Great article from one our lenders showcasing the various financing options most companies neglect to inquire about. Most companies source funds only from traditional banks and are left with a "NO" response mean while the options below can be used to gain cash flow to help grow your business. No Loan For You! : What Are Your Options? In my previous post I outlined what it takes to get a small business loan from one of Canada's largest banks. While the approval rate of SBL's is high, I concluded that is likely because small business owners don't even attempt to get a typical loan from a bank in their first two years of existence because they know they will be rejected. So when you are a brand new company OR you have maxed out your lines of credit with the bank, what are your options? I will discuss below: Accounts Receivable Factoring: Is a type of asset-financing arrangement in which a company uses its receivables, which is money owed by customers as collateral in a financing agreement. The company receives an amount that is equal to a reduced value of the receivables pledged. The age of the receivables have a direct effect on how much the receivables will be discounted. Where Factoring Could Work: Where a product or service is invoiced on Net 30-Net 90 day payment terms for work complete: Eg. Trucking, Staffing, Manufacturing, Oil and Gas. Purchase Order Financing: Purchase order financing involves one company paying the supplier of another company, for goods that have been ordered to fulfill a job for a customer. This is an advance and may not be for the entire amount ofthe supplies, but it will cover a large portion of it. In some cases, companies can qualify for 100% financing. The purchase order finance company will then collect the invoice from the end customer. The purchase order finance company makes their money by charging the company in need of funds various fees. These fees are taken out of the collected invoice. The remaining amount is returned to the company. Where this could work: Manufacturing, Distribution, Clothing, Electronics and any consumer goods made on a large scale. Equipment Financing: Using your equipment as collateral to raise cash through a bank or alternative lender. A bank will take a filing on your equipment where as an alternative lender may take 2nd position as part of an agreement so that you can enter into some kind of other financing arrangement such as invoice factoring. Loan against equipment: Use the value of your existing equipment as collateral to get a loan from a financial institution. Sale-Leaseback: Through an alternative lender, selling and then leasing your own equipment back to yourself in order to free up some cash. Where Equipment Financing Could Work: Sale- Leaseback is particularly effective if you are looking to get some kind of alternative financing but your receivables or other assets are tied up in bank loans or lines of credit. You sell your equipment in order to get the cash to pay off these loans/lines in order to get the filing taken off of them and then you lease the equipment back to yourself through an alternative lender. Merchant Advance: Merchant cash advance companies provide funds to businesses in exchange for a percentage of the businesses daily credit card income, directly from the processor that clears and settles the credit card payment. A company's remittances are drawn from customers' debit and credit card purchases on a daily basis until the obligation has been met. Most providers form partnerships with payment processors and take payments directly from a business owner's card-swipe terminal. Where Merchant Advance Could Work: This arrangement can work in situations where you run some type of retail business like a restaurant or any transactional storefront where you have customers coming in and buying goods daily. Inventory Financing: A line of credit or short-term loan made to a company so it can purchase products for sale. Those products, or inventory, serve as collateral for the loan if the business does not sell its products and cannot repay the loan. Where Inventory Financing Can Work: Inventory financing is especially useful for businesses that must pay their suppliers in a shorter period of time than it takes them to sell their inventory to customers. Eg: Electronics, Lawn and Garden Equipment, Power Sports, Recreational Vehicles (Golf Carts, RV’s) Crowd Funding: This is a process where someone receives many contributions of various sizes for their project or venture from a large pool of people. This usually takes place via the internet. There are numerous crowd funding websites and this has grown to a $5 billion + industry as of 2013. Rewards Crowdfunding: Entrepreneurs pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity/shares. Equity Crowdfunding: The backer receives shares of a company, usually in its early stages, in exchange for the money pledged. The company's success is determined by how successfully it can demonstrate its viability. Where Crowd Funding could work: Service, Project, Product, Investment This is meant as a guide for the small business owner who has been denied for a typical bank loan, or may be looking for options if that avenue has already been exhausted (as in your line of credit is maxed out) so that you can maintain cash flow for your business. Should you have any questions about any of these methods of funding your business please don't hesitate to contact me! Thanks! Colin Dido The holiday shopping season means you will likely receive many credit card offers online, in the mail or at the checkout of major retailers. Accepting a credit card without understanding the terms can leave you paying huge fees and staggering interest rates.
Black Friday, Small Business Saturday and Cyber Monday are the biggest retail and online shopping days of the year. While there are many great deals to be had it is important to do your homework to make sure you protect your holiday budget. The following tips will help ensure you are able to focus on holiday fun rather than legal disputes with retailers or losing money to scammers.
We have yet to work with a freight factoring client that did not want their business to grow. Invoice factoring is one of the tools that is particularly well-suited to the trucking industry, especially for those that want to add more trucks to their fleet, take on new business more quickly or attract the attention of larger shipping clients.
Freight factoring refers to the act of selling freight bills and/or customer receivable invoices.. By factoring freight bills, the trucking company does not have to wait for customers to pay and they can make instant reinvestments that allow them to get back on the road and take on new business, add trucks or leverage their availability and reputation to serve bigger freight accounts. 1. Freight Factoring Eliminates the Cash Flow Slow-Down Growing companies need consistent cash flow to meet operational needs, take on new business, make needed repairs or invest in new equipment. Our clients commonly cite slow-paying customers or customers with extended terms as one of the reasons that freight factoring is beneficial to their trucking business. 2. Factoring Invoices Facilitates Competitive Advantages By extension, getting payment on customer invoices the same day they are issued – without waiting for them to pay – can create an instant competitive advantage for a trucking company. Since slow-paying freight customers or customers with extended terms no longer affects their cash flow, they can extend better payment terms that can help them bring on new accounts. 3. Factoring Freight Bills Frees Up Working Capital No business can grow without access to working capital. If working capital is locked down in customer receivables, it cannot be put to work to pay operating expenses, meet payroll, cover the cost of taking on new business or be put to work to add new trucks to the fleet. Lack of cash flow can stall your growth; access to working capital lets you reinvest in your business more quickly! Trucking companies that factor invoices get instant access to the working capital that could otherwise be locked down for weeks – or even months – while waiting for customers to pay. You can calculate how much working capital may be tied up in your receivable invoices using our freight factoring opportunity cost calculator. 4. Factoring Invoices Provides a Trucking Company with Financial Leverage Not only factoring freight bills give you the ability to become more attractive to potential customers, it also gives you leverage with suppliers and vendors. With working capital in hand – instead of locked down in customer receivables – you can negotiate more favorable terms and savings. This type of cost savings means improved profitability for your trucking business. 5. Factoring Freight Bills Reduces Operational Costs Saving money with vendors and suppliers is only one way that factoring produces a cost-savings for a trucking company. In addition, operational costs associated with bookkeeping for accounts receivables and any associated collections activities are reduced – or even eliminated altogether. By Nigel Aplin | Oct 27, 2014
After several years of being the focus of consumers over-extending themselves, the Canadian mortgage industry can rest a little easier as rating agencies and policy makers may now have a new target: auto finance. Both the Bank of Canada in its recent commentary and Moody’s Investor Services, in a report last week on Canadian banks, singled out auto loans as a possible area of vulnerability. Auto loans at Canadian banks have been growing at an annual compound rate of 20% or more over the past seven years. Prior to 2007, auto leasing was a very popular vehicle acquisition option for consumers which offered low monthly payments but left auto makers with large inventories of used vehicles coming off leases which averaged between two and four years in duration. Pricing for leases increased significantly and many consumers began opting to purchase their vehicles and finance those purchases with loans which extended beyond the traditional car loan term lengths of three to five years. Auto finance loans which now extend over 72, 84, 96 or even 108 months offer consumers low monthly payments but create risk for lenders. The Bank of Canada commented last week that “auto sales have reached record highs” as it suggested that the risks associated with household imbalances are edging higher. The Moody’s report looked at the potential exposure of banks which have loaded up their balance sheets with auto loans which have grown from $16.2 billion in 2007 to about $64 billion today. An economic shock like a sharp rise in the unemployment rate could trigger defaults on these loans and the risk to lenders comes from the rapid depreciation of new vehicles, particularly in the period shortly after purchase. Loan balances could exceed vehicle values during these periods and long amortizations of up to eight or nine years mean that loan balances are slow to reduce. Unlike real estate, the value of autos never increases over time. Canadian consumers who can finance their car loans over long terms and enjoy relatively low monthly payments have also shown a preference for more expensive new vehicles and this only adds to the household imbalances to which the Bank of Canada refers. Canadian banks admit that auto finance is a rapid growth area for their balance sheets but they insist that they are maintaining prudent underwriting standards and that they stress test their portfolios regularly. Communicate Freely has recently launched a fiber-to-the-home and
fibre-to-the-business network in Port Perry, Ontario. This new network enables local business and residential customers to receive faster Internet, better quality telephone, and more reliable service than has currently been available from other providers in the area. Our current Internet speeds are 25Mb up and down, but the equipment is capable of bringing 1000Mb to each customer when the time comes. In addition to greater speeds, the equipment also enables greater reach. The system can reach out up to 30 Km, with the same speeds available to even the furthest customer away. The plan is to eventually build out the network to reach more distant residents of our town, that are currently dealing with either dial-up, or poor quality wireless service. Because we are building our network one customer at a time, it simply isn't practical to bring a contractor in for each new turn-up. Not only would the costs be prohibitive, the scheduling issues would make it difficult to turn customers up quickly, with installation times that are convenient for them. Time To Lend helped us arrange equipment leases that allowed us to obtain the splicing equipment we need to do all the work in-house. Not only has this greatly reduced the cost of turning up new customers, but it has also given us a lot of flexibility as to how we build and maintain the network. Leasing was the right solution, and it has allowed us to start small and continue to grow. Thanks! Tim St. Pierre System Operator Communicate Freely 289 225 1220 x5101 [email protected] www.communicatefreely.net Online accounting software is particularly attractive to small- to medium-sized business owners looking to reduce their IT costs and gain greater flexibility. Just like desktop accounting software, online accounting software programs – sometimes referred to as cloud accounting software – range in functionality from basic to very sophisticated. In the online space there are more considerations to make than what the application itself can do. When choosing an online or cloud accounting program, there are a number of questions you should ask when choosing a provider that can help ensure peace of mind and prevent problems down the track. 1. Where will my data be held? When using an online accounting program your data is stored remotely, not on your premises or within your IT environment. As such, you need to be sure your confidential company financial data is held at a professional, commercial data centre designed for this purpose. 2. What security measures are in place? Consider how your confidential information is accessed. Stored material should only be accessible by a registered user who decides who has access to vital company information, and ensures users only see the information needed to complete their job. Also, what back-up security measures are in place? A benefit to online accounting is having data stored off site, which can form an important part of a business disaster recovery plan. To safeguard your data, commercial data centres store information at two separate locations. 3. Do you need to pay more to get added functionality? If you need to manage payroll and inventory, ensure that these features are included and understand any limitations before signing up. For example, in the subscription price the Reckon Accounts Hosted service includes payroll, inventory, and unlimited company data files – most providers have a different payment model so be sure to check this out. 4. Can you access the software on all the devices you use? It is very useful to have your full accounting program accessible online, but will it work on all operating systems? If you are using an Android tablet or an iPad, make sure your online accounting application works on these devices as well as desktop computers such as a Mac and PC. 5. Is the application easy to learn or similar to your existing tools? If you are moving from a desktop accounting program to an online program, the easiest transition can be moving to the same or a similar program online. Well-established software programs are also great because they have a lot more resources available, such as classroom training and established networks of specialists. If you’re new to the program video demonstrations, webinars and in person demonstrations are a great way of seeing what a program looks like and how easy it will be to use and how the program works. If you are using an Android tablet or an iPad, make sure your online accounting application works on these devices as well as desktop computers such as a Mac and PC. 6. Can you use the program online and offline? You need to have a reliable internet connection to operate an online accounting system. However, sometimes connections do drop out. Consider how the program will operate when the internet goes down. Can you continue working offline and then synchronise the data when internet access becomes available? 7. Can you be confident in the longevity of the provider? The last thing you would want is for the supplier that you place all your business data with to go out of business. Try and find out about the supplier’s financial position to ensure they are profitable and have a strong financial track record – this will be easier to do if they are a public company. 8. Does the provider have a long-term roadmap? See if the provider has a track record of continual development and what their plans for the future look like. An important benefit of paying for software on a subscription basis is receiving regular upgrades and updates that ensure you’re always using the latest program. 9. Can you access a backup of your data? Check if backups of your company data are easily accessible – or accessible at all. 10. Is there support available? There’s support, and then there’s support. Check to see what costs are involved in support and where support is provided. If support is provided from outside Australia you should know their hours of operation and be mindful of time zones. Online and cloud accounting solutions can be a very effective, time-saving addition to any business. By choosing carefully you will be investing in a program to help your business improve productivity for many years to come. Pete Sanders, Reckon Business Division |
Keeping informed, educated and up to date is very important as it provides the tools to help you make better decisions. visit my blog regularly as information is updated on a daily basis. Keep Informed of Market Trends, Changes in Regulations, Money saving Tips, Market Conditions, Tips and Strategies on Saving Money, Building and maintaining Credit.
Archives
February 2016
Categories |