YOUR COMPANY IS LOOKING FOR BUSINESS FINANCE SOLUTIONS!
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?
CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Email = sprokop@7parkavenuefinancial.com
"Stop watching opportunities slip away due to cash flow constraints."
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Business Financing 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”
WORKING CAPITAL BUSINESS FINANCE
What is Working Capital?
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Working capital is a financial metric that measures a company’s ability to pay its short-term obligations.
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It is the difference between a company’s current assets and current liabilities.
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Current assets include cash, accounts receivable, and inventory, while current liabilities include accounts payable, taxes, and wages.
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A business with positive working capital has a greater ability to withstand financial challenges and invest in growth.
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Working capital is calculated by subtracting current liabilities from current assets.
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Example: A manufacturer has assets totalling $220,000 and liabilities totalling $130,000.
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Working capital is essential for business growth, but almost every business has periods when available working capital is tight.
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Net working capital represents the difference between current assets and liabilities, similar to working capital. However, it can be defined more narrowly by excluding cash and debt or focusing specifically on accounts receivable, accounts payable, and inventory. This provides a clearer picture of a company's liquidity and short-term financial health.
CASH FLOW CRUNCH? SMART WORKING CAPITAL SOLUTIONS ARE HERE!
Running a business with inconsistent cash flow creates constant stress and uncertainty. Late-paying customers, seasonal fluctuations, and unexpected expenses can threaten your operations.
UNCOMMON TAKES:
- Using working capital loans to negotiate early payment discounts with suppliers often yields higher returns than traditional investments
- Seasonal businesses can leverage working capital financing to create counter-cyclical revenue streams
Let the 7 Park Avenue Financial team show you how Working Capital Business Financing provides the flexible funding solution you need, offering quick access to capital that aligns with your business cycles.
DID YOU KNOW?
- 82% of business failures are due to poor cash flow management
- Working capital loans average approval rate is 65%
- 43% of small businesses seek working capital financing annually
- Alternative lending grew 176% in the last 5 years
Understanding Business Finance Strategies
Business finance strategies require a solid understanding of what the pros call your “funds flow.” It’s a combo of cash flow and working capital.
There are some real myths and misunderstandings, all of which can create confusion around your success in financing your company. Understanding these key financial metrics is essential for assessing your company's financial health. Let’s dig in.
The Role of Financial Statements in Business Financing
Business owners and financial managers in the SME commercial market can find their financial needs as reflected in their financial statements.
Success means you will have a solid understanding of how you’re winning (or losing) in this area of your business by analyzing the company's assets and liabilities.
At the end of the day, you’re looking for “suitability” in implementing a strategy and policy regarding business finance.
The Core Issue: Managing Cash Flow
The core of the cash flow issue? It’s pretty simple—your assets and what you owe change with your sales.
Negative working capital occurs when a company's current liabilities exceed its current assets, indicating potential liquidity problems and hindering its ability to pay suppliers and meet short-term financial obligations.
Even more complex sometimes is that your profits rarely equal your cash on hand! That’s why it’s essential to finance your current assets adequately!
Effective Ways to Finance Cash Flow and Current Assets
Understanding Cash Usage vs. Cash Generation
It's also important to understand whether your company uses or generates cash. The hard reality of business is that you will probably need equipment or technology to produce more sales.
One of the most effective ways to finance those needs is through equipment leasing finance. On occasion, the sale-leaseback strategy also makes perfect sense.
The Impact of Sales on Funds Flow
As we have said, knowing how sales affect your "flow of funds" is key. The best way to think of this in terms of cash flow is that your current assets usually move in the same direction as revenues, but often at different rates, depending on how well you manage assets such as A/R and inventory.
Think of this whole scenario as how funds flow through your business. By the way, it’s not bad to have sales growth consuming cash while generating "paper profits."
Applying the Suitability Principle in Business Financing
The pros call the right financing of a business the “suitability principle.” It’s all about using cash from the right sources, such as a financial institution.
A business credit line is a temporary source of cash that should be used to finance daily operations. Buying a long-term plant equipment asset is best suited to a lease or term loan.
Essential Guide to Working Capital Business Financing for Growth
Working Capital Management
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Working capital management is a financial strategy that optimizes working capital to meet day-to-day operating expenses.
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Effective working capital management enables a business to fund the cost of operations and pay short-term debt.
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Techniques for managing working capital include managing cash flow, reducing accounts receivable, increasing accounts payable, and reducing inventory.
Techniques for Managing Working Capital
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Managing cash flow: This involves forecasting and managing cash inflows and outflows to ensure that the business has sufficient liquidity to meet its short-term obligations.
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Reducing accounts receivable: This involves implementing efficient invoicing and collection processes to reduce the time it takes to receive customer payment.
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Increasing accounts payable involves negotiating with suppliers to extend payment terms or reduce the upfront payment required.
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Reducing inventory: This involves implementing just-in-time inventory management systems to reduce the business's inventory.
Working Capital Loans
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Working capital loans provide cash to fund a company’s day-to-day operating expenses.
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They are short-term debt instruments and not used for long-term debt or investments.
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Working capital loans are typically paid back within a year or less.
What is a Working Capital Loan?
A working capital loan is a business loan that provides a lump sum of cash to a business owner to fund a business’s short-term financial needs.
It can cover payroll, rent, utilities, materials, inventory, and ancillary services.
Working capital loans can be secured or unsecured and are usually paid back within one year or less.
Types of Working Capital Financing
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There are several types of working capital financing options available to businesses, including:
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Business credit cards provide fast funding to cover unexpected short-term expenses and can improve a company’s credit score.
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Cash flow loans provide a lump sum of cash that must be paid back in installments over time.
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Invoice financing / Accounts receivable financing: This involves borrowing against outstanding invoices due to receive immediate cash.
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Working capital line of credit: This provides a business with a line of credit that can be drawn upon to cover short-term expenses.
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Government Small Business Loan Program - Canada: This government-backed loan can be used for working capital.
Business Credit Cards
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Like most working capital loans, business credit cards can provide fast funding to cover unexpected short-term expenses.
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They can improve a company’s credit score if used responsibly via prompt loan payments.
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Interest rates on business credit cards can be high, so it's essential to pay off the balance in full each month.
Invoice Financing
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Invoice financing involves borrowing against outstanding invoices due to receive immediate cash.
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It can cover everyday expenses such as payroll, rent, and utilities.
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Invoice financing can be more expensive than other types of working capital financing, so it’s essential to review the terms and conditions before borrowing carefully.
Working Capital Line of Credit
A working capital line of credit is a flexible financing option that gives businesses access to a revolving line of credit. This allows them to borrow and repay funds as needed, making it an ideal solution for managing cash flow fluctuations or covering unexpected expenses.
With a working capital line of credit, businesses can draw on the available credit limit, repay the borrowed amount, and then draw on the credit limit again as needed.
Banks and other financial institutions often offer working capital lines of credit. The application process typically involves providing financial statements, business plans, and other documentation.
Lenders will review the business’s credit history, financial health, and other factors to determine the credit limit and interest rate.
Benefits of a Working Capital Line of Credit:
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Flexibility: Businesses can borrow and repay funds as needed, allowing them to manage cash flow fluctuations and cover unexpected expenses.
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Convenience: These lines of credit can be accessed online or through a mobile app, making it easy to manage funds.
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Cost-effective: Interest rates on working capital lines of credit are often lower than those on other loans, making them a cost-effective option for businesses.
Potential Drawbacks to Consider:
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Fees: Many lenders charge fees for working capital lines of credit, including annual fees, maintenance fees, and interest charges.
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Collateral: Some lenders may require collateral to secure the loan, which can put business assets at risk.
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Credit Limits: The credit limit on a working capital line of credit may be lower than expected, which can limit the business’s ability to access funds.
Qualification Requirements:
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A minimum credit score
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A certain level of annual revenue
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A certain number of years in business
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A solid business plan and financial statements
Overall, a working capital line of credit can be a valuable tool for businesses needing to manage cash flow fluctuations or cover unexpected expenses. However, it’s essential to carefully review the terms and conditions of the loan and consider the potential drawbacks before applying.
Documentation Required
Businesses typically need to provide a range of documents to demonstrate their financial health and ability to repay a working capital loan when applying for one.
These documents help lenders assess the risk and determine the loan terms.
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Financial Statements: Including balance sheets and income statements to provide a snapshot of the business’s financial health.
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Business Plans: A detailed description of the business and its goals, which helps lenders understand the purpose of the loan and the business’s growth strategy.
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Tax Returns: Both personal and business tax returns to verify income and financial stability.
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Bank Statements: Statements from the business’s primary bank account to show cash flow and account activity.
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Credit Reports: Personal and business credit reports to assess creditworthiness and payment history.
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Collateral Documentation: Deeds, titles, and other documents that verify ownership of collateral, if required.
The application process for a working capital loan can be complex and time-consuming. However, by providing the required documents and meeting the eligibility requirements, businesses can increase their chances of loan approval and access the capital they need to grow and succeed.
Working Capital Loans for Small Businesses and Startups
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Small businesses and startups can use working capital loans to cover short-term expenses such as payroll, rent, and utilities.
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They can be used to fund business growth and expansion.
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Fluctuating sales, inconsistent accounts receivable, business growth spurts, and new business opportunities are common reasons to get a working capital loan.
Common Reasons to Get a Working Capital Loan
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Fluctuating sales can cause cash flow problems, and a working capital loan can provide a safety net.
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Inconsistent accounts receivable: This can cause cash flow problems, and a working capital loan can provide a safety net.
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Business growth spurts can cause cash flow problems, and a working capital loan can provide a safety net.
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New business opportunities can cause cash flow problems, and a working capital loan can provide a safety net.
Maintaining a Healthy Level of Working Capital
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Maintaining a healthy level of working capital is essential for business growth and survival.
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It involves managing cash flow, reducing accounts receivable, increasing accounts payable, and reducing inventory.
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Mastering cash flow management is essential for maintaining a healthy level of working capital.
Key Takeaways
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Cash flow cycles drive working capital needs - understand your timing
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Revenue-based financing aligns payment with business performance
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Credit scores affect rates but aren't always decisive
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Accounts receivable represent untapped working capital
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Alternative lenders offer faster approval than traditional banks
"Working Capital is the lifeblood of business." - Warren Buffett
Conclusion
Owners and managers have more control than they think regarding financing choices. Remember that you lose some power when you finance your business for cash flow needs.
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Working capital loans can provide fast funding to cover unexpected short-term expenses.
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They can be used by small businesses and startups to fund business growth and expansion.
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Maintaining a healthy level of working capital is essential for business growth and survival.
To ensure you're doing it right, call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can help you clear up cash flow "confusion" with effective business finance solutions.
FAQ
What's the minimum qualification for Short-term Working Capital Financing Loans?
What types of businesses benefit most from Working Capital Financing?
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Seasonal businesses
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B2B companies
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Retailers
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Service providers
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Manufacturing companies
What are the best business financing options?
The optimal financing solutions include:
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Business lines of credit for flexibility
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Invoice factoring for B2B businesses
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Merchant cash advances for retail operations
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Term loans for established businesses
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Equipment financing for asset purchases
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Revenue-based financing for growing companies
When should I apply for business funding?
Strategic timing for funding applications includes:
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Before seasonal revenue peaks
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When spotting growth opportunities
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Before large inventory purchases
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During expansion planning
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Before expected cash flow gaps
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When negotiating supplier discounts
Where can I find quick business financing?
Fast financing sources include:
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Online lenders
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Alternative financing companies
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Fintech platforms
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Digital banking solutions
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Local credit unions
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Specialized industry lenders
Why choose invoice financing?
Invoice financing benefits include:
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Immediate access to cash from unpaid invoices
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No debt on balance sheet
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Flexible funding based on sales
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No fixed monthly payments
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Improved cash flow management
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Better customer payment terms
How does merchant cash advance work?
Merchant cash advances are the most popular and accessbile working capital loan:
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Advance funding based on future sales
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Percentage-based daily repayments
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Automatic deduction from card sales
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Flexible payment scheduling
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Quick approval process
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No fixed monthly obligations
What credit score is needed for businesfinancing?
Credit requirements vary by product:
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Traditional banks: 680+ typically required
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Alternative lenders: 600+ often acceptable
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Some products: No minimum score
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Revenue-based options: Focus on cash flow
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Asset-based lending: Collateral matters more
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Invoice financing: Client creditworthiness matters
When to use a business line of credit?
Business lines of credit are ideal for:
How much working capital do I need?
Calculate working capital needs by:
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Analyzing monthly operating expenses
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Projecting seasonal variations
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Considering growth plans
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Evaluating payment cycles
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Assessing inventory requirements
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Planning for contingencies
