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Kunal Gupta, CEO of Polar Mobile, is seen in his Toronto office on May 7, 2010.

JENNIFER ROBERTS FOR THE GLOBE AND MAIL/jennifer roberts The Globe and Mail

Every week, we will seek out expert advice to help a small- or medium-sized company overcome a key issue it is facing in its business.

It's the stuff of tech start-up dreams: Four years ago, Kunal Gupta, then a 22-year-old software engineering student at the University of Waterloo, pitched a mobile application to Rogers Communications Inc., which signed on to have the then-three person startup produce mobile versions of Maclean's and Canadian Business.

Four years later, Mr. Gupta and his staff of 40 can hardly keep up with the gigs his Toronto-based company, Polar Mobile, a designer of smartphone applications, keeps landing – from Time Inc. to CBS Sports to Microsoft Corp., for which it designed 500 apps for Windows Phone 7.

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Polar Mobile's latest coup: It has a deal with Research in Motion Ltd. to design at least 100 new apps for the Playbook this summer.

While it's all plum work, the company hasn't had the time to build up enough capital to fund the number of new hires it needs in order to keep up, says Mr. Gupta, chief executive officer of the company, which has 300 customers in 10 countries.

"No startup has the cash flow to hire as fast they want to hire," he says.

And Polar Mobile is growing really fast: It had just 25 employees a year ago.

Staffing is so tight that Mr. Gupta recently turned down a contract to avoid overwhelming his team.

More concerning, Mr. Gupta needs more talented, well-paid developers to come up with the innovative products to keep his company on top.

Polar Mobile has had help from angel investors, but mainly it bridges the cash gap with government grants for research and development, and skilled hires.

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The company has already received four grants, including money from the National Research Council's Industrial Research Assistance Program, the Ontario Centres of Excellence and the federal Scientific Research and Experimental Development Tax Incentive Program.

These grants have lengthy names, application forms and wait times – from three to 14 months. "As soon as we got SR&ED, we hired using that money. We would have hired sooner if we had that money sooner," Mr. Gupta says.

With several grant applications out right now, a second office opening in San Francisco and a sense that there's no time to waste, Mr. Gupta is eager for more grant money to come in. He says he has five current job openings and would add on three more. "I want more innovation. I want to make talented hires – that's the investment the company needs to be making," he laments.

The challenge: How can Polar Mobile better bridge the cash-flow gap so he can do the hiring he needs while he waits on slow government grants?

THE EXPERTS WEIGH IN

Rod McNaughton, director, University of Waterloo's Conrad Business, Entrepreneurship and Technology Centre

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Government grants are an excellent way to fund early R&D, but they're not a good source of expansion capital because of delays and program constraints.

If the owners are willing to share some ownership, injections of external equity could help to resolve the cash problem. Experienced investors will bring more than just money, and can work with management to address the challenges of growth. Large corporate customers may be willing to give a loan or make an equity investment in the company.

If they have not already done so, Polar Mobile should meet with the Business Development Bank of Canada to explore their various financing and equity investment options.

Polar Mobile may identify other startups, independent contractors, and even larger established companies with whom they can partner to share development work. By focusing on the part of the development process that they do best, Polar Mobile could outsource to India (or even Africa where there are small pockets of excellence in app development).

David Wilton, director of small business banking, Bank of Nova Scotia, Toronto

What we have here is really a cash-flow problem. The long timelines of waiting for grants really exacerbates the problem of not having enough capital in the company to fund growth and new hires.

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If they build a business plan that includes a cash-flow projection, they can take that to the bank and see if they can get a line of credit to help bridge the ups and downs.

Working with a good accountant can help improve cash flow. B2B [business to business]companies are increasingly using credit cards to accept payments, which gives you the money right away. If you do accept receivables, you can offer terms, such as a 5-per-cent discount if you pay early. You need to manage your receivables well because, if customers figure out they can pay late, they will.

With your payables, you can pay bills right on their due dates. Or, if your suppliers offer terms, you might take advantage of these if the discount is higher than your cost of debt. This stuff isn't sexy, but it's good solid business management.

Steve Smith, co-founder of CakeMail, Montreal

When we started out, we hired software engineers, which are a big-ticket hire, over admin or marketing. Even if your messaging is just okay, but your product is strong, that will finance future growth. When you're in a digital business, you have to make sure your product kicks ass.

There are also ways to get financing based on your SR&ED tax credit, which you get from the government after you've spent the money. If you can show a history of getting this credit to the bank, you can get a line of credit or bank loan based on that history.

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As well, there are firms like PricewaterhouseCoopers and KPMG that know the grants out there and can help you get funding – they know about grants that you might not. They'll take a cut for this. As well, they'll go out and get you funding before the tax credits come in and use the credit as collateral for the loan.

THREE THINGS POLAR MOBILE SHOULD DO NOW

Partner up

Work with a local partner or an outsourcing company to lessen some of the workload so more staff can focus on innovation.

Get tight with cash

To free up more money for payroll, better manage payables and receivables.

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Leverage future grants

Use that history of getting the valuable SR&ED tax credit. Talk to the bank about a loan or a line of credit. Or have a third party secure this financing for you so that you can hire skilled people now, not later.

Special to The Globe and Mail

Facing a challenge? If your company could use expert help, please contact us at yourbusiness@globeandmail.com

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