July 16, 2024


Profitable business

Working Capital Financing Approaches! Make Them Work For You

2 min read
Working Capital Financing Approaches! Make Them Work For You

Working capital finance, properly structured, can provide the boost your business needs to both grow and operate. Businesses take on the lack of cash flow challenge for a variety of reasons:

New Market Opportunities
Special projects


The bottom line is that properly structured business financing allows owners and financial managers to monetize the assets in the business on a short or long term basis. An example of a long term scenario would be a sale leaseback; short term example might be the cash flowing of your accounts receivable.

Text books tell us that there is a clear definition of working capital, namely going to your balance sheet and subtracting current liabilities from current assets. That’s a great textbook definition, but let’s visits the real world together on what that means.

The absolute number of dollars in your net working capital as defined by our definition above does not really matter. (Although positive is better than negative working capital!)

It is important to know that certain types of business finance solutions are more applicable than others depending on the special needs of your business. The classic example of a cash flow challenge is when you are growing, profitable, but have a gap between cash on hand in your business and short term obligations.

Examples of working capital finance? They include:

term loans – Recent trends have demonstrated the important of both short and medium term cash flow loans. The overall credit quality of your business and the amount you require will drive a final solution. Loans can be secured against certain assets, or unsecured. Unsecured cash flow loans are currently very popular and have grown out of 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 asset based lenders step in to take up the slack.

A well structured business credit line is in fact 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 Leasebacks

Bottom line? There are numerous sources of working capital financing. Choose the right one for your firm with the assistance of a trusted, credible and experienced Canadian business financing advisor. Then get ready to grow your business!

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