It is probably easier than you think to ensure you are addressing the cash flow challenge correctly - where it gets somewhat 'thorny' is matching a solution to the problem or locating an expert that can provide you with the business financing assistance you need.
Two key elements of your first step working capital assessment are your gross margins and your turnover. That's the big problem we have with text book/academic solutions to working capital - they point you to the text book calculation - give you a formula which essentially has you subtracting current liabilities from current assets, and voila! The inference is you have working capital. However, our clients have never paid a supplier or completed a company payroll with a ratio!
To properly assess your working capital needs focus on understanding your turnover - how much inventory do you carry, what are the days outstanding in inventory, and as importantly, or more importantly, are your receivables turning over. Have you realized that for many firms 80% or so of the total of all the business assets you have are tied up in A/R, inventory, and, on the other size of the balance sheet let's not forget payables.
So can you have financial success based on your new found knowledge and analysis of your cash flow and asset turnover? We think you can.
Canadian business financing solutions to small business finance loans really revolve around a couple viable solutions. Typically, in our experience Canadian chartered banks cant satisfy your business working capital needs - if only for the reason that they rarely finance inventory and require significant merit in your overall financials, profitability, external collateral, personal credit worthiness, etc.
So, where do you go from there? The other solutions are very viable and can take you to a potential 100% turn around in cash flow - they include working capital financing as a bundled line of credit on A/R and inventory via an independent finance company. For firms that are larger we believe the ultimate tool is an asset based line of credit that provides high leverage margining on all you business assets. Other more esoteric solutions, but still very viable although somewhat misunderstood are securitization, and purchase order financing of new contracts and orders. (Your suppliers are paid directly for the orders you have in hand - what could be better than that?)
Finally, coming up the road at lightening speed is factoring and invoice discounting. We mention them lastly but they are probably the most popular method, gaining traction everyday. Our favorite is confidential invoice financing, allowing you to control your financing.
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