Cash flow finance solutions are all about transforming your sales revenue into cash flow for your company. Sometimes it’s easy, more often than not… it isn’t. Various forms of asset financing are available to achieve that goal – they come with different costs, structures, and implications. Let’s dig in.

One of the things that business owners don’t often recognize is the need to take a hard look at the ‘ difference’ between working capital and cash flow in their business. What? There’s a difference? There sure is we tell our clients – because the text book situation occurs when your sales are growing, things are great, your accountant tells you that you’re making a profit… the only issue .. you feel you’re constantly in a cash flow crisis.

The best way to look at it is to simply view the situation around cash flow as the funds that are generated at specific times. It relates directly to what we call the ‘ cash flow conversion cycle ‘ which simply tracks the time it takes for money to flow through your business… and end up in the bank.

The profits you show on your income statement almost never approximate the amount of cash you have in the bank. How does the business address financing the working capital accounts: receivables, inventory, and work in process? Numerous solutions are available. A few bring new debt on the balance sheet, which often isn’t desirable (example – a working capital term loan).

The other solutions which typically ‘monetize’ your working capital accounts simply cash flow your assets – into capital… today. Those solutions? They typically include:

Canadian chartered bank lines of credit
Non bank asset based lines of credit
Inventory Finance
Receivable finance
Tax Credit Monetization (Financing your SR&ED claim)
Working Capital term loan
Unsecured Cash Flow Loan
Purchase Order Financing
Sale leaseback of owned assets

Certain types of cash flow finance solutions require traditional credit criteria – for instance banks insist and require clean strong balance sheets, profits, and solid historical cash flow. Thousands of business owners and financial managers can’t meet these criteria, so other solutions are still relatively easily attainable – they often come at a higher cost but still provide all the capital you need.

An example – The non bank asset based line of credit. It provides a revolving credit facility that monetizes your A/R, inventory and equipment into one business line of credit. While often 2-3 times more expensive thank current low bank rates it’s still a solid method of achieving cash flow finance.

We mentioned already that profits and assets don’t equal cash. If there is any good news in this statement its that if you do have positive working capital – i.e. assets to cover your short and long term liabilities you are solvent. But how you manage, and finance those assets will ultimately determine the success of your business.

If you are looking for ways to transform assets in to cash and manage growth seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow needs.