YOUR COMPANY IS LOOKING FOR WORKING CAPITAL SOLUTIONS!
SUCCESSFULLY ADDRESSING CHANGES IN WORKING CAPITAL CASH FLOW 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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
"An efficient capital management strategy is essential for any business to thrive, especially in challenging times." – Warren Buffett
Unlock the power of working capital finance to free your business from cash flow struggles and seize growth opportunities when they arise.
WORKING CAPITAL SOLUTIONS IN CANADA
Working Capital Financing is a challenge that every Canadian business owner and financial manager faces.
It’s that time of the year for ‘Sales ‘! To be successful in today’s Canadian business environment (an environment that includes intense competition and difficulties in accessing financing), Canadian businesses have to ensure that they have all their financing options up for review. Let’s dig into cash flow management solutions!
BUSINESS CASH FLOW OPTIONS
Let's take a look at some of these business finance options.
That includes alternative revolving lines of credit. These non—bank operating lines margin your firm's accounts receivable, inventory, potential Sr&ed tax credits, equipment, and real estate in a manner that provides you with maximum financing for your business growth needs.
HOW DO YOU ASSESS THE NEED FOR WORKING CAPITAL - 3 KEY WAYS
How does the business owner assess the need for working capital? That comes from carefully reviewing your firm’s financial statements and determining what is working and what isn’t. Look at items such as:
Current debt to equity - calculate by taking current liabilities and dividing by your tangible equity – ratios over 80% signal danger
Equity debt is calculated by taking your total liabilities and dividing them by tangible equity. When the ratio exceeds 100, your lenders are financing your firm more than you are.
An excellent ratio in the context of our working capital discussion is:
Turnover of working Capital - Calculated by net sales /working capital. This calculation will give you a strong sense of how efficiently you use working capital.
When sales go up, inventories and receivables tend to increase, too. As a business owner, you need to buy wisely and collect your receivables even more wisely. It’s a great way to look at how you are buying and selling.
You don’t want to be in a position where you or your lenders feel that you lack the working capital to run and grow your business.
YOUR BUSINESS WANTS REAL-WORLD SOLUTIONS
The above 3 examples are what we could call ‘ textbook ‘ answers to financing working capital and balance sheet issues that generate steady cash flow . Quite frankly, business owners we meet with intuitively know what those working capital challenges are. What is needed is a real-world working capital financing solution, not technical finance explanations!
EXAMINING BUSINESS FINANCING ALTERNATIVES
So, let’s look at working capital solutions in the Canadian environment.
For discussion purposes, we will avoid traditional chartered bank financing, which is more difficult to achieve for most small and medium enterprises.
Coming off the difficult 2008 and 2008 liquidity crises worldwide- and let's not forget about COVID–19!– balance sheets for many firms, including Canada, are challenged, and income statements are only coming back to life from a growth and profit viewpoint.
CANADIAN BUSINESS FUNDING SOLUTIONS
So, what are some of those solutions you should be investigating?
The Canadian business financing landscape is drastically changing – for additional working capital, firms should be working with a trusted and experienced advisor in Canadian business financing and examine such alternate solutions as:
- Asset-based lines of credit outside of chartered banking will margin all your current assets (including inventory) and allow you to meet your working capital challenges head-on.
- Another individual ‘flavour ‘ of an asset-based line of credit is factoring or invoice discounting – This provides business owners with immediate cash for receivables and, if appropriately managed, can be cost-effective, contrary to popular belief. Note – our best solution in this area is non-notification factoring, which allows you to bill and collect your receivables
Financing your SR & ED tax credits: Why wait for 6-12 months or more for your government grant refund? Monetize that tax credit now!
Two other more specialized (shall we say esoteric) methods of working capital financing are purchase order financing and inventory financing.
Three Uncommon Takes on Working Capital Finance
The Hidden Opportunity Cost of Ignoring Working Capital Needs:
Many businesses underestimate the long-term impact of poor working capital management. It’s not just about covering expenses—failing to optimize working capital can prevent enterprises from achieving future growth by restricting their ability to innovate or scale.
Leveraging Working Capital Finance for Supply Chain Resilience:
Beyond the obvious cash flow benefits, working capital finance can strengthen supply chains by ensuring timely supplier payments, fostering more robust partnerships and gaining better negotiation leverage.
Working Capital as a Strategic Growth Tool:
Instead of seeing working capital finance as just a way to manage short-term expenses, savvy business owners can use it as a lever for growth. Maintaining healthy liquidity allows businesses to pivot quickly, seize market opportunities, and invest in innovations.
KEY TAKEAWAYS WORKING CAPITAL
Cash Flow Management: Ensure sufficient cash flow to cover immediate obligations and operational costs.
Short-Term Financing Options: Understand different short-term financial tools like lines of credit and working capital loans.
Supply Chain Financing: Leverage finance to optimize supplier relationships and improve procurement.
Invoice and Receivables Financing: Unlock liquidity by converting unpaid invoices into immediate cash flow.
Liquidity Planning: Strategically manage liquidity to meet expected and unexpected financial needs.
CONCLUSION
Working capital finance is the cornerstone of sustainable business growth. It provides the liquidity needed to navigate daily operations and unexpected opportunities.
In summary, working capital financing in Canada continues to be challenging. Contrary to our theme of a year-end ‘ sale, ‘ it’s a full-time, year-round job for business owners and financial managers.
Explore your options, which may be alternative in nature, and understand the optimal rates, terms, and structures that will allow you to grow your business.
Call 7 Park Avenue Financial,a trusted, credible, experienced Canadian business financing advisor who can assist you with your capital and cash flow needs.
FAQ
What is working capital finance, and how does it help businesses?
Working capital finance provides businesses with short-term funding to cover operational expenses, ensuring they have the liquidity to run daily operations smoothly.
Why is working capital finance important for a company's liquidity?
It helps small businesses manage cash flow, cover payroll and accounts payable, pay suppliers, and handle other expenses during periods of slow revenue.
How can businesses determine if they need working capital finance?
Working capital finance can provide a much-needed buffer if your business struggles to cover everyday expenses or faces cash flow gaps between invoice payments. Careful analysis of the company's balance sheet is key.
What types of financing are available for working capital needs?
Standard options include a bank loan, short term working capital loans, lines of credit, invoice financing, and business credit cards, each providing unique benefits based on your needs.
How does working capital finance support business growth?
Businesses can take advantage of new opportunities like expansion, new product launches, and improved supplier relationships without financial strain by ensuring liquidity.
What is invoice financing, and how does it differ from traditional loans?
Invoice financing allows businesses to borrow against outstanding invoices, providing immediate cash without waiting for customers to pay.
How can supply chain financing improve supplier relationships?
Supply chain financing ensures timely supplier payments, strengthens partnerships, and allows businesses to negotiate better terms as they maintain sufficient working capital to fund operations in the company's day to day operations.
What are the risks associated with using short-term financing for sufficient working capital?
A working capital finance solution offers flexibility, it can lead to higher costs due to interest rates, fees, or potential over-reliance on borrowed funds. Merchant cash advances are a good example of readily available capital but high financing costs.
How does cash flow management differ from profit management?
Cash flow management focuses on maintaining liquidity to cover expenses via net working capital management, while profit management tracks overall business profitability.
What role does business credit play in obtaining working capital finance?
Strong business credit helps secure better terms for loans or lines of credit, making it easier to obtain working capital when needed.
How can businesses use working capital finance to improve their financial stability?
Businesses can use working capital loan finance solutions to cover short-term liabilities, ensuring they meet obligations while running operations smoothly.
What are the most common mistakes businesses make when managing working capital?
One common mistake is overextending credit to customers, which can lead to cash flow issues. Another is failing to monitor cash flow consistently, which can lead to liquidity shortages.
How can working capital finance help businesses during economic downturns?
During downturns, working capital finance provides a financial buffer, helping businesses cover critical expenses like payroll and inventory while riding out reduced revenue periods.
