YOUR COMPANY IS LOOKING FOR WORKING CAPITAL FINANCE!
WORKING CAPITAL LOAN / BUSINESS LINE OF CREDIT SOLUTIONS
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Working Capital, in our humble opinion at 7 Park Avenue Financial, shouldn’t be a 'Blue Moon' event for small business in Canada That's of course a term used to mean a ‘rare event', and unfortunately, a lot of Canadian businesses view their search for a business line of credit as somewhat of a search for that 'rare event'. We don't think it has to be that way, so let's dig in.
' IT'S ALL ABOUT THE CASH ' - WARREN BUFFETT
Not a lot of people disagree with Warren Buffett; one of his many favourite sayings is simply that ' it's all about the cash '. So when we sit down with a lot of clients for an initial conversation around working capital loans and business credit solutions we find it interesting that a lot of the talk seems to revolve around sales, profits, debt, equity, etc., but not always about cash flow and working capital. Therein lies the problem.
HOW DO YOU MEASURE BUSINESS SUCCESS IN YOUR COMPANY
So while others, including the business owner and financial manager themselves, measure their competitiveness in the long term by success by sales, profits, etc. let's not forget Mr. Buffett’s focus - cash flow in the short term on a day-to-day basis!
ASSET TURNOVER IS KEY
Companies such as yours generate cash by asset turnover, and the way you measure, finance and manage and analyze that cash turnover will ultimately be your success.
HOW DO COMPANIES IN CANADA ADDRESS RECEIVABLE FINANCING
What are the ways that companies in Canada finance receivables? The best and most common solutions for types of business lines of credit are as follows:
1. Canadian commercial bank lines of credit - ( the focus is on historical cash flow and personal credit score emphasis) - The best interest rate via Canadian banks is always an attraction for the business owner - the current low-interest rate environment included!
2. Receivable financing non-bank facilities - aka ' factoring' 'invoice discounting ' ' Confidential receivable non-bank financing ' (the latter being our favourite for clients unable to access bank finance) - these facilities come with higher fees and interest rates in general but offer access to much more capital
Asset-based lines of credit
Tax credit financing (SR&ED, etc.)
Securitization
The cost of financing and rates and fees in your business capital solutions will vary depending on the type of financing you seek, as well as your overall business credit profile. Another key determinant is whether you are accessing traditional or alternative financing based on the type of business lender best suited to your business needs.
WHAT ARE THE CASH FLOW DRIVERS IN YOUR BUSINESS
So what in fact are those 'cash flow drivers’? One of them is of course accounts receivable. Not necessarily the amount of investment you have in A/R, (although that’s important also) but the timing of those inflows of customer receipts.
DON'T FORGET PART 3 OF YOUR FINANCIAL STATEMENTS - THE STATEMENT OF CASH FLOWS
When business owners and dare say it, even financial managers review their accountant or internally prepared financials they always tend to focus on the balance sheet or income statement. The 3rd part of the financial statement is the cash flow statement, and because of its technical nature, many owners /managers fail to grasp how it measures your business success.
READING YOUR FINANCIALS - HERE'S 1 TIP
Here's a tip of that cash flow statement. Believe it or not, some of the smartest financial analysts around tend to read any financial statement by first reading the footnotes to the financials, and then looking at the cash flow statement. By that time, they have figured out a lot more about your company than you'd be surprised!
Working capital credit facilities via any type of traditional or alternative line of credit allows your firm to cover day to day funding needs and avoid the inevitable cash flow crunches that come from inventories, employee payrolls and other fixed cost obligations. Any type of seasonal or one-time event in your business or industry can adversely affect cash flow.
TRACK YOUR SALES AND COLLECTIONS ON AN ONGOING BASIS
The other key thing about cash flow that's worth discussing when it comes to a business line of credit is simply the fluctuations in cash flow and working capital needs. In some months collections are great, in some they are not, and in those same months, you might have larger outflows to suppliers, etc. Sales revenue rarely goes up in a straight line. So it is often impossible unless you track your sales and A/R trends to anticipate perfect cash flow needs. But you should still try - whether it's monthly or over 12 monthsbasis to capture longer-term trends
CONCLUSION
Every business in Canada will eventually struggle with funding issues so any tip or strategy around business finances will help your business survive a credit crunch. While business plans aren't necessarily required for loans and credit facilities they certainly can help your cause. At 7 Park Avenue Financial we prepare business plans that meet and exceed the requirements of banks or commercial lenders.
Business experts tell us that over 80% of companies fail just on the cash reason alone - ie lack thereof! We have demonstrated both methods and solutions around monitoring the flow of funds and access credit facilities that make sense. Focus on a long term look at the highs and lows of your sales revenues and target temporary bulges in business credit needs. While you can internally address issue such as lowering your expenses and utilizing long term sources of capital to acquire assets - ie equipment leasing, asset turnover is still key to day to day funding.
Small businesses should not underestimate the need for cash flow focus and the use of the right type of credit line for your firm. That effort allows you to avoid the tragedy and rejection feeling that comes from working capital shortages. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in your working capital needs.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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