Clear answers… no, even better, clear real world solutions. That’s what Canadian business is looking for in working capital finance. And that type of financing and cash flow solutions has been tough to come by over the last several years.
Let’s examine why your understanding of working capital and your ability to measure the need and the solution is as critical as ever in the competitive environment you fight every day.
Let’s focus on some of the hard facts first. If you don’t have working capital key issues such as payrolls, loan and lease payments, inventory purchases, etc can become big issues pretty quickly!
So how can you change assets and sales into the financing of cash flow? It’s a one word answer – monetization! You need to use a razor sharp focus on monetizing (i.e. changing!) receivables, inventory, and sales into working capital to address those key issues we just mentioned above.
The better you do this you will find the better the patients health will be and that patient is of course your company.
Canadian business owners and financial managers know that their balance sheet and income statement are related. Today we’re focusing mostly on the balance sheet – The amount and relationships between those current assets such as A/R, inventory, and payables can let you zero in real quickly on what some of the problems might be. (We won’t forget telling you about those solutions also!).
Yes, you do need positive working capital to ‘ stay healthy ‘ from a working capital and cash flow perspective. And talk about a balance act, if you are growing too quickly your investment in A/R and inventory hinders cash flow, and if sales are shrinking then your receivables shrinks also.
So, we’ve done the usual pretty good job (we think) of telling you what your problems are. But that’s not why you came here, right? Let’s address solutions.
Are there in fact real solutions that allow you to fix today’s financing of cash flow challenges, and at the same time address these issues in a long term manner . Here’s the good news. There are.
We tend to review 6 major methods of addressing your working capital challenges. They are asset based lending facilities, their junior sister, working capital facilities, as well as solely receivable financing. And coming up the rear are inventory and purchase order financing, cash flow term loans, and for smaller businesses merchant advance loans on future sales. And, guess what? Almost all of these solutions are non bank independent finance company solutions! We bet you did not know that?
All of these solutions have different levels of criteria for approval and success. Some are size based, and some are viewed as alternative, but boy do they work! Pricing is a factor also, and each of those solutions brings a different level of financing cost to the table.
If you want to investigate any of our 6 proposed solutions to both immediately and from a long term perspective fix your financing and cash flow issues seek a trusted, credible and experienced business financing advisor. Those solutions are just around the corner.