Managing and getting working capital are two different things, and worrying about cash flow financing and what type of lending and loans are out there is of course another, and probably the issue that concerns your firm most.Let’s look at some key issues around sourcing working capital for your Canadian business, although we are quite sure our information applies universally. How you have managed or are managing your internal financing is directly related to what solutions you have available.Let’s also be clear on what we are talking about, which is essentially your current assets and current liabilities. The accounts consist of receivables, inventory, your access to credit lines, and on the other side of the balance sheet your accounts payable. You want to have sufficient funds to satisfy your short term creditors, i.e. your suppliers, make any long term loan payments you have, and, most critically access cash for day to day working capital and growth.We have mentioned how you manage your cash flow. Most business owners we meet do it intuitively, i.e. your business has a flow or rhythm around paying suppliers, billing your product and services, and finally creating receivables and getting paid. We also find working capital an interesting term, because in reality the accounts we mentioned, i.e. a/r and inventory are in effect tied up. They are unable to be monetized or cash flowed, and that’s why you need working capital solutions.Most business owners don’t know the technical term for monitoring their cash flow and working capital. A great tool is called the cash conversion cycle; another is called the DuPont Cycle. Each of those two tools provide you with some very rudimentary calculations you can make to monitor how fast a dollar travels through your company, and what effect on your profits and returns faster turnover has. Check those two out!So, we’ve done a fairly good job of identifying our issue and problem… you were probably looking for solutions, right? The good news is there are several. The optimal solution in any business is to have your suppliers finance your firm – your cash flow increases when you don’t pay suppliers and are billing and collecting your own receivables. However, slow down payables to an extreme is not a recommended solution, certainly in terms of your supplier’s way of thinking!The solutions to cash flow financing in Canada are as follows: asset based lending, receivable financing, purchase order financing, and working capital term loans. All these solutions are either very suited to your firm or not applicable.Our favor rite and probably most recommended client solutions asset based lending; it’s simply a revolving line of credit on which you borrow daily against A/R and inventory. Yes, we said inventory. And these facilities are not loans per se; they are simply credit lines you access for your assets. Smaller firms should consider C I D invoice discounting, it’s our recommended solution, allowing you to bill and collect your own receivables but monetize them when you want. That’s true cash flow financing.Whatever your challenge speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in accessing working capital and cash flow financing that most makes sense for your business growth and profits.
Stop Dreading Working Capital Financing – Cash Flow Lending and Loans That Make Sense
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