Tweet
Eliminating That Painstaking Challenge of Cash Flow & Working Capital Funding Needs For Your Business
OVERVIEW – Information on a/r receivable finance solutions in Canada . Purchase order financing and direct funding for accounts receivables ensures cash flow success
Purchase order financing & Receivable Finance via a direct A/R funding solution are two key ways for Canadian business owners and financial mgrs to maximize working capital via key financeable assets - in this case either :
Accounts Receivable
Purchase Orders / Contracts
If they can't fund these two asset categories their firm will run the risk of serious working capital and cash flow deficiencies.
To paraphrase one of the most famous lines ever written - ' it's the best of times and the worst of times ' ... that being the case when sales and profit potential is great but owners are challenged by key issue such as :
- New owner equity or outside equity
- Debt (loans)
- Operational efficiencies
We're going to focus on that third area - improving operational efficiencies via proper financing of your current assets and sales. By the way, believe it or not that’s actually the cheapest way to finance your firm - given the higher cost of long term debt and the even higher cost of bringing in outside equity.
By leveraging your current assets - typically A/R and inventory you have the ability to both increase bottom line profits as well as optimizing cash flow.
Let's look at purchase order financing as an example. If you choose a purchase order financing facility you are obviously in a position to take on larger contracts and generate more profits for your firm. Overall larger orders and contracts also increase your competitiveness in your industry - with typically your competitors wondering how you do it!
By utilizing a p.o. financing strategy you simply allow the p.o. finance firm to pay suppliers for goods and service you need to facilitate the order. When your product is shipped and delivered the purchase order finance firm is paid via your bank or A/R Financing facility.
Although to many the perception is a higher cost of financing let’s look at what really has happened - you have converted inventory into A/R into cash - Payment by your customer generates profit. Without the financing of the purchase order you more often than not could not have fulfilled such large orders or contracts. So by sacrificing some gross margin you have grown revenues and bottom line profits.
Firms who have a significant investment in inventory can achieve similar financial success. With an inventory financing facility in place you can stock more products and generate those additional sales.
For firms who cannot achieve the traditional bank financing sought by most a combination inventory and receivable financing facility is available via an asset based line of credit. Here it's all about the ' cash conversion cycle ‘- turning A/R and inventory into cash and profits.
The higher interest rates charges by asset based lenders can easily be significantly offset by smarter volume purchasing and negotiations with key suppliers on pricing : Bottom line - you know have cash to pay for products and services.
The cost of not taking discounts or being unable to make volume purchases for cash is significantly great than the financing costs you have for alternative financing facilities such as inventory financing, purchase order financing and receivable financing.
KEY POINT:
Even if purchase order ,inventory and receivable financing were equal in cost to the cost of carrying receivable and inventory on your own books it would still be a viable solution because you would have less sales and less competitiveness in the marketplace .
Example - if f your firm could buy 500,000.00 of inventory on 2% net ten day terms and you were unable to take the discount the opportunity cost of not taking that discount is over 36%.
The simple statement we make to clients is as follows ' the cost of paying in full is usually much higher than the cost of borrowing '!
If your firm is focused on selling more, efficient financing around asset turnover and proper focus on the opportunity cost of working capital seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you determine the exact working capital / cash flow strategy around your company needs.
Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
http://www.7parkavenuefinancial.com
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
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
