Tweet
Get Ready For Inventory Financing & Accounts Receivable Finance Solutions !
More and more Canadian firms require inventory financing as a component of their business and sales growth . Inventory financing in Canada is relatively under utilized and most business owners don't understand how it works . This new form of financing is growing .
Inventory growth needs put financial pressure on the balance sheet as vendors and suppliers continue to dictate payment terms in order to meet their own business and profit goals . As more financial managers know the ability to turn inventory over as many times as possible is a significant operating measure for any firm .
A company computes its inventory turns by simply dividing the ' Cost of Goods Sold' by the amount of ending inventory and ending up with a turnover rate . The rate of inventory turns is never an absolute number , as different industries have different acceptable inventory turns . Also, we should note that there are sometimes different inventory components - i.e. raw materials, work in process, and of course the final finished goods .
Many Canadian, ( and U.S.!) firms moved significant purchases to China in the last number of years , As China has changed its banking policy, and has also been a victim of the world liquidity crisis , more and more Chinese manufacturers are not willing to carry accounts receivable in the manner they did several years ago .
The crux of the inventory problem issue for any firm is the inability of the company to convert orders into sales simply because they don't have the inventory to satisfy their customers . Without orders the firm has no financeable asset . Day to day cash flow rarely is enough to generate significant additional inventory purchases.
The ability of a inventory financing companies to finance required inventory in turn allows a firm to generate receivables which are converted in true working capital .
An inventory finance firm will evaluate the company's overall prospects , its management, inventory controls, etc and determine what per cent of the companies inventory can be financed . To take the matter further a lender might, on occasion, require the inventory to be inspected at regular intervals, or in extreme cases, held in a separate location under the control of the lender . The inventory lender is looking for an acceptable business model which is replicable . Generally speaking inventory financing is never done on a ' one shot deal ' basis.
The risk in this type of financing is reflecting in the pricing . Normally the only other way a company could attract capital to generate high inventory levels is to issue additional equity . This is categorically more expensive than debt, or in this case the inventory financing cost .
The Top Ways to Succeed in Inventory Financing
They types of companies that require inventory financing are usually in the following categories :
1. Growing importers who sell wholesale in North America
2. Importers who sell to consumers
3. Intermediaries who purchase product and ' flip ' the inventory to someone else
4. Manufacturing firms with fast turnaround business cycles
They also have good gross margins which can withstand the more expensive cost of this type of financing .
In summary , inventory financing and accounts receivable finance is a growing component of business financing . It works well in certain industries . Most firms who require inventory financing are either start ups, or those who cannot get traditional bank financing . ( In our experiences banks can rarely, if ever, meet a company's inventory margin requirements . Seek out and speak to a trusted, credible and experienced Canadian business financing expert who can assist you with your business finance needs.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Click Here For 7 PARK AVENUE FINANCIAL website !
7 Park Avenue Financial provides value added financing consultation for small and medium sized businesses in the area of cash flow , working capital , and debt financing .
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
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.