Working Capital Financing In Canada : Business Funding 101

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Working Capital Financing : Looking For The Real Thing In Business Funding?

OVERVIEW – Information on working capital financing & Business funding solutions in Canada. What if your company had all the cash flow you need to run and grow your business?

Working capital financing challenges require the ' real thing' in business funding. Is it even possible to imagine your company having enough cash flow all the time? That would certainly alleviate the daily challenges that seeming consume a large amount of the time when it comes to owners/mgmt. Let's dig in.

Part of your success in attaining the right amount of working capital understands what it is and what it is not. The most applicable way we encourage clients to understand the term is simply the funding needed to manage your daily business operations.

So in general it is 'short term 'in nature, although business owners can readily be excused for wondering why it is 'short term' if they are thinking about it all the time!

Understanding and recognizing the problem is half the challenge. That allows you to focus in on real world solutions, which by the way are available! Classic cash flow often simply revolves around understanding how you can finance inventories and A/R.


The concept of a 'cycle 'is very important in understanding the cash flow conundrum and the solutions around that conundrum. The bottom line is that the working capital ties up in your current assets changes - daily!

Cash becomes inventory which becomes a receivable which becomes cash again... what a concept! You will be in a better position to understand the working capital needs, and how to address them if you understand the length of your working capital cycle - simply put: How long does inventory remain on the floor and then converted into saleable inventory, and how long does it take for a receivable to be collected.

Delaying payables is the opposite way to work your way to fairly perfect working capital. Naturally that is not practical or recommended, but our point is simply that your working capital financing investment in your current assets is offset by the timing of your payables, which assists in your cash flow cycle.

So we've focused on the problem, what about solutions? It comes down to 3 basics:

Permanent working capital

Outside commercial financing/ or bank financing if available

Internal cash flow mgmt - i.e. payables mgmt & asset turnover focus

Which one or ones are best for your firm? Focus on understanding the turnover of your receivables and inventory - very quick rudimentary calculations can determine that. Also, develop a realistic cash flow forecast, because you now know what the needs are based on the knowledge we have obtained around understanding our turnover and requirements.

One useful tool? Clients we meet are often searching for a 'quick fix 'number - One calculation you can use in a general matter is that your firm requires working capital in the amount of 25% of your sales. That is of course a very general guideline.

To finalize working capital financing and business funding for your company your options are a long term fixed working capital cash loan, in some cases this is called mezzanine or sub debt financing. At the same time you may be in a position to secure bank financing of receivables and inventory, which has become more of a challenge than ever in the current economic and business environment.

Your firm is probably a candidate for a working capital factoring facility, which monetizes your receivables the same day you issue them - this is one form of generating all the working capital financing you need for business funding. These are provided by commercial non bank financing companies.

Bottom line: Understand what working capital financing is, calculate how much you need and when and why, and then implement the right solution that matches your business overall needs and credit quality. Seek out and speak to a trusted, credible, and experienced business financing advisor in this area of Canadian business financing.


Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info & Contact Details :

http://www.7parkavenuefinancial.com


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