Getting The Bank Or Business Lender ' On Side '
Become A Good Manager Of Cash Flow Assets
As the Canadian business owner and financial manager well know it takes more than that to get lenders, ( bank and non-bank) to get a good feeling about financing your firm and approving business credit for cash flow working capital finance solutions your firm might require. At the end of the day, it’s about ' protecting ' their financing and collateral interests in your company.
Unfortunately, there are ways to be totally ' not great ' at proving that you're a good cash flow business owner/manager.
ASSET TURNOVER HELPS DETERMINING WORKING CAPITAL HEALTH
In financing, more often than not it’s about ' the assets '. So while we can easily get caught up in fancy formulas are EBITDA and other calculations the reality is that it’s your assets and their turnover that determine your real working capital health. Mismanaging those assets makes you a great ' mismanager ' of cash flow and working capital.
One Of America’s great cash flow and investment managers ( Warren Buffett ) once said:
‘Does management think the tooth fairy pays for (future) capital expenditures'
Not all companies do the proper amount of planning so when the inenvitable cash flow crunch happens a business is usually caught of guard for lack of that planning . Understanding your asset turnover will allow the business owner and financial manger to address needs and identify proper business finance solutions.
Professional accountants and advisors call theis whole process the operating cycle, also called cash conversion . No secret to any business owner that it takes a fair amount of time for a dollar to flow through the company coffers from the time that you created products or generated services all the way through to payment of your final invoice/contract.
At 7 Park Avenue FInancial we look at the whole picture and determine the critical relationships and timing betwee generating sales from inventory or providing services, to turnover in payable and receivables. Knowing the exact numbers in those relationships helps us dertmine financing solutions for our clients.
While our client might often view these calculations as complex, it simply know some basic formulas around how much days inventory is outstand, how long it takes to collect your receivables, ( thats ' days sales outstnading ' ) and finally days payable . Not all our clients understand that simply slowing your payables creates a positive cash flow - the actual formula for this is average payables multiplied by amount of time you are looking at , and then divided by your cost of goods.
If there is one very important number to keep in mind relative to some of the calulations we have shown it simply that there should be a commensute rise in certain accounts and relationships =
Example - if sales are stable or going down , and receivables you are carrying are up - that is a bad thing ! There should be a strong correlation to growht in sales and grwoth in receivables and inventories, as an example.
Naturally, term debt lenders focus on your long term viability to generate payment for their loans. At its very simplest it’s about your cash flow from the management of your working capital accounts (A/R and inventory) that pays bills, not the fancy EBITDA formulas that reflect how much your assets have actually depreciated.
So when profits and EBITDA calculations are positive we meet clients that still are having a challenge paying suppliers and meeting payroll obligations.
So what we are saying is that it’s important to understand that sales revenue and profits and the ' value ' of your company, if you're focusing on just those, have made you a great Mismanager of cash flow and working capital.
It's all about know how your firm can access cash from assets, as well as being able to plan for future needs. That's where a bit of planning comes in - putting together a sales and receipts forecast, discussing these needs with a bank or non-bank lenders. The biggest mistake we see in this area from clients is they are not properly analyzing the cash timing of collections from accounts receivable.
HERE ARE SOLUTIONS TO NEGATIVE CASH FLOW
If your cash flows are negative through this planning process the solutions are pretty clear, and limited:
5 WAYS TO ACCELERATE CASH
1.Take on term debt
2.Have shareholders put in more money
3.Delay payments to suppliers
4.Really increase sales!
5. And finally - convert assets into cash via asset turnover focus
Converting assets into cash via :
Access to Canadian bank line of credit
Non bank asset based lines of credit
Equipment / fixed asset financing
Government Of Canada Small Business Loan Program - The Guaranteed federal business loan
CONCLUSION
Use our solutions and tips to avoid being a " MISMANAGER " of working capital solutions for your firm.
If you're looking for cash flow working capital finance solutions for short term or long term needs speak to a trusted, credible and experienced Canadian business financing advisor at 7 Park Avenue Financial on how to achieve the right solutions for financing your firm for health, growth and success.
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 areas 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. He is an experienced
business financing consultant
.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 financing 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.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2020
Are You Mismanaging Cash Flow? Fixing Working Capital Problems With Solid Financing Solutions Become A Good Manager Of Cash Flow Assets
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