Business finance and the challenges that come with financing your company can easily make the business owner/manager feel like he or she is ‘ flying blind. So when it comes to cash flow problems business owners would welcome some ‘ positive disruption’ in their finances. Luckily a number of solutions, as well as mgmt techniques can help. Let’s dig in.
‘ All tied up ‘ is really a solid expression for the working capital/cash flow challenge – if only for the reason that your investment in inventory and receivables is in fact tied up on you balance sheet – as opposed to those funds being in your bank account
Top experts tell us that working capital performance varies greatly between SME (small / medium sized businesses) firms and larger corporations. It’s interesting that one way that larger firms improve cash flow is by using the clout they have with clients to delay payables – which is a key factor in improving cash flow!
It’s important you have a handle on a few tools that help you measure cash flow performance and needs, as well as identifying times that external financing is needed. That financing for your cash flow needs can come from a variety of traditional (Canadian chartered banks) and ‘ alternative ‘ sources. Those sources include:
Invoice Financing / Factoring/ Confidential Receivable Financing
Working capital term loans
Non Bank Asset Based Busines Lines of Revolving Credit from Commercial Finance Companies
Financing Refundable Tax Credits
P O / Contract / Sales Royalty Financing
While alternate forms of financing will always cost more they provide the capital you need to fuel your business.
Using Confidential Receivables Financing as an example a business can access 90% financing on its total receivables. With proper collection processes in place this puts cash in your bank today. The higher cost of financing can be significantly offset by using that cash to take vendor discounts or negotiate better pricing, as well as giving the owner/manager confidence that they can take on more business without the dreaded cash flow problem worries that come with growth.
Naturally every industry is different relative to cash needs – service businesses for example are less capital intensive and typical financing needs revolve around receivables only. Larger mfg firms need full blow business credit lines to cover off inventory and other asset needs. Leasing assets is a great way to offset the cash flow investment required to facilitate asset growth.
The bottom line? No matter whether your firm is a start up, SME rising, or larger corporation it’s important to ensure you’ve got access to some ‘ positive disruption’ in cash flow needs. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor, avoiding that flying blind feeling in running and growing your business.