YOUR COMPANY IS LOOKING FOR BUSINESS CASH FLOW FINANCE!
WORKING CAPITAL LOANS AND FUNDING SOLUTIONS
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing businesses today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
DON'T LET WORKING CAPITAL FINANCE CHALLENGES BE THE SCHOOL BULLY!
Working capital finance in Canada. Talking to clients about working capital on some days feels like they have entered the world of Dante's Inferno, via his famous quote 'Abandon All Hope Ye Who Enter'!
Talk about the feeling of the entrepreneur who is unable to take advantage of critical business opportunities and growth projects leading to business success now and in the long term!
WHY WORKING CAPITAL FINANCE?
Working capital financing is financing your business can use in addition to any business credit lines - It allows you to purchase materials and fulfill sales orders to generate sales revenues. If your business has strategies around growth initiatives which might involve launching new products into new markets or conducting research and development under Canada's SR&ED program.
The ability to utilize working capital solutions to improve profit and asset turnover allows a business to maintain good supplier/vendor relationships as well as being able to utilize short-term financing for new employee hires. Businesses that are service industries and not capital intensive/asset intensive can access business financing solutions without the need for further equity injections into the business.
Cash flow needs revolve around your company's everyday operations - that's the need to pay wages and salaries, supplier and vendor obligations and managing the gap in payables and receivables - the working capital cycle / cash conversion cycle. Business success is all about the knowledge around access to necessary funding to operate and grow your company.
HOW DOES YOUR COMPANY UNLOCK SALES AND ASSETS FOR FINANCING
So when it comes to funding for business in Canada does it seem to you that you’ve got that 'tied up' feeling when it comes to unlocking sales and assets and turning them into cash flow? That doesn’t have to be the case, so let's dig in on the role of working capital in ensuring business success.
IT'S ALL ABOUT ASSET MONETIZATION
The concept of assets ' tied up ' is key to understanding working capital financing solutions. Ultimately you want to monetize current assets and allow those funds to flow through your business - growing your company.
HOW DOES THE BUSINESS ACCESS CASH IMMEDIATELY
Two types of what we can call ' instant cash ' immediately come to mind.
The first is of course assigning your receivables to a bank via a Commercial business line of credit via revolving credit facilities.
If your firm qualifies rates are low and you're typically allowed to borrow 75% of month-end margined trade credit receivables. The margining formulas are simple - you can draw down on your line of credit on any accounts under 90 days old.
Accounts receivable over 90 days is typically viewed as 'uncollectible', as a result, your bank is reluctant to finance those specific accounts as part of a receivable working capital facility for a small business. Maintaining your working capital ratio and focusing on good asset turnover is key to the success of any business advice you may receive!
LET RECEIVABLE FINANCING GIVE YOU CASH FLOW TRACTION
THE WORKING CAPITAL REVOLUTION - ARE TRADITIONAL BUSINESS FINANCING MODELS OUTDATED?
Lender approval for accounts receivable financing is one of the quickest forms of business credit approval. Invoice financing funding options are among the fastest-growing funding solutions for Canadian companies.
At 7 Park Avenue Financial Confidential Receivable Financing is our most recommended solution - allow firms to invoice and collect their own receivables with no third-party notifications. It is one of the best small business lending options available to firms looking to monetize growth.
HOW DOES RECEIVABLE FINANCE WORK
This method of working capital finance differs from the bank solution in Canada. Instead of pledging your receivables essentially the same security agreement is used to denote the sale of your receivables on a one or ongoing basis. While this method has a different pricing model, (it’s higher!) It allows you to borrow 90% of your A/R value, which is significantly better than bank limits.
It goes without saying, but we'll say it anyway! .. that proper management of current liabilities such as accounts payable as a key part of your business expenses is also a key part of your business's overall funding.
YOU CAN COMBINE ALL YOUR ASSETS INTO ONE BORROWING FACILITY - IT'S CALLED ASSET-BASED LENDING!
The A/R Discounting model can also be combined with inventory and equipment financing for any small business as well as larger more established companies, allowing you to maximize borrowing power on all your unencumbered assets. When combined in this manner it becomes what is known as an ' ABL ‘; an asset-based line of credit working capital facility. It's a solid solution for small business funding needs. Even a real estate component can be added into your facility for company-owned premises - thereby creating even more borrowing power.
MORE WORKING CAPITAL FINANCING OPTIONS
Both receivable discounting and asset-based credit lines, or traditional bank credit allow you to reverse your ' slow growth ' policy if that’s because of a lack of working capital funding for business - and they are solid alternatives to a business loan. At 7 Park Avenue Financial, we call it ' monetizing the balance sheet.
THE BENEFITS OF SHORT-TERM FINANCING OPTIONS FOR BUSINESS
All of these types of facilities do one thing - they reduce the time gap between building or selling something, and collecting your cash from clients. It is important to note that in all these facilities described, you are only paying what you are using, so the ability to draw down on working capital is always there.
OPTIMIZING SHORTER-TERM WORKING CAPITAL FOR MAXIMUM EFFICIENCY
In some cases a cash working capital loan for working capital needs might be the best solution for your firm - it might be a short-term business working capital loan that typically has 12 months to 2 months term and less stringent approval requirements ( these are an outgrowth of merchant cash advances ) - in other cases, it might be a permanent term loan based on the cash flows of the business. A solid owner credit score is typically required here.
These solutions have repayment schedules that are typically tailored to your funding needs and will hopefully ensure your overall capital ratio of debt to equity is maintained within reasonable guidelines for your industry.
Interest rates in the asset-based lending environment are typically higher - at 7 Park Avenue Financial we caution clients to focus on access to capital when considering the necessity of taking on a higher interest rate. That additional access to capital will typically help generate sales and profits.
While a business plan is not always required for the types of financing and small business loan we are discussing they certainly can help in many cases. Business plans prepared by 7 Park Avenue Financial meet and exceed the requirements of any bank or commercial lender and are cost-effective and delivered in a timely manner.
KEY TAKEAWAYS - UNDERSTANDING WORKING CAPITAL FINANCING OPTIONS
The working capital requirements of a business are all about cash flow
All types of business and sizes of businesses require working capital financing solutions to fund day-to-day operations
Long term asset and major investments should not be made with working capital - long-term debt should be financed by term loans and other long-term initiatives
Businesses with any level of cyclical or seasonal aspects to sales require good working capital alternatives
Small businesses accessing working capital funding must be able to demonstrate good personal credit/credit score of the business owner
Working capital loans help companies manage cash flow around short-term expenses
Different types of working capital funding are available
Managing working capital effectively is key to business long term growth
CONCLUSION - WORKING CAPITAL FINANCE FUNDING FOR BUSINESSES
It’s quite easy for small businesses to feel ' tied up ' when it comes to cash flow financing around your business needs for more capital and appropriate business loans.
When it comes to working capital finance funding for the business you have orders, projects, and contracts... the only thing lacking is the capital to move forward! Get the breathing room you need in cash flow financing -
Call 7 Park Avenue Financial, to a trusted, credible and experienced Canadian business financing advisor with a track record of solving funding for business success.
" The only place where success comes before work is in the dictionary" - Vidal Sasson
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What are the benefits of working capital financing?
The benefits of working capital financing include the ability of the business to manage current liabilities such as accounts payable and fixed overhead expenses. Businesses with working capital funding in place can ensure they have funds on hand for operating capital to purchase materials and inventory required in the business. Business liquidity is a major benefit of effective working capital management and a company will pay interest only on funds borrowed or drawn under a facility.
What is working capital financing and why is it important for businesses?
Working capital finance is a method of financing a business that allows a company to fund day-to-day business expenses and helps a business achieve growth capital goals for business growth and business expansion. Businesses have short-term fluctuations in cash due to the timing of cash inflows from collections and cash outflows.
Business sustainability is enhanced with effective cash management that allows a company to maintain acceptable financial ratios around debt financing and capital expenditure. Understanding the impact of inventory turns and days sales outstanding is key to the successful management of the working capital cycle in business finance.
What are the different types of working capital finance, and how do they differ from each other?
The different types of working capital finance include:
Working capital term loans/merchant cash advance
Business lines of credit / revolving credit facility
Invoice factoring/accounts receivable financing
Tax credit financing
Business credit cards
Sales leasebacks
PO financing
Each financing option has different terms of repayment and interest rates and financing costs - In some cases, some form of business collateral or personal guarantee might be required - Effective short-term debt financing solutions eliminate the need for additional equity financing by owners
How do businesses determine their working capital needs, and what factors influence those needs?
Businesses determine working capital needs are determined by the examination of the relations between current assets and current liabilities on the company's balance sheet. Additionally, an effective tool for determining working capital is the ongoing preparation of cash flow and sales projections. Depending on the business model and industry factors that affect working capital loan needs and cash needs include the cyclicality of the industry, general economic conditions, and the cash conversion cycle of a business.
What are some best practices for managing working capital, and how can businesses optimize their cash flow?
Best practices for managing working capital include a focus on effective credit extension and collection policies as well as ensuring maximum payment terms are negotiated with key suppliers and vendors. The use of and granting of Trade credit is an effective business tool in reversing negative working capital situations and maximizing working capital efficiency
Business owners should also focus on the relationship between short-term working capital versus long-term capital expenditures related to long-term growth goals. The role of revolving lines of credit accessed from banks or non-bank alternative financing lenders plays a key role in successful business financing strategies,
Business owners and financial managers should monitor key financial ratios on the balance sheet and income statement which helps determine working capital loan requirements.
What are the risks associated with working capital financing, and how can businesses mitigate those risks?
The risks associated with working capital financing include the financing costs and interest rates associated with business borrowing. Businesses should be prepared to potentially provide additional capital for the financing and excessive use of financing negatively impacts key financial ratios viewed by business lenders.
Business owners and financial managers can mitigate financing risk by ensuring they are aware of the appropriate working capital loan solutions, and by also considering diversification of business lenders. In certain types of financing the business owner's personal credit can be negatively impacted by the overuse of small business loans.
Click here for the business finance track record of 7 Park Avenue Financial
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