Cash flow finance brings out the curiosity in business owners and financial managers in Canada. That curiosity is often driven by wondering what the competition is doing, and, as importantly, have the companys current strategies around working capital financing really worked out. Let’s dig in.
Unfortunately in many cases you might feel that its about time to press the ‘ EJECT ‘ button from your current financing situation. Cash should be moving through you business… but it isnt. Part of the reason is the age old issue that sales growth and profit don’t equal cash in a business to business’ environment. Over the long term things seem to always work out… it’s the short term that is the challenge.
If you feel your business is ‘ failing ‘ in the cash area it boils down to your business model , how you manage your assets, and what type of financing you are or arent using to manage the whole sales/cash cycle.
In certain cases businesses need to either acquire or replace assets. Here some of those liquidity dangers we have been talking about get really exacerbated. That is because it’s even more dangerous when you use daily operating working capital and cash on hand to acquire assets that will be used by your business over the long term.
The solution to that problem is typical leasing finance – With either no o minimum cash outlay your business has the ability to acquire production assets, new technology, and rolling stock. Etc. Almost any asset can be financed under different ownership or renting structures. So if you’re focused on long term survival and growth that wont come at the expense of a cash flow crisis investigate the equipment lease finance option.
The textbooks, as always, have the tools to tell us where our business is at in terms of cash flow and working capital. They do this through the use of financial ratios which pinpoint the businesses overall solvency. However even when those ratios they give us are positive a cash flow crisis can be just around the corner. That’s because your investment in receivables and inventory look great on paper, they just aren’t converting to cash. That’s when investors, lenders, bankers, and suppliers start to sense a problem and in business it’s all about your reputation, especially when it comes to suppliers and lenders.
How does the business address ‘ bad ‘ working capital and cash flow situations. Whether you qualify for a traditional solution or alternative solutions a number of scenarios can reverse the upcoming cash flow crisis you are sensing.
Traditional bank credit lines
Non bank asset based lines of credit
Sale leaseback of owned assets
Working capital term loans
Purchase order financing
Tax credit (typically SR&ED) monetization
Which one of these, singularly or together will give you the ‘ EJECT ‘ button from that bad cash flow scenario? The answer lies in seeking out and speaking to a trusted, credible and experienced Canadian business financing advisor who can assist you with your working capital challenges.