How To Make A Success Story Of Your Business Cash Flow

OVERVIEW – Information on cash flow financing strategies and solutions in Canada . Working capital finance can more easily be accessed with this information
Cash flow financing in Canada is rarely termed a great success story by Canadian business owners and financial managers. How can working capital finance challenges be reduced? Let’s dig in.

Numerous factors affect your ability access the right amount of funding you need to run your business. Profit or the amount of it is certainly one of them. Many firms are profitable, but only marginally – and in a lot of cases we see with clients those profits fluctuate tremendously year over year.

Turning profits into cash flow is of course another story. In traditional ‘ bank lending ‘ it’s a strong requirement, as opposed to alternative financing which often focuses on assets and collateral in your business. And every business owner knows that in the SME ( small to medium enterprise ) sector most times a personal guarantee of some sorts is of course required. Those personal guarantees are a discussion for another day.

Let’s recap traditional and less than traditional methods of financing cash flow and working capital. They include the following:

Traditional Canadian chartered banking – credit lines/term loans

A/R financing

Inventory financing

Working capital term loans

Government Small business loans – structured as term loans but with maximum flexibility around payment

Asset based lines of credit – (These ‘ ABL”s transform all your business assets into one revolving credit line

Tax Credit Monetization

Unsecured cash flow loans, often terms ‘ sub debt’ or ‘ mezzanine’

Sale leasebacks of owned assets – this might include assets in one of two categories – equipment and real estate

In some cases it makes sense to form some kind of cash flow contingency plan that might include various forms of ‘ bulge financing ‘ solutions, or approaching suppliers and lenders for a payment moratorium of sorts. Those are tough to do, by the way.

Unfortunately many clients we meet don’t always have a handle on their financial performance. In some cases they are ‘ rear focused’ , having only historical data , which is challenging if no financial forecast or financial statement strategy is in place re reporting and analyzing.

Businesses with a handle on financial performance have much greater credibility with lenders; it’s as simple as that.

Remember also that while cash flow financing solutions are the fix from an external perspective it makes even greater sense to manage your assets to create internal cash flow.

That is done by having strong A/R controls and turning inventories over faster if inventory is a key part of your business. Naturally financial statement tools and other forms of business software greatly aid the business owner/finance mgr today. Knowing your DSO (day’s sales outstanding) and inventory turns and days outstanding payables is a fundamental you must know to be successful. Watch the business news on TV at night and you’ll notice the ‘ big boys ‘, those major successful corporations always have a handle on these numbers , They’re the key elements of the cash flow operating cycle.

If you’re looking to be a SUCCESS STORY in your mind (or that of your competitors) seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can help you reduce those cash flow and working capital challenges.

Author: Stan Prokop


7 Park Avenue Financial
Canadian Business Financing