Posts Tagged: ‘Canada’

Factoring and Accounts Receivable Financing Expert Tips

February 25, 2015 Posted by admin

Shaw Capital Management and Financing sharing information, tips and advice on factoring and accounts receivable financing and factoring to avoid scams and other fraudulent transactions. Information focus on the importance of choosing the right firm and understanding the intricacies of this financing alternative and what pitfalls to avoid.
There probably isn’t a day when Canadian business owners and financial managers don’t hear about factoring and accounts receivable financing as a method of financing their business in Canada. Despite its growing popularity and, we can say, relative importance in the Canadian business financing marketplace this financing mechanism is still somewhat understood.
What information do business owners need to know in order to assess if factoring, also known as invoice discounting, is a viable transaction? Also, are there mistakes and pitfalls to be avoided when considering this financing strategy?
Let’s examine the answers to some of those questions. You can be forgiven for trying to figure out why factoring has increased in prominence from a time when no one had almost ever heard of it! The answer to that popularity is more simply and obvious than you might think, and its simply that Canadian chartered banks are finding it increasingly more difficult to fund accounts receivable (and inventory of course) to the extent that their customers need this financing.
When you have a situation where the actual need for financing is acute, and the benefits and flexibility seems significant it is not hard to see the rise in popularity of such a financing mechanism.
First of all, 99% of the time, factoring provides your firm with a greater level of borrowing based on your accounts receivable levels. Quite of 90-100% of you’re A/R under 90 days can be financed.
So is it all good news? Not necessarily, as we are always meeting with clients that have chosen the wrong type of funding or factoring, and, even worse, find them locked into contracts they cannot get out of. That is uncomfortable for any size firm as you can imagine.
As with any newer type of financing the playing field is complex. You can be forgiven for not knowing how many factor firms are out there, how they run, what their own limitations are, and, even to a certain extent, do they in fact themselves have the funding to survive, let along finance your firm. For that reason we cannot over emphasize the need to work with a credible, experienced and trusted professional in this area.
Lets talk about some of the nuances, we can call them potential ‘pitfalls ‘also, of picking the wrong factoring partner. For a starter if you choose a firm who itself is not well capitalized, as we said, you might find that the financing commitments made to you cannot be honored. Canadian business has never had to think that the Canadian chartered banks could be ‘out of money ‘but the Canadian landscape is somewhat littered with small and medium sized factor firms that do not have the financial wherewithal to support their funding commitments in all places. That just re – enforces our idea that a trusted industry expert will guide you to the best partner for your firm.
Other issues, again, we can call them pitfalls, to look for include:
– being locked into a contract
– having the total factoring cost, or pricing, not reflected properly in your term sheet
– advance rates which don’t make sense relative to the price you are paying for discounting invoices
– Excessive notification and intrusion with your customers, which is very prevalent in the U.S. model of factoring (Many Canadian factor firms are branches of U.S. firms)
So let’s recap. It’s simply that factoring is growing in popularity. It works because it is providing funding where banks often cannot. If you don’t understand who you are dealing with and the various nuances of this type of financing it becomes a burden, not a solution. Investigate this great financing mechanism, but ensure you know what you are getting into. Talking to an expert always helps – that’s just common sense
Stan Prokop is founder of 7 Park Avenue Financial. Originating financing for Canadian companies, specializing in working capital, cash flow, and asset based financing, the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size.

Hiring Assets Don’t Plead ‘ Any Fifth ‘ Relating to Asset Finance Make Provides

February 9, 2015 Posted by admin

How can Canadian business benefit from the ability to offer customer finance solutions for clients. If we had to sum it all up into one thing we guess it well might be: ‘Increasing the sale of your products ha!

The good news is that a customer finance program can be easily executed either directly, if you have the experience and resources, or as importantly, indirectly via a solid partnership arrangement. And if you choose the partnership arrangement you can pretty well reduce the cost of your program to zero, which is a great price point, wouldn’t you agree?!

The key concept around a financing program for your clients is actually that it is a strong sales tool. Companies in Canada that use vendor financing tend to form over time stronger relationships with their clients. While the finance industry itself will portray this type of program as a ‘ control mechanism’ on your clients in our opinion its more of a customer relationship scenario. but we’ll let you decide that one.

It all starts of course in your firm’s sale cycle, and hundreds and probably thousands of firms that utilize vendor finance tools quickly find that simply offering a finance option in many cases gets that purchase order or commitment from your client. Unbeknownst to you clients could be talking to your competitors about their capacity to offer a finance option for a passing fancy products and services you are competing for.

Also, at the same time a financial firm who is aligned with your competitors might in fact be pitching your competitor’s product versus your own for their own selfish reasons.

One of the strong merits of a customer financing plan always comes home to the partnership cycle, because even after you have provided your client with a customer financing option the flexibility around financing options allows you to constantly work with your client on improvements, add- ons, Using a basic ‘ master lease’ allows you to constantly add on new sales and services to your existing arrangement with clients.

Ever wondered how your competitors sometimes appear to have made a sale to a major client in a much shorter sales cycle. If you investigated closely you might just find that your client was less focused on price simply because he was being offered a financing option via vendor finance that made sense and was quick and easy to facilitate.

At the end of the day you can devote money, time and resources to setting up your own program. In many cases that requires a major commitment of time, capital, and oh yes, you need to find out what what you are doing.

A strong alternative? Try a qualified alternative party to set up your own customer financing plan at no cost, at the same time customizable to your own business’s products, services, and needs.

Speak to a trusted, credible and experienced Canadian business financing advisor on a program that is most effective for your firm. All of a sudden you may well find that you are now winning and recovering lost clients and sales otherwise not achievable without a finance solution.

Types of Mutual Funds

November 20, 2014 Posted by admin

Over the years a diverse range of mutual funds has emerged to meet a very broad range of investment objectives among the investing public.

A fund’s prime investment goals are stated in the fund’s offering prospectus and generally cover the degree of safety or risk that is acceptable, whether income or capital gain is the prime objective, and the main types of securities in the fund’s investment portfolio. From their differing investment objectives, the following main types of funds emerge:

1. Bond Funds – whose main investment goals are income and safety of principal. Investment by such funds is primarily in good quality, high yielding government and corporate debt securities, some high-yield preferred and common shares and mortgages. Their degree of volatility
is related to the degree of interest rate fluctuation.
Example: Altimira Bond Fund.

2. Mortgage Funds – investment goals are similar to those of bond funds, and unit values are affected by similar economic factors. Investors hold a share in a group of mortgages (much as bond fund investors hold a share in a group of bonds) rather than holding title to a particular
Example: Royfund Mortgage Fund.

3. Money Market Funds – became very popular with investors during the 1980s and are now the largest category of mutual fund. The objective of this type of fund is to achieve a high level of income and liquidity through investment in short-term money market instruments such as treasury bills, commercial paper and short-term government bonds. These funds have limited opportunity for capital gain: many funds keep the net asset value at a set level (e.g. $10) by distributing monthly income to unitholders in cash or new units.
Example: Bolton Tremblay Money Fund.

4. Balanced Funds – whose main investment objectives are a mixture of safety, income and capital appreciation. These objectives are sought through a balanced portfolio of fixed income securities for stability and income, plus a broadly diversified group of common stock holdings for diversification, dividend income and growth potential. The balance between defensive and aggressive security holdings is rarely 50-50; rather, managers of balanced funds adjust the percentage of each part of the total portfolio in accordance with current market conditions and future expectations.
Example: Investors Mutual of Canada Ltd.

5. Common Stock or Equity Funds – These funds are primarily invested in common shares. Short-term notes or other fixed income securities may be purchased from time to time in limited amounts for diversification, income and liquidity, but the bulk of assets are in common shares in the pursuit of capital gain. Because common share prices are typically more volatile than other types of securities, prices of equity funds tend to fluctuate more widely than those funds previously mentioned. Some equity funds invest in a variety of overseas markets as well as Canada and the United States. These funds invest in markets perceived to offer the greatest opportunity for
growth on a global basis.

As with common stocks, equity funds range greatly in degree of risk and growth potential. Some are broadly diversified, heavily invested in blue-chip, income-yielding common shares and may, therefore, be classified at the conservative end of the equity fund scale.

Many common stock funds adopt a slightly more aggressive investment stance as, for example, Industrial Growth Fund which invests principally in securities with an objective of above average growth of capital. Other equity funds are of a more speculative nature, aggressively seeking capital gains at the sacrifice of some safety and income. Example: United Venture Fund Ltd.

6. Specialty Funds – are those which concentrate portfolio holdings on shares of a group of companies in one industry, in one geographic location or in one segment of the capital market. While still offering some diversification in their portfolios, they are more vulnerable to swings in the industry in whose shares they specialize or, if they have a portfolio of foreign securities, in currency values. Many, but not all, tend to be more speculative than most types of common share funds.
Example: AGF Japan Fund Ltd.

7. Global Funds – seek gains and diversification by investing in markets that offer the best prospects, regardless of location. Some global funds are invest in bonds, others are equity funds and still others are money market funds.
Example: Templeton Emerging Markets Fund.

8. Dividend Funds – are those that invest primarily in high quality preferred and sometimes common shares of taxable corporations in order to obtain maximum dividend income.
Example: Allied Dividend Fund.

9. Real Estate Funds – are those which invest in income-producing real property in order to achieve long-term growth through capital appreciation and the reinvestment of income.
Example: Investors Real Property Fund.

10. Ethical Funds – Investment decisions are guided by moral criteria. These criteria vary from fund to fund. One ethical fund may avoid investing in companies that profit from tobacco, alcohol or armaments, while another fund may invest according to certain religious beliefs.
Example: VanCity Investment Services Ltd.’s Ethical Growth Fund.