Business Working Capital Finance Options | 7 Park Avenue Financial

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Your Essential Guide To Working Capital For Your Business
Mastering The Cash Crunch ! Working Capital Finance Options For Your Business


Your Company Is Looking For Business Financing Solutions

The Business Working Capital Finance Option

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Financing & Cash flow are the  biggest issues facing businesses today


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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

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Direct Line = 416 319 5769

business working capital finance options and cash flow solutions for Canadian businesses


  Business Owners Guide To Cash Flow & Working Capital



The business working capital search often has owners/financial managers/entrepreneurs with that ' are we there yet?)  feeling as they struggle for finance options for their companies.



"Cash is king in business, and having a good handle on your cash flow is critical to success." - Richard Branson 





Business working capital finance options is all about your firm's ability to meet the obligations your business has around day-to-day operating expenses - the business owner knows them well -  Salaries and payrolls, purchase of materials and inventory, fixed expenses such as rent .. lease payments, etc !  Your financing options can come in a number of different solutions :


Bank Financing

Lines of Credit

Supplier credit

A/R financing / Invoice financing solutions


That's of course because that journey is often endless as your business grows / experienced challenges. The importance of being ' right' in this area can't be over-emphasized. Let's dig in.




Working capital is dependent on sales and assets, as you generate revenues which become receivables you’re in a better position to reduce your short term obligations such as payables and loan and operating commitments. The big ' IF ' is if you are turning those assets over and generating quality receivables. It all about how ' efficient' your business is, and that's what of interest to suppliers, lenders, or potential investors.


Problems often arise when sales fluctuate dramatically, leaving your company in a negative working capital position. The worst part of sales fluctuation is of course when sales go down dramatically- at this point not even better collections can reverse the tide. These times, your ability as an owner/financial manager is challenged to the hilt.





There are some ways to address working capital challenges in the absence of a sales slump. One of these is to sell of inventories if that asset class is a part of your business - one other solution is to consider a SALE LEASEBACK from a specialized lending institution to fund existing assets.  Often simply trying to forecast your short-term needs by careful analysis of your balance sheet accounts will also avoid cash crunches.





It's important to point out that every industry has different working capital needs, and some finance options will work for some but not all. Many businesses are dependent on cash sales or fast inventory turns can often escape net working capital drama.


Even more challenging is the steep hill ' start-up ' businesses face as they try to be taken seriously by banks and commercial lenders who focus on various credit scoring models. Many business financing solutions are under the umbrella of Asset Based Lending / Alternative Financing.


The ' shortlist ' of working capital solutions includes:


Bank / Credit Union Business Credit Facilities


A/R financing from commercial finance companies


Inventory finance - suited for retailers or as a combination of A/R and inventory business revolving credit facilities via supply chain finance


Working Capital Term Loans


Asset-based non-bank revolving credit facilities.


PO Financing / Export Financing


Lease financing - preserves cash flow and credit lines as you match long-term assets with minimal cash outlay


Mezzanine Financing


Sales/Royalty finance



"In business, cash is more important than your mother." - Harold Geneen






Several types of working capital loan financing are available to fund company operations

Working Capital solutions should not be used to purchase long-term assets or make investments in the business - they are used primarily for funding short-term operating business needs

Companies with a seasonal or cyclical aspect to their industry can benefit from working capital funding

Small businesses accessing working capital must demonstrate good personal credit of the owners of the business

The relationship between working capital management and overall business performance is key to business growth and success.

Different industries and business models within the industry will have a role in the type of financing required by a business


Six types of working capital loans include:


Short-term working capital cash flow loans

Business credit lines/revolving credit facility

Business credit cards

Government of Canada small business financing loans

Factoring/AR financing

Retail Merchant Cash Advance installment loans based on sales history


Business owners should be prepared to address and understand the fees and interest rates associated with any business financing option and the financial obligations that come with any specific solution


"The most important thing in business is cash flow. If you don't have it, you're out of business." - Ken Lowe





In accessing the right working capital finance options for your business it's critical to be ' educated' about your firm's overall financial position.


Call 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you in ensuring you're ' right ' about the perfect finance options and business loans for your business.




What is working capital finance, and why is it important for businesses?

Working capital finance is financing solutions that allow a business to obtain funding to meet short-term operating expenses associated with the business - Typical current liabilities of a business include payrolls, materials and inventory purchase, rent, etc.

Cash flows in a business will fluctuate so a company should have access to funding to meet unexpected challenges to cash flow - This method of financing is short-term in nature and is not utilized to purchase long-term assets. Long-term debt obligations are typically structured via term loans or leases or mortgages - and should not be financed via a credit line in order for a firm to maintain an appropriate debt service coverage ratio/debt to equity ratio.


What are the different types of working capital finance options available to businesses?

Types of working capital finance options available to a company include funding from traditional financial institutions / chartered bank financing as well as lines of credit available from alternative financing lenders / asset-based lenders. Other forms of short-term funding include supplier finance via vendor trade credit terms, as well as accounts receivable financing solutions such as factoring or confidential receivable financing. The personal credit score of the business owner is often important in some working capital financing solutions.


How can businesses determine which working capital finance option is best for them?

Businesses determine the best and most viable financing options by ensuring they understand the specific needs of the business and industry. As well the company should be able to demonstrate the appropriate level of creditworthiness and collateral and cash flow suited to the financing solitons required to address short term liabilities.


What are some of the benefits and risks associated with working capital finance options?


The benefits of working capital financing options include a company's flexibility to maintain adequate liquidy at all times, leading to better profitability and asset turnover via improved cash flow management - The ability to meet short-term obligations is key to long-term growth and success. 

Risks associated with working capital financing include potential higher interest rates and fees as well as the concern to maintain adequate debt-to-equity ratios within the business, The ability to attract proper financing limits the need for business owners to consider further equity financing which dilutes ownership. Companies must ensure they can demonstrate the proper credit ratings associated with solid short-term financing options. Additionally, some working capital loans might require some form of business collateral or external collateral - Businesses will pay interest only on the amount of financing they utilize under an approved facility. Merchant cash advances are readily available but they are expensive.


What are some strategies businesses can use to optimize their working capital and reduce their need for short-term financing?


Businesses can  optimize working capital  and reduce the need for external financing by utilizing short term funding techniques such as :


Negotiation of  better vendor/supplier credit for more sufficient working capital optimization


Managing current assets  around days sales outstanding and inventory turns to minimize line of credit drawdowns within the company cash conversion cycle - The impact of trade credit terms on a business's cash flow and profitability should not be underestimated


Improving collection performance and risk management by  understanding the  working capital ratio via balance sheet analysis of business operations - In certain circumstances credit insurance might be suitable for the business


Focusing on regular implementation of cash flow projections/budgeting and business financial planning/ financial statement analysis is key to success in obtaining working capital financing - It is important to focus on improving overall creditworthiness to allow for more favourable financing options.

' Canadian Business Financing With The Intelligent Use Of Experience '

7 Park Avenue Financial/Copyright/2024






Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil