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Working capital finance, properly structured, can provide the boost your business needs to grow and operate. Businesses find cash flow crunch challenging for several reasons:
new market opportunities
special projects
etc!
The bottom line is that properly structured business financing allows owners and financial managers to monetize assets in the business on a short- or long-term basis. An example of a long-term scenario would be a sale leaseback; An example of a short term could be the flow of your accounts receivables.
Textbooks tell us that working capital has a clear definition, namely going to your balance sheet and subtracting current liabilities from current assets. That’s a great textbook definition, but let’s take a real-world tour of what it all means.
The absolute number of dollars in your net working capital as defined by our definition above doesn’t really matter. (Though positive working capital is better than negative!)
It is important to recognize that some types of business finance solutions are more applicable than others, depending on the particular needs of your business. The classic example of a cash flow challenge is when you are growing, profitable, but your business has a gap between cash and short-term obligations.
Examples of working capital finance? they include:
Term Loans – Recent trends have demonstrated the importance of short and medium term cash flow loans. The overall credit quality of your business and the amount you need will provide the final solution. The loan may be secured against certain assets, or unsecured. Unsecured cash flow loans are currently very popular and have outpaced the popularity of merchant cash advances.
Business lines of credit, essentially an ‘overdraft’, are often the most common sources of cash flow. When these are not available from traditional bank sources, other commercial property based lenders step in to fill the void.
A well structured business credit line is actually a safety net for your overall cash flow needs.
Other forms of working capital financing? they include:
Invoice Finance – aka ‘Factoring’
purchase order finance
tax credit financing
sale leaseback
ground level? There are many sources of working capital financing. Choose the right one for your firm with the help of a trusted, reliable and experienced Canadian business financing advisor. So get ready to grow your business!
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