YOUR COMPANY IS LOOKING FOR BUSINESS CASH FLOW MANAGEMENT
AND WORKING CAPITAL SOLUTIONS!
Working Capital Management
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
Effective Working Capital Financing Methods are the lifeblood of successful businesses, fueling growth and ensuring operational stability.
"Unlock your business's full potential with smart working capital solutions – don't let cash flow constraints hold you back!"
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Working Capital Financing Methods and working capital solutions – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
FINANCING WORKING CAPITAL IN CANADA
Business Cash flow management in Canada. That’s a compelling force in the overall success of your business as it relates to working capital ... as they said in the movie,' May the force be with you, '.... and here's why and how!
Let's examine some of those forces and focus on what key areas are ultimately critical to your financing success regarding working capital, growth, and daily operational survival.
Properly turning over those current assets and managing current liabilities, such as payroll, is critical to funding your business.
Working Capital Financing for Modern Businesses
To fund cash flow needs and day-to-day operations, a company must optimize cash flow - Various methods are available, from traditional bank financing to newer and innovative alternative financing methods - As a business owner or financial manager, you need to understand these potential solutions - Let the 7 Park Avenue Financial team help secure your company's financial health.
Working Capital Financing Methods: Cash is King, and Profits are Not Cash!
Every Canadian business owner or financial manager probably agrees that nothing is more powerful in their businesses than ‘cash on hand ‘, or access to cash via working capital solutions.
Early in business careers, we often mistakingly focus on profits = cash on hand / available. But it isn’t so, as we all quickly discover. That’s short-term thinking, not long-term!
The reality is the cash generated from your business goes into purchasing fixed assets, paying suppliers, etc. Capital finance is crucial in managing cash flow and supporting business growth, providing various financing options to ensure operational stability and expansion opportunities.
HERE ARE FOUR KEY FORCES IN MANAGING YOUR BUSINESS CASH FLOW AND WORKING CAPITAL MANAGEMENT
So, what are those four key forces of business cash flow management?
Simply speaking, they are government liabilities, debt and repayment thereof, working capital access, and, last but not least, withdrawals of profits from your business.
The business owner must manage those forces on an ongoing successful basis. Paying taxes promptly and ensuring debt is repaid promptly are job #1 if we had to maintain a pecking order on these things. Additionally, it is essential to maintain sufficient working capital to cover day-to-day expenses and enable growth opportunities.
A pretty reasonable rule of thumb is that your firm has a couple of months of working capital to cover operating expenses outside your credit facility.
FOCUS ON YOUR OPERATING CASH
Working capital, unfortunately, tends to be somewhat of an up-and-down business for the Canadian company.
Is there a good way to determine whether you win regarding working capital forces? There is, and it’s to focus on operating cash for your company, which is very easy to calculate. The company's current assets, such as cash and accounts receivable, are crucial for assessing short-term financial health and calculating working capital.
HOW TO CALCULATE YOUR OPERATING CASH FLOW SITUATION
How is that calculation done? Using a month-end calculation, take your profit and add back the positive or negative changes in receivables, payables, and inventory.
Net working capital is the difference between a company's current assets and liabilities, which is crucial for assessing short-term financial health. Example - if receivables went up in the current period that’s a negative number, if inventory went down that’s a positive number. All of this is about sales of course.
UNDERSTANDING THE DIFFERENCES BETWEEN TERM DEBT, WORKING CAPITAL LOANS, AND CASH FLOW SOURCES
Regarding business cash flow management and working capital, don’t confuse term debt and lines of credit.
The working capital ratio measures a company's ability to fulfill short-term financial obligations, which is crucial in financial analysis. Business credit lines are good when they fluctuate - if you’re always at the top of your bank or asset-based credit line, that’s not good. You’re avoiding the issues of additional permanent equity in the business.
THERE IS SUCH A THING AS ' GOOD DEBT '
Term debt is not a bad thing if it’s used for the right reasons. Equipment finance is a solid example of taking on term debt if you are profitable and can retire the lease as agreed, all the while using the asset to generate sales.
Real estate debt, as large as it might be, is good debt, given you’re building equity with repayment. Secured and unsecured working capital loans can help boost a business's working capital for projects or operations, depending on the business's financial profile.
What, then, are our ‘takeaways ‘? It’s simply that you need to understand your cash cycle, borrow in the proper manner, and focus on taxes and equity take-outs properly.
11 WORKING CAPITAL FINANCING SOLUTIONS
In Canada, working capital and cash management solutions can come from 11 key areas:
Receivable Financing/ Securitization - There are numerous accounts receivable type solutions. Working capital loans address short or medium-term funding needs.
Inventory Finance. A working capital loan meets day-to-day operational needs.
Equipment Leasing - (long-term debt solutions for acquiring assets). There is no one-size-fits-all working capital financing solution.
Supply Chain/PO finance. The financing of working capital helps businesses manage cash flow challenges.
Bridge Loans. Various financial products finance working capital to manage operational costs.
Canadian Chartered Bank Facilities. Short-term assets are important for covering current liabilities and maintaining liquidity.
ABL Asset Based Lending. Sufficient working capital is crucial for maintaining operational health and facilitating growth opportunities.
Royalty Financing. A company's balance sheet details financial health and helps calculate working capital.
Tax Credit Monetization
Cash flow loans
Subordinated Debt
KEY TAKEAWAYS
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Short-term loans provide quick access to funds for immediate working capital needs.
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Invoice factoring transforms unpaid invoices into instant cash, improving liquidity.
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Lines of credit offer flexible borrowing options for managing cash flow fluctuations
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Accounts receivable financing leverages outstanding customer payments as collateral
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Inventory financing allows businesses to use their stock as security for loans.
CONCLUSION
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, to learn how your firm can ensure the force (of cash flow and working capital management!) is with you around working capital financing strategies that make sense.. for you!
FAQ
How can Working Capital Financing Methods improve my business’s financial health?
Working Capital Financing Methods can enhance your business’s financial health by providing quick access to funds, smoothing out cash flow fluctuations, and enabling you to take advantage of growth opportunities without depleting your reserves.
What are the advantages of using invoice factoring as a Working Capital Financing Method?
Invoice factoring offers immediate cash flow improvement, reduces collection efforts, and provides more flexible terms than traditional loans, making it an attractive option for businesses with substantial accounts receivable.
Why should I consider a line of credit for my working capital needs?
A line of credit provides flexibility to borrow only what you need when needed, often at lower interest rates than credit cards, making it an ideal solution for managing seasonal fluctuations or unexpected expenses.
How does inventory financing benefit businesses with large investments?
Inventory financing allows companies to leverage their existing stock as collateral, freeing up cash that would otherwise be tied up in inventory. This can help maintain optimal stock levels while preserving working capital for other operational needs.
What makes accounts receivable financing an attractive Working Capital loan Financing Method?
Accounts receivable financing offers a way to accelerate cash flow without incurring debt, as it’s based on your existing assets. This can help businesses maintain better customer relationships by offering favourable payment terms like a revolving credit facility - while ensuring timely access to funds - revolving similarly to business credit cards.
Some firms choose a short-term working capital loan, also called a 'Merchant Cash Advance ', which has a term loan installment payment structure.
What exactly is working capital, and why is it essential for my business?
Working capital is the difference between a company’s assets and liabilities. It’s crucial for maintaining day-to-day operations, covering short-term obligations, and ensuring your business can respond to opportunities or challenges quickly.
Are there any risks associated with using Working Capital Financing Methods?
While Working Capital Financing Methods can be beneficial, they may come with risks such as higher costs compared to traditional loans, potential loss of control over assets, or the need for personal guarantees. It’s important to evaluate each option and its terms carefully.
How do I choose the right Working Capital Financing Method for my business?
Choosing the right method depends on your business type, cash flow patterns, credit history, and specific financial needs. Consider consulting with a financial advisor to assess which options best align with your business goals and financial situation.
Can startups or new businesses access Working Capital Financing Methods?
Many Working Capital Financing Methods are available to startups and new companies, though they may face stricter requirements or higher costs. Options like invoice factoring or equipment financing might be more accessible for newer companies with limited credit history.
How quickly can I access funds through Working Capital Financing Methods?
The speed of funding varies depending on the method chosen. Some options, like invoice factoring or merchant cash advances, can provide funds within days, while traditional bank loans may take several weeks to process.
What factors should businesses consider when evaluating different Working Capital Financing Methods?
Companies should consider factors such as the cost of financing, speed of access to funds, impact on credit scores, collateral requirements, and how well the method aligns with their specific cash flow needs and business model.
How do Working Capital Financing Methods differ from long-term financing options?
Working Capital Financing Methods typically focus on short-term needs. They are designed to support day-to-day operations, while long-term financing options are geared towards major investments, expansion, or capital expenditures, with repayment periods extending over several years.
Can working capital financing methods be combined to achieve more effective cash flow management?
Businesses often combine Working Capital Financing Methods to create a comprehensive cash flow management strategy. For example, a company might use a line of credit for general working capital needs while employing invoice factoring to manage seasonal fluctuations.
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