For Travis Anderson at All West Crane and Rigging, a BC based company that rents cranes to clients in a wide variety of industries including oil and gas, the timing was right. “The turning point really was when we won some large projects,” he says. “We needed the start up capital which we could only do by factoring our receivables. And being a new growing company, we didn’t have the equity to go to the bank and ask for the funds.”
It takes creativity to address the many challenges faced in a challenging economic environment. A situation that is all too familiar for most companies operating in Western Canada’s oil and gas industry for the past few years. For All West Crane and Rigging it was financing growth at a time when banks were simply not there to partner up, despite a strong sales funnel in Mr. Anderson’s case.
While it is true that the types of challenges that companies face are wide and many, not all challenges are created equal. Some for example, undoubtedly would have yet still occurred in a thriving economy. Imbalances between accounts receivable and payable in any economy are all too common. But when an imbalance does occur, the order of magnitude gets magnified in an economic slump such as the one Western Canada’s energy industry finds itself in.
For All West Crane and Rigging, accounts receivable financing was the perfect solution that was provided to them by Calgary based CapitalNow Inc. Accounts receivable financing (or sometimes referred to as factoring) is a type of asset-financing arrangement in which a company uses its receivables as collateral in a financing agreement. In this agreement, an accounts receivables financing firm (such as Capital Now Inc.), gives the original company an amount equal to a reduced value of the unpaid invoices or receivables.
“This type of financing helps companies free up capital that is stuck in unpaid obligations,” says CapitalNow’s CEO Gerry Wawzonek. “Accounts receivable financing also transfers the default risk associated with the accounts receivables to the financing company.
For Travis Anderson, it was a no brainer. “We realized the benefits of being able to have access to cash basically whenever we needed it; within a day or two,” he says. “That was a huge convenience for us so we decided to continue and figured that it was a good deal.”
For other companies in the oil and gas industry (mainly on the service side for CapitalNow clients), a recurring issue has been making payroll. “That is a common problem that business owners come to us looking for help with,” says Mr. Wawzonek. “And I can’t tell you how many times we’ve been there to help our clients out that are in a pinch. We are in a relationship business and I stand by making and maintaining the strongest of relations with all my new and existing clientele.”
Companies like CapitalNow take a lot of tension out of the industry. “We deal on a very professional level and so our clientele really enjoy working with us given how flexible and understanding we are of their situation, comments. Mr. Wawzonek. “We are not nearly as dictated by procedure and policy like the big banks are which is a big help for us and our clients.”
CapitalNow began operations in 2007 and since that time hasn’t looked back. “We are now at 12 full-time employees and while it may be intuitive to think of our business as one that is counter-cyclical, in actual fact we are always primed for growth regardless if the economy is in an upswing or slump.” comments Mr. Wawzonek. “As an Alberta company we are very in tune with the culture of the province and we really do embrace the entrepreneurial frontier spirit that so many business owners embody out here.”
Without CapitalNow’s support entrepreneurs and business owners may be less ambitions to take on bigger projects, expand their business and hire more people; exactly what Alberta and BC’s energy industry needs right now.
“The short of that CapitalNow has enabled our business to stay on top of our AP and to fund new projects quicker,” says Mr. Anderson. “Basically, we are now able to be proactive rather than reactive in the market.”
“We don’t’ have any setup fees associated with our service, we are hassle free, we don’t interfere with a client’s existing banking relationships, and we are willing to be second in line after the banks in event of a liquidity event,” says Mr. Wawzonek. “The challenge for us now is simply to raise awareness for what we can offer clients and to show how effective our solutions really are.”