Working Capital Financing is forever a major challenge for small and medium sized businesses. And that is certainly not to say that larger corporations don't have that challenge, it's simply a case of having more assets and resources to deal with the same challenge.
As a business owner or financial manager the level of funding that you need, and the method in which you achieve that financing is really what drives the solution to your challenge. It is important, in understanding your cash flow needs and solutions, to determine if you’re working capital financing is required due to the capital intensive nature of your business - or if you in fact simply need to ' monetize', or 'cash flow ' your assets in an effort to generate more working capital and faster turnover of those funds. Your focus on cash and business financing becomes even greater if your sales and profits are increasing. However, at the same time the ability to obtain business credit remains a challenge. Bank financing has become more difficult to acquire, and many firms are looking at non traditional or alternative sources of financing to secure the funds they need for working capital. Another hard reality of working capital financing is that most small and mediums sized business are searching for more cash flow on an unsecured basis. This type of financing is very difficult to achieve in the Canadian marketplace, certainly in the Chartered bank environment. So what are the sources of financial capital that Canadian business owners and financial managers can investigate and potentially utilize? Let's cover off some of the basic options - These include:
When you are looking for working capital financing one of the key areas you can start with is your own key financial metrics. You don't need to be a seasoned financial analyst to determine at what rate your receivables are turning over. The bottom line if you haven't realized it yet (we are sure you have) is that receivables and inventory 'eat' cash. One key point needs to be made here, if your sales are growing at 15% and your receivables are growing at 15% that's not a bad thing. (To calculate simply measure the ratio of these two data points) However, if your sales are growing at 15% and receivables are growing at 30% your cash flow and working capital is being consumed by the investment you have made in A/R and inventory that is not turning over. Collections and inventory turnover are a key aspect of working capital financing. Commercial financing from a bank is the optimal solution for small and medium sized business - as have noted that is difficult to achieve. Funding a business can be complex and we urge clients to seek the advice and guidance of a respected, trusted and experienced commercial financing firm like CL King and Associates to ensure they pick the right tools to solve working capital challenges. Also read: The Meaning of A Credit Score
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How can a Business Credit Card help in managing Small Businesses? Remember, as a business owner, you should ensure that you maintain two separate finances i.e., separate financing for your business as well for your personal budget is absolutely essential. Hence, do not club these two finances lest you will be utterly confused in maintaining the accounts separately. The expenses incurred on your business are reflected, automatically, in your account when you use a business debt card. To build up a corporate credit, such credit cards are ineluctable. By registering your firm with the business credit bureau, your company's reputation can be enhanced to a good extent. Are business rewards cards worth the choice? With wide range of business rewards cards available in the market, you can choose the one that suits your company's needs. To those businessmen who purchase huge stocks in bulk, it is advisable to have a credit card with cash-back facility. Here are the top 3 benefits that you may avail by using the business credit cards - 1) Those maintaining fleet of vehicles for deliveries and frequent flier programs, and for those who globetrot on business purposes like meeting the clients very frequently, can avail benefits like gas discounts with these cards. 2) Business debt cards also offer various other advantages, which include but are not limited to flexibility to spend more than earnings in a particular month, if you badly need to invest in an important project. 3) Many a times, it just so happens that small business owners don't have enough funds, but get a golden opportunity that they miss out on, just because they don't have the necessary monetary support. The business Debt cards come to your rescue during such times. But, you must be beware of the fact that you should not accumulate too much of debt by unnecessarily increasing your expenses, just because you've high credit limits. If you want to learn more consult with the experts at CL King and Associates. CL King provides investment banking, equity research, sales and trading, and investor services to corporations and institutions. The firm also co-manages bond offerings, IPOs, follow-ons, secondaries, convertibles, and preferred. If you want to learn more, please visit here: http://www.clking.com/ Many people who start a business know very little about business and corporate credit. This is really to their detriment as business credit is so very instrumental in the establishment and operation of a successful business. Nonetheless, despite being a key component to getting a new enterprise up and running, many people move forward without any real information about corporate credit. One of the best ways for individuals to learn about credit is by participation in a business credit builder program. By doing so, people can learn all of the intricacies of business credit and avoid many of the mistakes that are all too often made. Our experts at CL King & Associates believe that by participating in a business or corporate credit builder program, individuals have an opportunity to learn their lessons the easy way. That isn't to say that they will not have to learn from their mistakes; rather, they will have an opportunity to learn from the mistakes of others. Seven of the most common pitfalls which credit builder programs help individuals avoid are as follows: 1) Many people fail to form a separate business entity for their new enterprise. Business credit builder programs will help individuals form an LLC, a corporation, or whatever other business entity makes the most sense for their operation. Because it is necessary to have a separate business entity in order to establish credit, this is a vital step. Operating as a sole proprietorship and self financing your business is the surest way to get rejected by the bank for a business credit card! Why? 2) Many people go directly to Dunn & Bradstreet to build a profile and have not completed a through compliance check. If your corporation or LLC is not in compliance before you build the business credit profile with D & B you can "red flag" your company! You must make sure your business phone line has a 411 listing that the entity has the appropriate business license and many other steps comprise a proper compliance review. 3) Many people apply for credit with companies or organizations which are difficult to obtain credit from. Business vendor and cash credit programs will guide individuals towards credit-friendly outfits which are conducive to establishing good company credit. 4) Many individuals co-mingle their funds. This means that they use one bank account for both their personal and business finances. This is detrimental on several levels, not the least of which is that it allows creditors easy access to personal funds in the event of non-payment. Credit builder programs will help individuals learn how to keep their funds separate to avoid such problems. 5) Many individuals fail to know how to get vendors to report good payment history to build your corporate credit profile with D & B or Corporate Experian®. With out vendors reporting your corporate credit profile simply will not be built! 6) Many individuals fail to use vendor account properly to help put your business in the best position to maximize cash lines of credit with the banks! 7) Many people seek credit at the wrong time. In other words, it is common for people to apply for credit when they are desperate and they are out of money, credit is bad. The time to build corporate credit is ideally at the start of your company and also when your business does not need it! In short, it is not always easy to establish business credit. This is especially true in today's economy. With something as important as business credit, individuals should really seek professional help or mentor-ship through business or corporate credit building agencies. |
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