3rd Down 110 To Go On Cash Flow Financing Strategies ?
OVERVIEW – Information on business financing and cash flow challenges and solutions in Canada . These strategies get your business to the revenue and profit goal line
Business financing in Canada, especially when it comes to cash flow challenges often feels like ‘ 3rd down, 110 to go “for the Canadian business owner and financial manager. It just might be time to ‘ break up ‘ with those challenges and focus on solutions. Let’s dig in.
It’s important to of course understand what in fact the cause of the problem is when it comes to working capital needs. In business these are often known as the ‘ drivers ‘of cash flow. When you know what those drivers are it’s much easier to focus on solutions – the right solution.
Naturally your profits itself is one of those key drivers , as well as your depreciation policy .Not every business owner knows that the basic finance definition of profit is simply your income plus depreciation over any given period of time, i.e. quarterly, annually, etc.
However, it’s the levels and your management of current assets and current liabilities that are also key.
Let’s get back to those current assets and liabilities – it’s there that lies your greatest challenge as well as they key to financing solutions. Increases in accounts receivable and inventory drive cash flow needs. And you ability to slow down payables also makes you more cash flow positive. Naturally that must be done while keeping key suppliers and lenders generally satisfied with you as a customer.
How then do business finance current assets – Typical ‘ traditional’ solutions include Canadian chartered bank lines of credit and term loans? When those cannot be accessed numerous other solutions are available – they include:
SR&ED tax credit monetization (if you are filing ‘ SRED’ claims)
P O / Contract financing
Sale Leaseback financing
Non bank asset based lines of credit
Unsecured cash flow loans
Remember also it’s how you manage these assets that is the ultimate scorecard of your business cash flow needs – the ability to turn over receivables and increase inventory turns makes you a cash flow winner and less reliant on external financing .
Fixed asset needs also plays a key role in your overall management – it is highly not recommended to purchase or finance assets out of credit lines as that is a classic mis matching of uses and needs of cash . The optimal solution is Lease Financing, allowing you to spread payments over the general useful life of the asset. 80% of Canadian businesses use lease finance at one time or another.
Many industries have specific cash flow needs – your firm might be highly capital intensive, or, at the opposite extreme a service business with no major assets.
In many cases cash flow needs are driven by what we call ‘ the bulge ‘. It might be the seasonality of your business, or perhaps a large new order or contract that places extreme cash flow pressures on your business. Here’s where early planning and the ability to match a business financing solution to your need are key.
If you’re looking to fix or improve present and future cash flow needs, while avoiding that ‘ 3rd down 110 to go ‘ feeling , seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success . It’s time to ‘ break up ‘ with cash flow problems and move on!
Author: Stan Prokop – 7 Park Avenue Financial :
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :
7 PARK AVENUE FINANCIAL = CANADIAN BUSINESS CASH FLOW FINANCING EXPERTISE
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