2M7's Forward Thinkers Scholarship Winner

Cash flow is the kind of problem that feels personal. You know your business is generating revenue. You know invoices are out. And yet the bank account tells a story that doesn't match the one in your head.

This is one of the most common situations Canadian small business owners find themselves in, and it has nothing to do with whether the business is viable. It has to do with timing. Money moves out before it moves back in, and in the gap between those two things, businesses that are technically profitable can still feel like they're barely keeping pace.

The good news: this is a solvable problem. Here's what actually works.

1. Stop Waiting to Invoice

The fastest way to tighten your cash cycle is to close the gap between when work is done and when the invoice goes out. Many business owners batch invoices at the end of the month out of habit. That habit costs you weeks of float every billing cycle.

Send the invoice the day the job is done, the product ships, or the milestone is reached. Most accounting software (QuickBooks, FreshBooks, Wave) lets you automate this. If you're still sending invoices manually, that's worth fixing too, but start with the timing.

While you're at it, look at your payment terms. Net-30 is standard, but it's a convention rather than a requirement. Many businesses successfully shift to Net-15 or even Net-7 for certain clients. Some add a small early payment discount of 1–2% to make faster payment genuinely attractive. Over the course of a year, shortening your average days outstanding has a real impact on how much cash you have available at any given time.

2. Get Serious About Receivables

Sending the invoice is step one. Collecting on it is the step most businesses handle inconsistently.

Pull your accounts receivable aging report. If you don't know where to find it, it's in your accounting software, which shows every outstanding invoice sorted by how long it's been unpaid. According to a Stripe analysis of 250,000 invoices, an invoice that remains unpaid past 90 days has only an 18% chance of being collected. Anything past 45 days deserves a phone call, not another email. Anything past 60 is a cash flow problem, not just an administrative one.

A few things that help:

• Follow up within 3 days of an invoice going past due, not 30
• Accept multiple payment methods, because the easier you make it to pay, the faster people pay
• For clients with consistently slow payment patterns, consider requiring a deposit before work starts
• For large project-based work, build milestone payments into the contract so you're not waiting until completion to see money

None of this is aggressive. It's running your business like the cash matters, because it does.

3. Negotiate Your Payables Without Burning Relationships

Most business owners put more energy into speeding up what comes in than managing what goes out. Both sides of the equation matter.

Talk to your suppliers. If you have a solid payment history with them, many will extend your terms from Net-30 to Net-45 or Net-60 without much pushback. That extension alone can give you meaningful breathing room when you're waiting on a large receivable. Some suppliers also offer a discount for early payment. That discount is worth taking when you have cash and worth skipping when you don't.

The same principle applies to equipment and asset purchases. Outright purchases wipe cash immediately. Leasing or financing that equipment spreads the cost over time and preserves working capital for things that are harder to finance, like payroll, inventory, and operating costs that don't come with payment terms attached.

This isn't about avoiding payment. It's about aligning when money goes out with when money comes in.

4. Know Your Cash Cycle, Not Just Your Profit Margin

Your income statement tells you whether your business model is working. Your cash flow statement tells you whether your business will survive long enough to prove it.

As QuickBooks Canada notes, without proper cash flow management, even profitable businesses can face serious obstacles. The two statements can tell completely opposite stories at the same time because revenue is recorded when it's earned, not when it's collected. If you invoiced $80,000 last month on Net-60 terms, that $80,000 does not exist as cash yet.

Understanding your cash conversion cycle, which is how long it actually takes from the first dollar spent to getting paid, gives you the visibility to plan ahead. A retailer buying inventory before a peak season, a contractor fronting materials before a draw payment, a service business billing at month-end and chasing payment for 45 days: each of these has a predictable cycle. Once you know yours, you can anticipate the gaps instead of reacting to them.

A 13-week cash forecast sounds like something only larger companies bother with. It isn't. Even a rough projection of what's coming in and going out over the next quarter gives you enough lead time to act before a shortfall becomes a crisis.

5. Use Working Capital as a Tool, Not a Last Resort

Here's a shift in thinking that changes how a lot of business owners operate: external capital isn't only for emergencies. For businesses where the cash cycle is structurally long, where spending always precedes earning, a working capital facility is a sign of clarity rather than distress.

The business owners who handle cash flow best tend to have financing in place before they need it. Not because they're struggling, but because they know a real opportunity won't wait for a bank's approval timeline.

For Canadian small businesses that don't meet the documentation requirements of the Big 5 banks, or simply can't wait weeks for an answer, a Merchant Cash Advance works differently. Rather than borrowing against credit history or collateral, you're accessing capital against your future revenue. Repayment comes as a percentage of daily sales, so it flexes with how your business is actually performing. Strong month? It pays down faster. Slow stretch? The repayment eases automatically. For a closer look at how this type of funding fits a growing business, read how a merchant cash advance supports a growing business.

At 2M7, the approval process is built around your current business performance: your bank statements, your revenue trends, your cash flow. Not a credit score from two years ago. Businesses operating for at least 3 months with at least $15,000 per month in revenue can apply with just three documents (bank statements, a photo ID, and a void cheque), and can be approved within 24 hours with funds deposited the same day. If you want to understand what that might look like for your situation, the conversation starts here.

The Real Problem Isn't Cash. It's Timing.

Most cash flow problems aren't evidence that something is broken. They're evidence of a gap between when you earn and when you collect. It's one of the oldest tensions in business, and every business owner confronts it eventually.

The ones who handle it best aren't necessarily the ones with the most cash on hand. They're the ones who understand the cycle, manage it deliberately, and know what tools are available when the gap needs bridging.

If you're working through a cash flow challenge right now, or you want to get ahead of one before peak season hits, 2M7 works with Canadian small business owners at exactly this stage.

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2M7 Financial Solutions is honoured to be featured in this month’s CanadianSME Small Business Magazine, with an interview highlighting small business financing advice from 2M7’s CEO, Avi Bernstein. From his insights on the state of the lending landscape, to his expertise on the challenges facing small businesses today – Avi provides insider advice on alternative lending options that can help small businesses secure the funding they need to operate and grow their business.

In the interview, CEO Avi Bernstein discusses the many factors that traditional lenders use to evaluate whether a business qualifies for a loan, and why this digital credit score algorithm method of evaluating businesses, is increasingly resulting in small businesses being denied funding from lenders such as banks and credit unions.“

Rapid shifts in new technologies, increased competition, and the state of the economy have led to an increased need for financing, but it is becoming increasingly more difficult from small businesses to access funding from traditional lenders,” said Avi, when asked about the challenges that small businesses face when it comes to securing funding. “Most small businesses need loans to bridge the gaps during uncertain times such as these, but small business owners continuously struggle to secure working capital.”

For over a decade, 2M7 has been dedicated to leveraging its expertise in the Canadian lending landscape to help as many small businesses as possible to get access to the working capital they need. This dedication has led to the development of a proprietary algorithm which uses a unique approach to evaluate risk and determine credit worthiness – enabling 2M7 to fund businesses that might not otherwise qualify for a traditional loan.

Furthermore, the 2M7 team strives to provide an alternative lending solution that better meets the needs of small Canadian businesses than traditional loans. With minimal requirements and simple terms, 2M7 has designed a straight-forward borrowing option that essentially provides small business owners with a cash advance that is deposited directly into their bank account within 24-48 hours, to use immediately within their business as they see fit.2M7 Financial Solutions continues to be at the forefront of the innovative technologies and processes that are transforming the Canadian financial industry in order to help grow the small businesses that are the backbone of our economy. As the industry continues to evolve, the 2M7 team is committed to continuously improving its flexible funding solutions and working closely with small business owners to better meet their changing needs.

To read the full interview, click here to open page 37 of this month’s digital edition of CanadianSME Small Business Magazine.

A small business owner walking into a bank branch today faces a different conversation than the one their parents had ten years ago. Higher borrowing costs have changed how banks price risk, how much collateral they demand, and how quickly they say no. For owners who need capital to make payroll, restock inventory, or replace a piece of equipment that just quit on them, that shift matters more than any headline number on a rate announcement.

The Bank of Canada's Rate Path and What It Did to Lending

When the Bank of Canada raised its policy rate aggressively starting in 2022, the intent was to cool inflation. It worked, but it also raised the cost of every variable rate loan, line of credit, and floating mortgage tied to prime. Banks didn't just pass along higher rates. They also tightened who qualifies for credit in the first place, because higher rates raise the odds of default across their loan books, and lenders respond to that risk by pulling back.

According to the Bank of Canada, cited in ISED's biannual survey analysis, borrowers themselves reported a tightening in overall business lending conditions, a signal that came directly from the Senior Loan Officer Survey rather than from lenders describing their own policies. That distinction matters. It means the businesses on the receiving end of these decisions noticed the change before it showed up in any official policy statement.

Fewer Businesses Are Even Bothering to Ask

One of the more telling shifts isn't in approval rates. It's in how many owners apply for debt financing at all. According to ISED, debt financing requests from small businesses fell to their lowest share since 2009 in 2024. That's not a sign that businesses stopped needing capital. It's a sign that more owners looked at bank criteria, decided they wouldn't qualify or couldn't stomach the terms, and didn't bother filing an application that would just get declined.

That quiet withdrawal from traditional lending channels is where alternative financing has stepped in.

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Why Banks Have Gotten Harder to Work With

Traditional lenders operate on thin margins and heavy regulatory oversight. When rates rise, three things happen inside a bank's underwriting process that owners rarely see directly.

First, debt service coverage requirements get stricter. A business that could comfortably cover its loan payments at a five percent rate might not clear the bar at eight percent, even if revenue hasn't changed at all. Second, banks lean harder on personal guarantees, collateral, and time in business, which locks out newer companies and anyone without significant fixed assets. Third, approval timelines stretch out, sometimes to six or eight weeks, because underwriters are doing more manual review on files that would have sailed through a few years ago.

None of this means banks are wrong to tighten up. It means the businesses that most need fast capital, seasonal operators, contractors waiting on invoices, retailers restocking ahead of a busy season, are the ones least equipped to survive a slow, restrictive process.

Where Owners Are Turning Instead

Alternative lending exists because it solves a timing problem banks are structurally bad at solving. A merchant cash advance, for instance, is underwritten against a business's actual sales history rather than a credit score alone, which means approval can happen in days instead of weeks. For businesses with inconsistent monthly revenue, that structure often fits the real cash flow pattern of the business better than a fixed loan payment does.

This shows up clearly in specific sectors. Restaurants running on tight margins can't wait two months for a bank decision when a walk-in cooler dies in July. Construction and trade businesses face a similar mismatch, since they're often paid on net-30 or net-60 terms while still needing to cover payroll and materials in real time.

Retailers face their own version of the problem heading into peak seasons, when inventory has to be purchased well before it turns into revenue. Waiting on a bank line of credit renewal during that window can mean missing the season entirely.

Credit History Isn't the Dealbreaker It Used To Be

Banks weight personal and business credit scores heavily, and a few rough years, common for anyone who ran a business through 2020 and the years that followed, can shut the door on conventional financing for good. Alternative lenders generally look at current business performance instead of past credit events. If bad credit has been an issue, that doesn't have to be the end of the conversation the way it often is at a branch.

Fast Business Funding as a Strategic Tool, Not a Last Resort

There's a persistent myth that alternative financing is what businesses turn to when they've been rejected everywhere else. That's outdated. Owners increasingly choose fast business funding deliberately, because speed itself has value. A contractor who can jump on a bulk materials discount, or a retailer who can restock a bestseller before a competitor does, is using capital as a competitive weapon, not a rescue line.

Small business loans through traditional channels still make sense for long-term, predictable financing needs, equipment with a long useful life, real estate, expansion with a clear payback horizon. But for working capital, bridging receivables, or reacting to an opportunity that won't wait for a loan committee, alternative structures like a merchant cash advance are frequently the better fit regardless of what a business's credit profile looks like.

Rates will eventually come down from where they've been, but the underwriting discipline banks have built during this tightening cycle isn't likely to disappear overnight. Lenders that got burned by looser standards in the past don't unwind those lessons quickly. Owners who build a relationship with alternative funding sources now, before they're in a cash crunch, put themselves in a stronger position regardless of where the next rate decision lands.

The businesses that come out ahead in this environment aren't necessarily the ones with the best credit scores. They're the ones that understand which type of capital fits which type of need, and who don't wait until a bank says no to look at their other options.

Talk To Us

If bank timelines and tightening criteria are getting in the way of decisions your business needs to make now, don’t hesitate to contact us. We work with Canadian small businesses across restaurants, construction, trucking, and retail to structure funding that matches how your revenue actually moves.

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