For A Quick Ratio Formula Does Current Assets Include Inventory Guess What Your Business Needs? Working Capital and Small Business Finance Loan/Loans Options

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Guess What Your Business Needs? Working Capital and Small Business Finance Loan/Loans Options

Picture your firm having access to all the working capital you need. Seems impossible? Not really… if you have a solid understanding of your options and your firms competency or ability to execute on those options.

Whether you’re Canada’s largest corporation or a small new start-up (and everything in between) your business needs working capital. Small business financing loans and financing options for working capital in Canada are limited to a handful of possibilities – but being aware of what they are and qualifying for them can be the solution to your continued focus on cash flow through some type of working capital loan.

It’s probably easier to make sure you’re addressing the cash flow challenge correctly – where it’s somewhat ‘thorny’ is more like solving a problem or finding an expert who can provide you with the business financing support you need.

The two main elements of your first step working capital assessment are your gross margin and your turnover. This is the big problem we have with textbook/educational solutions for working capital – they point you to textbook calculations – give you a formula that essentially means you can subtract current liabilities as current assets, and voila! Assume you have working capital. However, our clients have never paid a supplier or completed company payroll with a ratio!

Properly evaluating your working capital requires a focus on understanding your business—how much inventory you carry, how many days inventory is left, and just as importantly, or even more importantly, are your receivables changing. Have you realized that for many firms 80% or so of all the business assets you have don’t forget payables in A/R, inventory, and other size of the balance sheet.

Then you can achieve financial success based on your newfound knowledge and analysis of your cash flow and asset turnover. We think you can.

Canadian business financing solutions for small business finance loans actually revolve around a couple of viable solutions. Generally, in our experience Canadian chartered banks cannot meet your business’s working capital needs – if they rarely finance inventory and require significant qualification on your overall financials, profitability, external collateral, personal creditworthiness, etc.

So, where do you go from there? Other solutions are more viable and can potentially get you around 100% cash flow – they include working capital financing in the form of a bundled line of credit at A/R and inventory through an independent finance company. For larger firms we believe the ultimate tool is an asset based line of credit that provides a high profit margin on all your business assets. Other more esoteric solutions, but still very viable although somewhat misunderstood, are securitization, and purchase order financing of new contracts and orders. (Your suppliers are paid directly for the orders you have in hand – what could be better?)

Finally, getting on the road at a lighter speed means factoring and invoice discounting. We mention them at the end but they are probably the most popular method, gaining traction every day. Our favorite secret is invoice financing, allowing you to control your finances.

So there you have it. You have identified new ways to determine need; We have outlined 4 or 5 solutions that will take the guesswork out of working capital. These loans and financing options are available with a little research, and, if you choose, speak with a Canadian business financing advisor who can provide you with timely and valuable assistance with your cash flow needs.

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