The shock may have been absorbed by the time you’re reading this. The financial manager realizes that sales aren’t the same as cash flow and that your control of working capital loans could be your most important factor in both long and short-term success.
What type of financial institution will help you gain availability of liquidity? The truth is that each sector requires a different amount of capital work. The relationship between your inventory to your turnover and your cash reserves will determine the kind of loan you may need for the cash management system.
In addition, you may find that taking ‘ loans’ or adding debt to your balance sheet isn’t the best solution. However, you can also find alternative alternatives to loans that aren’t!
The reason you’re taking a look at your working capital loans management situation is likely on two factors. The first is that your business is growing too fast, or you are facing difficulties with asset management or with receivables and inventory. You likely realize that working capital management matches the funds you require to the equity and assets you have in your balance statement. As your profits and business expand, the equity in the owner is also growing.
Are loans the answer to your financial issue (or crises)? ?!). Sometimes, but not always. The long-term solution to the problem of managing cash flow may be a term loan for working capital that injects long-term money into your company. If you can get this loan, that is usually not secured and is an alternative. These loans are known as subordinated loans. However, these are offered to almost every business with a minimum of 50k; however, as we mentioned, they can go up to millions of dollars based on the amount of money you have available to your business.
Why would you need to borrow externally and add debt to your balance account when the solution lies within your company, not outside? Customers are often shocked when they discover that two alternative alternatives other than loans are also possible.
We’re talking about asset-based credit lines that are typically non-bank in nature. This means that private finance companies provide them. The rates for these facilities may be competitive with banks, but they frequently than not, they are higher rates. However, the capability to, often, in fact, double the working capital liquidity you have can dramatically increase the profits and sales. Think about it this way If you could double your sales while keeping your overhead expenses relatively low and increase your earnings, the extra revenue will quickly pay for the new cost of financing.
Another solution we’ll refer to is the sale of receivables. This type of financing results in no new debt on your balance sheet. It increases your cash flow and allows an immediate flow of cash to support growth. Although it is perceived as costly and not conventional, it is growing in popularity with Canadian businesses daily. Essentially, it’s your compromise between survival and growth and an additional expense for financing a non-loan nature.
In the end, working capital loans may be obtained from finance companies that are not internal sources. Or, you could create your finance firm by managing and selling your assets in various ways. Talk to a reputable, reputable, and knowledgeable Canadian business advisor to find the best options for your company.
Stan Prokop is the founder of 7 Park Avenue Financial, Originating financing for Canadian companies, specializing: in working capital, cash flow, and asset-based financing; the 6-year-old firm has completed more than 45 Million $ of financing for companies. For information and free consultation regarding Canadian business financing or contact information, go to > Commercial Lending USA