Inigo Montoya’s Guide to Cash Flow Financing & The Business Working Capital

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 YOUR COMPANY IS LOOKING FOR CASH FLOW FINANCE SOLUTIONS! 

Revolutionize Your Business with these Canadian Cash Flow Solutions

You've arrived at the right address! Welcome to 7 Park Avenue Financial 

        Financing & Cash flow are the biggest issues facing business today

                              ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

 

 

 

Bridging the Cash Gap: Working Capital Solutions for Canadians

 

 

Have we got a story for you? It's not even a story; it’s a fairy tale. A fairy tale? Truth be told, it’s been told already - we are talking about the movie 'THE PRINCESS BRIDE ', which some might associate with kids, but it's actually a film on a few different levels.

 

A character in the movie is Inigo Montoya. So, Inigo Montoya? The Princess Bride?  Oh, yes and cash flow financing! What in the heck could they have to do with each other? Let's explain.

 

In the movie, our friend Inigo is known for always saying, 'I do not think it means what you think it means'. That's our premise today on 'cash flow'. With apologies to Inigo Montoya.

Introduction: The Intricacies of Cash Flow and Working Capital

 

In Canadian business financing, "cash flow" circulates like a common currency. Alongside its close companion, "working capital," these terms can be interpreted in myriad ways, often confusing to Canadian business owners.

As a critical aspect of business health, understanding cash flow dynamics is vital for Canadian entrepreneurs and financial managers.

 

Why Cash Flow Matters: The Lifeline of Your Business

 

One cannot overemphasize the importance of cash flow in assessing the financial well-being of your enterprise. Whether you're a startup in Toronto or an established company in Vancouver, operating cash flow is a fundamental metric, second only perhaps to profit, in determining your business success.

 

  

Profit Vs. Cash Flow: Two Sides of the Same Coin - The Cash Flow Paradox: When Profit Doesn't Equal Liquidity  

 

While profit and cash flow are key indicators for Canadian businesses, they serve distinct purposes and are evaluated differently. Net income/profit  may give you an annual overview, but cash flow provides a more immediate picture of your financial state, especially concerning operational challenges as you try and forecast cash flow

 

Have you ever found yourself in a situation where your business is profitable yet lacks cash? This common quandary confuses many, as you'd assume that a profitable operation should naturally result in abundant cash flow. However, that's not always the case. Liquidity depends on your ability to convert sales into tangible cash inflows

 

Navigating Working Capital Challenges in Canada

 

So, what are your options when facing liquidity or working capital issues to achieve a positive net cash position in Canada? Multiple solutions can help you turn your receivables, revenue, and inventory into usable capital. These can be categorized as follows:

 

Working Capital Financing Options In Canada

 

• Receivable Finance: Invoice financing is a  strategic way for the business owner / financial manager  to turn your accounts receivable into instant cash -  Collateral of Personal assets is not required in a/r financing solutions as there is less emphasis on personal credit score

• Inventory Financing: Leverage your inventory for additional working capital.

• Sale-Leaseback Finance: Convert your owned assets via a  leaseback business cash flow loan while maintaining their use.

• Asset-Based Lending: Utilize all your business assets, including machinery and real estate, to secure business loans under a revolving business line of credit or term loan -  Interest payments are made on only funds that are drawn down under the facility at any given time depending on how much cash the company needs

• Confidential Invoice Finance: Maintain client relations while financing based on unpaid invoices. Companies achieve all of the benefits of cash flow factoring with Confidential receivable financing while being able to bill and collect their own invoices

• Tax Credit Monetization: Turn your tax credits into immediate working capital via cash generated from the funding of your claim before or after filing in lieu of waiting for the refund. SR&ED tax credit financing allows businesses to use their sr&ed claim as collateral for a short-term bridge loan their sred claims.

• Working Capital Term Loan: A more traditional route involves securing a term loan to boost your working capital.  Cash flow loans can also be achieved via short-term working capital loans that are readily accessible but come at a higher cost to borrow money - They are also known as an ' MCA" Merchant Cash Advance and are available from online lenders/cash flow lenders offering merchant cash advances based on historical cash flows /sales revenues  - installment loans based on anticipated future cash flows and sales

 

Conclusion: Business Cash Flow Financing & Working Capital Solutions for Canadian Enterprises

 

When navigating the complexities of cash flow and working capital, talking to a  Canadian business financing advisor is prudent when it comes to understanding cash flow lending solutions.

 

They can offer tailored solutions aligning with your circumstances and business goals to eliminate negative cash flow positions

By better understanding and leveraging your cash flow and working capital options, you position your Canadian business for survival and long-term business growth success.

 

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor

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FAQ: FREQUENTLY ASKED QUESTIONS  / PEOPLE ALSO ASK  /MORE INFORMATION

 

  

 

 

What is cash flow, and why is it crucial for my Canadian business?

Cash flow is the net amount of cash or cash equivalents moving into and out of your business. It is critical because it directly impacts your ability to cover operational costs, make investments, and grow your company. Without healthy and positive cash flow, even profitable businesses can face financial distress.

 

How does working capital differ from cash flow?

Working capital refers to the operational liquidity available to your business. It is calculated as Current Assets minus Current Liabilities. While cash flow measures your business's overall financial health, working capital focuses on short-term obligations. Both are vital, but they serve slightly different purposes.

 

What options are available for managing cash flow challenges in Canada?

Canadian businesses have multiple options for cash flow financing solutions, including a "cash flow loan", receivable finance, inventory financing, sale-leaseback finance, asset-based lending, confidential invoice finance, tax credit monetization, and traditional working capital loans. The ability to anticipate a company's expected cash flows via budgeting and cash flow forecasting is critical.

 

What risks do I face if I ignore cash flow and working capital management?

Neglecting cash flow and working capital management can lead to liquidity issues, which can impact your ability to pay suppliers or employees, stifle growth, and even result in bankruptcy. A company's expected cash flows should be able to focus on current liabilities on a day-to-day basis via effective cashflow finance solutions -  a cash flow projection is always useful

 

Is it advisable to consult an expert for managing cash flow and working capital?

Companies such as 7 Park Avenue Financial can offer tailored solutions for financing cash flow specific to your industry and current financial state. This expert guidance can help you navigate short-term challenges and strategize for long-term success via a thorough analysis of the company's cash flow statement and  expected sources and uses of funds

 

What are  the Key Components of Cash Flow Statements

Business Cashflow  finance management extends beyond a simple income and expense balance. Your cash flow statement is complex with three critical elements: financing, investment, and operations. Each of these factors uniquely affects your actual and future cash flow, and complications can arise if any one aspect is neglected as the business focuses on positive cash flows and meeting financial obligations

 

What are business cash flow loans?

 

Business cash flow loans offer flexibility to address various cash flow requirements for companies. While not solely based on sales revenue, a business's income holds significant weight in the application process. These loans are for purposes, including acquiring inventory, meeting payroll, expanding the workforce, bridging seasonal revenue gaps, and managing operational costs such as rent and insurance.

Typically accessible through online lenders, chartered banks, or business credit unions, these loans involve a review of a company's financial statements and sales projections to determine the borrowing capacity based on anticipated future sales.

Payment structures vary; they can be in the form of business term loans or credit lines, while some could be structured as short-term working capital loans/  merchant cash advances which are repaid directly from sales. Interest rates and repayment terms differ based on the loan type and lender, with repayment periods generally shorter and interest rates higher compared to traditional business loans.

 

What is invoice finance / aka "factoring"

Invoice financing is a short-term loan option enabling business owners to borrow against their unpaid invoices. Factoring services provide advances of approx. 90% on outstanding invoices, particularly beneficial for businesses facing extended customer payment terms like 30, 60, or 90 days.

Upon invoice payment by the customer, the lender disburses the remaining balance to the business owner after deducting fees. Interest rates typically range from .75 % to 1.5 % per month, plus an additional fee linked to the time taken for customer invoice settlement. Loan sizes depend on the total worth of outstanding invoices.

Unlike traditional credit assessment, eligibility for invoice financing centers on customer payment history rather than the business's creditworthiness. Hence, this option suits companies with limited creditworthiness but good creditworthy clientele.

 

What is the Difference Between Cash Flow Lending vs. Asset-based Lending

 

Cash flow lending and asset-based lending are distinct approaches to providing financial support to businesses. Cash flow lending involves assessing a company's recent financial performance and cash flows to determine the loan amount, while asset-based lending focuses on the value of a company's assets such as accounts receivable, inventory, and real estate.

In cash-flow lending, lenders analyze the company's financial history to decide the loan size, while asset-based lenders evaluate tangible assets to assess risk. Asset-based lending often has higher interest rates and terms compared to cash-flow lending and unsecured bank financing.

The application process for asset-based lending is typically more intricate due to the need for a proper assessment of the business's asset values in areas such as receivable, inventory, fixed assets, and commercial real estate if the latter is being considered.

  

Click here for the business finance track record of 7 Park Avenue Financial

Business Cash Flow Financing & Working Capital Solutions for Business |7 Park Avenue Financial

Unleashing the Power of Business Cash Flow Financing in Growth Finance

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YOUR COMPANY IS LOOKING FOR  GROWTH FINANCING  SOLUTIONS!

Decoding the Cash Flow Financing Conundrum in Business Growth Finance

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing businesses today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CONTACT:

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

 

FINANCING BUSINESS GROWTH IN CANADA

 

In the minds of many business owners and financial managers, business cash flow financing often would seem easier to fix with some ' patch ' - that unfortunately probably isn’t available! So it's sometimes necessary to get creative when it comes to cash flow financing and researching your growth finance options for your company's cash needs. Let's dig in.

 

INTRODUCTION

 

Getting the right financing for your business is a challenge, but it's a necessity for business future growth while at the same time managing cash flow issues around the need for more money.

 

 

The Canadian business financing financial landscape can appear complex. That's where skills around growth financing emerge whether it's conventional bank loans for a profitable business from traditional banks to unconventional alternative financing sources.

 

The important thing to remember in business financial growth is that depending on what type of lender you choose for business operations there are, in fact, a lot of both viable and, more importantly, accessible funding possibilities. Getting a business loan from banks might be one option. Another option for financing growth in your business is the world of alternative finance from commercial funding companies.

 

THE CHALLENGE OF GROWING A BUSINESS

 

Businesses can also finance expansion by generating additional sales and leveraging assets. As an organization scales, it might not have the cash flow to pay for these key activities before its products or services are delivered to clients. Growing companies at risk need to think about their cash flow more than ever- ie how much cash they will require.

When cash flow doesn't match what's required by cash-strapped businesses, experts recommend looking into various forms like working capital or lines of credit which are more appropriate for short-term needs while still being beneficial over time if used appropriately to address cash flow problems.

 

HOW DO YOU MANAGE CASH FLOW AND BUSINESS EXPANSION?

 

Business expansion inevitably increases expenses and exerts pressure on routine finances. Taking on too much debt also brings its own unique set of challenges as the business owner focuses on how to generate additional sales via money spent on additional operational expenses.

Securing cash flow resources when growing forces a business to manage every aspect of working capital. This means solid credit management policies, and strategic implementation of working financing solutions - as well as inventory management, is also key.

Formulating practical cash flow forecasts from cash flow statements  will equip a business and identify cash flow gaps

Growing too quickly without ample cash flow or working capital to underpin such expansion is always a risk.  This occurs when a company accepts large orders and contracts or invests heavily in growth on the presumption of future profits,  only to find itself unable to meet its immediate financial commitments. This scenario can lead to cash flow crises, impair supplier relationships, and ultimately, jeopardize the business's survival.

 

One more thing when it comes to financing for business - Are you looking for either debt capital, aka ' loans,’ or would cash flow/asset monetization solutions get you to the goal line? It is all about financing operations from either monetizing your balance sheet assets or taking on the right kind of debt load for either a small business loan for capital expenditure or a cash flow working capital solution to avoid negative cash flow.

 

While it might seem like we constantly preach ' capital solutions ' from the Canadian SME FINANCE marketplace, owners/managers should never forget how to generate internal cash. That’s done by managing your receivables and inventory turnover, and payables to the point where you're collecting A/R promptly, turning inventory, and slowing payables to have enough cash  (without alienating suppliers) in your financing activities.

 

Depending on what industry you are in, you also have the ability to ask clients to prepay or, as effective, get special payment terms from suppliers. That is another often overlooked method of securing financing.

 

Companies with an R&D investment can utilize SR&ED tax credit financing as a bridge loan to cash flow their refundable tax credit.

 

 

FINANCING CASH FLOW  VIA FINANCING OPTIONS

 

Financing solutions come with different interest rates and terms, and structures. Being able to present your financial statements and/or your business plan and cash flow projections is key to obtaining business capital of any type.

 

 

DEBT SOLUTIONS FOR BUSINESS FINANCING 

 

Govt Guaranteed Small Business Loans

 

Term Loans

 

Equipment Loans / Sale leasebacks

 

 

Cash flow solutions

 

A/R financing/factoring

 

Asset-based non-bank business credit lines

 

Inventory Financing

 

Tax credit financing

 

Unsecured Cash Flow Loans

 

Merchant Advances

 

Purchase Order Financing

 

 

BENEFITS OF GROWTH FINANCING 

 

Harnessing growth finance to elevate your business presents numerous advantages. One of the paramount benefits is the availability of capital. Growth finance unlocks funding opportunities that may not be accessible via traditional avenues, such as bank loans or credit lines.

An additional advantage of growth finance is the capability to rapidly scale your enterprise. With appropriate funding, you can infuse money into novel technologies, recruit new personnel, and broaden your reach into fresh markets at a quicker pace than otherwise possible.

Lastly, growth finance can be instrumental in giving you a competitive edge. By pouring resources into new product development and technological advancements, you can set your business apart from competitors and position yourself as a frontrunner in your industry.

 

 

 

 

 

ADVANTAGES OF NON-TRADITIONAL BUSINESS FINANCING  

 

The advantage of many non-traditional financings includes flexibility, the non-dilutive nature of your equity, as well as many prepayment provisions that do not come with traditional bank-type financing.

 

Knowing how much funds you need and what purpose goes a long way toward ensuring you can cover your cash flow and growth finance needs. Here the ability to plan for ' bulge ' needs or fixed asset investment is the key to ensuring the right financing/right time.

 

 

WILL A CASH FLOW LOAN HELP YOUR BUSINESS GROW? 

 

Whether it's a cash flow term loan or an unsecured working capital loan, any type of additional cash flow enhancement to your capital structure will help your company with growth plans. Needless to say, that type of financing will also help with growth projects your firm might have around new products, new customers, out-of-country growth, etc.

 

Don't forget that any cash flow shortfall can be addressed with a working capital solution that increases your overall liquidity.

 

Cash flow loans, sometimes known as working capital loans, can be used to finance growth projects, such as investing in a marketing campaign, product research or hiring salespeople. They can also help businesses tide over cash shortfalls when they’ve maxed out their line of credit due to unexpected challenges related to growth.

Many firms that are capital-intensive and have cash outlays for the purchase of new assets or investments in r&d do not have the additional collateral that a major Canadian chartered bank might require around the need for tangible physical assets.

A term loan or a working capital loan such as a merchant advance typically does not require additional collateral from the borrower. Term loans tend to be 3  to 5 years in length, while the thousands of firms opting for short-term loans are typically required to pay the loan back over a 12-month period. 

 

 

DON'T MAKE THIS BUSINESS FINANCING  MISTAKE! 

 

It's a cardinal rule of corporate financing that you should never acquire long-term assets with short-term cash-flow facilities. For example, long-term assets should be financed via longer-term equipment loans and equipment leases financing/equipment loans.

 

Bottom line? Match the useful life of the asset with the right financing. That leads to the proverbial ' cash flow crunch. '

 

Businesses that can offer proof of incoming cash flows and require funds for general growth and operations without straining access to their current business credit facilities are strong candidates for business loans. Ensure you can provide accurate and up-to-date information around receivables, payables outstanding, and inventory turns if applicable.

 

 

PITFALLS OF GROWTH FINANCE 

Expanding too quickly might originate from circumstances like delayed collections or premature overspending on assets prior to actual sales being realized. Excessive dependence on loans and debt is also a key danger.   The Harvard Business Review has a great article on determining how fast a company can afford to grow - Click here for the article.

 

 HOW TO MANAGE FAST GROWTH RISKS 

 

Businesses can manage high growth via solid cash flow and working capital management. Solid inventory and supply chain controls can help temper the rate of growth - and supplier/vendor relations are key.

 

CONCLUSION 

Understanding growth finance and the crucial function of business cash flow is essential for SME small businesses/firms aiming for expansion. Through preparation and good financial management businesses can successfully steer through growth-related hurdles.

Growth finance is all about the right type of loans and debt and cash flow financing for growth companies looking for transformational change. Debt is a very flexible strategy as an asset class, unlike equity solutions which also dilute ownership. 

 

Rarely will firms in the ' SME ' space be able to boast they have ' too much cash ‘. A more realistic goal that has real value is to ensure you have business credit access when you need it and for the right reason.

 

For proven advisory services seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your business cash flow financing needs to grow organically and take advantage of the right capital growth solution.

 

  

 

  

FAQ: FREQUENTLY ASKED QUESTIONS

 

    

What is growth capital?

 

Growth capital is used by companies for expansion. It's invested in mature businesses that need to expand or restructure their operations, enter new markets, or finance a significant acquisition -Growth capital is a type of private equity investment, usually minority investments in relatively mature companies that are looking for funding to expand or restructure operations.

Understanding financing options is key to growth and expansion. Having the right amount of growth capital helps a company invest in r&d or new markets and ensure headcount matches expansion plans.

 

 How do you create a growth finance plan for a business? 

 

1. Start by evaluating your current financial situation: Analyze your cash flow, revenue, and expenses.

2. Identify growth objectives and the necessary funding for future cash flow needs: This could encompass capital for product development, marketing and advertising, recruiting new staff, or expanding into new markets.

3. Explore financing options: After pinpointing your capital needs, begin examining your financing possibilities. These could include traditional bank loans, as well as many alternative financing solutions such as an asset based loan around tangible assets.

4. Develop a comprehensive plan for funding utilization: Formulate a plan which specifies how the funding will be used. This should incorporate distinct milestones and timelines for attaining your growth objectives which are usually required for approval via traditional financial institutions.

 

 How does cash flow impact business growth? 

 

Cash flow represents the net quantity of capital circulating into and out of an enterprise. It's indispensable for business expansion as it finances daily operations, settles debts, and channels investments into business growth. Sufficient cash flow guarantees that a business can fulfill its commitments and capitalize on opportunities without excessive dependence on external funding. On the other hand, ineffective cash flow management around areas such as accounts receivable can impede growth and even culminate in business insolvency.

 

 What strategies can a business use to manage cash flow during growth?

 

 

There exist numerous tactics that a business can employ positive cash flow amidst expansion. These encompass proficient management of credit, utilization of factoring and invoice discounting and other cash flow lending solutions such as asset based credit lines.

Control over stock and inventory, and competent management of the supply chain are important also, In addition, firms should also devise cash flow projections to foresee business needs and potential financial deficits. Short-term working capital loans such as the merchant cash advance financing solution might be appropriate for smaller businesses.

 

What is sales growth finance? 

Sales growth finance refers to the financial strategies and resources used to fuel an increase in a company's sales. These can include various forms of funding aimed at helping businesses expand their sales operations, boost marketing and promotional activities, enhance product development, or enter new markets to increase their customer base and sales volume.

While growth finance broadly aims at supporting all facets of business growth and the needs for future cash flows, sales growth finance specifically targets initiatives that directly or indirectly stimulate sales. This can include investment in new sales personnel, training for existing sales staff, technology upgrades for better customer service, or more targeted marketing campaigns.

As with all forms of finance, sales growth finance should be managed carefully, with a clear understanding of the potential return on investment, to ensure that the increased sales will generate sufficient profits and operating income and cash flow to cover the cost of the finance and income taxes.

 

 

 

How do you finance future business growth? 

 

Financing future business growth involves a series of steps and considerations:

1. Self-Financing: Start by using your own capital or profits if possible. This is often the simplest form of finance and it doesn't dilute ownership or control of your business while maintaining a positive net cash position for cash generated by the business's current assets.

2. Retained Earnings: Reinvesting the profits back into the business can also finance growth. This strategy requires good profit margins and careful financial management to ensure funds are available when needed.

3. External Financing: There are several options for external financing for  businesses with good credit ratings -

   • Traditional Bank Loans / Unsecured Loans: You could consider a traditional loan or a line of credit from a bank or credit union. These generally require a good credit history, the ability to demonstrate generating cash, profits / net income, and some form of collateral.

   • Equity Financing: This involves selling a stake in your business to investors, often venture capitalists or angel investors. While this can provide a significant cash injection, it does dilute ownership and may involve giving up some control over your business.

   • Crowdfunding: This involves raising small amounts of money from a large number of people, typically via the internet. Crowdfunding can take the form of equity, reward-based, or donation-based funding.

   • Grants and Government Funding: Depending on your location and industry, there may be grants or other funding available from local, state, or federal government agencies as an alternative to debt financing.

4. Strategic Alliances and Partnerships: Forming alliances or partnerships with other businesses can also provide growth finance. This might involve co-investing in projects or sharing resources.

5. Cash Flow Management: Effective cash flow management is essential to finance growth via the company's cash flow around operating expenses. This includes understanding the company's cash flow statement,  efficient credit management, short term investments financing via the use of effective receivable financing, buying equipment only when needed,  robust stock control, and effective supply chain management. Service companies typically require no inventory financing.

6. Financial Forecasting: Preparing accurate financial forecasts can help identify your funding needs and when they will arise as you spend money. It can also help you evaluate potential returns on investment and assess the viability of your growth plans at financing that comes with a reasonable interest rate based on overall creditworthiness. Ensuring positive cash flow and free cash flow means there are more cash inflows coming in while a negative cash flow indicates high spending while at the same time generating sales.

 

Click here for the business finance track record of 7 Park Avenue Financial

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Unlocking Business Cash Flow Financing

Business cash flow financing often requires some ' straight talk ‘. The ability to finance your company with the right loan / loans properly is one of the most powerful success forces in Canadian business. But how does the business owner/financial mgr determine where new cash flow and working capital will come from, and where it went? Let's dig in.

Working capital type loans have a multitude of purposes; in some cases it might be long term growth planning in typical business initiatives such as traditional marketing or even digital marketing initiatives, r&d capital spending, or a more robust ' feet on the street ' salesforce.

In other cases new influxes of working capital and cash flow might be required for current facilities which may be ' maxed out ' due to the constant replenishing requirement of working capital as you invest in inventory, receivables, and the purchase of new assets. It's important to note that new assets that have a longer useful economic life should never be financed with short term credit facilities.

That's a cardinal rule of business financing that many business owners / financial managers realize a little too late! Equipment leasing and financing as well as standard equipment loans are best suited for the purchase of assets. The majority of companies in North America (industry statistics say 80% )utilize lease financing. A subset of the lease finance option is ' sale leaseback ' finance, allowing your firm to keep the asset, refinance it for additional cash flow, and regain ownership of the asset at the end of the term. Commercial real estate can also be addressed as part of the leaseback process.

The new paradigm in business today is often tied to a firms investments in technology. Technology finance and tech funding needs can require a major investment of business capital. The good news is that ' IT ' (information technology ) needs can easily be accommodated in the world of lease financing. Also, it is hopefully no surprise that software, albeit an ' intangible ', can be financed, and companies can also raise working capital/cash via financing their ' SAS ' ( software as a service ) contracts.


In many cases cash flow financing makes sense because your company might not be ' asset rich ' which is certainly the case in the new economy of service-based industries that are less capital intensive. That of course means they don't have that ' hard collateral ' that typically Canadian banks are looking for.

Often the case is that your firm requires a permanent working capital injection, typically best satisfied by a working capital term loan. Here the focus is on the cash flow of the business and the ability to satisfy monthly payments which are usually over a 3-5 year term. Here the key requirement for your company is to present a defendable cash flow projection which is usually included as part of an updated business plan.

In any working capital loan or asset refinancing considerable discussion should be generated around the flexibility of repayment


There is in fact a very harsh and simple reality around your business cash flows. The answer? You've simple bought assets, or generated new assets such as receivables and inventory via monies spent.


There is a natural flow in business - it's all about paying down your debt, keeping taxes up to date, building working capital assets, and generating and taking profits


How does the owner/mgr make the right choices in raising funding for your business and keeping your financials understandable - i.e. understanding where the cash in your business is ' flowing '.


Many firms are challenged by low owner equity, which compounds the owner's ability to take cash out of the company.


Is there a simple secret to managing and financing your cash flow? The pros call this whole process ' operating cash flow ' it’s simply your profit or loss for the month plus or minus your changes in working capital accounts - we’re back to those receivables and inventories again.


External financing for your business will come from either term debt of business credit lines. By the way those business revolving credit facilities will come from either a bank or alternately a commercial finance company offering asset based credit line facilities.


When it comes to business credit lines the facilities that are most manageable are those when the credit line fluctuates significantly. Banks or finance firms will always look more favorably on your ability to constantly draw done and replenish the facility via your receivable and inventory turnovers.


Assets that need to be financing in your business might include plant and equipment assets, vehicles, as well as technology / software etc. Here a term debt options such as lease financing will almost always make the most sense.


What's the bottom line in accessing outside funding and managing your balance sheet properly. We summarize as follows:


- Develop a strong sense of how cash flows in your business- a good cash flow forecast based on your historical inflows and outflows helps


- Ensure your provincial and federal taxes are paid on time- If you have tax arrears they can often be consolidated into a new re-financing of your business


- Determine your business line of credit needs - this is a critical area of business cash flow financing. Remember that Canadian chartered banks are NOT the only credit line providers


- Finance those long term assets with long term leases or loans


- Focus on building equity in your business via good gross margins and profits

The overall quality of your ability to generate cash flow will be a dominant focus for any commercial lender. The a/r turnover and types of customers you sell to will also be a factor, and in general your accounts payable turnover should be consistent with your 'DSO ' (days sales outstanding ) performance. Taking a holistic approach to these points via what the pros call ' the cash conversion cycle ' will determine your loan success. Other ' soft factors' such as the lenders impression of your mgmt team and experience as well as personal credit histories etc should never be overlooked as a component of any loan submission.

In any commercial loan proposal there are always some key documents and information that should never be overlooked or omitted. A business plan and cash flow are key, and it should cover your requirement and use of funds, management overview, company background, as well as historical financial statements. At 7 Park Avenue Financial we prepare that document for clients with a focus on financials, not ' marketing ' or an infomercial on the company that is high on promises and short on financial delivery!


Firms with positive cash flow will always have a better chance of obtaining the required amount and type of loan they need. Every firm at certain times in its history experiences the ' cash flow crunch ' and growing too fast is not the worst problem to have, if you have the right financing solutions in place to address that situation. The ability to access funds to take on larger contracts, obtain preferred pricing from suppliers is a positive need for cash flow financing.

That growth in business often leads to a larger investment in receivables, sometimes augmented by slow-paying customers. In that instance solutions such as a/r financing, factoring, asset-based lines of credit, or Confidential Receivable Financing, the latter being our most recommended solution at 7 Park Avenue Financial. This type of facility takes away the 'notification' issue found in standard ' factoring' offerings and allows you to bill and collect your own a/r which at the same time achieving all the benefits of a bank type line of credit, ie the ' revolving credit facility '.

The Difference Between Cash Flow Loans & Asset Based Financing

KEY POINT: It is important to understand the difference between business cash flow term loans versus monetizing your assets across the multitude of solutions in the Asset Based Lending universe.

While both types of loans are ' secured ' monetizing your assets does not bring additional debt to the balance sheet. Each type of these two loans offers different benefits and risks. In each case your ' collateral ' is, in the case of the working capital loan the cash flow, while in an asset based loan it is the underlying collateral.

Working capital cash flows are always ' credit quality ' based, so the criteria we have talked about already such as historical cash flow, profit, type of industry, etc are key drivers in the approval process. Companies will typically want to be able to demonstrate good profit margins and a relatively clean balance sheet with acceptable debt/equity ratios.

UNSECURED CASH FLOW LOANS

Unsecured short term cash flow loans are all the rage these days - they come with higher rates by virtue of their unsecured status, but at the same time are much more easily accessible. A good rule of thumb is that your company can achieve loan approval for 10-15% of your annual sales volume. The popularity of these loans arose out of the Merchant Advance Loan industry in the U.S. which grew out of providing loans to retailers based on .. future sales and credit card receipts !.

These loans, unsecured for the most part, often fix a cash flow gap/cash crunch. They can fix the seasonality of many small to medium-sized businesses and can address those unplanned for emergencies that befall any business. Loans are often based on a one year term and payments can be made weekly or monthly at the discretion of the lender. Short term opportunities in buying product at an advantageous price.

ASSET BASED LENDING

The required amount of financing you need can often easily be acquired via the ' Asset Based Lending' process. These facilities mirror a bank line of credit, and allow you to margin and borrow against, on an ongoing basis your receivables, inventory and equipment/fixed assets. These are the ' collateral' components of the loan and historical cash flow is really a secondary factor in the approval process.


Asset lenders typically focus on larger deals and typical candidates are asset rich firms that might have profit and cash flow challenges. This is one way in which the non cash rich company can grow its business. Typical borrowing amounts are receivables at 90%, inventory at 30-50%, and the value of appraised assets. Companies requiring SME COMMERCIAL FINANCE needs can quickly see this type of financing will provide significantly more financing they could ever achieve via a bank. Customers are required to report, usually monthly at a minimum, on their a/r, inventories and payables. Your firm is a good candidate for asset based lending if you can report properly on your financial performance and are prepared to cooperate in the due diligence process leading towards an offer to finance.


Borrowing does not have to be a negative process - in many cases it allows your company to capitalize and seize on new market opportunities to grow your business. Most borrows can often easily find they can generate a solid return on investment for every dollar borrowed. A recent survey by a leading business capital provider in the U.S. stated that small businesses can achieve a 5x return on every dollar borrowed based on their planned use and turnover of capital borrowed.


If you’re focused on accessing the right finance solutions for your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your long term funding and working capital needs.




7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Business Cash Flow Financing In Canada: Improving & Understanding Access To Loans

Carrying On Without Cash Flow Is Not An Option ! Analysis and Solutions For Canadian Business

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INFORMATION ON BUSINESS CASH FLOW FINANCING SOLUTIONS

Carry on?
business cash flow ? That's not an option for Canadian business owners and financial managers. That's why the analysis of their cash and working capital needs, in the context of solutions available is so critical in today’s business environment.

So are we all in agreement? We mean of course that no company has the ability to on a long term basis operate successfully without cash. That shortage is often the reasons why many companies fail.

However, the balance sheet and the income statement, as we always preach, dont necessarily tell you the full story of your company's goings on! A cash flow statement, that’s the third part of every financial statement package will, however, truth be told you can perform a fair bit of solid analysis way before your accountant or your accounting system delivers that document to you.

So why do you want to be so attuned to that cash flow anyway. Simply because whether it’s the short, intermediate or long term it’s a true measure of your solvency. And that solvency is what keeps your creditors and lenders and suppliers either happy or dissatisfied with your payment ability.

In more sophisticated firms a real measure of cash flow is often ' free cash flow '. Simply speaking it’s the true cash flow calc which then subtracts your capital expenditures to come up with that ' free cash flow '. Investors in public companies look at that one a lot, and quite frankly since the small to medium sized business in Canada doesn’t pay dividends or have to report earnings and cash flow we dont really consider that one quite relevant in the context of today’s discussion .

So what is important then? Several other great tools area available. Just one of those is the cash return on sales analysis tool. Take your cash flow from operations and divide that by your net sales over that same time period. Let's say the number works out to 10%. What does that mean? Simply that 10% of the sales you generate provide cash to the company. At the end of the day the number is relative to your company because it tells you how efficient you are in turning sales into cash.

Another great tool to check out is current cash debt coverage, which we'll leave for another day’s discussion.

At the end of the day there are ultimately 5 reasons why companies fair - they have too much debt, they are caught in a vicious cash flow cycle, they have current assets that aren’t turning, or fixed assets and too little capital come into play.

To solve these challenges Canadian firms have a variety of solutions - they include bank lines, asset based lines of credit, receivable and inventory financing facilities, tax credit monetization, and securitization. Oh and dont forget the proper use of equipment finance.

Speak to a trusted, credible and experienced Canadian Business Financing advisor on business cash flow analysis and solutions available to your firm today.





7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


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 .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
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.



Stan Prokop

Business Cash Flow Financing In Canada : Your Call Of Duty To Your Company ?

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Is Your Company Staying Afloat When It Comes To Business Cash Flow Needs & Financing Solutions You Require?

OVERVIEW – Information on cash flow financing solutions for Canadian companies . Your company needs cash flow for business growth and profits

Business cash flow needs have us all in agreement, right? We need it to stay afloat? That's much better than the sinking option!

These days business cash flow financing needs is pretty well right near the top of your worry pile. We're going to cover off measuring the problem, and fixing the problem via traditional and alternative finance solutions. Let's dig in.
Oh, and by the way, alternative is fast becoming traditional, but more about that later!

In talking to clients about business financing and business cash flow we always get the distinct impression they feel their business is unique - and that may be so but the truth of the matter is that the cash flow financing challenges you face are being faced by everyone else in and out of your industry.

You're forgiven for thinking your business cash flow financing challenges are unique, probably because of the mix. What do we mean by the mix? Simply that each h company and industry has difference levels of inventory, receivables, payables, all of which factor uniquely into the working capital challenge. That creates different challenges at different times.

In fact, whether you like it or not, about 80%, yes 80% of all you assets are in receivables, inventory, and to some extent prepaid. That's for most firms, unless perhaps you're in a service oriented business only.

Your ability to ' turnover' these assets is what makes your business successful, or not.

Each industry has different gross margins, and if you have great gross margins then you can withstand a bit less turnover that is required in inventory and receivables. If you are in a low gross margin business turnover is absolutely critical. And you measure that turnover by three key metrics, inventory turns, days sales outstanding or collection turnover, and finally days payable outstanding.

Turnover drives working capital and many business owners kind of know that, but more often than not aren't focusing on improving that turnover.

So, staying afloat. There are a number of cash flow financing solutions that allow you to address cash flow financing for your business. If it was a perfect world (apparently it's not) you would have all the liquidity you need from you bank, but bank financing is always a challenge for business, and in many cases inventory is not part of the financing mix that is available.


There are some great cash flow for business solutions available to help you succeed in Canadian business financing.
That includes:

Financing receivables

Business credit lines from banks or commercial asset based lending

SR&ED Tax Credit Financing

Working Capital Cash Term Loans

Sale Leaseback financing


Most business owners don't know they can access cash flow financing via the financing of Purchase Orders (p o' s) and contracts. They allow you to consider orders significantly higher than you could have ever handled in the past.
And, finally firms with relatively good financial standing can access unsecured cash flow working capital term loans via non bank lenders.
So what’s it all about. We think we have been fairly clear, and hope you agree. It's about understanding your cash flow financing challenges, measuring them via the turnover of working capital accounts, and finally, accessing any one of the number of solutions we have provided.

Speak to a trusted, credible and experienced Canadian business financing advisor as to what makes sense for your firm.

7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

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

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
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.










Stan Prokop