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Working Capital Financing – Canada

Guest post by: Stan Prokop

Article Overview: An overview of Working Capital financing solutions and challenges for Canadian business owners seeking additional cash flow financing for business and profit growth .

Working Capital Financing – Canada

Canadian business owners and financial managers should realize that despite the current challenging business financing climate there are all sorts of working capital options available to finance your growth, or just your survival!

Expansion of your business, via increased sales, new order, contracts etc always demands more cash. There are traditional and non traditional ways for you to achieve business financing success. And quite honestly our clients are realizing that many non traditional forms of working capital are fact become very traditional based on new alternatives available to finance your business. Cash flow and working capital is being achieved more and more today by financing strategies that were either unheard of, non-existent, or frowned upon in previous years. Just some of those alternatives are asset based lending, or ABL facilities, receivable financing, purchase order financing, tax credit financing, etc.

Business owners in Canada read everyday that the government stimulus package is working, banks are 'lending again ', and somehow all that cash flow never seems to get to your business! Therefore creativity and access to capital become a priority one for the business owner to get working capital.

Let's recap some of those traditional and non- traditional sources of financing. If you feel you need assistance to understand the wide variety of solutions available for your firm we strongly recommend that you talk to an experienced, trusted, and credible business financing advisor to ensure you have choices.

We do believe banks in Canada are lending again; however are focus is on bankers and not the banks. What do we mean by that? Simply that it is very important to focus on business bankers who are actively and aggressively looking for your business. Bank financing is one of the lease expensive financing areas, but of course it comes with loan covenants, ratios, and personal guarantees. Those very issues are why many Canadian business owners prefer to consider non bank and independent finance company options.

Unknown too many Canadian business owners and financial managers are special finance offerings that are administered by the bank, but not widely marketed, such as the CSBF loan which in our opinion is, bar none, the best business financing in Canada for companies with revenues under 5 Million dollars.

As a business owner you can also consider putting new permanent capital into your firm via your own saving, or a partnership with an associate or strategic partner - i.e. supplier.

In non traditional , but increasing popular methods of financing you should talk to a business financing expert about an aggressive receivable financing facility - we prefer facilities that advance you 90% of cash immediately on invoicing, and also allow you to do the billing and collecting . For larger firms with a combination of receivable, inventory and equipment and purchase order needs based lines of credit']);"> asset based lines of credit are a perfect fit for a one stop solution.

We also wish to point out that working capital is somewhat of a generic term, and means many things to many people. The text book tells us that if you take your current assets and subtract your current liabilities you have the magic 'working capital 'number. That's great but the actual number of ratio you get has no real meaning to you. The solution is simply analyzing your receivable turnover, and your inventory turnover in conjunction with your accounts payable demands. The textbook calls this your cash conversion cycle - but it bring real meaning to your day to day financing needs as it will show you how long it takes for one dollar to flow through your company from order to cash . At that point you can consider various strategies to improve cash flow based on your operating cycle of collections, inventory on hand, and supplier terms of payment.

If you add up your days outstanding on A/R and inventory you will find that you can finance them with just payables management. You need working capital that you can access externally, or internally. Internally is better!

Working capital - it's important, it's available - talk to an expert and understand your cash flow options.

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Article Tags: canadian business, cash flow financing, financing solutions, working capital



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