Inventory Financing as a Working Capital Solution

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Why Is It So Hard To Finance Inventory In Canada? We Know Why !



Information on inventory financing solutions in Canada. The ability to finance inventories as a key component of your working capital strategy is key to business financing success

If your Canadian firm is ‘ inventory intensive ‘ then an inventory financing solution has to be an optimal part of your overall working capital strategy . Unfortunately it has probably never been more difficult to access the amount of financing you need for inventory in order to maintain and grow sales and profits.

Let’s review some of the key basics and then outline what types of solutions are available to your firm. The essence of inventory financing is simply the ability of your firm to generate a short term advance, or operating facility based on the amount of inventory you have on hand. A couple of key concepts come into play here. One is simply valuation – meaning of course there has to some agreement between you and an inventory financier as to what value can be placed on inventory.

We can appreciate to a certain degree the conundrum that Canadian chartered banks have with inventory – which is simply - how do we understand it! There are hundreds of different industries and business models in Canada, and the ability of any one entity to understand what the value of a certain industry inventory is, and more important, how it could be remarketed in liquidation is of course the challenge.

As a result, as we have inferred, the banks have tended to shy away from advancing any significant amount of financing against inventory. When financing is in fact advance it tends to be very formulaic, and, similar to the receivables advance, very focused on your overall operational, financial, and collateral situation.

What Canadian business owners actually need is for a true inventory lender to work with them to understand what the maximum amount of funding can be given against ongoing inventory on hand. Again we will raise one other technical point, which is when we talk to inventory it can be in the form of raw material, work in progress, or finished goods. Those three categories alone of course require a whole additional subset of lender knowledge.

Fortunately there are firms in Canada who are very focused on inventory financing – in some cases these can be in the form of floor plan financing , although the purpose of our information here is pure inventory financing .

We recommend clients work with a trusted, credible, and experienced advisor in this area – one who can deliver an inventory solution that either compliments your existing financing arrangements, or, in some cases perhaps replacing your current financing with a very focused and specialized asset based line of credit that maximizes the total value of your receivables and inventory.

When inventory plays a key role in your company’s sales process your ability to generate cash flow and working capital on an ongoing basis against this asset will ultimately prove to be a major competitive advantage for on going growth and profits.

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

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' 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