Working Capital Financing - Why Asset Based Lines of Credit Work by Stan Prokop

How can Canadian business owners and financial mangers secure working capital financing and cash flow financing for their business at a time when it seems that access to business financing provides significant challenges.

The answer is that a potential solid solution exists by the name of an 'asset based line of credit 'otherwise what we call a 'working capital facility '. What is this type of financing is it new to Canada, and more importantly - how does it work and what are the benefits and risks?

Although asset based lenders tend to be specialized independent finance firms many business people are surprised to find that deep in the bowels of a few Canadian bank there exists small, somewhat boutique, divisions who specialize in asset based lending. Ironically they are many times competing with their peers down the hall in more traditional commercial corporate banking.

The most active assets these firms finance tend to be ongoing receivables and inventory, but in many cases, utilizing an expert advisor or partner you can structure a facility that also includes a component of equipment and real estate.
Generally speaking a good way to think of an asset based line of credit is one that for a temporary period, typically a year or so in our experience, allows you to margin up and get higher advances on receivables and inventory. That translates into more cash flow and working capital.

One of the main attractions of an asset based lending facility (insiders call it an ABL facility) is that your firms overall credit quality doesn't play the largest role in determining if you can get approved for this type of financing. As its name suggest, financing is on your 'assets '! And doesn't really focus on debt to equity ratios, cash flow coverage, loan covenants, and outside collateral. Business owners who borrow from Canadian chartered banks on an operating or term loan basis are of course very familiar with those terms - in some ways we could call them ' restrictions '

Most lawyers and accountants will tell you that any type of business borrowing should in fact be entertained only with a respected, trusted and credible business financing advisor who can guide you thru the roadblocks and pitfalls of any commercial financing arrangement. Missteps in business financing can lead to long term negative effects around such issues as being locked into a facility, giving up too much collateral, or being locked into pricing that isn't commensurate with your overall asset and credit quality.

What are the key issues you should consider when considering such a financing facility? Primarily they are:

-Advances rates on each asset category (A/R, inventory/equipment)

- How is pricing defined (asset based lines of credit and ABL lending is general is more generous in overall facility size, but you should ensure you are only paying for what you use - Contractual obligation - in a perfect world (we know its not!) you should be focusing on the ability to pay out at any time, or at a minimum with some form of nominal breakage fee

- Ensure that the asset based lending facility, which generally costs more, will allow to you remain or focus on profitability; we spend a significant amount of time with clients on how that can defer the additional costs of Abl facilities by several different strategies

So whats the bottom line. As always it's simple - consider asset based lending and an ABL facility as a solid alternative for financing your business. Work with a trusted advisor as this type of financing is generally either mi understood or not too well known in Canada. Be selective in structuring your facility around issues that work best for your firm re benefits derived.That's solid business financing sense.

Equity Skimming - or not? by Alan D. Kosinski

  Equity skimming is a type of fraud that consists of the practice of swindling homeowners out of their equity, usually when they are in
default on their mortgages or their real estate taxes. Many times it involves schemes from mortgage brokers who seek out the uneducated who have equity in their homes. The homeowner ends up refinancing into a mortgage they can't afford. When payments get behind, these unscrupulous lenders get creative. They may refinance again and again every several months taking more closing fees and points until there is no equity left in the property. Others persuade borrowers to sign deeds in lieu of foreclosure, basically giving the lender the property.
Other times it involves people who call themselves investors who see a huge pile of equity in a property that is headed toward foreclosure. They approach the owner and tell them that that by selling their residence to "the investor", it would wipe the slate clean and "the investor" would take over all of the homeowners' property-related debts and obligations. The homeowner complies and loses all their equity in their property.
This sounds like theft already, but before we pass judgment on "the investor" this may be the only possibility for the homeowner to save himself from financial ruin. Let's face it - if the property goes to foreclosure the homeowner will be evicted. He and his family may be split up or end up in a homeless shelter. If the property sells for less than what is owed to the lender, the lender will go to court and receive a judgment against these poor homeless people. The judgment is good for twenty years and may be renewed twice. The lender can garnishee any paycheck the borrower may get in the future including tax refunds and lottery winnings. In order to get out of paying the judgment, the borrower files bankruptcy (if he can afford it). Then, the IRS comes looking for him. The loss that the lender took at the auction, including all legal fees, is considered income gain to the borrower. This gain is a taxable event. IRS won't stop until they get their taxes and penalties from this defaulted borrower. The borrower loses his house and has to pay taxes on the loss. Now the picture may be a little clearer for you.

Does this sound like it might be a fair trade - all the equity in the house for a "new beginning" in finances, credit, and life? Probably. However, the question still remains: When is this procedure fair and when is this procedure robbery (i.e. equity skimming)?There are many factors that must be considered. The largest consideration is the proximity of the foreclosure date. If the foreclosure process is in the beginning stages, there are at least eight options that a homeowner has to alleviate his problem. A conscientious professional investor should use his knowledge to help by calming the homeowner down and explaining in detail all his possible options. Most of the time, a call to an honest real estate broker and the problem is on the way to being solved. Sell the house and use the cash to start over.

If, on the other hand, the investor becomes aware of the property two or three weeks before the auction, it would be almost impossible for a real estate broker to find a qualified buyer ready to close before the auction. In this case, there are no other options available. The homeowner would be lucky to receive any offer, and would be wise to take it. Usually, first, last, and security for a new apartment and access to a moving van would be generous for the investor to offer. If there is considerable equity in the property, a chunk of cash sometime in the future may be appropriate.The main thing to remember here is that as in every encounter you have in life, you should always remember to structure the transaction so that everybody wins. You as an investor may get the equity, but you must handle these delicate people with kid gloves and ensure that they are also gaining from the transaction - and are content with the solution you have proposed.

Bank Financing In Canada. See Business Credit With Different Eyes by STAN PROKOP

Bank financing in Canada. Business credit is not always viewed the same way by business owners and financial managers. In many cases clients we meet are sometimes even thinking there's some sort of short cuts to quicker assets to bank finance.
Let's take a look at the proper way of addressing and accessing this critical financing for established and growing companies. And by the way, if you’re not established and doing well there are in fact other business financing alternatives to financing your business. Let's dig in.

The key point in achieving bank financing success in Canada is knowing of course how the bank views lending. That's actually the simple part of the puzzle, because, simply speaking, banks are cash flow lenders with a, shall we say ' strong interest ‘in secondary sources of repayment! Those secondary sources include personal guarantees, collateral, etc.In fact that's one of the key challenges you face if your firm in the opinion of the owner and manager has great prospects - because our Canadian chartered banks focus on how predictable your cash flow and profits were in the past. So having a bad current or past year in a number of areas simply puts you behind the 8 ball quite a bit.
While it’s not the concern of business of the business owner / manager one must not forget our banks, who are among the best rated and highest reputation in the world are highly regulated. As Canadians that’s a good thing when it comes to bank stability, solid capital bases etc. That, however, does little for the business owner looking for some maximum thinking or ' out of the box ' thinking.
Pricing for bank financing for business credit needs is pretty well the best relative to any other comparable finance solution. However, how is that pricing established? In the end it’s a combination of collateral you personally and your firm can provide, shareholder equity, the infamous ' cash flow coverage ‘An interesting point?
Even if your firm has all of those you might find that the bank views your entire industry as unfavorable or high risk, as a result you'll still be significantly challenged when looking for business credit solutions. That's when some of those other alternatives might make sense. Those include:
A/R financing
Asset based lending
Sale leasebacks
Mezzanine financing
Tax Credit financing

Many businesses find themselves in the unfortunate position of being place in SPECIAL LOANS if they default on their bank covenants. We again point out to clients in that position that there are numerous non bank alternatives to being rescued from special loans designation.One other conundrum of the business owner seeking bank capital in Canada is ' GROWTH ‘. Growth is a good think right? Not so fast mister... or Mrs! That because when it comes to financing growth means using cash, not generating cash, and banks historically wrestle with that issue. Again, that’s where some of those non bank solutions work best!
There is no real short cut to bank financing and business credit in Canada. You have to see it through the banks eyes, not your entrepreneurial ' special vision ' glasses!
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with bank needs and alternatives sources of capital.
Stan Prokop

Equity Release, What You All Need! by jeff will

Equity release
It is a type of equity home loan, which one can attain without selling off their property. It is just equivalent to retaining your very own house while obtaining a lump sum amount using the value of the house without selling it off to anyone. The discrepancy between the worth of a house and the worth owed against it, is the equity.
Home equity rel ease
Home equity release is the one that is guaranteed by your very own house.The worth of your house and the exceptional advance mortgage is fundamentally the difference between the on your home. Money based on the accessible equity on your home can be borrowed by lots of finance companies. Today, heaps of companies provide excellent deals on equity home loans.
Surprising isn't it? But there's a catch to it. This equitys release is predominantly positive for old people because, generally after you die, the income-provider who is providing you with the money have to be paid afterwards. For all those who cannot leave a large estate for their heirs, equit release is a viable option.
Equity release scheme, is another name of this home equity loan. The money obtained through an equity loan can be used for numerous purposes to consolidate your living and finance your dreams. You just have to release the equity on your property and enjoy its benefits alongside the pension you acquire.
Am I doing the right thing?

It is perceptibly necessary to take self-governing equity release advice from equity the release advisors as the release of your equity is a big decision and should not be made hastily. There are always alternatives, hence you may avail better chances than obtaining the release. First satisfy yourself and then take the desired steps.
How to calculate your equity release?
Most people visit lenders to calculate the value of the equity you have for yourself, but the procedure is simple and you can do it yourself too. After calculating the value of your property according to the current currency rate, you just have to deduct your mortgage value from it. If you are not sure about your mortgage value then you may talk to one of the best equity home lenders and figure it out accordingly.
Equity release calculators
The equity release can easily be obtained by release calculators which s are absolutely free and serve as a significant part of the equity release process. The results obtained through these equity calculators should not be considered final and should not be taken completely as they give the maximum amount that can be released.
A device used to determine the estimate of the amount which an applicant is permitted to receive is called an equity release calculator. Specific details are worked upon in order to gain the ultimate result through these calculators.
The current age of the applicant is to be mentioned, after that the value of the property is to be mentioned. The amount of your mortgage, if any, is to be provided. The websites which offer the equity rel ease calculators ask for personal information to evaluate. Before you enroll yourself for the equity release schemes, your amount will be calculated by your own self through these calculators, only if you provide your details correctly.

Understanding Equity Finance Mortgages by Harry Pontikis

  In an attempt to capture more of the first home owners market, Lenders have been lending up to 100% of the value of homes. In the past year, many have started lending all of the home price, as well as the taxes and fees to the value of an additional 6% above the price of the home. This makes the total borrowing 106% of the value of the property.
At a time where home affordability is a critical discussion point in Australia, there is a new solution to buying a home. It comes under many names but the principles are similar; They are called EFM's.

EFM's come into play If you want to buy a house but can't afford the repayments on the loan or you don't have enough for a deposit. Some lenders are willing to pay up to 20% of the cost without asking you to pay one cent in interest on that part of the loan - ever. Working in conjunction with a traditional home loan, an equity finance mortgage (EFM) allows you some slack on the cost of buying a home, in return for a certain amount of shared equity in the future value of the home.
An example is where you have to have saved 5% of the purchase price. The lender will contribute at 'no cost or interest' 20% of the home's value. So, you have to borrow the remaining 75% of the cost of the property.
e.g.

• House purchase price is $300k.


• Money you can contribute is 5% or $15k


• Lender will contribute 20% of the price or $60k.


• Home loan (and repayments) is 75% of the value of the property is $225k instead of:


• 95% of the value of the property or a loan of $285k.

The benefit of doing this is no interest or principle repayments for up to 25 years (or until the house is sold) on the EFM and because you have only borrowed 75%, your savings are significant each month in repayments.
The downside is your 'finance silent partner' can take up to 40% share in capital gains once your home is sold or you refinance. Should the value of your home fall, its capital loss is capped at 20%.
If you buy a house in a high capital growth area, you will be better off with a traditional mortgage but if you buy in markets where growth rates are modest or flat, an EFM is definitely a great option.
A concern is that they could drive property prices even further, making it harder for battlers to get into the market -even with such innovative products.

Film Finance Canada - Tax Credit Film Financing by Stan Prokop

Producers and owners of Canadian content in the areas of film, television, and animation credits are not always aware that they have the ability to monetize or cash flow their Canadian tax credits in Canada. The three types of productions that we have referenced are provided with solid financing assistance from the federal and provincial governments in Canada. Your ability to monetize these tax credits, and turn them into cash flow at time of filing, (or in some cases before) can make or break the overall financing success of your venture. Successful results can be achieving by working with a credible, trusted and experienced finance partner for your tax credit financing in Canada. The financing of these tax credits creates, in effect premium additional cash flow to allow you to enhance your initial equity and debt and gap financing strategy. Let's use a simple example wherein a Canadian produce in film, TV, or digital animation is financing a venture through equity and debt, and let's say it's a 50/50 proportionate relationship. The non equity portion of these ventures is often balanced with some sort of distribution agreements in Canada or elsewhere in the world. One strategy you could consider is to of course ensure prior to commencement and production that you qualify for and are eligible for the maximum amount of tax credits related to your venture. Let's say our example consists of a 1 Million dollar independent film, and there is a 500k equity and debt component respectfully. In our example, if properly qualified and document the film owner, producer, etc can qualify for a tax credit that might easily come into the 200k-250k range. Is that the end of our example? Absolutely not - what we are saying is that you can immediately finance that claim, either at time of filing, or in some cases earlier, and utilize that cash flow for all sorts of purposes related to your venture / production. As Canadian production and content continues to play a hefty role in the producing of Films, direct to video, pay per view, and digital products the ability to finance these ventures is always a challenge. Very few of Canada's banks and large financial institutions play a role in this type of financing; we therefore recommend to clients that they seek out the expertise of a credible, trusted and experienced advisor in this area. Maximizing your claim value and eligible cash flow are of course the rewards of working with the right party. Larger and well known studios require financing also, but the true challenge is for independent producers and their investors who have budgets that are often ten million dollars and under, sometimes quite significantly under that threshold we just referenced. The reality also is that the industry seems to be breaking all records in areas of growth and economic activity and new forms of content and distribution. The bottom line is that as demand increases and distribution structures improve the need for financing and tax credit financing in Canada is also increased. If a production can be properly pre-sold and distributed, and tax credit financing utilized as an integral role in initial production cost financing - well, that simply creates a perfect formula for financial success. To be successfully financing a production must have the proper amount of leverage, different exit and distribution strategies, and the proper utilization of tax credit and tax credit financing. Working with the proper parties can often achieve 50-75% immediate financing of your tax credits in Canada. The remainder is of course simply a buffer for the lender to allow for financing costs themselves, and any time lapses in the final approval and cheque from federal and provincial players that regulate the new generous tax credits. Tax credits are increasingly generous in Canada - just in the last year or so a number of enhancements have been made to the various programs at various levels of government. Take advantage of these credits, and further investigate monetizing those credits at time or filing of prior to maximize the cash flow and overall financing strategy of your film, TV, or animations projects.

Own a Car at Low Cost Finance Through Used Motor Loans by Eunice Scott

  In case you are not in a position to own a new motor vehicle or a car, a used car is equally good for you as long as it serves you well. It is lot easier to buy used motor car as not only it comes at cheaper prices but taking a loan also is easier. Used motor loans are especially crafted for the purpose of buying a motor car or any vehicle. The loans are given in a hassle free manner at cheaper cost.
Used motor loans [http://www.motorloansuk.co.uk/used-motor-loans-uk.html] are provided under secured and unsecured options with advantages of their own. Secured motor loans come at lower interest rate which is the biggest attraction. But you will have to offer any of your property as collateral to the lender. Equity in the property as collateral enables in borrowing greater loan if need be so. Often the very used motor vehicle to be bought serves the purpose of collateral and so there is no need for risking valuable property. Secured motor loans are given for a larger repayment duration which enables in spreading total monthly outgo in larger number of installments and saves money for other expenses.
Unsecured used motor loans providers do not require any collateral and instead are given solely on the basis of your repayment capacity and good credit history. Your annual income, employment proof, bank statement and financial standing decide that how much of an unsecured motor loan amount you can borrow. The interest rate however is higher because of the risks involved for the lender. The repayment duration is also kept lower for early risk free pay off of the loan.
Even in case of bad credit, used motor loans are available comparatively easier way. All you do is convince the lender that you seriously intend to pay back installments in time. Show proof of your income and its source and the loan is in your pocket. Take a copy of your credit report and check it for errors before approaching the lender.
You can beneficially source used motor loans from online lenders as they do not take any loan processing fee and the approval comes fast. But before that compare various loan offers for lower interest rate and terms-conditions. Also make sure that you buy used motor vehicle from a reputed dealer for better quality and check the vehicle for defects. Make sure that you take a warranty on the vehicle.
Used motor loans are of great help in owning a used motor vehicle. The loan comes at lower interest rate for larger repayment duration. Make the best use of the loan and repay it in time for enhancing credit score.