Information on working capital solutions and small business finance loan arrangements that make sense for your cash flow needs. Cash flow financing via loans or monetizing your current assets is your challenge - here's how to solve your problem for business financing
Just picture your firm having access to all the working capital you need. Seem impossible? Not really... if you have a solid understanding of your options and your firm's capability of qualifying or executing on those options.
Whether you're the largest corporation in Canada or a small new start up (and everything in between) your business needs working capital. In Canada small business financing loans and financing arraignments for working capital are limited to a handful of possibilities - but being aware of what they are and qualifying for them could be the solution to your constant focus on cash flow via some sort of working capital loan.
It is probably easier than you think to ensure you are addressing the cash flow challenge correctly - where it gets somewhat ' thorny ' is matching a solution to the problem or locating an expert that can provide you with the business financing assistance you need.
Two key elements of your first step working capital assessment are your gross margins and your turnover. That's the big problem we have with text book / academic solutions to working capital - they point you to the text book calculation - give you a formula which essentially has you subtracting current liabilities from current assets, and voila! the inference is you have working capital. However, our clients have never paid a supplier or completed a company payroll with a ratio!
To properly assess your working capital needs focus on understanding your turnover - how much inventory do you carry, what are the days outstanding in inventory, and as importantly, or more importantly, are your receivables turning over. Have you realized that for many firms 80% or so of the total of all the business assets you have are tied up in A/R, inventory, and, on the other side of the balance sheet let's not forget payables?
So can you have financial success based on your new found knowledge and analysis of your cash flow and asset turnover? We think you can.
Canadian business financing solutions to small business finance loans really revolve around a couple viable solutions. Typically, in our experience Canadian chartered banks cant satisfy your business working capital needs - if only for the reason that they rarely finance inventory and require significant merit in your overall financials, profitability, external collateral, personal creditworthiness, etc.
So, where do you go from there? The other solutions are very viable and can take you to a potential 100% turn around in cash flow - they include working capital financing as a bundled line of credit on a/r and inventory via an independent finance company. For firms that are larger, we believe the ultimate tool is an asset based line of credit that provides high leverage margining on all your business assets. Other more esoteric solutions, but still very viable although somewhat misunderstood are securitization and purchase order financing of new contracts and orders. (Your suppliers are paid directly for the orders you have in hand - what could be better than that?)
Finally, coming up the road at lightening speed is factoring and invoice discounting. We mention them lastly but they are probably the most popular method, gaining traction every day. Our favourite is confidential invoice financing, allowing you to control your financing.
So there you have it. You have identified new ways to determine the need; we have outlined 4 or 5 solutions that will take the guesswork out of working capital. These loan and financing options are available with a bit of research, and, if you choose, speak to a Canadian business financing advisor who can provide you with timely and valuable assistance in your cash flow needs.
Stan Prokop - founder of 7 Park Avenue Financial –
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Direct Line = 416 319 5769
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.
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