When Hussam Haroun set his sights on acquiring Colm Engineering Ltd., a well-established electrical engineering firm serving clients across Canada and the US, he faced a common timing challenge: traditional business capital loans couldn’t accommodate his acquisition timeline. While banks provide excellent long-term financing solutions in the right situations, the length of their approval processes didn’t align with the speed needed to close this particular opportunity.
This scenario occurs frequently across Canadian businesses. Companies with solid fundamentals and growing revenue sometimes find timing mismatches between traditional financing timelines and immediate opportunities. This has created demand for complementary working capital solutions that can bridge these gaps while businesses work toward or maintain their bank lending relationships.
Understanding Banking’s Growth Challenge
Banks excel at supporting businesses across many stages of development with comprehensive services, competitive rates, and long-term relationship focus. However, certain high-growth periods can create financial patterns that temporarily fall outside standard lending parameters—not due to any failing of the bank or business, but simply due to the dynamic nature of rapid scaling.
During intensive growth phases, businesses may experience:
- Month-to-month revenue fluctuations as new markets develop
- Evolving receivables patterns with rapid customer acquisition
- Immediate capital needs for time-sensitive opportunities
- Cash flow cycles that shift with expanding operations
These circumstances can create misalignments with traditional lending structures, requiring specialized bridging solutions while businesses may work toward re-establishing bank lending relationships.
When Business Needs Evolve Beyond Current Structures
Traditional business capital loans provide the foundation of Canadian business financing, offering credit at competitive rates that many businesses prefer. Sometimes, however, business circumstances evolve in ways that exceed current banking structures:
Rapid Growth Phases: Businesses experiencing sudden expansion may need immediate capital deployment while their banking relationships can not presently be restructured to accommodate new realities.
Seasonal Fluctuations: Companies may require temporary additional capacity during peak periods while desiring to maintain their existing banking arrangements.
Unique Opportunities: Time-sensitive contracts or acquisitions may require specialized financing structures while long-term banking solutions are being developed or worked towards.
Capitally’s Working Capital Solutions
Capitally provides working capital solutions that complement or replace traditional bank lending relationships by focusing on immediate opportunities where timing is critical. Rather than fully replacing traditional business capital loans, these solutions may bridge gaps while companies work with their banks on longer-term financing strategies.
How Colm Engineering Transformed Its Operations
Colm Engineering‘s partnership with Capitally demonstrates how working capital solutions can ultimately complement traditional banking relationships. When bank financing couldn’t accommodate the acquisition timeline, Capitally’s flexible approach enabled:
Rapid Deal Closure: While banks conducted their thorough due diligence processes, Capitally provided interim acquisition financing that aligned with the transaction timeline.
Operational Cash Flow Transformation: The most dramatic impact came in day-to-day operations. Colm Engineering’s cash conversion cycle improved from 60-90 days to approximately 5 days through invoice factoring, providing unprecedented stability for a business dependent on project-based revenue.
As Hussam noted, “Consistency in cash management was key. My KPI is cash stability, and Capitally allowed me to have that stability.” This working capital solution provided immediate stability while the company worked toward establishing optimal banking relationships for long-term growth.
Collateral Considerations During Growth Phases
Banks appropriately maintain comprehensive security interests to protect all stakeholders and ensure regulatory compliance. During rapid growth phases, businesses sometimes need specialized financing structures that may or may not work cleanly alongside existing bank security arrangements without creating complications.
For example, a manufacturing company with existing bank facilities might need specialized invoice factoring for new government contracts. Rather than creating complex overlapping security interests, if the bank is agreeable, a clean specialized structure can provide the necessary working capital while preserving existing banking relationships for future expansion.
This approach respects banks’ prudent risk management while ensuring businesses can access appropriate financing for their current circumstances—often serving as a bridge while expanded banking relationships are developed later.
Comprehensive Working Capital Solutions
Capitally offers several solutions that can work alongside traditional bank lending relationships:
Invoice Factoring: Converting Receivables to Cash
For businesses like Colm Engineering with creditworthy B2B customers, invoice factoring provides immediate access to working capital without waiting for customer payments. Key benefits include:
- Receive up to 85% of invoice value within 24-48 hours
- Professional collection services maintain customer relationships
- Scalable funding that grows with your business
- No fixed monthly payments or long-term debt obligations
Purchase Order Financing: Fulfilling Large Contracts
For distributors and importers, purchase order financing enables companies to fulfill orders that exceed their current working capital capacity. This solution complements traditional banking by focusing specifically on confirmed orders from creditworthy customers, providing immediate funding while longer-term credit facilities are being established or expanded, or awaiting a time when financial statements will support more traditional lending.
Asset-Based Lending: Leveraging Business Assets
Asset-based lending provides flexible credit facilities secured by inventory, equipment, and receivables. By providing capacity based on specific assets, credit facilities up to $10 million may be obtained.
Supply Chain Finance: Credit-Based Solutions
For established companies with strong credit profiles, supply chain finance offers efficient working capital optimisation that works alongside existing bank lending relationships, perfect for companies needing periodic transaction financing or wanting to optimise payment cycles without impacting current debt facilities.
Industry Applications
Capitally’s working capital solutions serve key Canadian industries:
Engineering and Professional Services: Companies like Colm Engineering benefit from strong gross margins (typically 25-50%), creditworthy commercial clients, and project-based cash flow cycles that make invoice factoring ideal for managing payment gaps.
Technology Companies: Canadian tech companies frequently achieve high gross margins but need capital for rapid scaling. Capitally enables them to leverage recurring revenue, bridge funding gaps, and scale operations without equity dilution.
Manufacturing and Distribution: These businesses face seasonal inventory requirements, extended customer payment terms, and growth opportunities requiring immediate capital deployment. Working capital solutions can bridge timing gaps while companies work with their banks on expanded credit facilities.
Staffing Companies: With weekly payroll obligations and 30-60 day waits for client payments, staffing companies find invoice factoring transforms their cash management from crisis to stability.
These industry-specific applications often involve collaborative relationships with the broader financial community.
When the Financial Community Collaborates
The Canadian financial community often works collaboratively to ensure businesses have access to appropriate financing at each stage of their development. Banks, recognizing their clients’ evolving needs, often recommend specialized providers like Capitally for specific situations while maintaining their valuable long-term relationships.
This collaborative approach serves everyone’s best interests:
- Banks can maintain their prudent risk management standards while supporting client success
- Businesses access specialized financing for their current circumstances without losing overall banking relationships
- Specialized providers can focus on their expertise in growth-phase financing as part of the broader financial ecosystem
Many of Capitally’s clients maintain ongoing relationships with their referring banks, working toward expanded traditional facilities as their business patterns stabilize and align with conventional lending parameters.
The Path to “Graduation”
One of the most compelling aspects of Colm Engineering’s story is what Capitally proudly calls “graduation” – the successful transition to traditional banking once the company had established stable operations and financial patterns that aligned with bank financing criteria.
“Stability allowed us to take the time we needed to get the bank reengaged. Now that we’ve created stability with Capitally, we’re going for higher profitability,” Hussam explained.
This graduation process demonstrates how alternative working capital solutions can serve as a bridge to traditional banking by helping companies:
- Establish consistent cash flow patterns that banks prefer to see
- Demonstrate growth capacity that strengthens financial statements for traditional financing
- Maintain operational stability during transitions to expanded banking relationships
Qualification Criteria
Capitally’s ideal clients share specific characteristics that make them excellent candidates for alternative working capital solutions:
Business Fundamentals:
- Annual revenue typically $1M to $50M
- B2B sales model with creditworthy customers
- Gross margins of 20% or higher (minimum 15%)
- Clean invoicing for completed deliverables
Customer Quality:
- Mid-to-large sized customers with strong credit profiles
- Diversified customer base reducing concentration risk
- Invoices typically $1,500 or higher
Geographic Focus: Capitally serves businesses throughout Canada
Financial Position: Companies seeking to complement existing personal resources, small bank lines, or BDC financing, with working capital requirements between $250,000 to $10 million.
Taking Action
If your business faces challenges similar to those Colm Engineering encountered—growth opportunities that require immediate capital while working toward future bank lending solutions—consider these questions:
- Are timing mismatches preventing you from seizing profitable opportunities?
- Do extended customer payment cycles create temporary operational challenges?
- Would bridging capital help while you establish or expand banking relationships?
- Could immediate working capital complement your existing financing strategy?
The Ecosystem Approach to Business Financing
The most successful growing businesses understand that different financing tools serve different purposes at different times. Just as businesses use different insurance providers for various needs, or different service providers for specialized functions, optimal financing often involves an ecosystem of relationships rather than a single source.
Banks typically excel at: Comprehensive services, regulatory lending, real estate financing, and supporting established growth patterns within the risk tolerances that are a fit for them.
Specialized working capital providers excel at: High-growth financing, asset-specific lending, rapid decision-making, creative solutions and situations requiring immediate deployment.
The ideal scenario: Businesses maintain strong banking relationships for appropriate needs while accessing specialized solutions for growth-specific challenges, often returning to expanded bank relationships once their growth patterns stabilize.
Your Path Forward
Colm Engineering’s journey from acquisition financing to operational transformation to eventual graduation to traditional banking illustrates how alternative working capital solutions can serve as valuable bridges during critical business transitions. When conventional financing timelines couldn’t accommodate the acquisition opportunity, Capitally’s partnership approach provided not just funding, but the stability needed to work toward preferred long-term financing arrangements.
As Hussam concluded, “As an entrepreneur, my plans would have been very different if it wasn’t for Capitally. Capitally never limited me—it was up to me and my customers.”
For Canadian businesses operating with strong margins, creditworthy customers, and growth ambitions that require immediate capital, working capital solutions offer a proven path to bridge timing gaps while establishing or maintaining strong bank lending relationships. The question isn’t always whether your business needs to replace traditional financing—it’s whether complementary or temporary solutions could unlock opportunities while you work toward your preferred financing structure.
Ready to explore how working capital solutions could transform your business operations? Contact Capitally to discuss your specific needs and discover how strategic financing partnerships can unlock your company’s growth potential.
