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Have you been searching the internet for how a Canadian company can secure working capital? When it is time for a business to expand, the first step is to acquire an appropriate amount of money. This way, you will have the working capital that will allow employees to be paid, taxes secured, and all of the proper materials to be in place.

Whether you are a small business or a multinational corporation, you may be scrambling to figure out how other Canadian companies are getting their working capital. Unlike neighbors in the United States, Canada has a system of options that is unique to it. In order to start moving forward, a brief introduction to the specific types of working capital Canadian companies rely on is all you need.

Why Canadian companies need working capital

As the old saying goes, “it takes money to make money.” This is old adage is absolutely true when it comes to providing services to a new client for an extended period of time without getting paid right away. This means that employee wages and your own invoices must be paid while you are awaiting payment for the services or products that you have rendered.

A short-term solution to the long-term problem of needing upfront cash is asking a lender for working capital. It may not be easy to obtain, but it is not as difficult as it first appears. After jumping through a few hoops and examining all of your options, you may find that the right step to working capital is right in front of you.

How working capital works in Canada

If you have some money that can cover a fixed monthly payment and a few assets, you are on your way to securing a loan of some type. Chartered banks throughout Canada offer this, but some are more strict or do not offer the terms that you want. A nonbanking facility with private investors or lenders is also a solution that some find more accessible. With either solution, you will be working with your own capital by putting property, liquid assets, and unpaid invoices on the line. This is typically termed “asset based lending” and is the most popular way to secure a loan of any type.

Some of the obscure or niche businesses that are offered working capital in Canada include:

  • Oilfield and natural gas services
  • Employee staffing
  • General retail, apparel, furniture, grocery
  • Warehousing and manufacturing
  • Light and heavy transport
  • Government related industries

Benefits of using working capital in Canada

Believe it or not, some businesses in Canada are using working capital when they do not actually need it. The purpose of this kind of technique is to improve credit history. For this reason, a business selects a lending institution and starts to make as many payments as they can. Regardless, the point is to keep this loan paid up and open for an extended period of time.

In these cases, the loan with the lowest interest rate is chosen. The benefits of this working capital scheme is to set up future credit for taking out bigger loans at institutions that a business has previously been denied. In other words, when you need more money than you have assets, you need to show that your business has a history of credit with a good rating.

Private versus public lending institutions

In many countries, if you are looking for money you do not have, you put up part of your assets and take out a loan. In most cases, this is a privately owned bank. You work with the loan officer to file the necessary paperwork and the money is yours. This can include upfront cash combined with a line of credit. Either way, you get the working capital you need.

Another option outside of a privately owned bank are institutions that single out particular kinds of businesses. For example, working capital is given to oil-related businesses in exchange for service invoices that have not been paid. Other long term loans are given by private lenders that could also be considered investors. However, there is another angle that involves public or government institutions.

Government agencies are sometimes just as committed to lending money as private ones. This is especially true in Canada. While it appears that a primary focus for many public sources of working capital are export related, there are also other types of companies that can get this type of help. Although there are many nationwide programs in Canada, there are also regional or province-related ones.

The specific types of services that are pinpointed by public Canadian government funded working capital institutions are:

  • Export development for Canadian companies
  • General financial assistance
  • Financing for artists
  • Working capital solutions
  • Financing for exporting
  • Financing for French-Language artists
  • Growth capital for Aboriginal business in Canada
  • Business development loans
  • Development of humanitarian aid markets
  • Business opportunities and services
  • Climate change services
  • Financing for foreign customers
  • Bonding solutions
  • Financing solutions
  • Government grants, loans and financing
  • International development programs
  • Small business internship programs
  • Additional sources of private sector financing

Nationwide working capital solutions for Canada

There is a long list of financial lending firms that have the government of Canada backing them. Their purpose is to help businesses of every size to access cash that they need to expand their business. During your first inquiry, you will receive a lot of advice concerning your business plan. You may learn that there are other fires that you will need to put out before you are ready for new working capital of any kind.

Regardless, government agencies that work with business financing will continue to review your request for as long as you want to make an effort. Their objective is not to make a profit. Instead, they may recommend that you apply for a grant or give you a line of credit loan due make planned payments for each month.

In the end, many businesses feel that this process takes too long and look toward industry specific private financing financiers such as oilfield factoring services.

Some of the Canadian institutions that help businesses gain working capital through grants and other sources are:

  • Business Development Bank of Canada (BDC)
  • Canadian International Development Agency (CIDA)
  • Foreign Affairs and International Trade Canada (DFAIT)
  • National Research Council Canada (NRC)
  • Canada Business
  • Community Futures Network of Canada
  • Foreign Affairs and International Trade Canada (DFAIT)
  • Industry Canada
  • World Bank
  • Export Development Canada
  • Government Trade Services: A Map to Government Support for International Trade
  • Indian and Northern Affairs Canada
  • Foundation to Assist Canadian Talent on Recordings (FACTOR)
  • Business Development Bank of Canada (BDC)