YOUR COMPANY IS LOOKING FOR CASH FLOW FINANCING
ASSISTANCE!
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?
CONTACT US
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
The Working Capital Crunch: Your Business's Hidden Growth Barrier
Nearly 82% of businesses fail due to cash flow mismanagement. Your company's growth opportunities are slipping away while you wait for customer payments, and inventory costs keep mounting.
Let the 7 Park Avenue Financial team show you accessible and rapid financing solutions that bridge these gaps, fueling your business to seize opportunities and maintain healthy operations.
WORKING CAPITAL LOAN FINANCING SOLUTIONS
So, Is Cash Management in your business in control… of you?
Or is the truth that you are in fact managing with a working capital formula and solutions that work. When it comes to business cash flow it’s not a time for inaction or procrastination. Let’s dig in.
Time-sensitive opportunities don't wait for traditional bank approvals, which is why savvy Canadian business owners are turning to working capital lenders for agile financing solutions.
Providing financing support is crucial for managing cash flow and ensuring smooth business operations.
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WHAT IS WORKING CAPITAL?
Understanding the Basics
Working capital is the lifeblood of any business. It refers to short term business expenses, i.e. the funds used to cover day-to-day operating expenses such as payroll, inventory, and utilities.
It is the difference between a company’s current assets and liabilities, measuring a business’s liquidity and short-term financial health.
A working capital loan is a type of short-term financing that helps businesses cover their short-term expenses and ensure their smooth operation.
Importance in Business Operations
Working capital is crucial for business growth. It enables companies to take advantage of new opportunities, invest in their operations, and manage cash flow fluctuations.
Without sufficient working capital, businesses may struggle to pay their bills, leading to cash flow problems, damaged credit scores, and even bankruptcy.
A working capital loan can provide the necessary funds to bridge temporary cash flow shortages, ensuring businesses can continue to thrive.
CALCULATING WORKING CAPITAL NEEDS
Calculating working capital needs - we get that often at 7 Park Avenue Financial.
The irony has never been lost regarding what ‘academics’ might say about how great your liquidity position is, given how accountants, textbooks, and even bankers measure net working capital.
It all starts when you’re told you have a ‘ high’ working capital (current asset to current liability ratio). A good look at your ‘ Statement Of Cash Flows ‘ as a part of your financial statements will identify your sources and uses of funds.
As a business owner, reviewing these statements is crucial to understanding your financial health and securing loans.
ASSET TURNOVER IS KEY TO REDUCING THE BUILD-UP OF ACCOUNTS RECEIVABLE AND INVENTORY
Naturally, you want to be in a position where your liabilities are low, but does having high receivables and inventory create a winning scenario?
We sure don’t think it does because all that might mean is that you’re mismanaging or perhaps simply unaware of the quality of asset turnover in A/R and inventory.
A demand loan can be a useful tool in managing receivables and inventory. It allows lenders to call in the loan at any time, providing flexibility but also potential risk for borrowers.
3 CRITICAL SIGNS OF INVENTORY PROBLEMS
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Insufficient Inventory: A business consistently running low on inventory may indicate a working capital problem. This can lead to lost sales, damaged customer relationships, and a negative impact on the bottom line.
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Excessive Inventory: Conversely, holding too much inventory can also indicate working capital issues. This can tie up valuable funds, increase storage costs, and lead to waste and obsolescence.
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Inefficient Inventory Management: Poor inventory management can lead to stockouts, overstocking, and wasted resources. This can signify that a business needs to re-evaluate its working capital management strategies.
Using inventory specifically, your warning signs might be as follows:
Inventory management and working capital issues can be critical to a small business's smooth operations and financial stability.
Sales are down, and inventories are building up. That's not good!
Inventory is outdated and somewhat unsalable - Not good!
3 KEY SIGNS OF POTENTIAL A/R PROBLEMS THAT AFFECT WORKING CAPITAL AND CASH FLOW
Here are your potential problem warning signs leading to negative working capital:
Customers are paying you more slowly relative to your payment terms - Not good!
Potential bad debts loom on the horizon based on serious delinquency in your A/R. Additionally, inconsistent loan payments can further strain your cash flow, especially if they are tied to a percentage of sales in a revenue advance scenario.
TYPES OF WORKING CAPITAL FINANCING
Working Capital Loans
Working capital loans are short-term financing that provides businesses with the funds they need to cover their day-to-day operating expenses.
These loans are typically unsecured, meaning they do not require collateral, and are repaid over a short period, usually within a year or less. Working capital loans can cover various expenses, including rent, marketing, and equipment purchases.
Other types of working capital financing include:
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Merchant Cash Advances: A type of alternative financing that provides businesses with a lump sum of cash in exchange for a percentage of their future credit card sales. The business owner's personal credit is sometimes an approval factor - These popular small business loans have a term loan/installment structure. Working capital loan terms are based on historical cash flows. A business bank account is essential for managing these funds, as it allows for the withdrawal and repayment of cash credit facilities against the current balance.
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Business Lines of Credit: A type of revolving credit that allows businesses to borrow and repay funds as needed, up to a maximum credit limit of the business line approved
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Invoice Factoring: A type of financing that allows businesses to sell their outstanding invoices to a third-party company, providing immediate access to cash. Your A/R is your most liquid asset next to cash itself; in essence, it is the heart of your liquidity.
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Business Credit Cards: A type of credit card specifically designed for business use, providing a convenient way to cover expenses and manage cash flow versus a small business loan .
By understanding how is working capital determined and understanding the different types of working capital financing available, businesses can make informed decisions about managing their cash flow and ensuring they have the funds they need to succeed.
SOLUTIONS IN CANADIAN BUSINESS FINANCING FOR CASH FLOW AND WORKING CAPITAL LOAN
If your business has the right levels of current assets, solutions to a working capital might be more abundant than you think.
These are some great ways to finance the balance sheet for short-term liquidity while avoiding long-term debt for your business. Short-term financial health is all about monetizing current assets converted into cash and measuring a company's success.
Those day-to-day operating activities are about company liquidity, giving our firm enough cash as short-term obligations come due.
They include:
Selling receivables (A/R Financing)
Inventory finance
Canadian commercial bank lines of credit
Asset-based (‘ABL ‘) lines of credit that are non-bank in nature and monetize all your current assets - plus your equipment!
Tax credit monetization, i.e. financing your SR&ED claims
Working Capital term loans
Supply Chain / P O Finance
IT'S ALL ABOUT TIMING FOR TEMPORARY CASH FLOW SHORTAGES
Utilizing any of the above solutions is all about timing. Here’s where you need skill and attention to detail, such as timing your payment inflows, managing payable and term loan commitments, and, of course, keeping costs in line.
Even managing account payables / short-term obligations properly helps you to achieve your working capital goal.
A short-term working capital loan, also known as a merchant cash advance, can be a quick funding solution based on your business's sales. It can help you manage payment inflows and short-term obligations effectively.
DIFFERENT INDUSTRIES HAVE DIFFERENT CASH FLOW NEEDS
Unfortunately, some businesses have it easier than others. Service businesses that require low capital investments and little or no inventory are often cash flow ‘winners’.
Tech businesses with high margins and low capital investment also can be cash-flow machines.
Small business owners, particularly in industries with tight margins and significant capital requirements, often face difficulty maintaining smooth operations during financial shortfalls.
DID YOU KNOW?
- 82% of business failures are due to poor cash flow management
- Working capital lenders process applications 75% faster than traditional banks
- 67% of Canadian businesses have used alternative lending solutions
- Average working capital loan amount: $125,000
- Typical approval time: 48 hours
CASE STUDY
A Canadian manufacturer faced a significant growth opportunity but lacked the working capital to fulfill a large order. They secured $250,000 in financing, which allowed them to purchase necessary inventory and hire additional staff.
Results: Revenue increased by 40% within three months, and they established a permanent relationship with the major customer. The flexible repayment terms ensured sustainable cash flow throughout the growth period.
KEY TAKEAWAYS
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Understanding the cash conversion cycle drives optimal working capital management.
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Revenue timing impacts determine ideal financing structures
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Strong accounts receivable management reduces borrowing costs
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Seasonal business patterns affect working capital needs
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Proper inventory control minimizes financing requirements
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Small business loans can provide the necessary funding, but they often require collateral and have specific application processes, approval timelines, and variable rates and fees compared to other financing options.
CONCLUSION
If you’re not in the above industries, you must master a solid working capital formula.
That’s simply because you need cash to run operations, buy assets, and finance working capital in A/R and inventories. Your ability to manage and exhibit good cash flow management will affect the type, quality, rate, and financing structures available.
Do you need help in winning the cash flow battle when it comes to cash flow needs and the management of assets -
Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can assist you with a winning finance solution and working capital formula.
FAQ
What makes working capital lending different from traditional bank loans?
Working capital lending focuses on business performance rather than personal credit, offering faster approvals and flexible terms.
How can working capital lending improve my business operations?
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Provides immediate cash flow relief
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Enables bulk inventory purchases
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Supports seasonal business fluctuations
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Allows for emergency expense management
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Facilitates growth opportunity pursuit
What types of businesses benefit most from working capital lending?
Companies with strong receivables, seasonal operations, or rapid growth opportunities gain advantages from working capital solutions.
What are typical approval rates?
Working capital lenders approve approximately 65% of qualified applications, significantly higher than traditional bank rates.
What factors determine working capital lending costs?
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Business credit profile
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Time in business
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Monthly Revenue
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Industry type
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Collateral availability
