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Working Capital and Cash Flow Mechanisms for Canadian Business
Information on working capital finance requirements and solutions for business credit for Canadian businesses . Your business doesn’t need a 'loan ' Do you really need a ' loan ' and are there are alternatives to monetize assets into cash flow . P.S. Yes there are!
working capital finance which is a true key measure of business credit health. Does a working capital loan need seem like a necessity as your business grows? Let's examine the why and more importantly the ' how ' of cash flow financing in Canada.
It is not hard to determine why there is such a focus on working capital finance in Canadian business - its simply because your ability to both manage, and access cash flow alternatives become the ultimate measure of short term financial health . We say short term because your overall capital structure and debt / equity relationship are of course the other piece of the business finance puzzle. Today we're focusing on short term health!
You know you are in good shape from a business cash flow perspective when you are in a position to meet your short term obligations - typically those are payables and any loan payments becoming due on a monthly basis within the year. If your cash on hand, receivables and inventory turnover are unable to meet those obligations consistently ... well ... its clear you need a working capital solution.
The reality of course is that cash flow fluctuates, and there are times when you have what is known to bankers as a bulge requirement - it is those times you need that access to working capital we spoke of.
So how do you determine what type of business credit financing you need, and, as importantly, how much. Sophisticated larger firms use the capital budgeting process to determine asset needs and why type of investment is required. It’s essentially the mix in the financing of your company - i.e. owner equity, debt, and financing of current assets, which is our focus - ' working capital'!
The good news about working capital finance is that if it is done properly it doesn’t incur debt, or reduce your owner equity - it just increases cash flow and business credit access. To some extent the term ' loan ' in working capital actually reflects a line of credit scenario, not taking more debt on to your balance sheet.
It is possible though in Canada to get a working capital term loan, for larger and medium size companies this is known as sub debt. Payments are fixed and in general the loan is unsecured and based on your cash flow ability to repay, both historically and projected.
If that is not the solution for your firm, what is then? The other solutions are a true bank operating facility, if, and sometimes that’s a big if, you meet bank criteria for lending. Other real world and more probable solutions for working capital finance business credit are asset based lines of credit , working capital facilities of a non bank nature around your inventory and receivables, or simple receivable financing via an invoice discounting facility.
In summary, working capital cash flow financing is not necessarily a ' loan ' per se, but there are options available for business credit financing in Canada. As we have shown you need to determine when you need that capital and why it’s important to have stand by facilities available. Speak to a trusted, credible and experienced Canadian business financing advisor on sourcing your proper working capital and cash flow needs.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
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 .
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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