Interested in Understanding Business Working Capital in Canada?

Updated: March 30, 2011

For firms that are mature in age, have good assets and strong operational cash flow those challenges are limited. However, if your company is on the opposite side of that spectrum you're living in a 'business hell' if we can use that term - at least if it isn't hell its purgatory!

How can you identify the best, what we can call 'straight forward' options for working capital and business cash flow solutions? We think the answer is simply understanding and getting a handle around the traditional (or conventional) Canadian business financing techniques, but, even more importantly, understanding newer solutions that are becoming more mainstream in acceptance everyday. Without the resources of an experienced business financing advisor you might not even have heard of some of these solutions, let alone having considered implementing them.

We're the first to agree that Canadian banks are lending again, rates are close to all time lows, and credit reins and collateral and covenants have slowly loosened. But again, small and medium sized businesses aren't feeling it. Another recent March 2011 survey, albeit U.S. based said most business owners still experience temporary or severe cash flow issues, forcing them to delay payments to suppliers, and delay spending on new assets for business growth.

In order to implement better, or newer working capital and cash flow business operational strategies your firm must understand how you are managing your finances now, what assets are available to monetize, and, often forgotten, you must have a handle of what future cash flow needs will be.

As we noted, traditional bank financing is alive and well in Canada. For those that can't leverage the amount of operational credit that they require a better understanding of 'new' solutions is required. And we know you've been waiting for what those new solutions are!

More recent and increasing widely accepted methods of generating working capital include the following - asset based lending, working capital facilities that margin a/r and inventory as a combo, confidential invoice discounting, securitization, cash flow sub debt loans, purchase order and contract financing, as well as bridge loans on already owned equipment. Our favorite - asset based lending... but more about that one on another day.

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