OVERVIEW – Information on methods and solutions available to the Canadian business owner and financial manager around business cash flow problems
Business cash flow problems often feel like placing business owners and financial managers in a sort of ‘ survival course ‘. When business knows how to measure, improve, and source cash flow solutions suffice to say things can only get better! Let’s dig in.
Even the largest corporations in the world recognize the need for cash flow management and access to financing solutions. For businesses in the SME Commercial sector it requires an even more concentrated effort.
We meet with many business owners/managers that sometimes seem, or get ‘ blind sided’ by the external environment. That’s why it’s important to spend some time planning – in effect it’s all about the ‘ what if ‘. In effect you’re attempting to link your sales to collections, other loan payments,
Where business owners/managers miss the boat, either in a small way, or entirely, is forgetting the changes that happen in working capital accounts; simply speaking the changes in A/R and inventory that over time constantly change your cash flow needs.
It’s important also to understand you need to forget about the ‘ cash flow’ that goes into investing in items such as equipment, technology. Here it’s important to mention that financing solutions such as EQUIPMENT LEASING make perfect sense almost always as business can match future benefits of assets to cash outflows.
A good way to look at solving cash flow problems is by assessing the ‘ gap ‘ that arises in business as funds go in and out of your business.
One method of ‘fast tracking’ business cash flow is to look closely at how you manage and finance your A/R. Many firms offer, or consider offering a ‘ discount’ to their clients for prompt payment. Many customers can’t or don’t buy into this method. And certainly all of your customers in total would never all at once buy into paying you promptly.
An alternative solution to achieving full success with this strategy is to finance your receivables through a discount receivable financing program. That 2% that you considered offering your clients for prompt cash payment is essentially the same cost as when you utilize a program such as CONFIDENTIAL RECEIVABLE FINANCING . The difference is of course that you are in charge, as any or all of your sales can be converted into immediate cash flow
If you can demonstrate you are eligible for bank financing its clear that that same cash flow benefit can be achieved. However, in order to do that you must demonstrate a solid historical cash flow, profits, positive shareholder equity, as well as personal covenants from owners.
Other methods to ‘survive’ and win re: the cash flow gap include:
Asset based non bank lines of credit
Tax credit Monetization (SR&ED BRIDGE LOANS)
Purchase Order Financing
Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in running and finishing the working capital survival challenge!
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
7 Park Avenue Financial
Off. 905 829 2653
Cell 905 302 4171
7 Park Avenue Financial
Canadian Business Financing