Working Capital Finance. Untying Funding For Business Cash Flow Needs In Canada

By: stan prokop

Working capital finance in Canada. Talking to clients some days feels like they have entered the world of Dante's Inferno, via his famous quote ' Abandon All Hope Ye Who Enter '! !br>
So when it comes to funding for business in Canada does it seem to you that you've got that ' tied up ' feeling when it comes to unlocking sales and assets and turning them into cash flow? That doesn't have to be the case, so let's dig in.
The concept of assets ' tied up ' is key to understanding working capital financial solutions. Ultimately you want to monetize current assets and allow those funds to flow through your business - growing your company.
Two types of what we can call ' instant cash ' immediately come to mind. The first is of course assigning your receivables to a bank via a Commercial business line of credit. If your firm qualifies rates are low and you're typically allowed to borrow 75% of month end margined receivables. The margining formulas pretty simple - you can draw down on your line of credit on any accounts under 90 days old. A/R over 90 days is typically viewed as ' uncollectible, as a result your bank is reluctant to finance those specific accounts.
Another solution, which gains traction everyday in Canada, is the RECEIVABLE DISCOUNTING financing that uses another method of financing your 2ND most liquid current asset - Your receivables. (Cash is most liquid ... inventory is 3rd!)
This method of working capital finance differs from the bank solution in Canada. Instead of pledging your receivables essentially the same security agreement is used to denote the sale of your receivables on a one of or ongoing basis. While this method has a different pricing model, (it's higher!) It allows you to borrow 90% of your A/R value, which is significantly better than bank limits.
The A/R Discounting model can also be combined with inventory and equipment financing, allowing you to maximize borrowing power on all you unencumbered assets. When combined in this manner it becomes what is known as an ' ABL '; an asset based line of credit working capital facility .
Both receivable discounting and asset based credit lines, or traditional bank credit allows you to reverse your ' slow growth ' policy if that's because of a lack of funding for business.
All of these types of facilities do one thing - they reduce the time gap between building or selling something, and collecting your cash from clients. It is important to note that in all these facilities described you are only paying what you are using, so the ability to draw down on working capital is always there.
In summary, it's quite easy to feel ' tied up ' when it comes to cash flow financing. You have orders, projects, contracts... the only thing lacking is the capital to move forward. Get the breathing room you need in cash flow financing - seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of solving funding for business success.

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Stan Prokop - founder of 7 Park Avenue Financial Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info re: Canadian business financing & contact details :

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