Flexible Financing with Top Working Capital Loans & Solutions

 

Maximize Your Business Potential with Working Capital Financing 

 

WORKING CAPITAL FINANCING IN CANADA

 

INTRODUCTION -  WORKING CAPITAL LOAN FINANCING TO GROW YOUR BUSINESS

 

Working and operating capital accounts for 49% of intended debt financing use among Canadian small businesses, according to the federal Credit Conditions Survey.

 

Choosing the right financing structure matters: a lasting cash shortfall can leave a credit line permanently drawn, while a three-month seasonal need may not justify a five-year loan.

Before signing a working capital loan agreement, determine whether your funding gap is temporary or ongoing. That distinction helps you choose the right financing product, repayment term, and lender.

Since 2004, 7 Park Avenue Financial has structured working capital facilities ranging from $250,000 to more than $25 million for Canadian businesses

 

 

 

WHAT IS A WORKING CAPITAL LOAN?

 

 

A working capital loan helps cover everyday business costs, including payroll, inventory, supplier payments, and growth-related expenses.

 

Repayment may take place over a short period or several years, depending on the loan agreement. Unlike a revolving line of credit, a working capital term loan follows a set repayment schedule.

 

 

 

Canadian business financing these days, in many cases, is 'beyond the banks.'

 

That was the catchy title of an old Canadian Business Magazine article. It profiled 15 (yes, 15!) alternate methods of financing working capital from a cash flow cycle and loan perspective. We've got some thoughts on that... so let's dig in.

 

 

Securing adequate working capital is key to maintaining smooth operations and growing your business.

 

 

Canadian working capital lenders provide the funds you need to cover day-to-day expenses, bridge cash flow gaps, and keep your focus on growing your business. At 7 Park Avenue Financial, we offer tailored solutions to meet companies' unique financial needs.

 

 

 

So what is and isn't working these days in business financing? Thankfully, as you may have heard, you have many new solutions and methods to finance growth and operations, from working capital loans to asset monetization funding strategies via the balance sheet.

 

 

 

It's all about working capital loans vs. lines of credit, both of which offer a variety of ways to secure small business loans/funds to cover internal cash-flow needs.

 

 

Working capital loans for small businesses could include receivables loans via factoring solutions and short-term working capital, aka ' merchant advances,' based primarily on your sales and cash inflows.

 

 

These business loans are typically 12 months long and are readily accessible and easy to apply for. While the interest rate is higher than other financing options, its fast, easy approval appeals to many business owners; it's an excellent example of applying today and getting approved tomorrow!

 

 

The Working Capital Definition

 

 

How can it help my business? We get those questions  a lot about working capital financing here at

7 Park Avenue Financial.

 

Will a working capital loan solve your cash shortfall, and can your business afford the repayments? Thats the key question!

 

 

Managing the relationship between the value of a company's current assets and current liabilities (the working capital formula/ratio! ) on the balance sheet leads to business finance success. That ratio is one of the most common ratios banks use in assessing commercial credit.

 

 

Working capital funds everyday expenses like payroll, inventory, software subscriptions, and utilities. Having enough working capital helps your business run smoothly and seize opportunities.

 

 

We have rarely met clients who have successfully raised angel financing. This is simply equity and ownership dilution and often focuses solely on high-growth scenarios, which may or may not include your firm. The idea of another owner or board member in your company may not sit well with many small business owners.

 

KEY USES OF A  BUSINESS CREDIT CARD  AS A ' BUSINESS LOAN '

 

 

Purchase inventory / raw material expenses

Investment in Growth projects / r&d capital to develop new products for a new market

Employee new hires for your operations / pay wages

Marketing/ Advertising / Digital Marketing expenses

Fund payables / Operational expenses

 

FINANCING TAILORED TO YOUR NEEDS

 

 

Alternative lending secured business loans are a solid way to fund your company. ABL (asset-based lending) is one of the best ways to secure flexible working capital financing to support your growth. Investigate asset-based lines of credit; they are viable and work.

 

A merchant cash advance is another alternative financing option for businesses, particularly those that process many credit card transactions.

 

It lets companies borrow against a portion of future sales and repay the loan with a percentage of daily or weekly revenue. While merchant cash advances can offer fast funding, they often come with high fees and less strict borrowing requirements than other financing options.

 

 

They finance inventory, accounts receivable and equipment all under one revolving business credit line. We rarely see a client not receive 100-300% more financing liquidity once these assets are combined and properly margined.

 

Bridge financing is another working capital management solution often used for firms experiencing ‘hyper growth’ or, in some cases, financial distress. Talk about a broad spectrum!!

 

It’s short- to intermediate-term financing to cover temporary working capital needs, allowing you to manage accounts payable, surprise expenses, and other short-term liabilities such as lease payments, purchasing supplies, and required inventory.

 

 

COMPARING FINANCING SOLUTIONS

 

 

Business situation	Structure to examine	Main question
Recurring seasonal cash swings	Revolving operating line	Can the balance fall when the season ends?
A defined growth project with gradual benefits	Working capital term loan	Do repayments follow the project’s cash generation?
Cash tied up in completed, eligible invoices	Factoring or receivables financing	Are the customers and invoices acceptable?
Larger funding needs supported by receivables and inventory	ABL facility	How much collateral remains eligible after exclusions and reserves?
Recurring operating losses	Turnaround plan and funding assessment	What changes will produce enough cash to repay debt?

 

 

 

COMPLEMENT YOUR LINE OF CREDIT

 

 

Canada’s Crown Corporation Bank is another solution provider that, in most cases, complements any existing financing you have, even senior credit facilities in the form of a bank business loan. It’s a solid way to access working capital term loans, equipment loans, or real estate financing at competitive interest rates. We require the business owner's personal credit and reasonable personal net worth. You can often structure bridge financing to pay interest only for a period, given the company's current situation.

 

Some business owners we meet are too focused on ‘big boy’ financing, also known as private equity and venture capital.

 

The reality? Only a small market sector can access this finance, and it’s very inappropriate from most Canadian businesses.

 

There’s no free lunch for the business owner when it comes to funding your company - whether that’s a bank loan or an alternative lender-type solution.

 

Complementing a line of credit with other financing options can be beneficial, especially since lines of credit offer an approved credit limit, allowing businesses to borrow as needed and only pay interest on the amount borrowed.

 

 

HAVE YOU CONSIDERED GOVERNMENT SMALL BUSINESS LOANS AND FINANCING PROGRAMS

 

 

We’re from the government, and we’re here to help! Heard that one?  Actually, in one instance, we heartily agree on the Canada Small Business Financing Program - the acronyms for this program vary. They include BIL, CSBF, and ‘SBL.’  You need to know these are not small business loans for working capital, but instead are term loan financing (typical 2-5 year amortization )  for 4 key asset categories:

 

Equipment

Leaseholds

Real Estate

Working Captial /Line Of Credit

 

We strongly believe, and always advise clients, that this is by far the best program for financing business assets and real estate in Canada, including for a new business or startup. Investigate this program and take advantage of it if you can. It does not get any better!

SBL loans are another government-backed loan that offers favourable terms for small business owners.

 

It’s most applicable for new and expanding businesses, including start-ups and franchises. Government loans require good personal credit scores.

 

Let the 7 Park Avenue Financial team help you develop your business plan and apply for this popular loan through our recommended bank or credit union.

 

 

WHAT IS WORKING CAPITAL FINANCING? FINANCING EVERY DAY BUSINESS NEEDS

 

 

By now, you've probably heard a fair bit about ‘Factoring’ these days.

 

It’s essential to distinguish between working capital loan and line-of-credit solutions, especially given the variability of interest rates on working capital loans, which can range from 3% to 40% depending on the lender, loan terms, and applicant qualifications. Virtually unheard of some years ago, it is fast becoming Canada's hottest financing method for working capital.

 

 

WHAT IS THE BEST FORM OF RECEIVABLE FINANCING? THE ABILITY TO FREE UP WORKING CAPITAL!

 

 

SMB loan financing/funding complexity comes down to how it works, what it costs, and selecting the right partner firm that matches your overall needs. Our recommendation to our clients in this area: Confidential Receivable Financing 

 

 

It lets you bill and collect your own receivables while financing them. Your sales become a cash flow machine.

 

Under this method of accounts receivable financing, you bill and collect your own receivables without notifying your clients, suppliers, etc. For short-term working capital funding, either entirely or selectively, we recommend a receivables loan solution.

 

You must provide at least 12 months of personal and business bank statements as part of the documentation for the receivables financing application.

 

We strongly believe most firms in Canada don’t currently have a handle on their business financing options. We can, of course, forgive business owners and financial managers, as they are caught up in the day-to-day running of their businesses and the financial challenges that come with that.

 

 

HOW DOES ASSET TURNOVER REDUCE FINANCING NEEDS AND BORROWING COSTS

 

Faster collections reduce your borrowing requirement by turning unpaid invoices into cash sooner. That cash can cover payroll, inventory, and supplier bills, reducing the amount you need to draw from a credit line or borrow through a working capital loan.

 

For example, assume your business generates $3.65 million in annual credit sales, averaging $10,000 per day:

 

• Customers pay in 60 days: Approximately $600,000 is tied up in receivables.
• Customers pay in 45 days: Approximately $450,000 is tied up in receivables.
• Potential cash released: $150,000, which could reduce borrowing by the same amount.

 

This calculation assumes steady sales and unchanged cash flows. The cash release comes from shortening the collection cycle; it is not an additional $150,000 generated every month.

 

The Bottom Line -

 

A business should calculate how long cash remains tied up between buying inventory, delivering work, invoicing, and collecting payment. The right financing amount follows that cycle.

 

 

SPECIAL SITUATIONS

 

CRA Obligations

Outstanding CRA balances—such as corporate income tax, GST/HST, or payroll deductions—can affect access to working capital financing. Disclose these amounts early, including any payment arrangements, so the proposed lender can assess its requirements. Depending on the obligation and lender, approval may require repayment, supporting documents, or conditions before funding.

 

 

Existing Lender Restrictions

An existing loan or operating line may limit additional borrowing or give the current lender security over receivables, inventory, and other business assets. Before arranging new financing, review whether lender consent is required and whether the lenders must agree on their security rights and payment priorities. Resolving these issues early helps prevent funding delays

 

 

Case Study: Matching Working Capital Financing to Business Needs

From The 7 Park Avenue Financial Client Files

 

 

Company

ABC Company is an Ontario craft brewery selling through its taproom, the LCBO, and independent retailers. Sales peak between May and September.

Challenge

The brewery’s $1.2 million bank operating line had remained nearly fully drawn for 14 months. New retail accounts increased its year-round investment in inventory, packaging, and unpaid customer invoices.

The owners viewed the shortfall as seasonal and requested a larger line. Instead, the bank flagged the persistently high balance at its annual review and proposed reducing the facility.

Financing Solution

7 Park Avenue Financial reviewed 24 months of working capital figures. The analysis showed that the brewery’s ongoing funding requirement had increased from approximately $550,000 to $900,000, while its additional seasonal requirement remained near $600,000.

We arranged a working capital term loan to refinance the permanent portion, with lighter payments in winter and higher payments during the stronger summer months. We also restructured the revolving line around seasonal needs, with borrowing availability tied to eligible receivables and inventory.

Security registrations and intercreditor terms were coordinated between the two lenders.

Results

• The operating line now falls to a low balance each autumn, addressing the bank’s concern.
• Available credit heading into the summer peak increased from almost nothing to approximately $600,000.
• Seasonally adjusted term payments eased winter cash pressure.
• The owners now review permanent and seasonal funding needs quarterly and arrange financing ahead of further growth.

 

 

 

 

KEY TAKEAWAYS

 

 

1. Business Financing Options: Various funding sources like loans, credit lines, and advances help meet operational needs.

2. Cash Flow Management: Ensures funds are available to cover daily expenses and unexpected costs.

3. Small Business Funding: Tailored financial solutions for small enterprises, crucial for growth and stability.

4. Short-Term Loans: Quick access to funds with flexible repayment terms suitable for immediate financial needs.

5. Revolving Credit: A reusable credit line businesses can draw from as needed.

 

CONCLUSION

 

Cash flow is at the heart of any small business. Every entrepreneur/business owner faces a funding challenge at one time or another. We have shown that working capital loans for small businesses and other financing types are available for your company.

 

When addressing working capital challenges, look for options that help you speed up asset conversion and meet financing needs.

 

Call 7 Park Avenue Financial, your trusted, credible and experienced business financing advisor for traditional and alternative small business loans for working capital needs and other financing services, whether you are a new business or established and growing.

 

We've got the alternatives for different situations based on your business and financing needs.

 

7 Park Avenue Financial originates working capital loan financing

 

FAQ: FREQUENTLY ASKED QUESTIONS

 

What is included in working capital?

 

The difference between your current assets and liabilities is the net working capital component of your business. Current assets, such as cash on hand and accounts receivable, are measured against short-term liabilities, such as accounts payable and other debt obligations due within 12 months - Understanding balance sheet relationships helps you access the best working capital loans. Commercial real estate loans are typically funded via a commercial mortgage.

 

What are the 4 critical components of working capital?

 

• Trade Receivables.

• Inventory purchases

• Cash and Bank Balances.

• Trade Payables.

 

 

 

How do working capital lenders operate?

Working capital lenders provide businesses with funds to cover everyday expenses around a business's financial health , bridging cash flow gaps and supporting growth. Visit: https://www.7parkavenuefinancial.com

 

What are the main benefits of working capital lending?

Working capital lending offers quick access to funds in the business bank account and flexible repayment terms that help manage cash flow effectively, and is often more quickly accessible than a bank business line of credit. Visit: https://www.7parkavenuefinancial.com

 

Is working capital lending suitable for small businesses?

Yes, it provides small businesses with essential funding to manage operations and pursue growth opportunities without taking on significant debt. Owners should have good personal credit and a minimum credit score of 650. Visit: https://www.7parkavenuefinancial.com

 

What costs are associated with working capital loans?

Costs vary in a business's financial situation  but typically include interest rates, fees, and repayment terms based on the lender and the business's financial profile. Visit: https://www.7parkavenuefinancial.com

 

Can working capital loans help my business grow?

Yes, working capital loans support business expansion by providing funds to cover day-to-day expenses and obligations and invest in growth initiatives. Visit: https://www.7parkavenuefinancial.com

 

 

What are the differences between working capital loans and term loans?

Working capital loans and business lines are typically short-term and support daily operations, while term loans are long-term and fund major investments. Visit: https://www.7parkavenuefinancial.com

 

 

How does invoice financing work in the context of working capital?

Invoice financing lets businesses borrow against outstanding invoices, providing immediate cash flow without waiting for customer payments. Visit: https://www.7parkavenuefinancial.com

 

 

What industries benefit most from working capital lending?

Industries with fluctuating cash flows, like retail, manufacturing, and services, benefit significantly from working capital lending and working capital line of credit. Visit: https://www.7parkavenuefinancial.com

 

How do lenders assess eligibility for working capital loans?

To determine eligibility, lenders typically evaluate the business's creditworthiness, financial statements, and cash flow history. Visit: https://www.7parkavenuefinancial.com

 

What is a merchant cash advance, and how does it relate to working capital?

A merchant cash advance is a short-term business loan that provides a lump sum in exchange for a percentage of future sales, offering an alternative working capital solution. Visit: https://www.7parkavenuefinancial.com

 

 

What is the process for obtaining a working capital loan?

The process involves applying to a lender, providing financial documents, and undergoing credit evaluation. Upon approval, funds are disbursed quickly. Visit: https://www.7parkavenuefinancial.com

 

How does working capital lending differ from traditional bank secured loans?

Working capital lending often offers more flexible terms and faster approval than conventional bank loans. Visit: https://www.7parkavenuefinancial.com

 

What are the potential risks associated with working capital loans?

Risks include high interest rates, short repayment terms, and the possibility of debt accumulation if you don't manage them properly. Visit: https://www.7parkavenuefinancial.com

 

 

 

KEY TERMS AND DEFINITIONS TO BETTER UNDERSTAND WORKING CAPITAL LOANS

 

 

Permanent working capital: The minimum level of inventory and receivables your business carries at all times, even in its slowest month. It grows as the business grows and does not go away.

Temporary working capital: The extra cash tied up above that minimum during seasonal peaks, large orders or project spikes. It rises and falls within the year.

Net trade working capital: Accounts receivable plus inventory, minus accounts payable. It measures how much of your own cash is tied up in operations.

Evergreen line: An operating line of credit that stays close to fully drawn year-round instead of rising and falling with the business cycle. Lenders read it as a sign that the line is funding a permanent need.

Clean-up requirement: A lender condition that a revolving line be brought to zero, or to a low balance, for a set period each year. It confirms the line is funding temporary needs only.

Self-liquidating facility: Financing that repays itself as the asset it funds turns into cash, such as receivable financing repaid when customers pay. It suits temporary gaps.

 

 

Statistics

 

 

• 49% of Canadian small businesses that sought debt financing in 2024 planned to use it for working or operating capital. canada
• Debt financing had a 9% request rate and an 89% approval rate, with an average authorized amount of $191,918. canada
• Among businesses that did not seek financing, 17% said the main reason was that the cost was too high. canada
• The survey covered 1,825 small businesses with 1 to 99 employees and has a 2.3% margin of error. canada
• ISED has released the 2025 Credit Conditions Survey results and an updated 2015–2025 trends report, both from July 2026. (Flag: swap in the 2025 figures before publishing if they are available.) canada

 

 

 

Citations 

 

Business Development Bank of Canada. “Working Capital Loan.” BDC. Accessed October 20, 2026. https://www.bdc.ca/en/financing/working-capital-loan. Main site: https://www.bdc.ca

Linkedin."Leverage Working Capital Factoring to Fuel Your Business Expansion".https://lnkd.in/guyHnGFr

Canadian Bankers Association. “Banking for Small and Medium-Sized Businesses.” Canadian Bankers Association. Accessed October 20, 2026. https://cba.ca/article/bankingforsmallandmediumsizedbusinesses. Main site: https://cba.ca

7 Park Avenue Financial."Unlock Your Business Potential with Working Capital Funding".https://www.7parkavenuefinancial.com/working-capital-financing-loans-business-credit.html

Innovation, Science and Economic Development Canada. “Credit Conditions Survey – 2024.” SME Research and Statistics. Government of Canada, 2025. https://ised-isde.canada.ca/site/sme-research-statistics/en/node/435. Main site: https://ised-isde.canada.ca

Nesto. “Prime Rate in Canada.” Nesto, October 2, 2026. https://www.nesto.ca/featured-articles/prime-rate-in-canada/. Main site: https://www.nesto.ca

Medium/Prokop/7 Park Avenue Financial."Break the Cash Flow Waiting Game: Working Capital Loan Strategies"https://medium.com/@stanprokop/break-the-cash-flow-waiting-game-working-capital-loan-strategies-af4872235ec1

OECD. “Canada.” In Financing SMEs and Entrepreneurs 2026: An OECD Scoreboard. Paris: OECD Publishing, 2026. https://www.oecd.org/en/publications/financing-smes-and-entrepreneurs-2026_bb7fc5c4-en/canada_4907f695-en.html. Main site: https://www.oecd.org

 

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Canadian Business Working capital financing challenges sometimes have business owners/managers feeling they're on the proverbial train to nowhere. What then are the issues and are there traditional or new innovative financing strategies available? Let's dig in.

Financing of working capital is required for a number of circumstances in business - the challenge is determining what type of  working capital financing  is best designed to meet your business goals. That might include growth opportunities or just funding day to day operating capital for business operations.

WHAT IS WORKING CAPITAL CASH FLOW AND WHY MUST IT BE ADDRESSED?

 

Your accountants will tell you that the definition of 'working capital' is simply the subtraction of current liabilities from current assets. Those great accountants though aren't necessarily the ones to address the actual challenge accessing cash to cover those shortfalls that fall in between that 'ratio calculation'. Our friends in accounting will also tell us that a ' good ' working capital ratio is 2:1 , namely two times more current assets than current liabilities. A company can of course have ' negative working capital ' further exacerbating the ' cash crunch '.

At 7 Park Avenue Financial we try and help clients instead understand the ' quality of earnings ' -namely how the financials look without accounting exercises around depreciation, etc and ensuring that true profits come from higher sales and better a/r and inventory turnover, where the real profit and cash should come from! Many business owners don't always realize they can avoid borrowing for cash simply by negotiating better terms with suppliers, thereby shortening their cash conversion cycle.


It's at this time that any commercial lender or bank will examine different types of information around your sales, credit profiles and background of owners, and the amount of financing you might require for a business capital need.



Many firms these days are taking the ' quick solution ' financing approach, which has some major benefits but comes with some level of risk also. They look toward short term working capital loans offered by many firms, including online portals ,sometimes called merchant lenders. Although rates are very high the loan formula is exceptionally simple - a loan for approximately 15-20% of your annual sales repaid on a basis that gives comfort to both the lender and the borrower on an installment basis. These loans are almost always 1 year in duration.




Most of the options above are supplied by big banks, which means that if you want to obtain a loan, you will need a good credit score and/or many years in business. Fortunately, there are alternatives for those who do not meet those qualifications. There are steps you can take to obtain business financing with low credit. For example, a merchant cash advance is one way to get the funds you need, and rather than considering your credit, lenders actually look at the amount of time you’ve been in business along with the amount of monthly credit card sales you process. If you can meet a few easy qualifications, you can get the money you need in just a few days, deposited straight into your business bank account. Repayment terms are based on a portion of your daily sales. The ability to pay off these loans from ' sales revenues ' allows many firms to qualify.




Some firms might have a business line of credit in place but need complimentary financing in addition to established facilities. Firms that rely heavily on the inventory component of their business might wish to add to inventory as well as on occasion take advantage of special pricing and supplier discounts. Other firms might have initiatives around new geographic territories or marketing initiatives.

Many early-stage companies require working capital for their investment in r&d capital. At 7 Park Avenue Financial we're big believers in FINANCING TAX CREDITS to accelerate cash flow.


Some companies are in industries that are not ' asset intensive ', but they of course still require cash and are unable to pledge large amounts of hard assets or other collateral such as real estate. Also, most business owners don't wish to have to raise additional equity which of course dilutes ownership. That is why a number of working capital solutions alleviate this problem, and at 7 Park Avenue Financial our experience tells us that companies with growth potential and experienced management who can demonstrate quality preparation of financials, or a good BUSINESS PLAN , etc will always be able to raise cash and access working capital loans.

HOW FAST CAN YOUR COMPANY GROW

The irony of the business owner's concern is, many times, that business is great. We hate getting technical with clients, but finance has a term called 'sustainable growth' - very simply put it's the growth rate your firm can achieve without increasing leverage or the amount of debt to equity in your firm. It's calculated as follows:


ROE X (1-dividends paid out)


ROE is of course return on equity, the amount of net income at the end of the year as a percentage of your firm's net worth.


Perhaps we have surprised some business owners by telling them the exact day that they will have to stop growing based on their inability or desire to borrow!


Anyway, our point is not that, it's simply that at a certain point you cannot grow your business anymore without debt. No one likes taking on too much debt.

WHAT IS AN ASSET BASED WORKING CAPITAL FACILITY ?

A better solution? An asset based working capital facility. This type of facility adds no additional debt to your firm but gives you maximum liquidity for receivables, inventory, and even equipment you already own.


So, we promise, no more technical financial discussion lets discuss the financing you need and the challenges you have. As we stated it is ironic that many times the stress of managing working capital is related to success - you have new orders, contracts, the need to build up inventory, or perhaps you have granted special payment terms to new or existing customers.


At the same time your firm has its own obligations to suppliers and term creditors such as the bank or equipment lenders, etc.


We can say that the problem is very obvious when you have suppliers that want to get paid either upfront or in 30 days, but you have inventory buildup needs and your customers are paying you in closer to 60 days, despite your terms of 30 days.


The traditional solutions are always too obvious, Canadian chartered banks for term loans or operating facilities, or even consideration to giving up some equity in your ownership. That is why the appeal for an unsecured working capital loan is so desireable for many business owners.


Those are solutions that are either desirable by many of our clients. The reality? Financial conditions and lack of collateral prohibit in many cases traditional financing.


Therefore those non traditional, but getting less non traditional solutions look more and more attractive every day. By sacrificing one of two points of gross margin true working capital asset based lending facilities can provide you with all the cash flow you need when it comes to financing inventory at aggressive loan to value, 90% of receivables, and, as we said in some cases equipment and even purchase orders.

BENEFITS OF PROPER CAPITAL LOAN FINANCING

So what is the final effect of a true working capital facility - it's financially much better than taking on term debt or selling equity ownership, etc. We have just shown you that by maximizing a true working capital facility you have increased sales, increased profits, and have not taken on additional debt or given away any portion of your equity stake.

Many firms may choose to take advantage of working capital term loans via the crown corporation supported by the Canadian government. Their solutions are complementary to existing senior lenders and therefore are a good bridge between debt and equity. Larger transactions in this area are termed ' mezzanine financing and, in essence, are unsecured cash flow loans. Typical uses of cash flow short term or long term loans are reduction in accounts payable, or addressing the cost of additional investments in accounts receivable and employee costs including salaries, etc.

Your company might be a ' victim ' of the seasonal tendencies that occur in many industries, therefore requiring additional management focus on the proverbial cash flow credit crunch.


KEY POINT - Business owners must differentiate between long term capital needs and short term cash flow requirements. The concept of matching finance to the appropriate balance sheet asset is key.

Asset acquisitions should be financed through long term debt solutions such as EQUIPMENT FINANCING. Many firms looking to acquire owner-occupied premises should of course consider a commercial mortgage as the proper debt financing in this regard.

FACTORING / ACCOUNTS RECEIVABLE FINANCING / CONFIDENTIAL RECEIVABLE FINANCING 

 

In many instances, either a new or amended BUSINESS LINE OF CREDIT will provide the cash flow your company needs. Either a traditional bank facility or an Asset based line of credit  can provide your company with cash flow that matches sales growth and the covering off of the additional investment your firm must make to carry accounts receivable and inventories. For smaller firms a small business factoring service will often solve the problem.

Canadian businesses that cannot qualify for traditional bank credit facilities can easily access non-bank asset based lending facilities. These facilities will almost always provide more access to credit than bank margining of the balance sheet, and while more expensive, can provide your firm with the cash you need to cover the business operating cycle . 

Factoring companies  in Canada offer, under the umbrella of asset based lending, allows a company to sell receivables on an ongoing basis as soon as sales are generated. Our recommended solution in this area is Confidential A/R Finance, allowing you to bill and collect your own invoices as well as taking advantage of all the benefits of factoring.



The GOVERNMENT OF CANADA SMALL BUSINESS LOAN PROGRAM for capital loans is one of the best loans for business in Canada, and an excellent vehicle for the financing of three specific asset categories:

EQUIPMENT

LEASEHOLD IMPROVEMENTS

REAL ESTATE

Commonly called the ' SBL LOAN ' it offers attractive terms and rates and the large majority of the loan is guaranteed by the federal government of Canada, via INDUSTRY CANADA.



CONCLUSION


Canadian business turns to the working capital finance solution when cash is required to run and grow the business. Different available solutions will allow you to run and grow your company while sales are increasing and existing assets and internal resources won't fill the gap. Access to business capital is key to success and a number of specific financing solutions in alternative lending and traditional finance can offer the best business loan solution for your business.


Speak to a trusted, experienced, and credible business financing advisor for more information on how finance for working capital and true working capital asset based lending facilities can help your Canadian firm grow sales and profits.



7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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

Canadian Business Working Capital Financing

Financing A Business In Canada Here's Some Golden Rules For Working Capital and Loan Solutions

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 Alternative Lending Cash Flow Solutions And Tips For Canadian Business Financing

Financing a business in Canada. A challenge? Let's just say that's an understatement when it comes to working capital, debt, and ongoing management and recognition of financial problems and opportunities. Are there some ' Golden Rules' we could follow. We here at 7 Park Avenue Financial think so so lets cover off some loans for business in Canada.

In some cases your firm might be growing too fast, and just at the time that when you are ready to either expand or take on larger orders and contracts your operating capital and business capital needs replenishing without having the funding you need to address growth challenges. Every company, small and large eventually needs more access to capital, for small and medium firms making a financing error can lead to impaired financials and even business downfall.

Firms with poor working capital typically are poorly managed and unable to meet cash flow needs, but on the other hand a constant reliance on new working capital often has the company demonstrating that it is investing all their cash to grow the business and increase return on investment.


Here is where expert advice and right choices come in, as the wrong debt must be matched to your cash inflows, and even more challenging is the fact that uncertain economic times, pandemics included making it very difficult to find business capital.

The amount of financing you need to run a business depends on how you operate it within your industry . Finance experts call that the ' operating cycle ' and it's simple, namely the amount of time it takes for a dollar to flow through your company from order to collection of the sale via your receivables. The ability to maintain positive working capital throughout that process dictates the amount and type of financing you need.

The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating cycle, and the business owners’ goals for future growth. However, while very large businesses can get by with negative working capital because of their ability to raise funds quickly, small businesses should maintain positive working capital figures. Even issues such as seasonality of a business can greatly affect cash flow needs.



Regardless of the product name, all financing solutions consist of either debt, equity, or a hybrid combination of both. Keep in mind that there are no “good” or “bad” solutions. The best solution for you depends on your specific circumstances and requirements.


One of those golden rules of business finance is to ensure that you properly match short term debt and long term debt appropriately. Each of these two has its own benefits and potential disadvantages. Is one better than the other? Not really, it’s just that it’s a case of making adjustments and staying ' in tune ' with what needs are appropriate or required at the right time.

Working capital loans , whether they be a term loan to inject permanent working capital into the business,or alternatively a short term loan, typically 12 months in duration are used to cover off short term operating needs such as payables, financing your investment in accounts receivable, salaries and wages, etc. It is improper to use shorter term working capital facilities for long term needs such as financing fixed assets/equipment, or real estate, etc,

From an understanding point of view we don't want to go too far down the textbook route in explaining working capital but it's important to simply know that its calculated by subtracting current liabilities from current assets on your balance sheet. Let's leave it at that.

But if there is a shortfall in that number, or the ratio is really tight you need short term liquidity financing of some sort - The good news is that more and more there are some new, creative and alternative financing options available to business owners seeking SME COMMERCIAL FINANCE. That SME " small to medium enterprise " segment in Canada is one of the largest parts of the entire Canadian economic landscape.

How to Get a Working Capital Loan

Numerous traditional and alternative lenders have the financing options you probably need to run your business. In general the same fundamental criteria apply to their level of due diligence into your business - i.e. years in business, annual revenues, is the business preparing proper financial statements that accurately reflect the state of the business, etc. Businesses that are smaller should realize that their personal financial affairs and how they are managed are viewed by the lender as a reflection of how the business finances are managed. Therefore decent credit bureau/fico scores are important.

HOW IS A WORKING CAPITAL LOAN REPAID?

In selecting a financing facility for your business you and your commercial lender should have a sense of repayment ability. Short term working capital loans are widely popular these days, in many cases online portals are used to apply, and lenders use algorithms to determine the amount of loan and repayment timing. Many business owners and their financial managers don't realize that the loans may sometimes be asked to be repaid weekly, but monthly is also common.

The loan amount for these facilities often called ' merchant advances ' is based on a formula of your annual sales, typically 10-20%, as well as factoring in your time in business. Interest rates and cost of financing tend to be some of the highest in Canada for these loans. The appeal is of course speed and flexibility of approval.




We have mentioned the need to separate short term borrowing for long term investments in your business. So for acquiring fixed assets equipment leasing and commercial mortgages are proven options to acquire assets/real estate. In some cases a firm might be looking to invest in leasehold improvements.

On' catch-all ' for financing assets, leasehold improvements, or real estate is the Government of Canada Small Business loan program, providing up to a $1,000,000.00 of financing with a government guarantee behind the majority of the loan. Seek out the services of an experienced Canadian business financing advisor who can help you acquire this loan. Key benefits are attractive interest rates, repayment flexibility, nominal personal guarantee, and financing for investments such as leaseholds that are typically harder to finance as they are intangible assets.

It is the perfect loan solution for building acquisition or modernization via leasehold improvements, as well as covering the purchase of new and used equipment. Since the largest portion of your loan is guaranteed by the Canadian government through this Industry Canada program that allows banks to lend to businesses that might not otherwise qualify for the funding they need.

So in financing a business it is really about what the finance experts call ' sources and uses ' of funds and what type of financing suits your firms specific company or industry needs.

Canadian Bank Financing

Often seen as the ' go to ' solution for general working capital, operating loan, and other financing needs the Canadian banks offer unlimited funding and flexibility for firms that qualify. The attractiveness of a bank revolving line of credit is that it is low cost and can be used only when you need to draw done funds. The banks are very focused on repayment !; so you must be able to demonstrate historical and present cash flow generation. Loans are structured to meet your business needs but borrowers quickly become aware of the more stringent credit qualification and criteria for firms to access bank financing. Those criteria include established businesses for the most part, and focus on the size of the business, quality of the balance sheet, debt to equity ratios, and personal covenants and outside collateral requirements.

The vast majority of businesses in Canada can qualify for both Factoring, as well as the related type of facility, Purchase Order Financing. Factoring financing is probably the fastest growing type of working capital financing when it comes to how to finance a business in Canada. While some call it a receivables loan it is in fact just monetizing your a/r for cash flow.


Since cash flow problems often stem out of a company's inability to collect it's receivables in a timely fashion any commercial or government-related receivable can be financed for immediate cash. At 7 Park Avenue Financial our recommend factor finance solution is ' Confidential Receivable Financing ', allowing you to bill and collect your own receivables without any intrusion by a third party.

If your firm had very good gross margins and can sustain the 1.5-2% fee associated with the financing your firm can become an ATM machine, generating cash as fast as you generate sales revenues. The flexibility and faster access to cash are the great appeal of receivables finance.

Another type of specialty finance related to your ability to take on larger orders and contracts is purchase order financing. This type of financing pays your supplier directly, allowing you to fulfill orders and contracts that might otherwise be lost to competitors for lack of working capital. Similar to factoring finance P O Financing has a higher cost but if your firm has good gross margins it allows your company to grow substantially larger without owners having to put up more equity. Alternative lending in Canada via solutions such as we have described is very much on the rise .

It certainly hasn’t escaped us that not only is it difficult when it comes to financing a business in Canada to manage internally, you of course have to stay in tune with what’s happening in the economy, your industry, and dare we say, politics! Talk about a full-time job.



A lot of your financing for loan capital of any type will probably come from external financial solutions. They might include a line of credit, bank debt, working capital term loans, receivable finance, inventory finance, equipment leasing, and monetization of tax credits. Those tax credits typically are covered under Canada's SR&ED program and if you have refundable tax credits they can be easily monetized under a SR&ED Loan facility. That accelerates the refund of your valuable investment in r&d capital.




However, you also generate cash internally, and you need to know how to measure that.



When you assess working capital or debt needs you need to be in a position to focus on cost, risk, and what that financing does to your balance sheet? All of those must be taken into consideration.



Also consider your current capital and debt structure and how your balance sheet will look after financing is completed. As an example, something to think about is that working capital and cash flow can be generated through monetization of assets - this doesn't really bring debt to the balance sheet, so you've achieved your goal without increasing debt.



On occasion it’s important to discuss any taxation impact on your financials with your accountant, as there are both positive and negative aspects to debt and tax.



If your firm is mature and operating efficiently you’re in a position to access all sorts of traditional financing. The other side of that is alternative finance, which works just as well but might be more costly on occasion - not always, but sometimes.





It's hard enough to access financing but choosing the right partner is a struggle in itself sometimes, ensuring that the funding source will be with you in tight markets and good times. Apparently, those two fluctuate over time. The 2008 worldwide debacle caused many finance firms to disappear or implode, causing havoc among thousands of businesses in Canada, whether you were a start-up or large corporation!



One solid Golden rule of business finance is to be proactive when it comes to access to debt solutions and working capital. You might even have to make the tough decision around diluting equity when there is too much debt on your balance sheet. That’s a costly one.



Another of those Golden rules is to have a solid sense or understanding of how outside forces, pandemics included, can affect your company's financial viability! If market conditions are continually volatile you clearly need to focus on longer term stable financial solutions.

WHAT ARE YOUR BUSINESS GOALS ?

Constantly stay on top of your cash flow planning, and consider the need for a proper business plan that accurately reflects the true growth and profit potential of your company. You might be focusing solely on growing sales, in other cases you might be going into new product lines or geographies, or investing in r&d. If you want to more clearly understand what business financing solutions are available for financing a business in Canada speak to a trusted, credible and experienced Canadian business financing advisor.



7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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

Working Capital Finance Solutions & Bank Alternatives !

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Benefits Of  Financing Alternatives Vs. Traditional Bank Loans

What Is Working Capital? How To Find Alternatives To Bank Financing

Canadian business owners and financial managers seeking working capital finance by banks or other sources are generally experiencing growth in sales and profits. That's the good news, which is of course offset by the fact that this type of success requires additional working capital and newer ways to finance your business. Putting working capital to work enhances your firms value when return on capital is higher than your cost of financing!


Liquidity has become the name of the game and ' cash is king' even today never seems like a worn cliché.  Past studies by the Conference Board of Canada indicated that the key worries of business owners were working capital cash flow. (Also referenced were ' regulatory issues and competition'). The bottom line is: business owners and their financial managers want options


So you have sales and assets... but can those assets generate working capital finance by banks or other alternatives?

The ability to secure funding at critical times is always challenging for entrepreneurs, even in established companies. That one of the biggest reasons that alternative funding has risen to so much prominence. A wide variety of finance solutions is now available to the Canadian business owner - solutions that involve cash flow financing via the monetizing of current assets such as inventory and receivables, monetizing future sales ( merchant advance/short term working capital loans), equipment financing and sale-leasebacks, and traditional cash flow term loans, also known as ' mezzanine financing '.


Somewhat remarkably many businesses have even turned to online borrowing solutions in Canada. Canadian chartered banks have also participated in the online borrowing industry, although reviews of customer experiences in business journals such as the GLOBE &  MAIL and NATIONAL POST have met with some lacklustre customer experience. Although approvals are relatively fast interest rates and borrowing costs and terms of repayment have left many customers wanting better solutions.

In online borrowing models, including peer-to-peer loans significant emphasis is based on owner personal credit history. Alternative funding options are continually changing in the digital space and borrowers are well advised to speak to a business financing consultant in this area. It is safe to say that business owners can't be expected to call and interview all the different online lenders as it relates to loan info, cost of financing, and loan criteria.

The main appeal of short term working capital loans is the emphasis on fast approval, no requirement for additional collateral, and less emphasis on personal credit scores and net worth.


The bottom line is that businesses who choose to grow and that require external funding want to deal with reputable lenders/financing partners. Unfortunately many Canadian firms can't meet the criteria under traditional bank lending policies , even though financing needs are critical to their business.



For working capital purposes it's all about ' current assets ' which include typically receivables and inventory. As you invest in those two assets to generate sales your working capital needs go up, and your ability to manage and turn over those assets plays a key role in the sourcing of working capital by banks, and non-bank institutions.


You should not be afraid to enter into traditional or alternative working capital solutions if you have properly managed current assets - you are simply monetizing for liquidity, and that's rarely a bad thing.  Business owners know cash goes down when you are expanding sales as you invest in assets and resources.


So are Canadian chartered banks the solutions to your working capital needs. Probably, possibly, maybe is our answer, meaning that if your firm is capable of meeting bank criteria for a revolving line of credit your needs typically can be met. Of more and more concern to our clients is their ability to not be able to generate sufficient financing for the sister of receivables, aka inventory!


That then takes us into an alternative for bank financing, which is the fast growing area of asset based financing, in particular asset based lines of credit. These facilities cost more, but give you total margining of the market value of your receivables, inventory, and , guess what, we'll throw in equipment and real estate if you want to temporarily margin them for working capital. And remember, your balance sheet is not taking on debt when you enter into either a bank or alternative asset based line of credit, you're simply monetizing your financials for cash flow.

The reality is that alternative methods of financing are growing more popular - yes they are more expensive, but if your firm generates sufficient margins and return on equity your ability to tap into virtually unlimited working capital can prove to be a very positive experience.

The reality of working capital finance by banks or alternative methods is always the same - you need to determine your asset turnover, there will always be times when you need a bulge in inventory and A/R to fund your growth.

Solutions for alternative working capital cash flow include:

Non bank asset based lines of credit  - These facilities help to smooth out what the pro's call the 'operating cycle ' of your business , assisting those times where cash inflows don't match outflows based on a/r and inventory turns. As you invest in current asset categories of receivables and inventory you experience a decline in cash reserves. Businesses with seasonality or ' bulges' of sales activity require solid business credit lines. 'ABL' ( Asset Based Lending ) lending is true collateralized lending.




The operating cycle may cause businesses to experience shortfalls for a specific period. There are numerous reasons why this can happen, but one underlying reason is that a business may extend credit to its customers to attract more business. The more credit a business extends, the less cash is available during that time. That’s why a line of credit can help these businesses with their cash flow management.

A/R Financing/ factoring (We recommend Confidential Receivable Financing) - 

Accounts receivable finance is one of the most highly utilized and successful forms of non bank working capital financing. This type of financing allows you to, in effect , sell your invoices to generate cash flow. Many business people don't understand this type of funding is not a loan, in effect its a transfer and cash flowing of your asset - A/R! 

So pricing is not an interest rate per se, but a discount to the total value of your invoice, typically in the 1-1.5% range.  We recommend confidential a/r financing, allowing you to bill and collect your own accounts with no intrusion of any finance firm into your customer relationship.



Sr & ed Tax Credit Bridge Loans

Sale leaseback solutions

Inventory & Purchase Order Financing

Loans for professional practices ( Doctors/Dentists/Lawyer/Accountants, etc )  - These loans may involve financing needs around equipment, marketing,  or in some cases acquiring another practice. Expansion for business real estate is also a common need in this area.




Short Term Working Capital Loans ( aka ' Merchant Advances ) - As we have discussed to a certain degree these online/peer-to-peer solutions became ultra-popular after the 2008 recession and became a strong competitor to invoice discounting finance. Loans are typically based on a percentage of annual sales, typically between 10-20%. Although readily accessible we consult to clients around the pros and cons of this financing, one issue being higher interest rates.

It is important to understand the financial concept of matching when it comes to working capital finance solutions. These sources of capital should be used for day to day operating needs.  Serious mistakes occur when these types of solutions are used for long term need such as investments in equipment, r&d,  marketing, etc.

At 7 Park Avenue Financial we find that many new clients are confused around some of the terminology around the ' working capital loan '. Also noted is that certain loans in this category are secured, others are not.

Is Alternative Financing Right For Your Firm?

Business financing is a challenge, so owners must invest their own time, or work with a trusted advisor to evaluate options. Companies with good sales revenues, profits and clean balance sheets will have more options, but we have demonstrated that commercial lenders providing alternative finance options are plentiful and offer numerous cash flow solutions to your short term needs. If your firm has sales, and or assets you have non bank funding options.


Liquidity, that's what it's all about. Speak to a trusted, experienced and credible Canadian business financing advisor in order to ensure your traditional and alternative business financing options are first, clear, and second, available!





7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

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.









Stan Prokop
7 Park Avenue Financial/Copyright/2020