Tweet
You Don’t Need A Fortune Teller To Predict Business Cash Flow Challenges Ahead
OVERVIEW – Information on cash flow challenges faced by small and medium business owners in Canada. Solving the working capital finance challenges creates a path for sales and profit growth
It would be great to hear our clients say they have no problems in this area of Canadian business financing. Unfortunately that's rarely the case. Let's dig in.
Let's look at the root of some of those working capital challenges; what are the real issues, and what's really causing the problems? Next step after that? Solutions!
It's of course great to have sales - and sales and profits are even better. In general when you have those you have the essence of a healthy business. But those are in effect what we could call paper transactions and it always comes back to 100 year old clichés such as ' cash is king ' and 'the sale isn't made until you're paid '.
That cash is required for all those boring things, paying suppliers, paying employees, and meeting your obligations on loans and leases and other business commitments.
Your challenge is typical - how then do you create a flow of cash in the long term, as well as addressing short term bulges to ensure you have liquidity.
Naturally when you have a good handle on cash flow everyone views you in a positive light, most importantly your suppliers and lenders.
The solutions to cash flow challenges often come out of inability to plan or address the right type of cash flow solution. You run the risk of liquidity problems when you current assets aren't able to be converted in a timely manner into cash - those assets are typically receivables and inventory.
There isn't a day when we don't run into a textbook type of working capital finance challenge - it's as simple as requiring product to satisfy regular or new large orders, generating invoicing, and then waiting 30, 60 or 90 days for payment. That is the textbook challenge when we talk to clients asking us for assistance in solving cash flow problems.
So hopefully we have done a pretty good job of telling you what your problems and challenges are - let's address some real world solutions!
The problem though? Unfortunately many clients can't meet business net worth, personal net worth, and liquidity ratios and covenants your bank might require. Also we strongly believe that inventory financing by banks in Canada is increasingly more difficult to achieve.
Our recommended solution? Don't borrow - monetize. That's the best advice and plan we set out with clients in order to solve cash flow problems. You could get a working capital cash flow term loan, but that just creates additional debt on your balance sheet. Instead, take those assets you already have on your books and monetize them - those assets are the previously mentioned inventory, A/R, and in some cases tax credits due your firm as well as unencumbered equipment.
Liquidity for those assets can be achieved by a receivable financing program, an asset based line of credit, or a short term bridge loan on an asset such as a tax credit or paid for fixed asset such as equipment.
Many of these solutions are outside the chartered bank system in Canada - they are the new world of alternative finance ‘and can be accessed by talking to a trusted, credible and experience Canadian business financing advisor.
Your ability to monetize your assets, keep suppliers paid and current as well as having the ability to grow your business is key to long term business success.
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
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
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.
Stan Prokop
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.