Tweet

Inventory Financing – Canada

Guest post by: Stan Prokop

Article Overview: The article discusses inventory financing in Canada as a component of working capital financing for Canadian firms - inlcluding options and current financing availability .

Inventory Financing – Canada

Canadian business owners and financial managers are always challenged to properly finance inventory for both regular operations and of course growth.

There are a number of inventory options in Canada - some of these are complimentary to your firm's current operations, some are unique and stand along financing arrangements.

As we have noted, business either require inventory financing as a part of their regular operations, or they often require increased inventory financing based on growth and large new orders and contracts .

Customers that our firm works with fall into a few specific categories with respect to their inventory financing needs:

1.They have existing inventory financing through their banking arrangement

2.They have bank financing but this does not include an inventory component

3.They have alternative financing arrangements via an based line of credit']);"> asset based line of credit or a purchase order financing arrangement

It is also important to mention that when we sit down with a customer and discuss inventory financing the term inventory is used as a 'catch all 'term - in reality Canadian business inventories fall into several categories - raw materials, work in progress, and finished goods.

Canadian banks in Canada finance current assets of your firm as an 'operating facility 'or revolving line of credit. This type of facility margins receivables at usually 75%, and inventory at much less of a % of margining. That places a working capital pressure on the firm as it requires cash to pay for goods, with this cash not turning into a receivable and cash for at least another 60 days.

When bank financing does not include an inventory component that is when the financing challenge truly begins.

We are of the opinion that the best inventory financing arrangement for Canadian firms is a true based line of credit']);"> asset based line of credit that is a non bank facility. We can also call this a true working capital facility, as it provides you with a very strong margining of BOTH your receivables AND inventory! In our experience, and depending on your industry, you will achieve the highest level of margining, and therefore working capital, based on this type of financing arrangement. Although financing costs will be higher than bank rates you will have the capital you need to grow your business and service orders and contracts.

When your business is heavily dependent on an inventory component (unlike a service oriented company that has either no inventory or little inventory) you need financing to be able to turn over stock and remain on strong terms with key suppliers, or overseas suppliers.

How much inventory financing is needed? Many business owners intuitively know how much inventory they need to have on hand, or what amount of financing they need to support that inventory. If they don't we work with customers to help them understand those calculations and numbers. A great and easy tool for the Canadian business owner or financial manager to use is the simple measure of: INVENTORY TO CURRENT ASSETS

As a business owner you are always concerned about enough inventories on hand to service customers. Receivable are close to cash, but inventory is not exactly self liquidating into cash, so the management of inventory is critical.

To calculate your ratio simply take inventory and divide by your total current assets, and for discussions sake multiply by 100 to get a %. So what is a good number? The answer is there is no right answer as every industry is different. So the best way to employ this great tool is to calculate this ratio historically and on an ongoing basis and determine if you are entering a 'red flag' situation.

We encourage Canadian firms to talk to a trusted business financing advisor to determine what options are available, and how they can maximize inventory financing for their future growth and profits!

Related Articles
  The Myth Of Inventory Finance Companies
  Inventory and Purchase Order Financing – Canadian Solutions
  Business Inventory and Purchase Order Financing Canada
  What If Inventory Financing Lenders Were the Solution to Your Cash Flow Based Financing
  Inventory Financing – Canada - A unique financing challenge
  Small Business and Medium Sized Business Inventory and Purchase Order Financing in Canada
  Are Inventory financing lenders and P O Factoring solutions your best business financing bet ?
  Small Business Inventory Financing in Canada
  Purchase Order Financing Canada
  What is the Solution to Finance Inventory for Canadian Business?
  Is Financing Inventory and Financing Purchase Orders Actually Possible In Canada ? Yes You Can!
  A Different Solution for Business Inventory Financing
  Guess Who’s financing inventory and using purchase order Finance ( P O finance) ? Only Your Competitors – that’s who !
  Inventory Loans and Purchase Order Loans – How does Inventory Financing Work in Canada
  Canadian Franchise Financing – Made in Canada Solutions!
  Inventory Finance – Canadian Inventory Financing
  Real World Lessons On Inventory Financing from Purchase Order To Cash
  Inventory & Purchase Order Financing - Canada -
  Inventory and Purchase Order Financing in Canada
  P O Financing and Inventory Financing – Benefits... and Risks!

Article Tags: asset based line of credit, inventory financing canada, working capital



Related Forum Posts
Accessing the Canadian Market - Leo, an idea that came to mind is try to align yourself with Hispanic Organizations in Canada. This will build your credibility within communities and get more referrals. Not sure if you plan on being based in Canada or operate your business from Columbia but either way being in the web development arena allows you to work from anywhere. You can also search for opportunities originating from Canada thru elance.com, getafreelancer.com, freelance.com or rentacoder.com
Re: Introducing a US franshise to a Canadian market - [quote="BuzzAroundBooks":1l00q6iy]Hi Everyone, If there was a franchise you liked and located exclusively in the U.S., how likely would you be able to introduce the first one in a new market like Canada? How open are franchisors to this sort of idea? Has anyone heard how this was done in the past?[/quote:1l00q6iy] US franchisors are really open to "export" their concept to Canada for 2 main reasons: the proximity and the culture: Canada is just a few hours away from any US city and both cultures are very similar. I am actually reading stats on this subject as I write and about 80% of american franchises tat go international go to Canada first.
Retired Executives - Hello everyone. Does anyone know where I could be in contact with retired executive? Reason I ask is because I am in seek of a mentor to assist me with my business and I am having a hard time finding a mentor in Canada. It seems like executives in the US and Europe are lot more helpful than in Canada, as I have contacted a few individuals in Canada and they have either been rude or simply did not reply back to my e-mail. Does anyone know where I can find some retired executives, as I might have a better luck with them? Thanks!
Import Hairdryer to Canada - Hi I want to import hairdryer from Italy to Canada. I am looking for information about it because I don’t know what exactly I have to do to import this product to Canada. What do I need to do to import this product to Canada?
Seek Venture Capital & Funding - Hello, Greetings from India. I am Seeking Venture Capital for Offshore Software Company Start-up. Need advise along with Business Model Sample. I have a basic outline for an offshore company. 1. Technology - like Microsoft Dot Net, Java, LAMP 2. Talent Team - Found Good Technology Developers. 3. Where I can get the leads/potential customers - Leads have been identified who are willing to move forward offshore projects. 4. I do not have resources like funding. It is a very critical factor to me Industries: Manufacturing, Real Estate, Retail, Insurance, Distribution & Logistics, Healthcare, Industry Associations and Software Product Development, Agricultural Industries and Etc. Services: Offshore Software Development Company. Offices to be located: Hyderabad, Andhra Pradesh, India and USA. Products/Services/Applications in areas like POS & Billing, Sales & Distribution, Production Planning, Material Management, Inventory Control, Plant Maintenance, Purchasing, Accounting and Logistics. Dynamic Web Programming with Database Driven Content Management Systems, Online Stores for E-Commerce, B2B Solutions, Community Portals, Website Redesign and Development, Custom ERP with Enterprise Wide Functional Modules such as Marketing, CRM, Accounting, Inventory Control, Sales & Distribution, Production Planning, Purchase & Stores, Logistics and Supply Chain. Seek your further questions and help. Thank you, Best Regards, Jayapratap.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Leading from Authenticity is a Beautiful Thing

12 Principles to Spark Innovation

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.