When it comes to business financing, 7 Park Avenue Financial has the competitive edge you need to build your business. In only two months – between March and April 2008 – we facilitated in excess of one million dollars in financing, evident in our public track record you can see here.
How to Get Your Canadian Business Equipment Financing Lease Approved - By Stan Prokop - 7 Park Avenue Financial
'What is my rate?' is a question I am often asked by customers when they work with us with respect to equipment and lease financing. They are surprised when I tell them that they get to pick their own rate! (All customers want the lowest rate!)
I am not trying to be facetious when we make that statement. What we are saying is that the over all credit quality of a customer, as perceived by the lender ( that's important!) is in fact set by the customer, thereby driving a final approval on rate, term and structure of the proposed financing request.
The role of the customer, or their trusted advisor is to understand the basic credit information requirements and how the overall risk to the customer and their industry will be perceived by the lender. The irony of a lot of business leasing is that the industry for the most part used historical analysis to project future ability to pay. That is a difficult concept for the customer to handle more often than not - as an example the customer may have lost some money last year, driving a negative cash flow figure. Prospects have improved, new orders are coming in, and yet the business has a problem in getting new financing.
The customer needs to ensure that the information and ' story ' make the transaction become more ' approvable'.
Critical categories in the information submission by the company are as follows:
Length of time in business
Personal credit history of the owners
Relationships with other financial institutions
Quality of the financials (Some customers submit balance sheets that don't balance!)
Additional collateral available if necessary
Summary of key financial info such as depreciation, cash flows
Positive focus on management and its background and experience
If the customer is qualified to make such a submission a solid package as per our list noted above should lend itself towards an approval at current market rates and structures. If the customer feels they are not properly qualified to make such a submission they are strongly encouraged to used a qualified intermediary who knows the industry and, more importantly, knows the specific weighting given by a lender to the above noted submission requirements.
The amount of information required around each component is more often than not determine by the size of the transaction or the lenders total exposure to that customer. In many cases small ticket transactions (those under $ 25,000.00) are adjudicated via a credit application and public reporting sources such as Equifax or Dun and Bradstreet. Typically 60-70% of all small ticket transactions are approved.
In summary, customers who want to get a prompt and of course positive lease approval should focus on providing a clean package of required information that will ensure a prompt approval based on specific industry requirements around the transaction size and asset type. Knowing that the lender will focus on future potential of the firm, the management experience, and the collateral asset are valuable data points for any business seeking a business equipment financing lease.
Stan Prokop is the owner of 7 PARK AVENUE FINANCIAL, a Canadian firm which originates business financing and lease financing for Canadian firms. The firm helps Canadian businesses achieve the financing they require. See http://www.7parkavenuefinancial.com/Home_page.html.
Canadian Business Loans – is my Cash Flow really free? And how Free is It! - By Stan Prokop - 7 Park Avenue Financial
Canadian business owners and financial managers might not be familiar with the term free cash flow. When owners discuss business loans with their bankers and other lenders they often focus on the ‘profits ‘their firm is generating. More sophisticated owners and financial managers realize that profits in fact have not a lot to do with cash flow. Furthermore, those owners that understand the concept of ‘cash flow ‘are unfamiliar with our term, we note as ‘free cash flow ‘.
When the business owner takes his financials into the bank he is often proud of course to discuss the ‘profit ‘that the company has generated. The banker or other intuitional lender is probably turning over those pages in the financial statement and looking at the cash flow. Cash flow will of course repay any loans that are made, not profit, which is a term from the income statement of course. Profit and cash are never really equal or identical amounts on the financial statement.
We should also assess the quality of the profits and earnings – as they may be distorted in a number of different ways. Many companies prepay things like advertising, insurance, development etc and hope they will of course bring in future profits . They may, but then again they may not. Inventory is bought and paid for, and will hopefully be sold, but in some cases inventory will be rendered obsolete.
Another angle for our profit analysis, as it relates to our concept of cash flow discussion is the fixed assets on our balance sheet may or may not be true resemblance of their actual value or replacement cost.
All of this brings us to the key issue of our concept of ‘free cash flow ‘, and that is the issue of capital spending. Because it usually is a major capital outlay for any firm, and the fact that assets will bring income over a much longer period of time, it deserves a good amount of focus. What we are saying is that depending on your firms capital needs they will have potentially volatile effects on your cash flow. When your firm may be having a tougher year and liquidity is not optimal then it will be very challenging to make investments out of cash into new assets for the business. Therefore business owners, for cash flow purposes, should probably be reviewing on an ongoing basis their maintaince needs for their assets, and their replacement needs.
How can business owners estimate the level of capital expenditures and cash outlay? One great method of doing this is to monitor your cost of goods sold and benchmark it against our capital expenditures. They should probably be growing at the same rate – that’s a valuable analysis tool for your business and cash flow planning.
So lets come back to our definition and concept of ‘free cash flow ‘. Free Cash flow is calculated by taking your firms profits, adding in depreciation, and then subtracting your capital expenditures. As complicated as that might seem to non- financially oriented business owners it is simply saying that your firm is earning a profit, you are in a position to replace assets, and the amount left, your FREE CASH FLOW, still allows you to take on additional debt, declare a management dividend or bonus, etc .
Let’s recap – we are encouraging business owners to differentiate between ‘profit’ and cash flow. Once they have focused on cash flow (profit + deprecation) they should analyze that number in the context of additional assets they have to purchase to grow the business successfully. The amount of cash leftover after those asset purchases is a key financial metric for your banker, and it should be for yourself also , because, Cash is king!
If you’re looking for business financing, you want to deal with an expert – that’s where we come in. 7 Park Avenue Financial has built a solid reputation on providing solutions for Windsor Ontario business financing that goes above and beyond your expectations. How do we do it? We remain committed to matching your business with the best lender that works with your organization’s specific needs.
At 7 Park Avenue Financial, you’ll also notice that customers come first – we want to give you the service and financing options that you deserve. We focus on personalized solutions that build trust, not ‘volume-based’ business that doesn’t guarantee a lender who matches your situation.
As we listen to your ideas and source Windsor Ontario business financing for you, we guarantee flexibility to find the best possible solution with timely results. Our ability to understand your personal financial challenges is 7 Park Avenue’s most valuable and exclusive strength – and we want to pass this strength onto your organization through our financial solutions.
We hold strongly to the belief that nothing can replace a relationship-oriented approach to business financing.
Why not call today? The right business financing for your organization is at your fingertips – and we’re waiting to help you obtain the financial solution you need!
