Small Business Loans in Ontario for Working Capital – 3 Solutions!

Small business loans for working capital in Ontario and the rest of Canada for that matter are similar to shoes - they come in various sizes and styles! Let’s explore what you as a business owner are looking for when you discuss working capital needs.
Part of the problem we tell clients is simply the terminology. Working capital means different things to different business owners. What it means to you, clients ask.

If we want to keep things simply working capital can be achieved successfully, and in a fairly timely fashion in the following three manners:

1. A cash working capital term loan that injects permanent working capital into your firm and is paid back over a specific period at a fixed rate

2. Monetizing your current asset accounts – i.e. advance high levels of margin against your receivables and inventory

3. Receivable Discounting – otherwise known as factoring your receivables for immediate working capital and cash flow

Those are the three main ways in which we advise clients on achieving working capital fulfillment for their business. We would point out that there are a couple of spin offs of variations of the above strategies – one is so simple that you probably know it intuitively but haven’t focused on it. So what is that strategy?

We will call it our internal strategy – You can increase your working capital tomorrow at no cost – we repeat, no cost by doing the following:

- Collecting your receivables more quickly
- Turning your Inventory over faster
- Slowing down your accounts payable

All of those require management skills and a greater level of customer intrusion – which is to say you do so at the risk of potentially offending suppliers and valued customers. But it is the perfect way to achieve working capital nirvana... trust us on that.

The current business environment makes it very challenging for you as a business owner to achieve any level of working capital via a loan or monetization of your current assets.

Canadian chartered banks are among the most respected in the world, but business owners know that it is extremely difficult to achieve working capital via traditional bank financing. As a business owner you need two things – reliable financing, and financing to grow your business. If you have bank financing and are unable to replace it the situations becomes of course even more challenging, because you become ‘self financing ‘at a good point.

Key Business Point – If your firm has positive working capital (subtract current liabilities from your current assets) you need external financing. For a starter you are essentially stopping or at a minimum hindering your growth when you are self financing or have financing challenges with traditional institutions.

One of the best pieces of advise we feel we give business owners is to not focus on one solution only as the ‘ holy grail ‘ to their working capital challenges . The reality, in our experience is that the solution to cash flow challenges will come from a variety of different sources, certainly two at a minimum that will allow you to achieve working capital and cash flow piece of mind.
We have discussed simply better internal controls around working capital accounts to self achieve better cash flow. There is a finance expression we recall – we believe its along the lines of ‘ assets in the barn ‘ – what that simply means is that your firm might have unencumbered assets ( the best examples are equipment , machinery, real estate ) that can effectively be monetized into a bridge loan or working capital loan .

Most alternative financing structures come with high rates than traditional banking. We address this issue with clients by saying that in some cases these solutions will actually save your firm from extinction, but on a more positive note, they can, despite their costs, help you grow sales and profits, thereby offsetting much of the perceived higher costs.

Factoring is a good example of that, as we have shown many clients that this can be an effective way to borrow capital at almost no cost if they use the tool effectively and enter into the right type of facility. That is just one example.

Don’t be afraid to consider new or alternative working capital sources, it might be the best business financing decision you ever made.

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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/small_business_loans_working_capital_solutions.html