The recent announcement of a 25% tariff on Canadian goods entering the U.S. presents a significant challenge for small and medium-sized enterprises (SMEs) across the country. With the U.S. being Canada’s largest trading partner, many businesses now face rising costs, supply chain disruptions, and uncertainty in their biggest market. While these tariffs create obstacles, they also present opportunities for well-prepared businesses to adapt, innovate, and even gain market share.
At Amica Capital Corporation, we specialize in factoring, purchase order (PO) financing, and letters of credit—powerful financial tools that can help Canadian SMEs maintain cash flow, fulfill large orders, and expand into new markets. Here’s how your business can navigate the new trade environment and come out stronger.
The Impact of 25% Tariffs on Canadian Businesses
For Canadian companies that export to the U.S., these tariffs mean:
- Higher Costs: U.S. buyers may pass tariff costs back to Canadian suppliers, reducing profit margins.
- Delayed Payments: Many U.S. businesses will experience financial strain, leading to longer payment cycles.
- Lost Sales: U.S. companies may seek alternative suppliers from non-tariffed sources.
- Supply Chain Disruptions: Rising costs may limit access to key raw materials.
While the short-term impact may seem daunting, businesses that act strategically and secure financial backing can maintain stability, capitalize on new opportunities, and expand their market presence.
Three Financial Solutions to Overcome Tariff Challenges
- Factoring: Ensuring Strong Cash Flow
Problem: The tariffs may lead to slower payments from U.S. buyers, making it difficult for Canadian businesses to cover daily expenses, payroll, and supplier costs.
Solution: Factoring allows businesses to sell their unpaid invoices for immediate cash. Instead of waiting 30-90 days for payments, companies can receive up to 90% of the invoice value upfront, ensuring a steady cash flow.
Key Benefits:
- Keeps operations running smoothly even if U.S. customers delay payments.
- Helps businesses offer more competitive payment terms, making them more attractive to U.S. buyers.
- Reduces the risk of bad debt, as the factoring company takes on the collection responsibility.
- Purchase Order (PO) Financing: Fulfilling Large Orders Without Cash Flow Concerns
Problem: Even if demand remains strong, many businesses struggle to fulfill large orders due to the upfront cost of purchasing raw materials or inventory.
Solution: PO financing provides the necessary capital to cover supplier costs before receiving payment from customers. This is especially valuable for manufacturers, wholesalers, and distributors needing to scale operations without draining cash reserves.
Key Benefits:
- Enables businesses to secure and fulfill larger contracts with U.S. buyers.
- Ensures smooth supply chain operations despite increased costs.
- Allows businesses to pivot to new markets by funding sales beyond the U.S.
- Letters of Credit: Expanding into New Markets with Confidence
Problem: With the added financial risk of selling to new buyers outside of North America, businesses may struggle to establish trust and secure payment.
Solution: Letters of credit (LCs) provide a payment guarantee, ensuring that businesses get paid for exports to new markets, including Europe, Asia, and Latin America. Accounts receivable insurance further protects against risk of buyer payment default.
Key Benefits:
- Reduces risk when expanding internationally.
- Strengthens negotiations with new buyers.
- Encourages diversification beyond the U.S. market.
How Canadian Businesses Can Adapt and Thrive
While the 25% tariffs create immediate challenges, they also present opportunities for businesses that act decisively. Here’s how Canadian SMEs can turn adversity into an advantage:
- Strengthen Domestic and Global Market Presence
- Leverage CETA (Canada-EU trade agreement) and CPTPP (Asia-Pacific trade agreement) to expand sales beyond the U.S.
- Use financing tools like PO financing and LCs to enter new markets with confidence.
- Offer Competitive Payment Terms to U.S. Buyers
- With factoring, businesses can extend flexible payment options to U.S. customers, making them more attractive suppliers compared to competitors struggling with cash flow issues.
- Acquire Struggling Competitors
- Some competitors may fail due to cash flow issues, presenting opportunities for acquisitions and market expansion.
- Secure Alternative Supply Chains
- Look for non-U.S. suppliers to reduce reliance on tariff-affected goods, optimizing cost structures.
Final Thoughts: Turn Tariffs into Opportunity
The 25% tariffs may seem like a setback, but businesses with strong financial strategies can not only survive but thrive. Factoring, PO financing, and letters of credit are essential tools that enable businesses to maintain stability, fulfill orders, and expand into new markets despite economic uncertainty.
At Amica Capital Corporation, we provide customized financial solutions that empower Canadian businesses to stay competitive and grow in any economic climate.
Is your business prepared to navigate the new trade landscape? Contact us today to discuss how we can help you secure the financing you need to overcome challenges and seize new opportunities.
📞 Call Us: 416-817-2804
📧 Email: info@amicacapital.ca
🌐 Visit Us: www.amicacapital.ca
Let’s build a stronger, more resilient Canadian business sector—together!
