Business financing options in Canada often depend on the overall health of your company. A lot of questions can be answered by simply looking at some very basic and fundamental numbers and relationship in your financials. The doctor is in. Let’s dig in!
Key to any business financing or survival for that matter is the whole issue of solvency. Here owners and managers want to assess the level of assets and debt. Lenders will always want to focus on owner equity, with a more refined focus of this number being ‘ tangible net worth.
Finance options will also depend on your ability and need to meet current financing commitments. Here we will point out that even a company that has had its loan called can still get very strong levels of alternative financing based solely on the asses of the business. This type of financing typically is called ‘ ASSET BASED LENDING ‘ and can come in many forms, both term debt and operating debt. They provide a path back to what many term ‘ traditional financing ‘.
The asset lending we’ve mentioned, when it comes to operating financing, will almost always revolve around receivables and inventory. The size, quality, and management of these two assets will dictate what type of financing you need… and… as importantly are eligible for.
You can properly measure, and help manage these two assets in some basic simple ways. In the case of A/R it simply calculating your ‘ day’s sales’ in receivables turnover. Since the sale of inventory translates into a sale and then a receivable the management and tracking of A/R and inventory is a great way to track business health. P.S. The big companies do it all the time, all day, every day, and more often than not senior management is compensated on the management and performance of these two assets.
In the past, and we suppose we’re doing it, we’ve suggested to clients that they track a simple chart that shows sales growth and then measures that same growth against the growth of A/R and inventories,
When looking at finance options it’s important to assess whether you are looking for business financing to operate, start, or expand. In addition to traditional finance solutions offered by the Canadian chartered banks numerous other solutions work. They include:
A/R Financing
Working capital term loans
Inventory financing
Asset based lines of Credit
SR&ED Tax Credit Bridge Loans
Govt Small business loans (to maximum 350k)
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you assess business health and finance options that suit your operating or growth requirements.