Golden Rules For Financing A Business In Canada . Working Capital and Debt Solutions .. That Make Sense !

Financing a business in Canada. A challenge? Let’s just say that’s an understatement when it comes to working capital, debt, and ongoing management and recognition of finance problems and opportunities.

Are there some ‘ Golden Rules’ we could follow. We think so.

One of the golden rules of business finance is to ensure that you properly match short term debt and long term debt appropriately. Each of these two has its own benefits and potential disadvantages. Is one better than the other? Not really, it’s just that it’s a case of making adjustments and staying ‘ in tune ‘ with what needs are appropriate or required at the right time.

It certainly hasn’t escaped us that not only is it difficult when it comes to financing a business in Canada to manage internally, you of course have to stay in tune with what’s happening in the economy, your industry, and dare we say, politics! Talk about a full time job.

A lot of your financing will probably come from external financial solutions. They might include bank debt, working capital term loans, receivable finance, inventory finance, equipment leasing, and monetization of tax credits. However, you also generate cash internally, and you need to know how to measure that.

When you assess working capital or debt needs you need to be in a position to focus on cost, risk, and what that financing does to your balance sheet? All of those must be taken into consideration.

Also consider your current capital and debt structure and how your balance sheet will look after financing is completed. As an example, something to think about is that working capital and cash flow can be generated through monetization of assets – this doesnt really bring debt to the balance sheet, so you’ve achieved your goal without increasing debt.

On occasion it’s important to discuss any taxation impact on your financials with your accountant, as there are both positive and negative aspects to debt and tax.

If your firm is mature and operating efficiently you’re in a position to access all sorts of traditional financing. The other side of that is alternative finance, which works just as well but might be more costly on occasion – not always, but sometimes.

It’s hard enough to access financing but choosing the right partner is a struggle in itself sometimes, ensuring that the funding source will be with you in tight markets and good times. Apparently those two fluctuate over time. The 2008 worldwide debacle caused many finance firms to disappear or implode, causing havoc among thousands of businesses in Canada, whether you were a start up or large corporation!

One solid GOLDEN RULE of business finance is to be proactive when it comes to access debt solutions and working capital. You might even have to make the tough decision around diluting equity when there it too much debt on your balance sheet. That’s a costly one.

A great GOLDEN RULE is to have a solid sense or understanding of how outside forces can affect your company’s financial viability. If market conditions are continually volatile you clearly need to focus on longer term stable financial solutions.

Constantly stay on top of your cash flow planning , and if you want to understand what solutions are available for financing a business in Canada speak to a trusted, credible and experienced Canadian business financing advisor ,