Knowing that your company has a need working capital cash and funds is one thing of course - knowing what lending solutions are available is of course another altogether different (yet related!) topic.
Let’s examine the real world essentials of working capital financing in the context of the Canadian market, targeted mainly at small and medium sized business such as yours.
We all know the buzz words: cash flow, cash is king, liquidity... you name it, and the text book has them all. But we want to focus on real world solutions to your Canadian business financing needs. And that’s where working capital and operating capital come in, i.e. your daily requirements for managing assets such as receivables and inventory.
What many business owners and financial managers fail often to realize is that your sales backlog, new contracts, , and your other assets in the business often mask the essence of our topic today, with is liquidity and cash flow to meet your daily financing needs . Clients are often surprised to find that although they are profitable, have assets, and have great prospects their inability to manage receivables and inventories and payables leave them in short term and ongoing cash flow crunches.
The most impact you can make on this problem lies in three of your accounts - they are receivables, inventory, and payables. Payables simply because your ability to slow or delay payables increases cash flow, it’s as simple as that. That though, needs to be balanced by maintain proper supplier relationships.
So you therefore have decisions to make around working capital where you will get cash funds, and what is your real need for lending and cash flow on a long term basis. Borrowing on a long term basis for short term needs never works, and time and time again we meet clients who have ' mismatched ' short term needs with long term alternatives .Don’t do that!
We think we have you up to speed now on the problem - les focus on the solutions to the need for that working capital, where those funds come from, and what lending sources can assist you in that cash flow challenge .
As we said, you want to monetize current assets, not borrow and incur long term debt. The one exception to this is a cash flow term working capital loan that in some cases makes sense because you are injecting permanent working capital into the business.
The real solutions to the working capital cash flow challenge revolve around the following - a bank operating facility that margins your receivables and inventory. Many firms either don’t have the financial profile to access this type of facility, or in some cases banks simply don’t lend against inventory, or you are often ' capped ‘ in this regard. Therefore the solutions we recommend to clients are asset based lines of credit with true asset based lenders; smaller firms qualify for a combo working capital financing and cash flow facility that margins your receivables and inventory, but at higher rates than the bank.
Our favorite options for smaller challenged firms is confidential invoice discounting - your ability to finance all you invoices but retaining full billing and collecting ability.
Since it's always about opportunity, many clients aren’t aware that purchase order financing is also available for their cash flow need. This comes at a higher cost but allows your firm to take on significant business it otherwise might have to forsake.
So, there you have it. To recap our bottom line (business owners love the bottom line!) you need to match your financing mix to your own business needs. Solutions you may not even have heard of are available to you now, and your competitors might be using them already.
Speak to a trusted, credible and experience Canadian business financing advisor - identify the need, and implement your working capital solution today!
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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :
http://www.parkavenuefinancial.com/working_capital_cash_flow_funds_need_lending_cash.html
