It would be great to hear our clients say they have no issues in working capital finance and challenges, and that solving cash flow problems is the least of their worries. Unfortunately we haven’t met one customer that seems to be comfortable sharing that with us.
Let’s look at the root of some of those working capital challenges; what are the problems, what caused the problems and then talk about why you are probably reading this… you want working capital solutions.
It’s of course great to have sales – and sales and profits are even better. In general when you have those you have the essence of a healthy business. But those are in effect what we could call paper transactions and it always comes back to 100 year old clich?s such as ‘ cash is king ‘ and ‘the sale isn’t made until you’re paid ‘.
That cash is required for all those mundane things, paying suppliers, paying employees, and meeting your obligations on loans and leases.
Your challenge is typical, how you do create a flow of cash in the long term, as well as addressing short term bulges to ensure you have liquidity.
Of course when you have a good handle on cash flow, everyone looks at you with a positive outlook, the most important is your supplier and lender.
Solutions to cash flow challenges often arise from the inability to plan or overcome the right type of cash flow solution. You run the risk of liquidity problems when your current assets cannot be converted in a timely manner to cash – these assets are usually in the form of receivables and inventories.
There is no day where we don’t find this type of textbook of working capital financial challenges – it’s as simple as requiring products to fulfill regular or new large orders, generating invoices, and then waiting 30, 60 or 90 days for payment. That’s the challenge of textbooks when we talk to clients asking for our help in solving cash flow problems.
So we’ve done a good enough job to tell you what your problems and challenges are – let’s discuss some real-world solutions.
The essence of working capital financial challenges is that you cannot access business credit. We encourage all customers to seek Canadian bank business loans that are hired when they are in a position to do so. Unfortunately many clients cannot meet the net value of the business, the value of personal wealth, and the liquidity ratios and agreements that your bank might need. We also strongly believe that financing inventory by banks in Canada is increasingly difficult to achieve.
Don’t borrow – cash it. That’s the best advice and plan that we established with clients to solve cash flow problems. You can get a working capital cash flow term loan, but that only creates additional debt on your balance sheet. Instead, take the assets that you already have in your book and cash them out – those assets are the inventory previously mentioned, A / R, and in some cases the tax credit is due to your company and unencumbered equipment.
Liquidity for these assets can be achieved with credit financing programs, asset-based credit lines, or short-term bridge loans to an asset such as a tax credit or to be paid for fixed assets such as equipment. Many of these solutions are outside the chartered bank system in Canada and can be accessed by speaking with a trusted, credible and experienced Canadian business finance advisor.
Your ability to monetize your assets, keep suppliers paid and fixed, and then have the ability to grow your business when you value and consider monetizing assets into short-term liquidity.