Here are 5 working capital management solutions for cash flow loan needs and why these solutions will address your cash flow challenges.
Working capital management challenges often conjure up the fact that there's something rotten in cash flow land. Is there a solution to your cash flow needs? Is that type of loan even available? Let's dig in.
So, let's assume we're a cash flow doctor! Does your company have any of these symptoms: Management focused on "cash on hand" almost all the time, growing too quickly, selling more - making less, no periodic cash flow budget plan or the inability to meet some of your business financial obligations?
The prescription: A cash flow solution that works specifically for your firm!
Expanding too quickly allows you to stay ahead of the competition of course, but brings with it something the finance folks call "overtrading," which is a cash conversion cycle of negativity when those commitments can't be made because of the high investment in receivables, inventory, and fixed assets you have made to grow your business.
Bottom line - you've got business assets, but they are all tied up, leading to a case of poor liquidity. And we must be honest here: if you didn't have the assets or sales potential there is almost no way we can help.
Your ability to bring liquidity and monetize your assets focuses strongly on identifying how you are able to convert assets to cash.
What about those solutions we've spoken of? It always comes down to current assets, so you require a solution to be able to monetize sales quickly, and convert A/R and inventory in working capital management success.
In Canada, your alternatives are several, and these would apply to almost any business anywhere. Many clients that come to us focus on what they term a "cash flow loan." Is that available, yes...is it recommended? Maybe! It's a term loan for permanent working capital. Naturally that comes with more debt and fixed interest payments, so that is many times not an optimal solution. But it is a permanent working capital solution.
Our other preferred solutions to the working capital management challenge are the following: Confidential invoice financing, asset based lending, purchase order financing, and inventory financing.
These solutions come in a variety of combinations depending on the size of your working capital requirement, as well, as the general financial profile of your business - i.e. are you currently financial challenged, or are all aspects of your business simply great. It's rarely the latter when we talk to clients.
In summary, investigate the benefits and mechanics of the five solutions we have outlined. Determine which ones work for your firm, and speak to a trusted, credible and experienced business financing advisor on your ability to secure in short order the cash flow and working capital you need to run your business successfully.