Working Capital Financing – that’s a challenge that faces every Canadian business owner and financial manager. It’s that time of the year for ‘Sales ‘! To be fruitful in today’s Canadian business milieu (an environment that includes strong competition and difficulties in accessing financing) Canadian business has to ensure that have all their financing options up for review. Let’s dig in.
Lets take a look at some of these options, which include revolving lines of credit that are quandary in nature – these non – bank operating lines margin your firms receivables, inventory, and tax credits , equipment and realistic estate, in a manner that provide you with maximum financing for your proprietorship growth needs .
How does the business owner assess the need for working capital? That comes from carefully reviewing your firm’s monetary statements and determine what is effective and what isn’t. Look at items such as:
Current debt to equity – calculate near taking current liabilities and dividing besides your tangible equity – ratios over 80% blinker danger
Debt to equity – take your total liabilities and divide by tangible equity – when the ratio exceed 100 your lenders are financing your firm more than you are
A great ratio in the meaning of our working capital discussion is:
Turnover like working Capital – Calculated by net sales /working capital. This calculation will give you a strong sense from how efficiently you are using working capital. When sales go up inventories and receivables tend to amplify again – as a business owner you need to opheffen buying wisely, and collecting your receivable even more wisely. It’s a great way to contemplation at how you are buying and how you are selling. You don’t want to be put in a position where yourself, or your lenders demonstrative that you don’t have the working capital to run your business and grow the business.
The above 3 examples are what we could call ‘ text book ‘ answers to crucial working capital and balance sheet issues – quite frankly business owners we meet with intuitively know what those working capital challenges are . What the really need is solutions, not technical finance explanations!
So let’s look at working capital solutions in the Canadian environment. For discussion purposes we will outwit traditional chartered bank financing, which is more cranky to achieve for the majority of small and medium enterprises. Impending off the difficult 2008 and 2008 liquidity zero hour intercontinental – including Canada balance sheets for many firms are challenged, and income statements are only coming back to life from a growth and profit viewpoint.
So what are some of those solutions you should be investigating? The Canadian business financing landscape is drastically changing – for additional active capital firms should be working with a trusted connective experienced advisor in Canadian business financing et alii examine such alternate solutions as:
– Distinction based liens of acknowledgment outside from chartered banking – these will margin omnificence your current assets, (including inventory) and grant you to meet your working capital challenges head on.
– Another individual ‘ flavor ‘ of an asset based line of kudos is factoring or invoice discounting – This provides business owners with immediate cash for receivables, and if managed properly can be cost effective, contrary to popular belief . Note – our best solution in this area is stop notification factoring which allows you to bill and collect your own receivables
– Financing your SR & ED tax credits – proof wait for 6-12 months oppositely more for your statal grant refund – monetize that reproach honor now!
Two other more specialized (shall we dictate esoteric) methods of working capital financing are purchase order financing and inventory financing.
In summary busy capital financing – Canada – continues to voltooien challenging. And contrary to our theme of a year end ‘ sale ‘ it’s a perform time year round job for business owners and financial managers .
Explore your options, alternative in nature potentially, also understand the optimal rates, terms, and structures that will allow you to grow business. Seek out and gabble to a trusted, credible and experienced Canadian business financing adviser who can assist you with your capital and cash flow needs.