Securing Your Business: 5 Practices to Secure Your Business Online

A big part of business is focusing on profit margins and productivity, but keeping a business operating healthily gets a bit more complicated than that. One of the concepts you can’t afford to neglect is working capital. Working capital is a necessary data point for any business, and while sometimes it’s taking a bit more time to understand, it is absolutely crucial for maintaining a healthy balance sheet and operating effectively. We’re going to go over what working capital is, why it’s important, and some of its uses in the business world. Let’s get started.

What is Working Capital?

Working capital is essentially what you have left after taking out all the money you need to pay the bills. Think of it like you would in your personal life with a normal job. You get paid, you add up all your household bills and debts, set that money aside to take care of those necessary expenses, and you can work with whatever you have left. If needed, you also have assets you can leverage such as your savings, valuables, and other things that can help beyond the cash you have on hand. In more professional terms, this is everything you have, assets and cash on hand, minus the liabilities you have such as credit card debt, the bills necessary to keep the business running, payable taxes, and more. How you determine your overall working capital is by adding up your assets and financial resources and subtracting the total amount required to pay your expenses. We’ll keep it easy with solid numbers, but your actual calculation will likely be slightly more complicated. Let’s say you add up your assets and have $100,000 in value. After you add up your liabilities, you calculate that you have $50,000 to pay in total. $100,000 minus $50,000 is $50,000. That's your working capital.

Why is Working Capital Important?

Working capital is important in two main ways. At a first glance, it seems as if having as much of it available as possible, but that’s not quite accurate. Let’s go over both ways it can go and why balance is important.

What is Negative Working Capital, and Why it is Important?

This is the primary concern most business owners are going to have, and it’s certainly one that is most immediately noticeable. Negative working capital is when you use the formula we provided earlier, and you don’t have enough to cover your liabilities. That means you don’t have enough to pay your bills, essentially. If you don’t have the capital available to pay off your liabilities, you certainly can’t commit to any sort of growth, and the immediate future of your business doesn’t look promising, either. There are solutions to this that we will talk about later, but this is the worst-case scenario in a lot of situations.

What is Positive Capital, and Why it is Important?

Positive working capital is the opposite of negative working capital. It’s when you do have some resources left over to work with. For example, if you were the average homeowner working a normal job, you’d have some money left over after paying bills. Not all of it is “take home money”. Some of it has to go into savings in case you plan something big, like a major family trip abroad. The same concept goes for positive capital in business. That doesn’t mean that having it in extreme excess is optimal, though. In fact, it can mean that you’re making poor business decisions. If you regularly have way more working capital than expected, it typically means that you’re not taking advantage of growth opportunities, low debt situations, and other crucial parts of the business world. In the long term, this can mean that your business growth stagnant and that excess will start to decline eventually. It can also mean that you’re not providing reasonable upkeep for your business, which has major consequences, or it can mean that you’ve failed to account for various liabilities and your results are false; which is a major accounting error. In the vast majority of situations, you want to have your growth goals in mind, and you want enough to facilitate those goals. It’s also “working” capital. So, make sure it’s working for you.

How to Increase Working Capital for Higher Growth Potential?

Whether your business has a negative working capital amount, or you simply have larger growth goals you want to accomplish, increasing your working capital is usually going to be attractive. As long as you’re actually using it. Doing that can be difficult, but there are some key data points to target and strategies to use. Primarily, you’ll have two core options: You can increase the number of assets you have to offset your liabilities, or you can get rid of some liabilities such as debts that are close to being paid off.

Increasing Working Capital Assets:

Increasing your working capital assets is going to focus on improving your margins. The larger your margin is, the more working capital you’ll have left over assuming you don’t increase your liabilities. This is essentially the same as telling you to "earn more money”, which isn’t very constructive if money is the problem in the first place. If you’re already generating positive working capital, focusing some of those resources on short-term growth that helps with your margins is a strategy you can use. However, that’s a problem if you’re in the negative since you don't have anything to work with. For example, let’s say you have positive working capital, but you don’t have enough to focus on your goals. You might not be financially capable right now. Instead, pump some of that into marketing a big sale, increasing your inventory in high-demand areas, and similar things to earn more working capital. That’s where a working capital loan comes in, and we’ll get to that shortly.

Decreasing Liabilities to Gain Working Capital:

The other way to earn more working capital is to get rid of liabilities where possible. If there is debt that can be paid off in the short term, paying that off frees up a little more to go toward working capital amounts. If you can lower your tax liability, that’s another way to keep a bit more of your margin. It can also be possible to delay purchases. While growth is the ultimate goal, if you’re struggling to maintain a healthy balance sheet, delaying purchases until you can generate more working capital to accommodate them is crucial. For example, let’s pretend you’re a restaurant. You’re moving around $50,000, but after you pay your vendors, staff, and landlord, you’re only keeping $10,000, and that’s your networking capital. If you can consolidate some of this cost, for example automate ordering process and reduce waiter’s team, you can lower the liability cost and generate more profits. Again, this is something that a working capital loan can help with if liability removal strategies aren’t working or aren’t feasible.

What is a Working Capital Loan?

Alright, we’ve talked about a variety of issues that can pop up with working capital and damage your ability to grow, but now it’s time to start talking about real solutions. There are a lot of situations where you just don’t have any room to work with. You can’t boost your assets, because you don’t have capital, and you can’t remove any liabilities, because they’re all long-term, non-negotiable, and absolutely required. So, how do you get over that speed bump? Primarily, you can get a working capital loan. A working capital loan is a loan used to overcome cash flow problems; but it’s not just used in negative circumstances. Any business owner can benefit from one at a certain point, and it can be a positive experience. Here are some of the ways it’s used.

1. Funding Growth Goals

Sometimes, you’ll have growth goals, and you’ll have positive working capital, but you just don’t have enough funds. In that circumstance, you can use a working capital loan to get that extra bit of funding you need in the short term. For example, let’s say it’s the perfect time to open a new location, but you’re $20,000 short on the overall costs. A working capital loan can help. Of course, the payments will become liabilities later. So, it’s best to be in a relatively healthy position when using a loan for this purpose.

2. Overcoming Financial Speed Bumps

Every business will experience a speed bump in its financial growth at some point. Take COVID-19 for example. Nearly every business went from doing great to suddenly seeing a drop in assets for one reason or another. A working capital loan can help overcome those bumps. If you go into the negative slightly, you can get a working capital loan that helps you remove smaller liabilities and invest in ways to build up non-depreciating assets to grow your margins. There are strategies involved in using a working capital loan this way, but one can save a business and keep it above water in such situations. It’s a lot like when you accidentally spend too much of your check as an average person, and your car payment is coming up. You don’t want to lose your car. So, you get a personal loan to cover it until you’re in a better situation.

3. Waiting on Invoice Payments

In an ideal world, all customers would pay on time, and you’d know exactly when funds were going to arrive. Unfortunately, that’s not how it works. Sometimes, you’ll technically have plenty of working capital on the horizon, but invoices just aren’t getting paid on time. A working capital loan can work like an advance on those invoices to make sure you’re still able to make moves while you wait.

4. Taking Advantage of Opportunities

Sometimes, you’ll be presented with opportunities you don’t want to pass up. For example, maybe you rely heavily on a supplier’s hardware for one of the products you manufacture. For a limited time, they’re offering half-off on bulk shipments of that hardware. That can allow for tremendous savings in the future and a lot of potential for growth. However, you might not have the ability to fund it without throwing your balance sheet off balance. This is another situation where a working capital loan can be the little edge you need to come out on top. Its fast, gets the job done, and keeps you from missing such fruitful opportunities.

Understanding the Working Capital Cycle

Beyond noticing problems with your working capital and finding solutions, you’re also going to want to look at the working capital cycle. This will help you predict when you’re going to have certain assets available, and that allows you to plan for them efficiently. The working capital cycle is the time it takes for your assets to become cash that can pay off your liabilities. For instance, think about the customer invoices for a subscription service. You know that 1000 customers are set to pay their invoice on the 30th. That means that, while you have those accounts as assets, they aren’t realized yet. You don’t actually have the money. The time between now and those payments clearing is your working capital cycle. After the 30th, you would be able to pay your liabilities in this scenario. As such, you want to streamline your working capital cycle as much as possible to ensure everything is moving quickly and efficiently. The best way to do this is to ensure that your customer payments are covering your liabilities. Since waiting for accounts to clear usually takes the longest, ensuring that they pay the liabilities off allows your other assets to simply keep growing and building up more working capital.

The Risk of Certain Working Capital Assets

You’ve probably put together a decent understanding of what working capital assets are at this point. If not, the basics are your customer invoices, inventory, cash, and pre-paid debts. One of those is somewhat volatile, and you shouldn’t aim to build much of your working capital on it. That’s your inventory. Your inventory can be a risky asset. It can become obsolete, depreciate in value, and dramatically impact your working capital amount without any chance of turning into cash. Take fidget spinners for example. During the craze, everyone stocked up on them. That was almost guaranteed cash flow. However, when the trend stopped, that inventory became largely useless. Anyone with too much inventory consisting of that product saw their cash flow tank. This can happen with anything. So, it’s important to understand that risk, diversify assets, and have a solid plan to use your inventory; not just stockpile it for perceived working capital. Think of all the people who bought into Beanie Babies in the 90s, and then think of what happened a few years later when no one cared. The Beanie Babies represent your inventory, and no one caring represents your entire inventory devaluing like crazy. You don’t want things sitting around unless they are guaranteed to be necessary for the future.

The Three Types of Working Capital and How to Differentiate

Finally, there are three types of working capital, and while they all generally work the same way, you will need to differentiate between them.

1. Net Working Capital

This is all the working capital you have at your disposal, and it’s the general number that you’re going to want to keep tabs on.

2. Temporary Working Capital

This is your working capital amount in temporary situations. Think of things such as the speed bumps we talked about earlier, or maybe even expected boosts such as holiday sales. Since the causes for the fluctuations are temporary, you have to work that into your understanding of your working capital during that time period.

3. Permanent Working Capital

The name of this one is misleading. It’s not the amount you’re guaranteed to have all the time. It’s the amount you absolutely need to make it. If you make less, your business’s health starts dropping, and you either fix it or lose it. This is the bottom line of what you need to barely get by, and you want to calculate it regularly since your liabilities and assets will change regularly.

Get a Working Capital Loan with 2M7 Financial Solutions

If you’ve gone through this brief guide and realized you could really use a working capital loan to help your business for any reason, contact us to start the process. We specialize in advanced loans that can help your business seize opportunities, fix temporary problems, and continue operating in a healthy state.

Cash flow issues are a concern for most small and mid-sized business owners. In fact, many SMBs find it difficult to manage growth because of concerns about funds. Having access to the right funding makes it easier to support business growth. There are many different choices out there, but a merchant cash advance might be one you want to consider. Not convinced an MCA is the right choice for your business? Take a look at these Merchant Cash advance benefits and discover how MCAs could help you grow.

Lightning-Fast Access to Funds with a Merchant Cash Advance

One of the biggest benefits of an MCA is how fast you can access the funds you need to grow your business. Whether you need to cover a bill or you want to put a new marketing strategy in place, an MCA helps you do it sooner.Traditional loans can take months to arrive in your bank account. That’s after all the work of preparing your application and waiting for approval too.With an MCA, you could have the funds in your account in a matter of hours.

Think about the Future, Not Your Past

Most traditional forms of business funding rely on your financial history. Lenders will look at your credit score. If you’ve missed a payment or two, you might not qualify for a loan.An MCA is more forward-thinking. Instead of checking your credit score, the lender estimates future credit and debit sales.The lender then offers you a lump sum based on where you’re going, not where you’ve been. If your credit score is less than stellar, an MCA could be the right choice to help your business grow.You also don’t need to provide personal guarantees like you would with a loan.

Merchant Cash Advance Benefits Include More Flexibility

Flexibility is another reason to consider merchant cash advances for your expanding business.A traditional loan offers you a one-time, lump-sum payment. You’ll then pay the amount back with monthly scheduled payments.Merchant cash advances are different. Instead of paying the same fee every month, the MCA is repaid by a percentage of your credit and debit sales.If your sales dip one month, so too will your payment to the MCA. If you have higher than expected sales, your payment will increase too. This can help you pay back the MCA faster.This flexibility makes it much easier for a growing business to manage repayment. With merchant cash advances, you can stop worrying about making your loan payment.

Use Funds as You See Fit

With a traditional bank loan, you may have to tell the lender what you’ll use the funds for. Loan approval is then tied to buying equipment or investing in real estate.What if your needs change from month to month? Market conditions change quickly, and businesses like yours need to stay one step ahead.With a merchant cash advance, you’re in control of how the funds are spent. If you need to pay bills today and invest in a new website tomorrow, an MCA can make it happen.

Ready, Set, Grow

If you’ve been wondering how to fund your business’s growth, consider a merchant cash advance. The easy application process means you could have the funds you need in short order.If you’re not sure an MCA is right for your business, get in touch with us. We can help you discover the right alternative lending solution for your business.

If you have ever sat across from a bank representative, filled out a stack of forms, and walked away empty-handed, you are not alone. Securing small business funding in Canada has become genuinely harder over the past few years. Interest rates have climbed, underwriting standards tightened, and many business owners who would have been approved without question five years ago are now facing rejection letters. That reality is frustrating, and it deserves to be named plainly before we talk about what you can actually do about it.

The good news is that understanding exactly what lenders evaluate changes the entire game. Whether you are pursuing a traditional bank loan, a Merchant Cash Advance, or another form of fast business funding, the criteria lenders use to assess your application are knowable. Here is what goes on behind the scenes.

Credit History vs. Business Health: What Actually Matters More

Personal credit scores get a lot of attention, and they do matter. But for most small business owners seeking funding outside the Big 5 banks, they are rarely the deciding factor. Alternative lenders are far more focused on the operational health of your business than they are on a three-digit number pulled from your credit bureau file.

The reason is simple: a lender who advances capital against your future revenue wants to know whether that revenue is real, consistent, and growing. A credit score tells them about your past borrowing behaviour. Bank statements tell them whether your business can actually repay what it borrows.

That said, a damaged personal credit history can still complicate your application, particularly when it comes to interest rates and loan structures. If you are worried that your credit history might disqualify you, you can read more about how to get a business loan with a bad credit score to see what other options are available.

The Big 5 Banks vs. Alternative Lenders: Understanding the Friction

Canada's major chartered banks operate under regulatory frameworks that require them to be conservative. Their approval processes are designed for businesses with established revenue, years of audited financials, strong personal credit, and collateral. For many small business owners, especially those in their first few years of operation, those requirements create a wall that is genuinely difficult to climb.

Alternative lenders exist precisely because that wall has left a large segment of the Canadian small business market underserved. Products like Merchant Cash Advances, revenue-based financing, and short-term small business loans were built for businesses that have real cash flow but do not fit a bank's rigid profile. The approval timelines are shorter, the documentation requirements are more practical, and the underwriting process is designed to assess your actual business rather than compare you to an institutional checklist.

This does not mean alternative lending is without scrutiny. Reputable alternative lenders still evaluate your application carefully. But the criteria they use tend to be more relevant to where your business actually is today.

Essential Documentation: What to Have Ready

One of the genuine advantages of working with an alternative lender like 2M7 over a traditional bank is how straightforward the documentation requirements actually are. While a bank might ask for years of audited financials, business plans, and tax returns, getting approved for a Merchant Cash Advance requires just three things:

• Three months of business bank statements
• A photo ID
• A void cheque

That is it. The bank statements give lenders a clear picture of your cash flow, the frequency and consistency of deposits, your average balances, and how existing obligations are being managed. The ID and void cheque handle identity verification and ensure funds are deposited directly into the right account. 

Being organized still matters. Having these three documents ready before you apply signals that you run your business with intention, and it keeps the process moving quickly. Approvals can happen in as little as a few hours, with funds deposited within 24 hours of approval. If you want to put your best foot forward before applying, we've put together some effective strategies to help boost your business cash flow.

How Industry Risk Shapes Your Application

Not all businesses are treated equally by underwriters, and that is worth understanding before you apply. Lenders build risk models that factor in historical default rates by sector. Some industries are considered higher risk, not because of anything specific about your business, but because of how that category has performed across thousands of loans.

Restaurants, retail, and construction businesses, for example, often carry more scrutiny than professional services or healthcare businesses. Seasonal businesses face questions about cash flow stability. Newly regulated industries, or those with volatile margins, may trigger additional review.

This does not mean lenders in these sectors cannot get funded. It means the strength of your cash flow documentation, your time in business, and your repayment history need to work harder. Knowing which box your business falls into before you apply lets you structure your application in a way that addresses those concerns proactively. Regardless of your industry, the key is showing the stability of your operations.

Collateral: How It Works in the Canadian Landscape

Collateral requirements vary considerably between lenders. Traditional bank loans often require tangible assets like real property, equipment, or inventory as security. For many small business owners, that requirement alone is enough to end the conversation before it starts.

For 2M7, our Merchant Cash Advance requires no collateral. You are not asked to put your property, personal assets, or business equipment on the line. Funding is extended based on your business's revenue and performance, full stop.

At 2M7, we prioritize transparency and clarity. That means you will know your complete cost of capital before you sign, with no hidden fees or surprises down the line. If you have questions about how any part of the agreement works, we are always happy to walk you through it.

Ready to See What You Qualify For?

The application process does not need to feel like a black box. 2M7 works with Canadian small business owners every day to find funding structures that fit their actual situation, not just the profile a bank wants to see.

If you would like to talk through your options without any obligation, reach out to us directly. We will take the time to understand your business and connect you with a funding solution that makes sense.

Get Approved Today

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