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Working Capital Financing Canada – Canadian cash flow solutions

Guest post by: Stan Prokop

Article Overview: Information on working capital financing solutions in Canada from a short term and long term perspective - What solutions are available and how can Canadian business owners assess which solution best meets their needs .

Working Capital Financing Canada – Canadian cash flow solutions

Working Capital financing- Canadian business owners and financial managers often recognize the need for working capital and but are often challenge in two key areas - what solutions are available and are the working capital solutions temporary or current , or permanent .

If you are a Canadian business owner that is looking for long term working capital your needs revolve around future projected growth, expansion, or in some cases simply the hiring of additional marketing personnel is a solid long term cash flow need .

Generally speaking if you are looking to grow sales and profits working capital is the solution to that type of challenge. One of our clients sells textiles to major box retailers in Canada - sales have grown and the company actually had a great year in 2009 ( many firms did not!!) and feels they can grow business by 100% in the current year , based primarily on new product lines and customers . So you ask, what is the problem? The answer in two short words - working capital.

If you are carrying the additional inventory and receivables that come with that growth you have a working capital challenge. Therein lies the challenge of course - what type of solution do you need, and how do you find it. Naturally you want a facility that meets your needs, can grow with your firm, and is structured under the right terms and rates.

If you have a proper working capital facility that should generally require no additional working capital.

The key thing to remember when you are looking for working capital is the term 'benefits to cash flow ' - What do we mean by that ? Simply that if you are looking at adding new personnel, or new computing power or technologies that you will receive the benefits of those assets over time - if that is the case why would you pay for them tomorrow . The bottom line is that it is extremely beneficial to match your cash outflows with the benefits of your new assets, over time! And in a perfect world you want the ability to ensure you can grow that working capital need.

Many business owners simply don't know or understand where that cash flow comes from.

It comes from two areas, your ability to maximize on your current assets, i.e. receivables, inventory, and purchase orders, or new debt that you are willing to take on in the form of a cash flow working capital loan.

If we refer to the former solution Canadian chartered banks offer the best rates, terms and structure for maximizing working capital. The challenge simply is that you are not always able to get the capital you need for growth in the Canadian chartered banking environment.

The key to understanding your needs is your ability as a Canadian business owner or financial manger to understand your working capital cycle - i.e. how fast do you collect your receivables, how does your inventory turn, and what are your payment terms or pressures from suppliers. By having a clear understanding of those numbers you can determine working capital needs, and also assess what the proper solution is. In short term working capital that means several things - a new or better banking facility, financing your receivables through a more aggressive non bank working capital facility. This could be either a factoring arrangement for receivables only, or a more extensive

Asset based lending arrangement. In medium sized to larger firms in Canada it could also be effectively addressed by a mezzanine or sub debt cash flow loan.

Talk to an experienced, credible and trusted business financing advisor who can ensure you understand your options in the working capital area.

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



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