Business Cash Flow Problem Working Capital | 7 Park Avenue Financial

WHAT THOSE TEMPORARY CASH FLOW CRUNCHES!

If our businesses were a straight line with totally repeating ongoing transactions a lot of cash flow shortage shock would go away. Unfortunately, that is rarely the case, so seasonal and bulge situations often occur, often along the lines of the ' cash flow shock' we talk about.

The owner /manager's ability to forecast seasonality and bulges in business will always alleviate working capital shock .

WHAT TYPE OF BORROWING FACILITY DO YOU NEED?

At the end of the day, the most common solution to the business cash flow problem is the ability to ensure you have a borrowing facility in place that allows your company to address future cash flow uncertainty.

If your firm has profits, historical cash flow and acceptable financials chartered banks and business credit unions are the solutions for the long term.

FINANCING THE BALANCE SHEET

As long as you have business assets (receivables, inventories, equipment, orders/contracts) numerous non-bank solutions exist to allow you to feel that you have cash flow availability. Funding current assets is a key part of addressing a cash flow crunch.

CONCLUSION

If you're looking to avoid small business cash flow problems shock and ensure you have access to financing solutions that address the right stage your company is in ( start-up, mature, high growth, turnaround, etc ) to grow products and services, so seek out and speak to a trusted, credible and experienced Canadian Business Financing Advisor who can assist you with your financing needs. It's all about the amount of cash you need to satisfy enough cash for funding your company.

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

Direct Line = 416 319 5769

business financing consultant

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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

Sunday, January 10, 2021

Canadian Business Loans: On Your To Do List For Accessing Financing Options

Feeling Lost Out On Loan And Finance Options In Canada?

Canadian business loans and financing options are often very near the top of the business owner/financial manager’s ' to do ' list when it comes to running and growing the business. It can be also said that it’s often common for the owner/manager in the SME sector to feel ' lost ' when it comes to achieving those financial goals and accessing the right business loan. Has to be the case? Not really... let's dig in.

WHAT IS THE SME BUSINESS SECTOR?

By now pretty well everyone seems to recognize that the SME (small to medium enterprise) sector in Canada is one of the constant powerhouses of the economy. Everyone seems to have a different definition of what this sector is; some maintain its, for example, companies with under several hundred employees and sales of 20 Million as an example. That's not that SME to us! but less focus on the solutions available to finance those firms.

SMALLER BUSINESSES HAVE A LARGER FINANCING CHALLENGE

The one thing everyone does seem to agree on though is that 'size counts' in business financing and the small to medium guy has a lot more of a challenge in accessing. More often than not it feels like an obstacle course, as the owner /manager finds it very difficult to obtain long term financing options that will help secure business growth.

THE CHALLENGES OF BANKS TO FINANCE SMALL BUSINESS

On occasion, it might help to put yourself in the shoes of the bank or the many commercial lenders that offer financing solutions for working capital business needs to Canadian companies. Lenders focus on key items such as tangible equity, assets, and in many instances outside collateral.

CANADIAN BANK SOLUTIONS FOR THE SME

Canadian chartered banks in Canada are often the 'point person' when business financing discussions come up around the needs of small businesses. While often criticized for providing the financing business needs they do participate positively in a number of ways, including the best interest rate.

Banks typically provide:

Govt Guaranteed Business Loans - The Canada Small Business Financing Program

Term loans

Small overdrafts

Mortgages

They are successful because they are on every corner, have very clear rules and borrowing applications, and can be a source of constant contact with the owner/manager.

ALTERNATIVE FINANCE TO THE RESCUE?

While bank solutions are low cost and accessible it's in fact commercial finance firms that provide a lot of the other financing options that will get small businesses to the goal line. Commercial finance firms generally aren't regulated, take more risk, and are profit-motivated. Additionally, they provide small business loan options simply not available from the banks. It is often important to have a good business plan and cash flow projections - 7 Park Avenue Financial prepares business plans that meet and exceed bank and commercial lender requirements.

LIST OF ALTERNATIVE FINANCING OPTIONS IN CANADA

Those options:

Short Term Working Capital Loans/ Merchant Cash Advance/Business Credit Cards - Good personal credit score required - these facilities have higher interest rates but are very easily accessible

CONCLUSION

Whether it's bank financing or non-bank commercial finance options the SME business owner doesn't have to feel lost when it comes to financing options for a small business loan that suits their needs at acceptable interest rates. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your operational and growth goals when it comes to loans in Canada that suit your funding and growth needs.

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

Direct Line = 416 319 5769

business financing consultant

Saturday, January 2, 2021

Your Business Growth Financing And Funding Strategies Search Just Might Be Over

Looking For The Phoenix Effect When It Comes To Growing Your Business?

Proven Information On Business Growth Strategies Financing Funding In Canada

Business growth financing strategies financing and business funding in Canada, no secret here, present cash flow and capital funding challenges. The Canadian small business owner and financial manager dreams of his or her firm being able to achieve the Phoenix effect. That’s the Egyptian fable that has the Phoenix Bird rising from the ashes and signifying resurrection and hope.

SALES AND CASH FLOW - THEY ARE DIFFERENT!!

Let’s dig in. We're never surprised these days, in talking to our clients, that many owners/managers sometimes don't associate growth with a cash flow drain. Their logic is: ' Sales are great, we've just got those new contracts and PO's, and we’re introducing a new product ‘...etc...Etc. In their minds, and rightfully so, those expanded revenues will generate more profits. It's a perfect world, right?

Not so fast! The owner/manager has forgotten in those growth scenarios we noted that cash goes out quicker than it goes in. It's a fundamental cornerstone of business finance- Growth eats cash!

WHEN SALES GROW YOUR CURRENT ASSETS BUILD UP!

The reason is of course is that you must invest more in inventories, receivables, equipment, as well as ' beefing up ' other areas of fixed costs - i.e. people, etc.

RECOGNIZING A FINANCIAL CRISIS

So even if the business owner/manager recognizes the problem what then is the solution to avoiding a financial crisis of some sort? Frankly, we see things go awry quickly because when you firm is in cash crisis mode that is not viewed by commercial lenders and banks as a lending opportunity to your firm!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! You don't want to be caught in your lenders board room explaining that you didn’t see it coming.

BUSINESS LINES OF CREDIT CAN PROVIDE THE SOLUTION

The most common solution for these sort of growth stories is the business line of credit. That type of financing can be achieved via a Chartered bank credit facility, or a newer solution these days, the Asset Based Line Of Credit, offered by non-bank commercial lenders. These facilities of course monetize your 'current assets ' and allow you to borrow on a revolving basis.

WHY IS ASSET TURNOVER KEY TO GOOD CASH FLOW

A word to the wise, don’t let accessing either of these two facilities lull you into a false sense of security. Your focus should still be on strong asset turnover to the best of your ability, so inventory turns and collecting A/R in high growth situations should be a top priority.

HOW TO PLAN FOR CASH FLOW NEEDS

Many business owners still don’t realize that they can plan effectively for cash flow needs. A simple spreadsheet tracking your sales, collections will identify the amount of your cash needs. That allows you to be proactive in planning for business growth financing. By the way, that sort of simple analysis will always be viewed positively by your cash flow lender.

WHAT STAGE OF GROWTH IS YOUR FIRM IN?

Naturally, there are different stages of ' GROWTH' when it comes to business funding solutions that can be all the way from start-up to explosive growth scenarios. All stages of business growth come with different financing solutions - some short term, others long term.

Small businesses aren't exactly the candidate for those Bay street venture capital folks. We've referred to bank credit lines, as well as non-bank ABL lines of credit. Other cash flow growth solutions include:

Non-bank asset-based lines of credit

CONCLUSION

Which type of financing will make your growth successful? Let your firm experience the PHOENIX EFFECT... seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with growth funding.

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

Direct Line = 416 319 5769

business financing consultant

Wednesday, December 30, 2020

A Business Finance Strategy Doesn’t Have To Be A Long List - Growth Strategies For The SME Sector In Canada

HOW TO DESIGN GROWTH STRATEGIES

Business Finance Strategy Growth Strategies For Canadian Business

A business finance strategy doesn't necessarily have to be a long list of technicalities when it comes to financing the SME (small to medium enterprise) in Canada. Designing growth strategies can be a simple plan or process around getting the financing you need. Let's dig in.

While a business plan and formal cash flow forecast of needs aren't critical to your planning finance for your business they will go along way to understanding your needs, particularly the cash flow estimates which will dictate how much financing is required, and when.

HOW DOES A BUSINESS MANAGE GROWTH

We have seen that it is key for owners and managers to ensure they can exert control of business growth challenges. Understanding the company's objectives area and ensuring that financing is in place to sustain that growth is key to business success. The ability to have a business plan and understand the turnover of assets in key categories such as accounts receivable and inventory is key. Ensure your company has the right mix of debt and equity.

WHAT ARE SOURCES OF CANADIAN FINANCING

Remember also that Canadian business financing comes from various sources - that includes Canada's chartered banks, commercial credit unions, insurance companies, and independent commercial finance companies - Canadian and subsidiaries of U.S. firms.

DON'T FORGET THESE OTHER SOURCES OF FINANCING THAT ARE OFTEN OVERLOOKED

Remember also to consider some sources of financing that never make it to the top of the obvious list when the business owner or a financial manager is planning financing. They include suppliers, and even the government, primarily through the BIL/CSBF program, commonly known as the SBL loan.

SR&ED CLAIMS ARE FINANCEABLE

Don't forget also that if your firm has a research component you can file SR&ED claims, and, more importantly, finance that sred claim as soon as you have filed, recovering valuable cash flow for ongoing growth and development of your products or services.

WHY IS ASSET TURNOVER IMPORTANT

Also, we are in a never-ending discussion with clients on asset turnover and sales when it comes to short term corporate finance. Why? Simply because better asset utilization will increase profits and cash flow, and those profits, kept in the business, are... you guessed it... a source of financing!

THE BUSINESS CAPITAL STRUCTURE

When thinking about your finance needs it's important to ' bucket' those needs into the category of either debt or equity - two very different kettles o fish! How you arrange you’re financing via debt or equity dramatically affects the returns and risk to owners and other stakeholders, i.e. your lenders.

Top experts in finance always tell us that the proper use of debt in your overall capital structure is a great way to fund your operations and provide better returns to owners. At the far end of the spectrum though is the fact that too much debt brings risk and potential bankruptcy when cash flow cannot repay those arrangements.

MONETIZING KEY ASSETS

We're huge fans of asset monetization as an alternative to debt. A growing business will always have receivables, inventories, contracts, etc. Those can be financed via the bank or a non-bank lender, providing you with ongoing cash flow but without taking on long-term debt with fixed repayments.

SOURCES OF BUSINESS FINANCING

Remember also that the stage your business is in actually will in many ways dictate to you what type of financing is achievable and through whom. That financing is going to come from:

CONCLUSION

The name of the game always in growth financing is to determine the amount of cash/capital you need before the crunch arrives. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with a business finance strategy and provide alternatives that make sense.

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

Direct Line = 416 319 5769

business financing consultant

Sunday, December 20, 2020

Business Credit Lines In Canada - Eliminate The Crash Landing Aspects Of Funding Your Company

What You Need To Know About A Business Line Of Credit

Business credit lines in Canada. We sometimes think it’s a lot like ' sensible shoes '. You suddenly realize how important they are! So when it comes to working capital funding in Canada the business owner quickly realizes the importance and value.

WHAT TYPE OF CREDIT DOES YOUR COMPANY NEED

But is the Business ' LOC’ something that only the Ouija board can discern as to what's the best business credit for your firm? Some firms even use a business credit card as their line of credit/short term financing solution - that's one of the ways to bank your firm, but not the best of course, it just takes some drilling down into what is available and what's best.

WHAT IS THE MAIN USE OF BUSINESS CREDIT LINES

If there is one solid use for business credit lines it’s simply their ability to finance your business as you move along in growth. If you're not self-financing and don't have a huge equity position (coupled with slow-paying clients) the corporate credit line gives you cash flow.

ASSED BASED LENDING SOLUTIONS CAN ALSO FINANCE ACQUISITIONS!

Don't forget also, as we've been known to preach that solid a/r and inventory balances can even be used to partially finance acquisitions - all the better if the firm you're acquiring has those same type of current assets.

2 KEY CHOICES IN A BUSINESS CREDIT LINE - WHICH ONE WORKS BEST FOR YOUR FIRM

In Canada, you have 2 Choices for access to business revolving credit. One is the ' go-to ' - our Canadian chartered banks. Interest costs with banks are of course low, and these days they actually couldn't be much lower. Bank requirements for business credit lines might be viewed as 'strict' by many borrowers.

Quite frankly we have never felt they were necessary strict - it's just that we must assume if the bank is lending unlimited amounts at low rates that they can be easily forgiven for asking for companies with good financials, profits, positive cash flows, external collateral, and good personal credit history/credit score of owners, including of course the proverbial ' PG ' - the dreaded personal guarantee.While the business owner may wish to separate their credit profile from the business the banks do not see it that way - they want to know if you manage your personal finances similar to the way you run or will run your company!

ASSET BASED CREDIT LINES ARE THE NON BANK SOLUTION FOR WORKING CAPITAL

When your firm can't access bank credit for revolving facilities your other choice is in fact a lot more accessible. It's the ' ABL ' - The asset-based business line of credit. Although 98% of the time asset-based credit facilities are more expensive they are easier to access from an approval perspective. Facility sizes run on the small size to the 250k range - and large facilities run to the tens of millions of dollars, usually funded by independent commercial finance companies. There is no reason for your firm to be using business credit cards to fund your business on a day to day basis!

WHAT IS THE COST OF ASSET BASED CREDIT

When it comes to interest rates in asset-based lending is more costly, but your firm has access to more business cash - and of course, you only pay interest on what you are using in the facility. Subject to credit approval both a variable or fixed rate is available in most credit facilities both in traditional banking and alternative finance.

DO BANKS OFFER ASSET BASED CREDIT FACILITIES

An interesting thing about ABL credit is that it's offered by the Canadian banks as a part of their business loan offering. but they don't run many TV commercials on that one. We won’t get into why we think that’s the case, but give us a call anytime and we'll tell you why we think that way!

ALL ASSET CAN BE FINANCED UNDER AN ABL FACILITY

Surely most business owners know they can't really access business credit line facilities if they don’t sell on commercial credit terms. From the occasional call, we get we're never quite sure they do in fact realize that. However, an interesting point is that ABL lending has subsets of inventory and equipment financing, so you in theory could have an ABL line that simply margins inventory and equipment. A good example might be a retail chain.

Our banks are very trusting when it comes to letting you run your business on a credit line. They in some cases only do an annual review of your financials, in certain cases, you might be reporting monthly on some basic business metrics. By the way, you maintain the use of the same business bank account in ABL lending.

ENSURING YOU HAVE PROPER FINANCIALS AND UP TO DATE BUSINESS INFORMATION AND AGINGS

Asset-based lenders offering credit lines are more giving but less trusting with small businesses . By that, we mean that they trust, and they verify! So be prepared to do a bit more reporting and expect the odd personal visit here and there! We meet many business owners who wonder what their bank looks like! But of course, there are a lot of great bankers in Canada who know their clients business. There is no defined credit limit in asset based financing as the facility grows as your assets and sales grow for your products and services.

CONCLUSION

Don't feel that the non-access to funds via a business credit line puts you in 'crash landing' mode. Take advantage of different financing options in order to get approved for the funding you require . Understand your needs, alternatives, and seek out a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding needs.

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

Direct Line = 416 319 5769

' 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

Monday, December 14, 2020

Funding Business Turnaround - Growth Financing Secrets And Tips For Canadian Business

(The Other Reason) Why Companies Fail (And How To Prevent It!)

Funding business turnaround. Whether it's growth financing or rescuing a company from that terrible spot known as ' dire straits’ no business owner/manager wants to ' crash '. So imagine our surprise when we read and talked to the management of a firm that put out a great article entitled ' WHY COMPANIES CRASH!

WHY COMPANIES FAIL?

But wait a minute, when we read the article and discussed it with the writer we found it focused on some great, but not financial issues. Those issues included salary and compensation models that didn’t work, strange organization structures, and poor or non-existent business goals. Great stuff, and we'll leave those areas to consultants and others, but that is not our focus, which is failure due to lack of working capital, no financing, poor financing, or wrong financing. Let's dig in!

WILL CANADIAN BANKS HELP?

As we can imagine financing at a time when it's least available to your firm is.... difficult! While we might assume ( or hope ) that Canadian chartered banks are the best or most likely to save a firm the hardcore reality is that bank loan rates and margins and a non-tolerance for excessive risk quickly rise to disappoint when growth and turnaround finance is needed the most.

In fact when Canadian chartered banks feel that your firm reaches ' CODE 10' on their risk meters they actually move your account to a special loans category and increase your borrowing costs. Not what you had hoped!

FIRMS WITH ASSETS AND GROWTH POTENTIAL CAN BE SAVED

Firms that have assets and growth and survival possibilities of course want to avoid bankruptcy and face the burden of losses owners, lenders and investors in your firm.

Assets are what often saves a firm that is a great place to start. While assets can of course be sold off and liquidated. At that time surely the business owner couldn't have any more bad luck... but wait, and then Revenue Canada shows up also. It couldn’t be worse.

CREATIVE FINANCING STRATEGIES ARE NEEDED

But that’s when creative financing strategies employing the concept of asset-based lending can save the day. By carefully assessing and appraising the ongoing value of assets such as accounts receivable , inventory, unencumbered fixed assets,, real estate ( if applicable ), and tax credits and patents.

REFINANCING STRATEGIES THAT WORK

Careful crafting of such a facility allows a firm to pay off existing banks or lenders, come to suitable terms with those friendly CRA folks, and have ongoing capital for maintaining supplier and customer expectations.

When properly negotiated and documented proper borrowing structures can be put in place without onerous ratios and covenants that often control your ability to address growth financing and working capital.

BUSINESS FINANCING SOLUTIONS

Numerous single and combination of finance strategies exist for funding business turnaround and growth. They include:

A/R Financing Accounts receivable financing solutions such as factoring and confidential receivable funding