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How to Manage Your Canada Working Capital Properly

For every business in Canada working capital is probably one of the most crucial elements to its success. Thus, you need to focus your attention on how you can manage your working capital properly. In these times of instability, you may face extraordinary challenges that can affect your business. Only by being able to make the right decisions about the use of your capital can you make sure that you overcome them.

Preserve Your Capital

In Canada working capital must be preserved if you want to nurture the growth of your business. So you need to regularly assess your markets, your strategy, and your balance sheet. Review them to find out your strengths and weaknesses. Find the right opportunities, but also learn how to recognize risks. Make sure that you keep your cash flow steady, as this is crucial for the viability of your business.

You should also manage your debts properly, and you need to review your debts and check where negotiation is possible. You should find alternative sources of cash, including short-term credit.

Finally, cut costs where you can without eroding value and contradicting your business strategy. In these tough times, controlling costs is mandatory if you wish to keep your business afloat.

Optimize Your Capital

The key here is efficiency. You need to squeeze the maximum benefits you can get from your working capital. Just because you’re profitable now doesn’t mean that you can sustain it for the long term.

Check how your assets are performing, and evaluate their performance internally and against your competitors. Take a more active stance on business asset management. You may discover that you’re not using your assets properly, and you can make the necessary improvements to enhance the way you preserve and allocate them. By operating more efficiently, you can free up some more cash to bolster your capital.

Raise your Capital

As your business grows, your capital requirements should always be reviewed so that they can be met as expeditiously as possible. No matter how profitable your business may seem right now, there’s no guarantee that nothing will ever hamper your growth towards industry leadership. Raising capital often comes at a cost, so prepare for any eventuality by identifying your capital needs in the future, now.

Invest Your Capital

Finally, you should learn how to invest your capital properly, so study up on various ways in which you can use them for maximum profits. You need to be diligent and conscientious. Look for opportunities for investment instead of waiting for it to knock at your door.

Managing your finances is one area you need to pay attention to, because in Canada working capital is the tool by which you foster business growth. With proper capital management, your business may not only lead the industry in Canada, but also throughout North America.

What’s the Difference Between Working Capital Lines and Business Loans?

Some small business owners seem to think that there’s really no difference between working capital lines of credit and business loans they can get from a bank. They’re basically both money that you can get for your business which you have to pay back with interest. But actually, these are two very different forms of financing, and if you’re contemplating on boosting your cash flow you should be aware of some of the key differences so you can make the best choice for your business.

Purpose

Business loans can be used for a whole variety of purposes. But essentially, all these possible reasons can be categorized in two distinct categories. Either the loan is used to cover operating expenses to keep the business afloat, or they can be used for some sort of growth or expansion for the business.

Working capital lines of credit are usually used to cover regular working expenses, such as overhead and salaries.

Interest Rates

Usually, a business loan involves a fixed interest rate. It’s different with the line of credit, as they’re usually tied to a specific variable rate like the prime rate or the Treasury bill rate. This interest rate may range from 1% to 6% over the tied-in rate. This means that every month the interest rate may change for the line of credit.

Fees

The interest isn’t the only thing you need to pay for when you take out a loan or a line of credit. Loans may involve a variety of fees, such as the loan processing fee and the credit fee. There may even be a fee if any collateral needs to be appraised. With the line of credit, there may be a processing fee at the start and then an additional transaction fee whenever you draw from the line of credit.

Draw

Receiving the credit amount also differs among these two financing options. With a business loan, you get the entire amount of money right at the start when the loan documents are signed. You don’t get any additional money from the loan. But with a line of credit, the loan works very much like a credit card. You have a limit, and then you can borrow as often as you want as long as you don’t exceed the specified limit. If you pay back the amount you’ve used, then you can continue borrowing as often as you need to as long as it doesn’t go over your limit.

Payment

With a business loan, some items are specified. You have to pay an exact amount on a regular basis until you pay back the loan and the interest. With the line of credit, the amount you have to pay depends on the agreement you have with the lender. For example, you may only be required to pay the interest due, or you may also have to include partial payment of the principal.

So if you are a small business owner, consider these differences carefully so that you may make the right choice as to which is the right option for your business. For some, loans may be very useful, but for others the availability of working capital lines is the best option.

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How a Unsecured Business Loan Can Increase Your Business Working Capital

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We offer Unsecured Business Loans $25,000 – $500,000 Across U.S. & Canada!

For most businesses, taking out a traditional loan from the bank is often the first thing they do when they need a quick infusion of cash into their business working capital. But many small businesses are starting to realize that getting the money this way is increasingly becoming more difficult. Banks are becoming more tight-fisted lately when it comes to approving loans and if you or your business have bad credit or you don’t have sufficient collateral, then you may be out of luck.

Luckily, you have another option, and that is to take out a Unsecured Business Loan. Technically, it’s not even a loan. You just get the money you need right at the onset of the agreement, and in return the lender gets a percentage of your sales until you pay back the cash advance and the premium. Among most lenders, this percentage is commonly pegged at 8%.

There are a number of ways in which a Unsecured Business Loan can be beneficial:

Your application is much more likely to be approved. If your bank loan application was denied due to your low credit, you may be relieved to know that your credit in this case is irrelevant. What’s more important is the actual stability and performance of your business. Banks need to assess your business plans, tax returns, and your financial statements. But those who provide Unsecured Business Loans check only how long you’ve been in the business and how much you generate in monthly credit card sales. If you’ve been in business for at least 9 months, for example, and you generate at least $5000 in monthly credit card sales, you’re likely to get approved for a Unsecured Business Loan.
The entire process is quick and easy. Banks can take time—weeks or even months—to process a loan. But you may need only a week to receive your Unsecured Business Loan. This can be a crucial difference, especially if your business is in dire need of additional business working capital.
Your credit and collateral is protected. Unlike commercial loans, a Unsecured Business Loan won’t affect your credit rating. That’s because it’s technically not even a loan. It doesn’t get reported to the credit bureaus because it’s technically a sales transaction. You don’t even risk losing your collateral, because there’s no requirement for it.
You only pay back the loan when you’re also paid by your customers. Loans in general require regular (as in monthly) payments in fixed amounts. But with Unsecured Business Loan, the rate of collection varies depending on how strong your credit card sales are for the month. This can be a boon for businesses in which the revenues are seasonal or wildly fluctuating, such as hotels.

So in the end, even if banks will not grant you a loan you need, there’s still hope. You can still save and even nurture your business by increasing your business working capital with a quick Unsecured Business Loan. For more information about this service, check out www.neebocapital.com.

The Advantages of Getting Commercial Capital Through Freight Factoring

2014 Freight Factoring — freight factoring. In essence, the trucking company sells the invoice to a factoring company at a slight discount, and then gets a large percentage of the money immediately.

If you own a trucking company, it’s highly possible that you experience some challenges with your cash flow. That’s because you have to deal with a whole lot of day-to-day issues. These include salaries for your employees, the cost of fuel and repairs, and other expenses. Nearly every trucking company offers a credit period for their clients, which is why commercial capital problems are inevitable. When your clients only pay after 30 to 60 days (and sometimes even 90 days), it’s no wonder you have trouble with expenses that need to be paid now.

Fortunately, there’s a solution that’s specifically designed for this situation, and it’s called freight factoring. In essence, the trucking company sells the invoice to a factoring company at a slight discount, and then gets a large percentage of the money immediately.

Freight factoring offers several advantages:

It boosts your commercial capital. Your cash flow problems are gone because you’ve essentially taken out the waiting period. You now have money for whatever you need. You can pay your bills on time, and you can also use the money for growth and expansion.
It’s faster than getting a loan from the bank. Banks are notoriously slow in granting loans, and it may take you weeks, sometimes even months for a loan to be granted. Your bills are due now, so obviously you need the money now—a fact that banks don’t seem to realize. But factoring companies understand such needs perfectly, which is why the money is transferred to you almost immediately.
You can control your debt to equity ratio. This ratio rises when you take out a loan to solve your cash flow difficulties, and it is also monitored by investors and creditors.
You can avoid payment collection troubles. Having to chase after clients for your own money can be tedious and annoying—and sometimes it can be terribly frustrating. The factoring company may take it upon themselves to do the collecting for you.
You can cut down on extraneous staff. You no longer need to hire people to check that your clients have good credit ratings, and of course you also don’t need your people to make follow-ups or collect your payment.
You lessen the risk you take with your client’s credit. Factoring companies may share information about the credit ratings of your customers, so you can assess which ones are good and bad credit risks.

In one survey, 935 trucking companies filed for bankruptcy in just the first quarter of 2008, and that only included the companies with at least five trucks in their fleet. If you don’t want your trucking company to join their ranks, you may want to consider a quick and reliable infusion of commercial capital, and you can get that with freight factoring.

For more information about our freight factoring services, please check out www.neebocapital.com.

Save Your Business Working Capital with the Help of Equipment Finance

If you plan on starting a business today, you’ll need some tools and equipment, and these things cost money. If you set up an office, you’ll probably need computers and software. If you own a construction company, you’ll need heavy duty vehicles. If you open a hospital, you’ll need X-ray machines and other similar equipment. All these things are expensive which is why it is necessary to have sufficient business working capital.

Features of Equipment Finance

If you spend all your startup money in expensive equipment, you may not have enough business working capital to deal with day-to-day expenses such as salaries, rent, and utilities. Fortunately, you can free up some money to improve your cash flow through equipment finance. Essentially, you get a loan with your equipment as collateral. If ever you fail to make the payments, the equipment will be taken away from you.

One factor that needs to be considered here is that the loan cannot be more than what the equipment is worth. This is obvious, since if you default on the loan then the equipment won’t cover the amount you owe.

Another consideration is that the loan period cannot be longer than the useful shelf life of the equipment. Some types of equipment simply become obsolete after a few years.

Advantages of Equipment Finance

With equipment finance, you can take advantage of several benefits which you may not get through other means:

This method of financing can be very quick and easy to arrange. This is especially true compared to other traditional forms of financing. Banks, in particular, move like molasses in granting such a loan. That is, if you even find a bank willing to provide this kind of financing.
Once you get the money, you can easily solve your cash flow problems. You now have the money available for various daily expenses so that your business can operate more smoothly and efficiently.
You can also use the money to develop other aspects of your business in order to increase your revenues.

Leasing

Keep in mind, though, that if you plan on using equipment finance you may want to do so even before you buy the equipment. You may be able to make regular partial payments for the equipment you need rather than spending a bulk of your business working capital on it. So in a way, you’re leasing the equipment.

By getting equipment financing this way, you may be able to avail of the latest high-tech equipment right away, which gives you a significant advantage over your competitors. You may even gain access to specialized equipment through the leasing company, which may have special working relationships with equipment manufacturers who produce what you need for your business.

This can also improve your cash flow so that you can deal with overhead expenses and also have enough money for growth and expansion opportunities when they arise. Leasing also protects you from having to hang on to equipment that has become obsolete, which can hamper with your business goals.

Need Equipment Finance? Click here to visit our lending site.

Working Capital Lines vs. Other Lines of Credit

A line of credit can be a huge help to a small business. The security it offers frees you to use your capital in other ways other than as a hedge for emergencies. By being flexible, you limit what you have to pay back in interest since you only take out what you really need. Many people are familiar with working capital lines, but there are other types which you should know about if you own a small business.

Working Capital

Working capital lines of credit typically help small businesses pay for their expenses while they wait for their customers to pay them. For example, utility bills and worker salaries can be paid completely and on time by drawing from the line of credit while you are still waiting on your accounts receivables.

When your accounts receivables are paid, you can then pay back what you drew from the line of credit along with the interest and other fees. This line of credit has a limit, and if you repay what you drew then you can still get access up to the limit of the line of credit. So if you have a $10,000 limit and drew a thousand dollars, you only have $9,000 left on your line of credit. But when you pay back the thousand dollars and the interest, your line of credit goes back to $10,000.

This type of line of credit is usually available for an entire year, after which it can be renewed if both parties are amenable. The interest rate is pegged at a specific percentage over a published rate (such as +1% to +6%) like the prime rate.

Asset Purchase

Getting a business working capital line of credit is pretty much like buying a car through a loan. In business, you may be extended a line of credit to purchase equipment and other assets. The main difference between the working capital line is that it’s non-revolving. If you have a $100,000 line of credit for asset purchase and you spend $10,000 on equipment, you only have $90,000 left on your line of credit even if you repay the $10,000 you drew.

In general, the interest for this type of line of credit is fixed. But sometimes it may be pegged at an adjustable rate.

Construction

We’re not talking about large construction projects here. For example, you may want to make improvements in the space you’re leasing for your restaurant. With a construction line of credit, you first have to pay for the construction out of pocket. Once the lender determines that the construction is complete, then your expenses may be reimbursed. This is also a non-revolving line of credit.

As you can see, working capital lines of credit are not the only lines of credit you can use in order to nurture your business and allow it to grow. If ever you’re approved for a line of credit, try to see which types are available so you can increase your chance of making your business a success.

For more information about business capital lines of credit, please check out www.neebocapital.com.

Obtaining Commercial Capital Through Spot Factoring

If you have a business emergency or if you want to put money into a potentially high-profit investment, it makes sense to use your commercial capital. But if the money isn’t readily available, there’s still a way for you to get it right away hassle-free. You can do this through spot factoring.

How It Spot Factoring Works

First, you need to choose an invoice that you’re going to issue to a customer and then find a factoring company that offers spot factoring. As soon as they verify the invoice, they can then provide the emergency funds you require.

You then invoice your customer like you normally would. But this time, you just add a notice of assignment to the invoice. This will state that the customer should give the payment to the factoring company instead of paying you. You then send the factoring company a copy of the invoice, along with an acknowledgement of the debt or a delivery note. In return, they will transfer a certain value (anywhere from 70 to 85%) of the invoice. Once the customer makes the payment later on, the factoring provider gives you the rest of the value of the invoice minus their fees.

Key Points

Spot factoring is a bit different from the regular form of factoring that most factoring companies offer. So if you are familiar with the traditional factoring methods, with spot factoring you need to be aware of certain differences. They are as follows:

It’s essentially a “one and done” deal. For traditional factoring, usually the factoring company advances the money for several of your top invoices, or sometimes even all of your invoices. With spot factoring, even just a single invoice may be required and there’s no contract required. In traditional factoring, often there’s a contract that covers a longer period of time. This usually lasts for half a year up to a year and a half.
Not every factoring company offers this service. Most factoring companies prefer regular customers—in this sense they’re just like every other business. So if you want to make use of spot factoring services, you may have very few options.
In general, spot factoring is much more expensive. This is understandable, since you need to cover the cost of the credit checks and background searches, and they can’t be spread over a lengthy contract.

Getting commercial capital quickly and conveniently is the very essence of factoring. With spot factoring, everything’s stripped down to the basic concept of using invoices as collateral for cash advances. It’s for a single invoice and you get your money quickly and use it for whatever purpose.

The important thing to keep in mind is that you need to find the right company that offers spot factoring services. That way, you will be assured of a fair business transaction. For more information about spot factoring services, check out www.neebocapital.com.

What are Your Factoring Options?

We provide cash flow in all 50 States and to over 140 different industries including Canada - Click the image to see deals we've made recently. — We provide cash flow in all 50 States and to over 140 different industries including Canada – Click the image to see deals we’ve made recently.

Factoring is one of the solutions that companies can turn to when they suddenly need to free up their cash flow. To understand how factoring works, we first need to look at one of your company’s most important assets: Accounts Receivable. When you have a lot of receivables, this means that you already have sales but you don’t have the cash yet. You already sold your inventory, spent for the operating expenses, but your client is not yet obliged to give you cash for the time being.

What this does is that it drains you of working capital. You have no cash to spend for other expenses because you’re still waiting for your client to pay you.

When you turn to factoring as a solution, you’re selling your Accounts Receivable to a factor or a third party. The ‘factor’ usually advances a percentage (70% – 90%) of the receivables and this solves your problem of cash flow.

By selling your receivables, you now have cash to use for other aspects of your business. This also effectively transfers the risk of these receivables to the third party. The ‘factor’ will be the one to ensure that these receivables are collected, so any risk of your clients not paying is effectively transferred to them as well.

Once the ‘factor’ collects the entire amount, you also get paid the rest of the amount you were originally owed, minus transaction fees taken by the ‘factor.’

Factoring is a common practice especially with companies that have overseas transactions. It’s also one of the most effective ways of getting additional cash flow.

Spot Factoring – You get to choose which of your receivables you sell. If you’re not comfortable selling all of your invoices, this is the option for you.

Export Factoring – This is a solution for exporters, allowing them to cater to international customers without having to wait so long for the payment and without having to deal with the many challenges associated with overseas transactions.

Freight Bill Factoring – If you’re a transportation company, you can make use of your freight bills and get additional cash even before the goods are completely delivered.

Construction Factoring – Contractors and those in the construction industry know that it takes time for a project to be completed, so with this solution, you get the cash needed to start on your next construction project without having to wait for the current one to be completed.

5. Government Receivables Factoring – It’s exciting to win a contract from a government agency, but the problem is that such agencies usually take time to pay their dues. Also, a project with the government takes time to get paid. What you can do is sell your government invoices to a ‘factor,’ and this will give you cash flow without having to wait for, and rely on, the timelines of the government agency you are working with.

Factoring: A Solution to Your Cash Flow Woes

Most business owners know that during certain times of the year, things can get pretty tight, financially. This is why it’s important to know your options, and factoring is one of them.

Factoring is a tunnel out of cash flow problems.

For many years, businesses have turned to factoring companies to get additional cash flow. By becoming proactive and treating receivables as a source of immediate cash, you get additional cash flow that you need at the moment. Invoices from customers that will remit the payments at a much later date are still assets of course, but if you need the cash ASAP, factoring is the solution for you.

Who Benefits from Factoring?

It’s also important to understand exactly who benefits from factoring. Financial firms that offer factoring services will get a transaction fee from those who seek their services, but these are usually firms that have a lot of freed up cash and whose business is really focused on lending money to others. The problem with having too many assets in Accounts Receivable and not enough in Cash is that you don’t have a lot of elbow room to move. Fortunately the ‘factor’ who purchased your invoices and takes over collecting it from your customers will give you this elbow room.

Usually, those who benefit from Factoring services consist of small businesses who don’t have sources of additional cash. They also don’t have the capability to apply for large loans from banks and other traditional lenders. This is because traditional lenders usually look for external collateral that small companies may not be able to provide.

Additionally, traditional financial institutions may look at credit worthiness and credit history, and this becomes a problem for businesses who are just starting out. On the other hand, turning to your invoices as the main source of cash flow is a pretty solid financial strategy.

Advantages of Factoring vs. Loans

Both factoring and applying for a loan will give you elbow room, but here are some reasons why factoring is usually the better option:

Goodbye, interest.

With factoring, you forego the interest rates that lenders charge. Depending on your company’s situation, these interest rates can be really steep when you turn to banks for loans or lines of credit. With factoring, which is an ‘advance’ instead of something you ‘borrow,’ interest is something you wouldn’t have to worry about.

Flexibility

Factoring also gives you flexibility in terms of how you use the cash. Whether it’s to pay your employee’s salaries, upgrade your current equipment, or fund your Marketing expenses, there’s no restriction whatsoever in how you want to use the money. Compared to loans, you don’t have to do anything to change your capital structure.

Risk transfer

While with loans you have the risk of not being able to pay back the bank and getting charged sky-high interest rates, there is no such risk with Factoring. In fact, you’re transferring the risk of your customers not being able to pay you in full to the ‘factor.’

For more information about factoring services, please check out www.neebocapital.com.

2014 Canada Working Capital

Approval within 48 hours from the time the application is submitted

Where can a small business turn to for working capital in Canada, especially in today’s brutal economic environment? Lenders are beefing up their loan requirements, and they’re only lending to corporations and individuals with top-notch credit. However, some Canadian financial institutions are not as strict, and more understanding, when it comes to getting your small business the working capital it needs.

What Is Working Capital?

Working capital is the cash that companies need to carry out short-term things. It is this concentration on short-term things that sets apart working capital from long-term investments in R&D and fixed assets.
Working capital is the division between current liabilities and current assets. “Current”, once more, means that these things tend to go up and down in the short-term, decreasing or increasing in concert with operating activities. Current assets include inventories, accounts receivable, short-term investments, and cash. Current liabilities include a business credit line from a financial institution, accrued liabilities like taxes payable, and so forth. All of these things turn over and change on a regular basis.

Businesses don’t usually go bankrupt because they’re not profitable. They enter into bankruptcy because their funds get depleted, and they cannot keep up with their payment obligations when they come up. Growing, profitable companies can also just run out of funds, because they need larger volumes of working capital to support new investment in accounts receivable and inventories as they grow.

Working capital financing has helped many small businesses get ahead when nothing else could. It is up to you, as a competitive small business owner, to get the working capital lines you need to move your business forward. Whether you’re developing new products, launching new products, adding e-commerce features to your site, or enhancing your promotion and marketing strategy, working capital lines can help take your business to the next level.

What Are The Terms Typically Like For A Working Capital Loan?

Loans that range from $5,000 and on up
Extremely competitive rates
Terms that can span up to 60 months in duration
Approval within 48 hours from the time the application is submitted
Funding within five to 14 business days of the receipt of signed documents
Programs available for businesses, individuals, and professionals with poor credit
Funds can be used for whatever purpose the businessman wants

What Are The Benefits Of Procuring Working Capital Loans?

Start-up capital needed to start, maintain, and expand a business
Cash flow & operational funding
Expansion funding
Machinery & equipment
Loan consolidation

How Do Working Capital Loans Function?

Financial institutions that issue working capital loans and business lines of credit often do so against the security of personal guarantees or current assets. The amount of credit will depend upon a number of factors, and the financial institution’s loan officers will carefully analyze those factors. The factors include the build up of inventory, the outstanding receivables, and the work in process.

Need Working Capital in Canada? Click here to visit our lending site.