepared to provide a ‘sales package’ if you’re flow throughing your build. Absorption rate (reselling) / Appraisals must accompany your application so engage an accredited appraiser – Appraisers Canada registered...or better yet, ask your lender who they prefer this way you are not wasting your time and money. Credit quality – private, public or institutional...we solve each of these cases for you. If you’re just looking to refinance your commercial property, we fund those transactions often within 48 hours. Historical Rent rolls/ Occupancy rate, current mortgage terms, recent financials - we can prepare a plan with you. We can fund at or near prime. There are no mortgage limits in this space...that’s our years of experience and relationship building that assures your funding success. There are lenders for each of your needs, don’t guess who you should be working with to attain a mortgage on your project, trust an experienced advisor for your funding needs. Greg LaBella - greg@7parkavenuefinancial.com

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Bridge financing / alternative financing for Canadian small business Does your co. have a project that is very margin friendly but the funds aren’t there to build it? Conversely, is a debt obligation coming due that is going to starve your cash flow? Both common issues and both are financeable. Underwriters will always perform responsible due diligence so prepare your business case, know your debts and even more importantly, explain your ‘take out’ program so that the lender is confident he’s being repaid. We will build your proposal and cash flow profile with you then present to our underwriters. No guessing or dancing with your banker as we are results driven. Financing in ABL, factoring, PO/Inventory and all equipment and lease financing needs...and profitability with poor cash flow struggles we can finance too! Trusted financing advisors. Check out our History! greg@7parkavenuefinancial.com

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Vendor leasing programs

A vendor leasing package is best described on the radio ad put out by the Brick furniture company – don’t pay a cent event! This program in short is a vendor leasing program (not based on rates or payment/term practices, simply a leasing opportunity) but it’s designed for consumers not resellers. How? Via the leasing/credit that is extended to the customer from a separate funding entity. Here’s what you want to know when your sales are B2B, not B2C as is the program via the Brick noted above that we are acutely familiar with. B2B means we are creating a lease offering to a business, not a consumer. Businesses categorize their leases based on their accountant’s advice– either an Operating or Capital lease based on the valuation of the asset(s) and the accounting practice that is best suited for your companies needs. Capital lease means you are intending to own the assets therefore show them on the balance sheet and you will be ‘writing’ down/depreciating them too which has tax implications that your accountant will properly advise on. The Operating lease simply means that you are ‘expensing’ the costs monthly and they do not show under the asset section on the balance sheet – same thing, discuss with your accountant the tax benefits of this practice also. Back to the lease and the point about the valuation or cost to purchase. This means that the cost of the lease to purchase has governing thresholds that separate the lease from a basic lease credit application over to ‘financials’ required by the borrower in order to obtain a lease offering. Generally, assets totalling or above $50,000 will require financials from the co. seeking to acquire them from the vendor. The Vendor management company is the only one who will obtain/request these financials, not the vendor – they will not see a buyer’s financials. Usually a guarantee will be required regardless of the size of purchase so don’t be alarmed when a borrower is asked to sign a PG. BTW, if the asset sale is less than $50,000 likely it’s a simple lease application form not requiring financials – all guaranteed though, that never changes. This program has two philosophies behind them: Quick access to credit and; the ability to up sell since the purchase is not a large single cash outlay but instead, it’s many small one’s smoothing the cash flow over time for the borrower. Does this cost anything to offer your clients on your selling floor? A leasing funder earns their fee’s(if any) and revenues (interest) from the client so it’s the most cost effective way of increasing sales...and your sales staff will love you for it too. Having said that, leasing is often more expensive then bank credit, but when it comes to bigger ticket items they can be very competitive for your business, easier to access credit and they do not inhibit or restrict your current operating lines you may already have with the bank. I recommend this program for minimum Sales orders over $2000; otherwise it can be cost prohibitive particularly for business. Finally, Vendor leasing programs extends credibility to your company. How? By way of their offering, they are saying they have reviewed the general viability of your company and products, and said ‘yes’ we will pay the seller cash today, we trust they will deliver a fair product to the borrower as agreed too. This is credibility you deserve and have earned and may be the competitive edge you needed to drive traffic. Need more info.? http://www.7parkavenuefinancial.com/vendor_financing_program_leasing_plan_customer.html Greg LaBella greg@7parkavenuefinancial.com

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Special loans and the exit strategy

First thing to know about ‘special loans’ is you’re not alone! This happens to a great number of very good and well managed companies that we regularly have the privilege of working with blending new financing during, what’s typically, a trough period. I say trough because the company needs to turn the down-cycle around in order to increase the ratios and most often in order to do this, a company requires either restructuring or new funding. We originate the funds, not correct your structure. For those who don’t know what ‘special loans’ are, it’s simply a separate group of bank financing risk officers who assist (involve themselves in your business) with your business loan ratio’s as a company has recently become non-compliant with the bank’s risk department which may include default. Simply put, you’ve fallen below the safe threshold on your working capital limits and your short term assets have fallen, ratio wise, below your short term liabilities. This minimum figure to avoid special loans is often regarded as 1.25:1. It’s not uncommon to be surprised and get that ‘demand payment’ or ‘loan recall’ letter regardless of your history and success which is clearly not the case today. While the bank is now monitoring your business very closely, you have your CFO look for alternative financing – Asset Based Lending (ABL financing) or components of likely offer the financing opportunity for your business. Across the balance sheet there are many assets that can be funded in creative ways so that you don’t have to keep cutting expenses. Combinations of PO to AR financing supported by inventory and existing hard assets/equipment can provide the security to fund a business’ existing credit lines they’re use too, acquire new equipment and even increase cash flow hence, ramp up sales over the next year and boost a company’s ratio limits moving out of special loans. This happens, just not always back with your old banker. Sometimes this type of financing can come close to matching your lending lines when the banks ratios are below their risk tolerance. These loans are not meant to take-out the banks permanently as the banks still have the best lending rates for SME however, they are meant to bridge your business back to health. Lastly, it’s not uncommon to recognize this banking relationship is over and a new bank will be sought out to restart the traditional lines you were accustomed too. Regardless of institutional or non bank funding needs contact only an expert in both financing transactions. We originate financing for companies who, at times, require non bank financing, keeping your business in business.

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10 posts! it seems like 'posting' is becoming a regular habit...i hope others are finding value in the 'write-ups' as i do if for you!

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Hiring a business accountant....from a non-accountant

When should you seek the advice of your accountant, for non accounting inquiries? Accountants perform many tasks, ultimately keeping the owner/shareholders/stake holders current on the financial status of the company. They’re not likely going to guide you on your sales plans, operational techniques, marketing strategies or HR matters. What they will provide is a snap shot of your financial position. Stronger accounting teams will automatically provide varying ratio’s indicating the health of the company and in some instances, comparative analysis to other like companies. Who usually asks their accountant for advice? Without limiting the enormity of this list but qualifying the likely group of owners who will seek their advice, those who ask for their accountants input and advice are those that respect their accountant. Fact; An accountant, directly can save a company. As a business advisor to private co’s on their financing needs, most often we receive referrals from accountants when their clients have financial headwinds or require guidance on debt capital raise. Also, fast growing companies or profitable but strained cash flow company’s also need financial advisory service bridging the gap on large aggressive ‘money now’ projects. These same accountants can provide direction for companies in all types of cash flow needs – whether they are projecting negative cash flow over the coming year or reporting their limited assets to expand when the next project is too big for the company’s assets. Though we have saved a few co after bankruptcy too but that’s not the focus here. Even with savvy accountants, company’s do falter and hit rough patches, often referred to as growing pains or wake up reminders. Only the invested accountant will have a client concern well beyond their billing hours to ensure the stability of the company, often in advance of the owner. They live and breathe patterns and trends so their foresight comes from experience, don’t think its hype and hysteria without merit when your trusted accountant communicates financial concerns ahead of time. I cannot emphasize the importance of hiring a recommended professional accountant or group to oversee your accounting needs as their value goes beyond the annual financial reports and tax return filings. Request referrals from their clients too. Company managers ask us all the time and we completely respect and honour this most important question. Btw, it’s very costly to assist companies who are on the verge of a financial collapse, who were failed by their ‘accountant’ who lacked both the professionalism and the ability to competently prepare financials...there seems to be a synergy between these like partners also. An invested and insightful accountant works to avoid downward spirals well in advance and most often ensures financial stability by surrounding themselves with experienced and like minded professionals. Your business is too important to not have the best accounting team, and it’s worth it. Here’s the Standard checklist CPA put out for perspective clients seeking their recommendations. This list easily applies to most professional advisory services. http://www.icao.on.ca/MediaRoom/MediaReleases/2007mReleases/1009page7338.aspx Business advisor originating responsible and sound financing across Canada

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Asset based lending...seeking credit for your assets

The ABL means ‘YOU’ can obtain debt financing for your business Most likely you are reading this because your company has just convened a meeting and finance has been tasked to shore up the cash flow – too many ‘red’ signals ahead. Reasons can be varied; major inventory expansion, a significant debtor has pushed back their terms on you, project stall indicating postponement on payment, your equipment needs an overhaul and next year’s budget is too late. What are your options? One, cash flow models are designed around these types of what we call, very real business cycles, that most often can either be financed or bridged. Since every business is unique and many co’s have some combination of the following assets; inventory, receivables and equipment each financing facility will have some uniqueness to your structure also. Quite often one of these assets is lacking causing for limitations in financing as the three amigo’s make up for a ‘perfect’ scenario...many co’s just aren’t that perfect. Based on your company’s business structure and asset make-up, a non-bank finance company will fund your cash flow needs margining a percentage of each class. For example, 90% of your Receivables, 30-80% of your inventory and varying degrees percentage potentially on your equipment – fair market value, orderly liquidation or salvage value. Variable s that affects your inventory financing will be its re-saleable value (cost or market value but the lower of the two). Quick and easy liquidation type inventories will garner the higher borrowing ratios. Ditto for equipment and of course your company’s receivables will typically allow for the highest advance rates of the three ABL tools. Oh ya, take advantage of confidential receivable financing too, this practice maintains the integrity your firm deserves. All cash flow challenged company’s objective is to optimize their debt opportunities and minimize their borrowing costs, we get that. Trust an experienced and expert ABL origination group, providing all Canadian business type financing, right across the country for over 30 years. Our track record - http://www.7parkavenuefinancial.com/FINANCING_TRACK_RECORD.html Call 905 829 2653 or greg@7parkavenuefinancial.com

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Leasing...your new salesman!

Have you been looking for a creative way to increase your sales without depleting your cash flow or your existing business credit line? Maybe you don’t have either facility in place but the objective remains the same. Well, there is a way via customer leasing designed for your business. Strong business leaders will strategize on each of their investments ensuring the right returns. This means after the company has completed a thorough business assessment evaluating their next investment ensuring the company’s financial health and future prosperity, they can move swiftly based on their current structure. Effectively, utilizing the lease option leaves untapped any pre-authorized business credit so that a company maintains a liquidity line or revolver in the event they need for other strategies while acquiring more assets against their cash flow projections. By offering leasing right on your selling floor to your customers, you’ve effectively moved the ‘maybe’ to a ‘yes’ client. Here’s your option! Lease to own it or in the vendors case, lease to sell it! Really, if you sell furniture or electronic equipment or most any tangibles that typically another company or consumer can re-use and/or can resell, you have a great chance of leasing that product out to the marketplace. Ideally, commercial sales work best however there are definitely opportunities that provide leasing to the retail market. What does it take to provide this type of credit to your clients? Well, generally they have to have decent/good credit, and typically a minimum order size. Ideally sales orders over $2000 allows for reasonable financing rates and typically with good credit and volume size those rates can decline and increase the sales close process.

How can your business institute this type of ‘new’ salesman to your floor? The program can offer an on-line credit application basically answering the ‘credit’ question almost immediately with a completed leasing application, customers can find out what their monthly costs would be almost immediately, often the same day but less than 24 hours. Contact only a trusted, credible and experienced Canadian business Financing Advisor with a track record of success greg@greglabella.com

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Keys to cash flow financing and working capital loans

Working capital loans can be finicky so proceed with the following read first. Highlighted are the key ingredients a business owner should address when requesting a working capital loan; Profitable (sorta) and you must have a sizeable equity stake in your business. Also, it doesn’t matter if you’re a start-up or you’ve been in business for many years...you have to show that the business can sustain this financing facility – positive cash flow. There are two main types of business structures. Keeping it simple; you’re either a cash based business or credit ��� receivables business. Working capital loans cannot be secured against cash flows in a cash based business (let’s not ‘factor’ the credit cards for this story but merchant type financing is viable with solid margins) your business needs to show that it’s profitable and can sustain the working cap loan. Let’s be mindful, guarantees are still a requisite and security comes with tangibles. If your business is new, working capital funders want to see you have garnered some assets through bank lending first and have good credit. The process from here typically is structured by your financing manager who will show via a cash flow report the ability to finance the debt. Working capital financing for going concerns. 1-2-3 it all comes to you, there’s a cash crunch or you see one coming soon. Really, this financing, either short or long term, is all about your ability to pay your debts. If your bottom line shows that the business can sustain debt even thought the funds are not there today, a business case can be made for a loan generation ultimately bridging you through this cash flow-stressed period. An u/w in this industry will know right away the strength of the industry – growing/declining etc. which supports their decision to extend working cap funds to you also. Lastly, are you profitable? Profit means a lot of things; a means to afford the loan and two, has a strong ability to manage expenses suggesting a strong management team – the intangible that must be leveraged when the team has a successful history. Remember, profitable means annualized even though your cash flow is challenged...they are independent of one another especially, and unfortunately when you count on it! Regardless if your business is either a New Venture or Going Concern, the key factors such as industry, cash or credit business, management, the plan/purpose, cash flow analysis, profitability, good credit history and the debt / equity ratio all bundle up to a funded working capital loan. Common sense lending. Experts in Canadian working capital loans. greg@7parkaveneufinancial.com

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Cash Flow tips

Some of the greatest and long serving firms today have also had to deal with this inevitable question so don’t be embarrassed by any means of cash flow problems. However, you should be embarrassed if you forecasted an issue and didn’t do anything about it. Honesty can often be your best planner. When you forecast and work through the touch questions, at least 24 months out a company can often deflect the ugly. Don’t be afraid to create at least three different models – the good, the bad (likely) and the ugly! Where there is a reasonable risk… start planning for it now. What this means regarding ‘planning’ is to first recognize when cash-flows may pose a problem. From that answer can a CFO or CEO look at what type of action plans can be created to off-set that cash squeeze. If for instance, a Co., forecasts a short-fall 15 months out from now and it’s likely to hold for 1 or 2 quarters you can plan now to offset it. If the operating budget is created and the sales projections, in your risk model, don’t align with the cash outlays it’s time to review what’s in your tool box. What is in your tool box that can smooth cash flows? Decelerating monies can be actioned based on stress tests over the following methods: By extending your payables by 15 or 30 days does that support the cash flows? Does postponing a capital project work overall in the plan without compromising the integrity of the company’s future? Postponing or cancelling dividends resolve the matter – be careful with this one as it can dethrone management despite the practical consequences. Renegotiating your long term debts and reworking your vendor terms so that payments flow with seasonality’s may be viable without exposing too much risk to the company. Clearly you have envisioned a future cash-flow problem and exposing potential risks can draw some real ugly reactions including full recall of any debts so this strategy has to be carefully crafted in order to preserve the overall integrity of the firm. On the flip side, how can you accelerate cash receipts w/o making policy changes to your debtors and creditors and bridge those same cash flow shortages you’ve forecasted. Well, the antithesis to payables is accelerating, often due to incentives, credit via receivables. Toughening the credit policy can induce speedier payments that in it may reduce or close the cash flow gap projected altogether. Tighten inventory levels and/or drop underperforming product lines freeing up additional capital. Other option to accelerate cash flows is reduce or drop advances to contractors or limit rebates on sales volumes. Every option has consequences and of course these tough questions need to be answered before an action plan is delivered. Most importantly though, do not deny the risks and dealing with the headwinds before they occur…you’ll be surprised how many debtors (you may have to change institutions) will work with a well planned forecast. Are we are a reactive society? No doubt. Here are a few successful companies who missed the advanced signals or did not forecast and react to a reasonable risk model; Chrysler multiple times, Delorean, United Airlines, Nortel (risk to this industry was very difficult to measure but inevitably their war chest ran dry) blackberry (the trends were crystal clear) and the almighty and brilliant Reichmann brothers and one of their high flying divisions – Olympia & York Properties. Who DID react to their risk model: Ford – they truly forecasted headwinds and created the only mega car company in the US to not require a bail-out by issuing an IPO timely to the collapse of 08. This was the ideal plan their forecasts could provide, despite the costs via share dilution over obtaining institutional financing – would have been cancelled immediately upon the crisis inception due to exposure and uncertainty and they must have known that. Build your forecast and react, this will ensure a healthy balance sheet and most importantly a health cash flow statement. You won’t regret it. Lastly, avoid using the gov’t as your own cash register – taxes are not part of ‘your’ cash flow…lenders see this as risky behavior because the feds always take first position and past actions are regarded as future behaviors. Trust an experienced advisor -greg@7parkavenuefinancial.com

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Business financing methods in Canada

Business Financing for most business needs – Cash flow support and access to capital for expansion and growth are the common requirements for CFO’s and CEO’s. Regardless of the size of your business or business stage you’re in now (start up, maturing quickly or matured business cycle) you’re here to improve your cash flow and capital needs. We aim to accomplish this with you. In addition to the primary goal of running your company profitably, you also want to run it efficiently so that when you come up against the inevitable headwinds, the financing is set-up so that you immediately reduce variable and controllable costs. Margins need protecting and by managing your assets so that your cash is not tied up vis a vis new equipment purchase and, by paying creditors timely and as agreed upon with them you are in essence, establishing strong business credit. Thrust your company ahead of the competition by earning access to the least cost of money. Those businesses that have excellent cash flow are also the ones that have access to cheap money. Painful to hear because it’s the opposite thinking for those who need both – ‘cheap’ ‘capital’! There are many types of business financing alternatives that you should be aware of that are not equity dilutions keeping you in control of your business financing; Asset Based Lending (ABL), Purchase Order financing, Inventory financing, Equipment financing, Leasing/Lease back, Accounts Receivable (factoring)financing, SRED financing (film and animation) all via Secured/Unsecured Credit lines, term loans and bridge loans including combinations of each debt financing opportunity. We have created specific insight for each facility so please acquaint yourself and call us to see how we can assist you. Tackle any one or of these subject matters by clicking the link or save yourself the trouble and call me…I can answer your questions faster than you can type…most of the time anyway!!! Own your business financing destiny and ensure you have a trusted advisor who will design optimum debt financing facilities so that your focus is on growing your business. Trust only an experienced business financing advisor.

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Business financing and funding early keys...do I even start this project?

Any business owner knows to default to their banker when they have extended business financing needs. The reason they default to the bank is because of the least cost of capital and, it can be quick too if there is a regular rapport between the two of them too. I always encourage both of these programs. Here’s why; unless you inherit money you are not likely to receive capital any cheaper in the marketplace to fund your business projects then your business bank. Ok then, so why would a business owner reach out to a business advisor for financing any of their projects? Number 1 reason is cash flow. Simply, the business either does not have enough money in the bank to finance their intended project but see’s great profitability (remember this point) in their business expansion but they do not have the capital or debt ratio’s to finance a new project right now. Well, that’s according to their bank! As a business advisor we look to step up your cash flow, expand your business as you require or for that matter acquire another business. The underwriters we deal with are institutional as well as private who are sophisticated and recognize a healthy firm, strong management with healthy prospects and DO want to invest in you. Here are some of the key pieces in the business financing development review that can both help expedite the process and avoid the shock factor late into the review that you saved your time on by knowing in advance: • Review of your current finances – full recent financials. Have your accountant prepare your interims also if you are 2 quarters past your YE. • Be able to concisely communicate your project that has compelled your company towards financing it now. Where the market has affirmed your instincts and strongly suggests the business venture is viable is darn important too! This means, know your market because the lender wants to know it if they haven’t recently funded projects in your spectrum recently. • In the financials there are many ratios that are important to consider. Each industry type has its specific ratio relevance so we will not dive deep into that for now but, what often binds non-bank asset lending ratios are profit margins. Margins are often overlooked as an important key to any type of borrowing by the borrowers...you must have significant margins to overcome risk levels and extended periods of time required for financing. The reason for this is to have the profitability to fund financing over extended periods of time ensuring the business does not die on its own sword – lack of profit hence, go further into debt! • Next, do you have assets that can be monetized? Assets such as receivables, inventory, equipment, property etc. can be monetized now. Not to mention PO financing that can be a great stop gap measure in real cash flow matters on major projects. • Lastly, is Security...personal guarantee’s (PG). The PG can be avoided via an established and good business credit history. Invariably, business owners must succumb to this at one point or another. Sometimes PG’s can be avoided as some underwriters are tolerant, but Be prepared before you engage, this is very common to require this pledge in order to obtain financing if you haven’t earned the reputation already of having a good business credit risk. Check with Dun and Bradstreet if you are unsure. When it comes to alternative business financing and arranging debt financing on your own be sure to know, in addition to rates, what’s involved in the financing requirements and who to contact to ensure a quick assessment and smooth arrangement for your debt needs. Otherwise, it costs nothing to contact us to review your project with you. The project keys in this blog focus on the existing business financing; Margins, Market, Assets and Security.

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Leasing vs. a Canadian Small business loan – CSBF

When is it better to obtain a lease agreement verse a small business loan? I’d love to tell you there is one answer and finish this blog but that would be flat-out incorrect. Below is a simple and important key points guide to make a comparative but, when you’re ready to invest in your business venture or just expand your existing one, call me with your scenario and I’ll answer you based on your needs. Below are some requirements to ask yourself with helping to decide what type of financing is most suitable to you. When considering an either-or-scenario a borrower needs to ask a few questions of their business. For instance; Will my business require more than my home location to be successful? If it does and you need an office/commercial environment you will likely need an SBL/CSBF. If you only need a piece of equipment and you can run your business from home, likely the process of leasing will suffice. That doesn’t mean though that the business will be profitable sooner, just that it starts sooner and that’s all. BTW, lets not confuse leasehold improvements with leasing...they are not related at all. Simply, leasing is regular payments made to use equipment that generates, typically, revenue for your business whereas leasehold improvements are regular payments made toward the hard costs invested in your place of business that you typically do not use directly to generate revenue. Examples of leasehold improvements are the paint, plumbing and signage for the workplace your business operates out of. The process for obtaining a CSBF or Canadian small business loan requires the following: Lenders do have varying degrees of requirements but below is typically what you’ll be required to answer to when you walk in to your bank and speak to a business advisor on your own; Let’s do a check list comparative, everyone likes this method of comparison and it’s easiest to identify with when comparing similar use products.

Business plans can cost $500 or $50,000 for one of these depending on how sophisticated your plan is. Your plan may require professional marketing services evaluating a market, its size and scope etc. that a banker will want to understand before he/she seriously considers the project. Most banks want, clients coming in off the street, a minimum of 25% and up to 50% of your own skin in the business. This is for a new start-up, not a franchise. Some banks completely repel certain business industries (for example non-franchise restaurant) while others continue to lend to these same ones – just not a favourable business cycle for a specific industry to that bank. We believe the risk should be carried by the business not your personal wealth you’ve worked so carefully to build and grow. We aim to minimize your investment in the business while ensuring you have enough capital to weather normal business cycles, that’s our experience talking. Trust only an advisor who has financed your type of project...sometimes multiple times too. Find out what you really need to invest before calling your banker. We have the best financing partners in industry, we are certain of that!

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Equipment financing reducing the monthly cash flow costs.

Turn your equipment into cash savings - now...and, you’ll continue to both own the equipment and use it at the same time. Securing assets to loans is ancient history...the beauty of it though is that you can continue to go back to the proverbial well with your quality equipment both producing product and revenue for your business while you negotiate a debt deal security. For instance, a private Co. is a start-up Master Packaging Provider to the mfg industry. This Co. invests $750,000 on a multi part packaging line. In order to obtain equipment financing they must qualify for it first - this is our entry point into this business venture by the way. Once all the financing has been put in place (debt and lease financing is our specialty) the wheels are put in motion and the company secures the equipment and starts their regular monthly payments. Fast forward... the Co. has continued to grow over the following 3.5 years, paid their bills on time and now see themselves as a potential borrower once again by looking to invest in a much needed second packaging line. Great, the financiers are gung ho. It’s only been a short time period since start-up so anyone in finance knows this isn’t a going concern that has enough history to secure itself in the marketplace therefore they still come with quite a bit of risk – ease of entry into the market by competitors, copy-able and, the forecasts ahead are ‘steady’ not in an early growth stage. So what will this Co. do for financing? Glad you asked...if it was a no-brainer and the cash flow now supported the loan, contracts and PO’s were all long-term and in place, they can lease the equipment with little investment. Leasing is one common funding method and is great – provides for lower monthly outlays and postpones a material amount of the debt into the future. The normal negative side is the cost to borrow – this Co. may be in for rates anywhere between 8-18% without any additional security. Even if the cash flow supports this acquisition, is this deemed the most ‘cost effective’ method of debt financing for this Co.? Again, another great question...you guys really are a terrific audience, thank you. Lien the existing line to the lessor (sale/lease back which should be noted provides for proportionately lower financing amounts compared to lease financing on the full market value. ) and reduce their risk while optimizing the capital structure and tax benefits, hence the Co. will enjoy a reduced monthly total outlay to the financing firm. If you’ve cleared the debt security on the current packaging line and it’s completely operational and maintained this piece of equipment may be able to provide you with the best financing monthly rates without the Co. having to invest any new money in the project. How does that sound? Well, since we’ve all come to the same conclusion here, the Co. can just go down to their regular institution and obtain this funding – case closed. In some cases this is possible. But, if you want an experienced equipment financing advisor to review your options and provide the optimum solutions then you are one step closer to reducing your monthly cash flow costs and keeping your Co. liquid while the funders hold the risk. Most controllers have the knowledge to oversee various types of equipment financing, unfortunately not the time or resources to make the best equipment financing deal for the Co. ...we do that for you! Bottom line, they have a choice, so seek out and speak to a trusted, credible, experienced Canadian business financing advisor with a credible track record who can help you facilitate the most cost effective financing that has the right financing firms for your projects. Greg LaBella - Agent of 7 Park Avenue Financial http://www.7parkavenuefinancial.com/greg-labella.html