What If …. Inventory Financing Lenders Were the Solution to Your Cash Flow Based Financing ?
OVERVIEW – Information on inventory financing lenders and cash flow financing solutions in Canada. The ability for business to properly monetize and finance current assets and orders/contracts is key to business financial success
A proper inventory financing facility in Canada is one in which you can draw down on a satisfactory level of your inventory value and repaid it as you replenish capital via account receivable and cash collections. Let's dig in.
Your success in achieving a proper inventory financing component in your overall business financing in effect optimizes your working capital to the extent you need to.
How would your overall financial position change with that additional working capital and cash flow? You would then have the ability to take on additional contracts and purchase orders, your supplier relationships would most probably improve, and faster asset turnover of assets and receivable generates faster profits and return on assets. Those are good things.
The main advantage of an inventory financing or A/R financing component is your ability to accelerate cash flow. Let's be honest, if you were self financing (i.e. no borrowing facilities) and had to wait for inventory to be sold and receivables collected then you are significantly slowing your growth ability.
In the context of the inventory financing we are discussing this financing is not a loan per se - that's important to understand. It becomes a part of your revolving facility and is simply collateralized by receivables and inventory.
Your inventory financing arrangement is reflected in a type of document generally known as borrowing base certificate. We also advise our clients that it is highly preferable to have a strong handle on your inventory reporting, and also you should preferably be using some sort of a perpetual inventory accounting system.
Inventory is a very generic term, we hate to do it but we complicate things further by discussing with clients the fact that inventory can consist of raw materials, work in process, and of course final finished goods inventory . As a result the valuation of what is financed varies by industry and inventory type. Slow moving or highly specialized product is much more difficult, but not impossible, to finance.
Could you be more competitive and profitable if you have inventory financing at 40-50% of your gross inventory value - we are pretty sure you could be!
On larger transactions you should fully expect some sort of initial appraisal and due diligence or valuation on your inventory.
In Canada inventory finance is highly specialized, we can almost call it a niche financing. Speak to a trusted, credible, and experienced business financing advisor to determine if this financing works for you.
Through that process you should be able to develop a clear understand of the differences between bank financing, asset based lending, which incorporates inventory finance, and purchase order financing if that is applicable to your business model .
At this point you are now in a position to ensure that inventory financing advances are a great way to acquire mfr and carry inventory for orders and contracts you receive.
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
7 Park Avenue Financial
2910 South Sheridan Way
Office = 905 829 2653
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.