OVERVIEW – Information on sources of working capital and traditional and alternative business credit finance solutions in Canada
That might come as quite a surprise to many business owners and financial mgrs who feel that might not have real ' choice ' in business credit solutions. So how do we gravitate to the right cash flow solution for our businesses? Let's dig in.
Understanding the type of business credit you require is all about living through a working capital ' crunch ‘. Most businesses at one time or another live that challenge every day.
Working capital is best understood as your operating capital, - That's the investments your firm has in areas of receivables and inventory, as well as the constant demand to replace and replenish assets. Your goal should be to ensure those current assets such as receivables and inventories are monetized in the best manner possible.
So who can help? The textbook definition doesn't really help us out - our accountants and analysts tell us to go to the balance sheet, subtract current liabilities from current assets, and , voila! That's working capital!
One of the biggest contradictions in working capital that you need to understand is the issues of assets, profit, liquidity and turnover. Once you have a handle of those the concept of working capital and, more importantly, the solutions start making more sense.
How you manage those short term assets of A/R and inventory is what working capital is about. Many business owners quickly realize that one of their liabilities, i.e. payables, is actually a large asset in measuring working capital and managing it. That is because if you can continue to convert inventory into A/R into cash, and slow down payables you are achieving working capital progress.
Is there a perfect way to measure your working capital needs and progress? One of those methods is to check into the 'cash conversion cycle '- It's a tool you can use to measure how low a dollar takes to flow through your company. It simply takes your inventory and receivable days outstanding, subtracts your payables days outstanding, and there is your final number.
In order to achieve solid working capital you need to increase turnover - that can be done by accelerating cash flow by borrowing against receivables, or selling receivables via a factoring process.
Other working capital finance sources include:
Asset based non bank lines of credit
Sale leaseback strategies of assets you already own
A/R factoring / Confidential Receivable Finance
Working capital term loans
SR&ED Tax Credit Financing
Merchant Advance/working capital short term loans
Your working capital solutions in Canada might seem limited, but in fact they are very focused and real. You can increase working capital today with no one’s assistance simply by accelerating turnover of your assets such as receivables and inventory. If you feel your challenge is more of a long term nature a working capital term loan (if larger these loans are called subordinated debt) is the solution.
Over the long haul monetizing your assets, not borrowing more - that's where asset based lines of credit work best.
So what’s working capital all about - it's a case of understanding what it is, looking at how your firm performs in key metric areas of turnover, etc, and then choosing a solution that works best for your firm, whether that is long term in nature, or a bulge type facility that augments your daily cash needs.
Seek out and speak to a trusted, credible and experience working capital business financing advisor to determine what choice is best for your firm.
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
Office = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
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
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