Just imagine that your business has access to all the working capital it needs. It seems impossible? Not really…if you have a solid understanding of your options and your company’s ability to qualify or execute those options.
Whether you’re Canada’s largest corporation or a small startup (and everything in between), your business needs working capital. In Canada, small business financing loans and working capital arraignments are limited to a handful of possibilities, but being aware of what they are and qualifying for them could be the solution to your constant focus on cash flow. cash through some type of working capital loan.
It’s probably easier than you think to make sure you’re addressing the cash flow challenge correctly; what becomes somewhat ‘thorny’ is finding a solution to the problem or locating an expert who can provide him with the business financial assistance he needs.
Two key elements of your first step working capital assessment are your gross margins and your turnover. That’s the big problem we have with textbooks/academic working capital solutions: They point you to the textbook calculation, give you a formula that essentially has you subtract current liabilities from current assets, and voila! ! the inference is that you have working capital. However, our clients have never paid a vendor or completed a company payroll with an index!
To properly assess your working capital needs, focus on understanding your turnover: how much inventory you have, what days are outstanding on inventory, and most importantly, your accounts receivable turnover. Have you noticed that for many companies 80% or more of the total of all business assets they have are tied to accounts receivable, inventory, and on the other size of the balance sheet, let’s not forget accounts payable?
So can you be financially successful based on your new knowledge and analysis of your cash flow and asset turnover? We think you can.
Canadian business financing solutions for small business financing loans really revolve around a couple of viable solutions. Generally, in our experience, Canadian chartered banks cannot meet the working capital needs of your business, if only for the reason that they rarely finance inventory and require significant merit in your overall financials, profitability, external guarantee, personal creditworthiness, etc.
So where do you go from there? The other solutions are very viable and can lead to a potential 100% change in cash flow: they include working capital financing as a combined line of credit on accounts receivable and inventory through an independent finance company. For businesses that are larger, we believe the best tool is an asset-based line of credit that provides high-leverage spreads on all of your business assets. Other more esoteric solutions, but still very viable although somewhat misunderstood, are securitization, and purchase order financing of new contracts and orders. (Your suppliers get paid directly for the orders you have in hand, what could be better than that?)
Finally, going up the road at the speed of light is factoring and invoice discounting. We mention them last, but they are probably the most popular method, gaining ground every day. Our favorite is confidential invoice financing, which puts you in control of your financing.
So there you have it. He has identified new ways to determine need; We’ve outlined 4-5 solutions that will take the guesswork out of working capital. These loan and financing options are available with a little research and, if you wish, speak with a Canadian business financial advisor who can provide timely and valuable assistance with your cash flow needs.