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Our preference on cash flow financing for Canadian business is to learn from an expert. The rookie thing never seems to work ..! One of the most famous industrialists of all time once said ' the only irreparable mistake in business is to run out of cash ... when you run out of cash they take you out of the game. No Canadian business owner or financial manager wishes to be ' taken out of the game '. So lets look at some of the analysis, as well as ' the fix ' when it comes to financing your working capital. We always are a little of wary in initial discussions with clients around how they are doing when they are only focusing on just profits and sales, which are great by the way . But the juggling act around sales growth and profits, to use one analogy, also revolves around the spinning knives of cash on hand. Confusion reigns supreme around even the terminology on cash, cash flow, and working capital. Naturally actual real cash on your balance sheet, i.e. your bank account, is your business lifeline .Cash flow on the other hand revolves around the changes in your working capital accounts, which, by the way, includes payables also. Your working capital, on the other hand, is really the value of our working capital accounts, ie receivables and inventory, and how they relate to your payables. Financing solutions for Canadian business working capital are numerous. Cash flow and working capital solutions include: Bank operating lines of credit
Receivable Financing
Working capital term loans
Unsecured cash flow loans
Asset based lines of credit
Supply chain /P.O. Financing Which of these solutions work best for your firm? Although sales generate cash it's used to support your vendors, payroll, utilities, etc, and etc. ! Those sales however convert to receivables, and those can be easily monetized by all of the solutions we note above, with the exception of the working capital term loan. Term loans are debt, and if you dont necessarily want to take on more debt and interest expense its more often than not best to use financing that converts inventory, receivables, and purchase orders to cash . Oh and by the way, that sure beats putting more equity into your company, or selling assets. (Selling non performing assets or looking at a sale leaseback is not necessarily a bad thing by the way). Remember today's motto though, don't run out of cash or you ability to access cash. The most serious signs of cash flow doom are usually quite obvious: serious losses, inability to access traditional financing, lack of assets to finance new cash flows. Can we learn anything else from those confessions of a cash flow manager? Understanding the past sometimes help, so knowing your historical peaks and valleys is a good thing, and your ability to plan and demonstrate future cash flow needs sure helps! And the tools you'll need? Very basic: cash balance and aged receivables and payables. A look into future sales projections sure helps. In summary, while stretching suppliers or bringing in new ownership and equity work, they aren't desirable. Sales are good, in fact they are great, but focus on financing solutions and mgmt tools that convert working capital assets to cash. Speak to a trusted, credible and experienced Canadian business financing advisor on your firms ability to achieve the right type of cash flow financing to compliment sales and .. hopefully, profits. Stan Prokop - founder of 7 Park Avenue Financial – http://www.7parkavenuefinancial.com Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 85 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info re: Canadian business financing & contact details: http://www.7parkavenuefinancial.com/cash_flow_financing_business.html
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