Imagine that your company has access to all the working capital it needs. It seems impossible? Not really … if you have a solid understanding of your options and your company’s ability to qualify or execute those options.
Whether it’s Canada’s largest corporation or a small startup (and everything in between), your business needs working capital. In Canada, small business financing loans and working capital financing applications are limited to a handful of possibilities, but being aware of what they are and qualifying for them could be the solution to your constant focus on the flow of money. cash through some type of working capital loan.
It’s probably easier than you think to make sure you are tackling the cash flow challenge correctly; Where it gets ‘tricky’ is finding a solution to the problem or finding an expert who can give you the business financial assistance you need.
Two key elements of the first step working capital assessment are your gross margins and your turnover. That’s the big problem we have with textbook / academic solutions for working capital: they point you to the textbook calculation, they give you a formula that essentially makes you subtract current liabilities from current assets, and Ready! the inference is that you have working capital. However, our clients have never paid a supplier or completed a company’s payroll with a ratio!
To properly assess your working capital needs, focus on understanding your turnover – how much inventory you have, what days are outstanding in inventory, and most importantly, or most importantly, are your accounts receivable. Have you noticed that for many businesses, roughly 80% of the total of all the business assets you have are tied to accounts receivable, inventory, and on the other balance sheet size, let’s not forget about accounts payable ?
So can you be financially successful based on your new knowledge and analysis of your cash flow and asset turnover? We believe you can.
Canadian business finance solutions for small business finance loans really revolve around a couple of viable solutions. Typically, in our experience, Canadian chartered banks are unable to meet the working capital needs of their business, if only for the reason that they rarely fund inventory and require significant merit in their overall finances, profitability, collateral. external, personal creditworthiness, etc.
So where do you go from there? The other solutions are very viable and can lead to a possible 100% change in cash flow: they include working capital financing as a combined line of credit in a / re inventory through an independent finance company. For larger companies, we believe the ultimate tool is an asset-based line of credit that provides a high margin of leverage on all of your business assets. Other more esoteric solutions, but very viable although somewhat misunderstood, are securitization and financing of purchase orders for new contracts and orders. (Your suppliers are paid directly for the orders you have in hand, what could be better than that?)
Finally, going up the highway at lightning speed is factoring and invoice discounting. We mentioned them last, but they are probably the most popular method, gaining traction every day. Our favorite is Confidential Invoice Financing, allowing you to control your financing.
So there you have it. You have identified new ways to determine need; We have outlined 4 or 5 solutions that will take the guesswork out of working capital. These loan and financing options are available with a little research, and if you wish, speak with a Canadian business financing advisor who can provide timely and valuable assistance with your cash flow needs.