The Working Capital Lifecycle - Canadian Business Cash Flow Loans and Financing

Updated: June 29, 2011

Start up firms grow from great or aspiring ideas. This is when capital is most often a real challenge, and the combination of owner equity and debt becomes the total issue for the entrepreneur. As the company starts to gain traction and grow revenues in the early years financing comes from both traditional and non traditional sources.

It's important to spend time at this stage in the lifecycle to determine the amount of capital you need, on items such as operations, inventory, facilities, etc. Doing your homework at this stage in the lifecycle will prevent many future problems!

Inevitably many firms face a growth crisis. This is one of the key areas of the company lifecycle we'll address in looking at some solutions to this often challenging time in any business owners life.

As the growth challenges are solved (hopefully) businesses transition into maturity and inevitably look to a transition of some sort - i.e. sale, divestiture, merger, wind down, etc. The bottom line, we've just walked you through the business lifecycle.

Who can assist you in the challenges of solving various challenges at different points in the lifecycle? Typically people such as your lawyers, accountants, bankers, and consultants and advisors are the ones with solutions.

When clients ask us about working capital and ' the bank ' we always only say one thing - it's the banker, not the bank. The ability to find a great commercial banker is worth its weight in gold .Your ability to find a competent and confident commercial banker who can point out the sources of traditional bank financing and then execute on them for you is invaluable.

Having collateral and assets is critical in a working capital bank borrowing environment. No matter how you look at it, in Canada that borrowing is also going to require both personal guarantees and potentially collateral outside of the business. You can't escape that requirement in Canadian business cash flow loan financing.

Many of the clients we deal with either cant access traditional bank capital, or choose not to go that route for reasons of the guarantees and collateral we mentioned. That's when non bank financing becomes an alternative solution.

Solutions such as receivable financing, working capital facilities, asset based lending, and financing of your tax credits can all ensure you have access to business cash flow. While some of these solutions are more expensive than bank financing they are more readily obtained and still improve your balance sheet and allow you to build your business.

It's often the balance sheet which can help you determine which stage of the business lifecycle you are in. Your ability to expand, pay your short term bills such as suppliers, loans, etc are keys to the business lifecycle. Naturally larger more established companies have more assets, and ' wiggle room ' we can say to address working capital issues.

Good business cash flow solutions will make your company more viable at any stage of the business lifecycle. Your ability to borrow during any stage of the business lifecycle allows you to move forward to the next stage of transition in your company.

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