Looking For A ‘Go To ‘ In Canadian Business Financing Solutions?

OVERVIEW – Information on working capital and cash flow solutions for Canadian firms searching for cash flow and business funding

When business owners and financial managers are looking for financing in today’s challenging commercial financing environment they are in many cases contemplating alternative types of financing outside traditional Canadian chartered bank solutions.

So why are these companies looking for alternative solutions. There is a fairly strong consistent profile that emerges in Canadian firms looking for alternate working capital solutions.

Many companies, despite the difficult 2008 and 2009 financial economic challenges are encountering many opportunities to grow. Yet as those growth opportunities emerge they find themselves challenged by traditional debt to equity ratios and lower tangible net worth’s than are required by traditional financial institutions such as the Canadian banks.

We quickly add that if Canadian businesses are enjoying profit, a clean balance sheet, and adequate capital ratios they are absolutely candidates for Canadian banks. However, not all firms find themselves in this situation! Instead firms are challenged by bank lines that have been capped or constrained, debt covenants that restrict, and higher cash flow needs due to higher investments in accounts receivable and inventory required to fulfill those great new contracts and purchase orders.

So what’s the alternative?
There is a’ triple threat solution’ available to many firms who may not even know this type of financing is available. We will call it the ‘holy grail ‘ of working capital financing, because it covers purchase orders, inventory, and accounts receivable. Business owners clearly recognize those as key elements of their ‘operating cycle. That is to say they get an order, they purchase or manufacture product, and convert the sale into an account receivable. That’s the good news; the bad news is that that entire process probably takes 90 days, even more sometimes. Cash flow is needed in the interim!

Why is working capital and cash flow so important to your business. One reason is simple and should be obvious – if you manage and understand the whole process you will have a strong ability to predict how much cash you need in the future – and all you need to do is invest some time in understanding your balance sheet .

Customers are turning to factoring or accounts receivable financing as the most immediate and obvious solution to their problem. By partnering with the right firm they convert their receivable to cash the day they are able to invoice and recognize revenue. The lower Days Sales Outstanding achieved by factoring turns credit sales into cash.

This same working capital allows the Canadian business owner to strengthen supplier relationships, which is critical in a negative economy. In some cases your firm might be able to, (for the first time ever perhaps?!) To take prompt payment discounts. It might not be obvious to some owners that the ability to take prompt pay discounts can offset a very substantial part of the higher cost of factoring.

We have talked of a combo of alternative financing solutions that are inter – dependant on each other. Canadian business owners may not necessarily be aware that purchase orders can be financed also. With good purchase orders from solid customers financing can be obtained on the strength of the purchase order itself. This continues to be a relatively unknown financing concept in Canada that is gaining some popularity.

We spoke of receivable financing, a.k.a. factoring, purchase order financing, and let’s not forget the final piece of our puzzle, inventory.

Solid financially stable businesses with bank credit line can in fact obtain inventory financing or margining of their inventory. Many smaller and more ‘frail’ firms cannot, and aren’t aware there is a growing number of inventory financing options. On balance we can say that a reasonable commodity type inventory, (i.e. saleable) can in fact be financing for anywhere from 40 cents to 80 cents on the dollar.

In summary, Canadian businesses that do not qualify for full fledged bank operating lines can choose one, or all three of three different alternative working capital solutions – those being factoring, purchase order financing, and inventory financing. Consider seeking and working with a trusted, credible and experienced Canadian business Financing Advisor with a track record of success in these alternative facilities and your firm will have an arrangement that takes your financial success to the next level.


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:


Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171


‘ Canadian Business Financing with the intelligent use of experience ‘


7 Park Avenue Financial
Canadian Business Financing