Looking For The Phoenix Effect When It Comes To Growing Your Business?
OVERVIEW – Information on business growth financing in Canada. What funding strategies can be employed to grow a company’s sales successfully
Business growth financing strategies in Canada, no secret here, present cash flow and capital funding challenges. The Canadian business owner and financial manager dreams of his or her firm being able to achieve the Phoenix effect. That’s the Egyptian fable that has the Phoenix Bird rising from the ashes and signifying resurrection and hope.
Let’s dig in. We’re never surprised these days, in talking to our clients, that many owners/managers sometimes don’t associate growth with a cash flow drain. Their logic is: ‘ Sales are great, we’ve just got those new contracts and PO’s, and we’re introducing a new product ‘…etc…Etc. In their minds, and rightfully so, those expanded revenues will generate more profits. It’s a perfect world, right?
Not so fast! The owner/manager has forgotten in those growth scenarios we noted that cash goes out quicker than it goes in. It’s a fundamental cornerstone of business finance- Growth eats cash!
The reason is of course is that you must invest more in inventories, receivables, equipment, as well as ‘ beefing up ‘ other areas of fixed costs – i.e. people, etc.
So even if the business owner/manager recognizes the problem what then is the solution to avoiding a financial crisis of some sort? Frankly, we see things go awry quickly because when you firm is in cash crisis mode that is NOT viewed by commercial lenders and banks as a lending opportunity to your firm .
You don’t want to be caught in your lenders board room explaining that you didn’t see it coming.
The most common solution for these sort of growth stories is the business line of credit. That type of financing can be achieved via a Chartered bank credit facility, or a newer solution these days, the Asset Based Line Of Credit, offered by non bank commercial lenders. These facilities of course monetize your ‘current assets ‘ and allow you to borrow on a revolving basis.
A word to the wise, don’t let accessing either of these two facilities lull you into a false sense of security. Your focus should still be on strong asset turnover to the best of your ability, so inventory turns and collecting A/R in high growth situations should be a top priority.
Many business owners still don’t realize that they can plan effectively for cash flow needs. A simple spreadsheet tracking your sales, collections will identify the amount of your cash needs. That allows you to be proactive in planning for business growth financing. By the way, that sort of simple analysis will always be viewed positively by your cash flow lender.
Naturally there are different stages of ‘ GROWTH’ when it comes to business funding solutions that can be all the way from start up to explosive growth scenarios. All stages of business growth come with different financing solutions.
We’ve referred to bank credit lines, as well as non bank ABL lines of credit. Other cash flow growth solutions include:
A/R Financing/Invoice Finance
SR&ED Tax Credit monetization (If you claim SRED credits)
PO/SUPPLY Chain finance
Sale leaseback of assets owned
Which type of financing will make your growth successful? Let your firm experience the PHOENIX EFFECT… seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record who can assist you with growth funding.
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