Problems You’ll Encounter If You Don’t Have Sufficient Canada Working Capital

If you own or manage a small business in Canada working capital should always be monitored. Just about every business in the world has to make sure that they’ve got access to sufficient working capital all year round. This is how they stay ahead. And this is how they survive.

But let’s define working capital for a moment, so that we’re all on the same page. Working capital is when you take into account all your resources that you can easily turn into cash within a year (current assets), minus all the debts that must be paid back with the year (current liabilities). In short, working capital refers the efficiency and current health of your business. If you lack sufficient working capital, you may encounter several serious problems:

  1. It’s more difficult to find investors for your business. Without sufficient working capital, you demonstrate that your business doesn’t have the ability to earn a positive return for investors or pay back a loan to lenders. As a small business in Canada working capital deficiency may prove too much of a risk. And without investors and creditors, you seriously hamper your business’s ability to acquire crucial resources.
  2. You miss out on great hires. Finding the right employees to work for you can really help your business grow considerably. It’s not just that the superstar employees may not work for you because you don’t have the means to pay them a fair compensation. Sometimes you may even have to forgo hiring staff that you really need. When your employees are using too much time and effort on jobs in which they don’t have the skill (typing reports, figuring out Excel, selling products, etc.), the lack of sufficient working capital can be truly detrimental.
  3. You can’t run day-to-day operations efficiently.  You need to purchase equipment and inventory, you need to buy supplies, and you have to pay your employees. If you make do without the necessary supplies, equipment, and inventory you can affect your profit margins, and any trouble with salaries can affect employee morale and efficiency.
  4. Emergencies can be terrible and even fatal to your business. What if some unforeseen circumstances not covered by your insurance cause you to lose your inventory? How will you replace them, if you don’t have the working capital to make the necessary replacements? This is just one possible emergency that can happen. In the business world, emergencies tend to happen on a regular basis, and the lack of working capital can end your business permanently.

In Canada working capital must always be overseen so that they remain sufficient for all the company’s needs. If they’re not, steps must be taken to correct it. Perhaps sales revenues can be boosted, or some long term assets can be converted to cash to solve cash flow problems.

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How to Manage Your Canada Working Capital Properly

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.

2014 Canada Working Capital

Approval within 48 hours from the time the application is submitted
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.


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