Monday, February 10, 2014

Is there life after business working capital financing and cash flow runs out? It's unthinkable but the reality is that business failure looms in the horizon when companies in Canada (and everywhere else by the way)
So how do you cope with cash flow challenges and what does the Canadian business owner and financial manager need to do to address this financing challenge.

As a starter, whether business people like it or not (certainly owners and financial managers) you have to have a grasp on your overall liquidity situation. This essentially becomes a matter of relationships, understanding how the relation of your current assets ( receivables, inventory, cash on hand ) are relevant to your cash flow success.

Not every analysis of some of these relationships is going to be relative to your firm all the time. The reality is that different industries have different financial profiles and it becomes a case of understanding where your company fits into the industry profile. And by the way, we never met a client yet who didn't think their firm was a bit different!

When you look at cash flow solutions you're looking at really two areas of focus, one is the overall solvency of your firm, and secondly the amount of risk you're prepared to take in making investments, taking on debt, and growing their company}.

That's of course the inner view. The outer view is from lenders and suppliers, who are looking inside your company} relative to your debt paying capability and your overall financial health, now and somewhat into the future. They have a vested interest in doing that based on what products of services they are supplying. And lenders don't even get us started on that...! The bottom line is they are looking to get repaid!

So business working capital financing then becomes a measure of looking at your balance sheet, i. e. your company resources... and addressing the various types of assets you have and how to monetize them to meet your operational goals. Any look into your balance sheet is a 'static one’... it's where you are at one place in time. It basically reflects how you're performing today. That income and cash flow statement basically show you how you got there.

So it's therefore important to understand some of those structural relationships when addressing cash flow financing.

In Canada your choices for working capital financing are one, or a combination of the following - receivable financing, sale leaseback financing, inventory financing, cash flow term loans, and bank and asset based lines of credit.

Which one of the above makes sense for your firm and how do you satisfy those working capital objectives? Speak to a trusted, credible and experienced Canadian business financing advisor today on how to best meet your business finance needs for growth and operational survival.

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