YOUR COMPANY IS LOOKING FOR A/R FINANCING!
FINANCING ACCOUNTS RECEIVABLE IN CANADA
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Are you struggling to bridge the gap between invoicing and actual cash flow? Financing accounts receivable could be the answer to your business needs.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer FINANCING ACCOUNTS RECEIVABLE solutions that solve the issue of cash flow and working capital – Save time, and focus on profits and business opportunities
The Lifeline Your Business Needs: Exploring Accounts Receivable Financing
ACCOUNTS RECEIVABLE FINANCING / WORKING CAPITAL SOLUTIONS
Canadian business owners and financial managers are increasingly hearing about ‘factoring ‘their accounts receivable via an accounts receivable financing facility - a cash flow solution and Canadian business financing strategy. Increasing numbers of companies are investigating what most people consider an ‘alternative financing’ strategy.
Financing accounts receivable allows businesses to convert outstanding invoices into immediate capital, fueling growth and smoothing out cash flow bumps.
IS THERE AN ALTERNATIVE TO A BANK LINE OF CREDIT?
‘Alternative ‘refers to an alternative to a Canadian chartered bank line of credit. As Canadian companies build up their investments in accounts receivable ( and inventory ), they find it more difficult than ever to ensure that their customers pay them on time. Per the terms they provide to their customers, they typically do not receive those payments in 30 days.
MANAGEMENT FOCUS IS ON CASH FLOW TODAY
Naturally, as we head into the 2021 Business year, the current somewhat difficult economic environment lends itself to slow-paying receivables. Management, therefore, is paying increasing attention to managing cash flow, and, most notably, this is taking up more and more of senior management and business owners' time when considering financing the balance sheet.
THE CASH FLOW CONUNDRUM
The primary challenge is as simple as it gets—suppliers, landlords, and, dare we say it, your employees want to be paid on time, while the source of that cash is tied up in receivables that are paid in, many times, 60-90 days.
FACTORING IS ONE SOLID SOLUTION TO CASH FLOW ADN WORKING CAPITAL CHALLENGES TO GROWING SALES
Enter Factoring as a potential solution that will allow the Canadian company to benefit from increased cash flow, albeit at a cost. To be clear, factoring is also referred to as ‘invoice discounting’ and ‘accounts receivable financing ‘.
HOW DOES A/R FINANCE / FACTORING WORK
The mechanics at the outset seem overly simple. You send your invoice (or invoices) to the ‘factor’ firm, which immediately, usually the same day, sometimes the next day, issues your funds for that invoice or group of invoices. Suddenly, you immediately have the working capital and cash flow to run your business.
FACTORING IS NOT A LOAN!
Let’s be clear: this is not a loan per se. It is an immediate advance of funds against money owing to your firm for products and services you have delivered. We used the alternate term ‘invoice discounting’ as noted above. The ‘discount ‘is the amount of the finance charge the lender keeps for carrying the receivable - Key Point - it is a fee, not an interest rate.
SHORT-TERM FINANCING NEEDS VERSUS LONG-TERM NEEDS
We can't overemphasize that the funds generated from an accounts receivable financing facility, such as we have described, should be used for short-term working capital needs. You need to view the factoring facility in exactly the same manner as your bank line of credit (if you had one!)
AR FINANCING IS FAST AND FLEXIBLE
So, here is more about the potential ‘benefit ‘of factoring that we have alluded to.
We can somewhat easily say that a factoring facility can be set up fairly quickly, certainly in much less time than it would take for your firm to negotiate a bank cash term loan or a Canadian chartered bank line of credit. Another benefit? It’s simply that you receive that much-needed cash the same day.
A significant amount of the invoices, usually 80-90%, is ‘advanced ‘to your firm on the same day. The difference is held back as a temporary holdback and remitted to your firm, less the finance fee when your customer pays.
THE COST OF ACCOUNT RECEIVABLE NON-BANK FINANCING
We have focused on some of factoring's benefits, such as this type of facility's strong cash flow and ease of setup once you have found a solid partner firm.
However, the cost of the facility is usually between 1 -2 % of the invoice amount for a 30-day period. Naturally, you entered into such a facility because your customers probably weren’t paying you in 30 days already, so you can see that the financing fees can add up.
WHAT IS THE BEST FACTORING SOLUTION / FACTORING COMPANY IN CANADA? HERE AT 7 PARK AVENUE FINANCIAL WE CALL IT ' CONFIDENTIAL'
So, as in all business evaluations, there are trade-offs – if your firm can absorb the financing costs with adequate profit margins on your products and services, you can categorically benefit from a factoring, a ka working capital facility .! Oh, by the way … Consider our recommended solution – Confidential accounts receivable financing that allows you to bill and collect your receivables with no notification to clients or your suppliers. It works!
LET 7 PARK AVENUE FINANCIAL CREATE A CUSTOMIZED A/R FINANCE SOLUTION FOR YOUR FIRM
What does that mean for you? It means that when you work with us, you’re working toward a 7 Park Avenue financial solution that caters to the unique needs of your business. We don’t hand out cookie-cutter solutions to our clients and send them on their way – instead, we listen to the needs of your business and then match your unique situation with an ideal lender for those needs.
CONCLUSION
This ensures that turnaround times are workable, avoiding costly delays that can arise when a business isn’t matched with a lender or financing program that works for it.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with your cash flow and working capital needs.
AR FINANCE FAQ
What are the benefits of financing accounts receivable?
Financing accounts receivable offers businesses immediate access to capital by converting unpaid invoices into cash. This helps manage cash flow, fund growth opportunities, and mitigate financial constraints.
How does financing accounts receivable differ from traditional loans?
Unlike traditional loans, financing accounts receivable uses unpaid invoices as collateral, providing businesses more flexibility and faster access to funding without adding debt to their balance sheet.
What types of businesses can benefit from financing accounts receivable?
Businesses across various industries can benefit, especially those that deal with lengthy payment terms or seasonal fluctuations. This includes manufacturers, distributors, wholesalers, and service-based businesses.
Is financing accounts receivable suitable for small businesses?
Yes, financing accounts receivable is beneficial for businesses of all sizes. It provides small businesses with the cash flow to cover operational expenses, invest in growth, and navigate through periods of financial uncertainty.
How does creditworthiness affect financing accounts receivable?
While creditworthiness is important, financing accounts receivable focuses more on the creditworthiness of the customers who owe the invoices rather than the business itself, making it accessible to companies with varying credit profiles.
What happens if customers fail to pay their invoices after financing?
In such cases, the financing company typically bears the responsibility. They may choose to pursue collections from the customers directly or work out an alternative solution with the business.
Are there any restrictions on how businesses can use the funds obtained through financing accounts receivable?
Generally, businesses can use the funds as they see fit. Whether covering operational expenses, investing in new equipment, or expanding the business, financing accounts receivable offers versatility in fund utilization.
Can businesses choose which invoices to finance?
Yes, most financing companies allow businesses to select which invoices they want to finance. This allows businesses to control their cash flow and manage their finances strategically.
How does financing accounts receivable work?
Financing accounts receivable involves a business selling its outstanding invoices to a third-party financing company at a discounted rate. The financing company then advances a portion of the invoice value to the industry, providing immediate cash.
What are the typical terms of financing accounts receivable?
Terms vary depending on the financing company and the specific agreement. Still, they typically include the advance rate (percentage of the invoice value advanced), discount rate (fee charged by the financing company), and repayment terms.
