YOUR COMPANY IS LOOKING FOR FACTORING FINANCING AT
REASONABLE COSTS!
FACTORING COSTS FOR SHORT TERM WORKING CAPITAL NEEDS
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Accounts receivable factoring financing costs in Canada. For some business owners and financial managers in the Canadian marketplace, this issue either was or has the potential to become a true-life horror story. Does it have to be... absolutely not! Let's explain.
WHAT IS THE TRUE COST OF ACCOUNTS RECEIVABLE FINANCING & FACTORING ACCOUNTS RECEIVABLE?
To put it another way, wasn't it the Beatles who sang ' misunderstandings all you see ...' in their Strawberry Fields tune. That's probably a better assessment of the conundrum some face when addressing the costs, structure and mechanics of factoring in Canada.
So what we are searching for is actually the answer to the question: ' What is in fact the true cost of factoring in dealing with a factoring company. And how do we measure calculate and address those costs in dealing with a financing company?
FACTORING COSTS IN INVOICE FINANCING ARE EXPRESSED AS A FEE - NOT AN INTEREST RATE!
How much does it cost to factor receivables? We get that question often at 7 Park Avenue Financial ! For the majority of businesses in Canada, the actual discount rate (clients confuse that with an interest rate) is in the 1.5 - 2% range. That is based on a turnover of accounts receivable in typical 30 days collection terms. which in many cases is unrealistic in today’s business to the business environment. This is actually one of the key points in financing receivables in Canada. Having the margins to absorb the factoring fees allows you to cash flow sales and have all the cash your firm requires.
The majority, (not all) factor finance firms in Canada, by their nature in effect, become your collection dept. when they insert themselves into your business process. If you were to retain control over your own accounts and collections (Yes, Virginia, you can!) and focus aggressively on collecting your accounts you in effect have negotiated one of the most aggressive A/R pricings in Canada. At 7 Park Avenue Financial our recommended a/r finance solutions is Confidential Receivable Financing, which allows companies to achieve all of the cash flow and benefits of traditional factoring for short term cash needs, while at the same time allowing you to bill and collect your own accounts receivable!
FACTORING VERUS A/R FINANCING - HERE IS THE DIFFERENCE
Furthermore when you factor in all the costs of a bank line of credit including stand by fees, unused facility fees, misc bank charges etc you will find that your total cost to finance in a bank facility is probably quite a bit higher than you may have thought. Also, bank lines are under specified credit limits, and one of many key benefits of a good factoring company in Canada is that your facility grows in lockstep as your company grows.
You can also choose between recourses factoring or non recourse factoring, allowing the business owner to keep the credit risk or transfer it to the finance company. Each has its own benefit and costs.
How do you achieve the ability to collect your own receivables and finance only the A/R that you choose to finance when you need to? The answer is, as we have mentioned, the Confidential Invoice Finance facility - one that’s priced aggressively and allowing you the business owner/manager to be MASTER OF YOUR DOMAIN!
So if there is one key point today it's simply that your ability to turnover assets such as receivables effectively reduces your overall financing costs. And the funds you generate from accounts receivable factoring companies allow you to ship more, sell more, and grow more .. including adding more profits and equity to your business.
4 KEY POINTS TO ACHIEVING THE BEST FACTORING COMPANY COSTS
Looking for a quick snapshot of all issues affect A/R finance costs in Canada. Quite simply they include:
1.The actual discount rate you negotiate
2.The holdback on each invoice, which typically should be in the 10% range
3. Misc audit, disbursement and wire fees
4. And, most importantly, a breakage fee should you choose to refinance with another party or financial institutions such as a bank.
YOU NEED EXPERT HELP TO GET THE BEST A/R FINANCE SOLUTIONS
Does the industry in Canada do a great job of explaining pricing for this key area of business financing? On balance we would say ' no ' , so seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your A/R factor financing needs at costs and a structure that makes sense - for your company!
P.S. Don’t forget also that funds generated from A/R finance allow you to stay cash-flow positive, take discounts with current suppliers ( reduces your overall cost of financing !) , and allows you to take on business and contracts that otherwise might have to be forsaken.
CONCLUSION
Almost every industry in Canada can benefit from specialized a/r financing & factoring facilities - some industries are large users of this method of funding - for example, real estate commissions, medial companies, trucking firms, employment agencies, etc. Costs vary due to the size of the facility, perception of overall credit quality, etc.
If you are looking to finance daily working capital needs and fund long term sales growth seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your funding needs.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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