A Working Capital Management Sale : Here’s Your Best Deals On Cash Flow Financing

2013 – What Went Wrong With Your Working Capital And Cash Flow Challenges


OVERVIEW – Information on business funding and capital financing in Canada. What solutions are available for effective cash flow management and business success

Working Capital Financing – that’s a challenge that faces every Canadian business owner and financial manager. It’s that time of the year for ‘Sales ‘!

To be successful in today’s Canadian business environment (an environment that includes strong competition and difficulties in accessing financing) Canadian business has to ensure that have all their financing options up for review. Let’s dig in.


Lets take a look at some of these options, which include revolving lines of credit that are alternative in nature – these non – bank operating lines margin your firms receivables, inventory, and tax credits , equipment and real estate, in a manner that provide you with maximum financing for your business growth needs .


How does the business owner assess the need for working capital? That comes from carefully reviewing your firm’s financial statements and determine what is working and what isn’t.

Look at items such as:

Current debt to equity - calculate by taking current liabilities and dividing by your tangible equity – ratios over 80% signal danger

Debt to equity - take your total liabilities and divide by tangible equity - when the ratio exceed 100 your lenders are financing your firm more than you are

A great ratio in the context of our working capital discussion is:

Turnover of working Capital - Calculated by net sales /working capital. This calculation will give you a strong sense of how efficiently you are using working capital. When sales go up inventories and receivables tend to increase also – as a business owner you need to be buying wisely, and collecting your receivable even more wisely. It’s a great way to look at how you are buying and how you are selling. You don’t want to be put in a position where yourself, or your lenders feel that you don’t have the working capital to run your business and grow the business.

The above 3 examples are what we could call ‘ text book ‘ answers to major working capital and balance sheet issues – quite frankly business owners we meet with intuitively know what those working capital challenges are . What the really need is solutions, not technical finance explanations!

So let’s look at working capital solutions in the Canadian environment. For discussion purposes we will avoid traditional chartered bank financing, which is more difficult to achieve for the majority of small and medium enterprises. Coming off the difficult 2008 and 2008 liquidity crisis worldwide – including Canada balance sheets for many firms are challenged, and income statements are only coming back to life from a growth and profit viewpoint.

So what are some of those solutions you should be investigating? The Canadian business financing landscape is drastically changing – for additional working capital firms should be working with a trusted and experienced advisor in Canadian business financing and examine such alternate solutions as:

- Asset based lines of credit outside of chartered banking – these will margin all your current assets, (including inventory) and allow you to meet your working capital challenges head on.

- Another individual ‘ flavor ‘ of an asset based line of credit is factoring or invoice discounting – This provides business owners with immediate cash for receivables, and if managed properly can be cost effective, contrary to popular belief . Note – our best solution in this area is non notification factoring which allows you to bill and collect your own receivables

- Financing your SR & ED tax credits – why wait for 6-12 months or more for your government grant refund – monetize that tax credit now!

Two other more specialized (shall we say esoteric) methods of working capital financing are purchase order financing and inventory financing.

In summary working capital financing – Canada – continues to be challenging. And contrary to our theme of a year end ‘ sale ‘ it’s a full time year round job for business owners and financial managers .


Explore your options, alternative in nature potentially, and understand the optimal rates, terms, and structures that will allow you to grow business. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your capital and cash flow needs.




Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian companies , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded in 2004 - Completed in excess of 90 Million $$ of financing for Canadian corporations . Info re: Canadian business financing & contact details :


Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:

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

Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

Let’s Go ‘ Person To Person ‘ On Your Cash Flow Management Via Receivables And Inventories

Quality Cash Flow Solutions, And How To Get Them!

OVERVIEW – Information on cash flow management via receivables financing . Inventories also play a key role in working capital needs



Let's go ' one on one ‘ on a critical subject to Canadian business financing success, and that’s' cash flow management '. Typically that involves key current assets such as inventories and receivables, but things like debt load and your firm’s success in generating sales are also key factors.

We meet many clients who simply either directly, or indirectly admit that there current processes just aren't working! They want to know how they can access financing solutions that would make their company more competitive, successful, and effective.


Your ability to access the right type of financing depends on how credible your business is when it comes to having proper financials and reporting in place. So we can make the case that you not only have business assets, but your firm’s credibility is also key to financing and operational success.

So how do you in fact attract the financing that you need from lenders, perhaps other shareholder or investors, etc. That's where performance counts and when it comes to managing receivables and inventories you're going to get ' maximum credibility ' when it comes to loan and financing approvals.

Do lenders actually know how good or bad shape your ' current assets ' are in? (Current assets = A/R, inventory, prepaid and corresponding current liability - payables). They sure do!

There is a great story around a famous Wall Street speculator called Bernard Smith... he simply toured the back of companies - if the smoke stacks weren’t busy and inventories were piling up he sold the company short on the stock market and reportedly made millions .

Things are a lot different today, but it certainly proves our point that a lender and investor has the tools , probably even more so today, to monitor your performance in cash flow management . Smith was an investor, not a lender, but both those two share the same position on the right hand side of your balance sheet - either having a claim on your assets or your ownership!


If you have the ability to show that you understand the relationship between inventories, receivables and sales experts in the field of finance will tell you that you are very ahead of the game. And that’s a good thing.

Let's take a look at A/R as an example. Most business owners (hopefully) know that they can track their A/R performance by a simple calculation called day’s sales outstanding... But you can further enhance your management of A/R, (and inventory) by also tracking the relationship between sales and A/R. Just carrying those extra receivables has a huge cost to your company.

Our bottom line, if you ignore these key relationships your company clearly runs the risk of being accused of poor cash flow management. Additionally you will have difficulty in accessing cash flow financing solutions such as:

Bank credit lines

A/R and Inventory Finance

Asset based lines of Credit

Receivable Financing


Etc!

So, that’s some ' person to person ' advice on how to not have our previously mentioned Mr. Smith not make any judgments on your firm.

Speak to a trusted, credible and experienced Canadian business financing advisor on cash flow management solutions in Canada.

7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW FINANCING SOLUTIONS



Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/cash_flow_management_receivables_inventories.html