Receivable Financing Company: Unlocking Your Business Potential | 7 Park Avenue Financial

Tweet

YOUR COMPANY IS LOOKING FOR CANADIAN ASSET LOANS AND ACCOUNTS RECEIVABLE FINANCING SOLUTIONS! 

Essential Strategies for Enhancing Liquidity with Receivable Financing

You've arrived at the right address! Welcome to 7 Park Avenue Financial 

        Financing & Cash flow are the biggest issues facing businesses 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

Receivable Financing Companies transform outstanding invoices into immediate working capital, offering a strategic advantage for businesses in need of quick financial solutions.

Unlock cash flow now—turn your invoices into immediate funds!

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer RECEIVABLE FINANCING  solutions that solve the issue of cash flow and working capital  – Save time and focus on profits and business opportunities

INTRODUCTION -  UNDERSTANDING ACCOUNTS RECEIVABLE LOANS IN CANADA ( P.S. IT'S NOT A LOAN!)
 

Asset loans and accounts receivable financing are often sought-after innovative financing solutions you probably have been hearing about. They are ' subsets ' of asset based lending in Canada and are helping thousands of firms achieve that ' cash flow positive ' feeling for funding their business debt schedule.

Receivables financing allows companies to access cash immediately as they generate sales revenues via this unique loan agreement. Let's dig in.

Receivable financing is a popular solution for businesses facing cash flow challenges who want to maintain consistent cash flow, provides a vital lifeline by allowing companies to finance accounts receivable in exchange for immediate cash flow, By doing this liquidity is increased outside of the restrictions of traditional bank loans, thus allowing for day-to-day funding and growth.

THE RISE OF ACCOUNTS RECEIVABLES FINANCING / FACTORED RECEIVABLES IN CANADA

Despite its newfound popularity it's been safe to say that alternative financing is still just finding its feet in Canadian business - growing in traction and popularity every day. We're going to clarify some of the myths around receivables financing/funding for the borrowing company as well as focus on key benefits of using receivable financing companies.

 
INVOICE FACTORING COMPANY VERSUS BANK FINANCING / TRADITIONAL BANK LOANS 

One of the main differences of an accounts receivable loan is that typically it is financed through a non-bank arrangement. You should seek this type of loan if you are unable to generate sufficient working capital to finance your business in a traditional Chartered bank environment in Canada.  While Canadian banks by far provide the lowest cost and often most flexible form of capital for your business it's unfortunately not available to all those who apply!

Asset loans that encompass ' operating facilities ' are structured, around the various asset categories of your business - the two main asset categories are:


Accounts receivable


Inventory


Fixed assets/equipment balance sheet assets can also qualify for asset-based credit lines in conjunction with A/R and inventories.

 
LEVERAGING BUSINESS ASSETS ON THE BALANCE SHEET 

Leveraging fixed assets/equipment/real estate your company owns simply enhances your overall borrowing power.

It's the true underlying current value of your A/R, inventory and equipment that provides you with true borrowing power - much less reliance is placed on balance sheet ratios, loan covenants, outside collateral, etc., those latter three items being the key part of any bank type facility, and is focused on your historical and present cash flow generation. Bottom line - receivables financing works via the asset sales arrangement.


The irony is, of course, that historical cash flow ratios do not work for many companies that are experiencing temporary challenges and that require 'bulges' in working capital to fund their growth and operations.


Asset loans, and asset based lines of credit focus on the collateral in commercial financing. Many clients we deal with have the collateral in A/R, inventory, purchase orders and new contracts, equipment, etc. but can’t satisfy traditional cash flow lending requirements.

They then are the true prime candidates for an asset loan, an asset based line of credit, or at its simplest and most basic form, receivable financing that fully margins their accounts receivable with no set limit on future growth.


So now we understand what the facility is.

How does  AR financing work on a day-to-day basis via the financing company,  you might ask? It's simple - A company using accounts receivable financing commits invoices to a funder for early payment in return for a fee. The cost is expressed as processing fees/factoring fee and is not expressed as an interest rate when it comes to receivable factoring. Typically companies can borrow approx 80-90% of the invoice amount.

  
REAP THE BENEFITS OF ACCOUNTS RECEIVABLE FINANCING / INVOICE FINANCING  

The answer is simply that it’s a facility that goes up and down, and no outstanding debt comes onto the balance sheet with your borrowing needs.

As your receivables and inventory fluctuate you draw down against their current value. This optimizes the amount of cash flow and working capital available for sales growth and profit generation.


The security mechanisms around these facilities are very similar to any type of bank financing via traditional financial institutions in Canada. Additionally, approval is often much faster as a simple first charge lien is placed on the assets being financed - Factoring fees are more competitive than ever.


Advance rates on accounts receivable outstanding invoices and inventory are established and as cash is advanced and then repaid by your customers the cash is turned over to pay down your revolving balance. It’s as simple as that. The true beauty of the facility is that as you grow your facility grows with you, maintaining the cash reserves you need.


These working capital facilities, predominately A/R and inventory-based based are becoming more traditional every day via solutions from accounts receivable financing companies versus traditional commercial lending.

In account receivable financing, using our recommended Confidential receivable financing a business maintains control of the a/r collection process that it has borrowed against and collects on. The credit rating process is geared towards your a/r quality, not the business overall personal credit rating of the business owner.

 KEY TAKEAWAYS 

 CONCLUSION 

If you're a business owner or financial manager looking to eliminate the term 'scarcity in your business financing and growth needs call 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can get your firm back on the road to cash flow perfection when it comes to accounts receivables/lines of credit and your goals around business growth.

  

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION  

What is accounts receivable financing?

Accounts receivable financing is a type of business loan or sale agreement for companies. A/R financing via ' receivable loans '  is a way for companies to borrow money by using their unpaid invoices to use invoices as collateral using factoring companies as their lender for day-to-day business expenses.

Traditional factoring finance from an accounts receivable company is a way to help businesses get money when they need it by selling their accounts receivables, or invoices. The company's balance sheet represents a method of monetizing a firm's assets, including receivables and accounts receivable financing allows a company to generate cash flow immediately from sales revenues.

All receivables less than 90 days old can be financed as short term cash flow needs occur. Financing can take days to approve, versus much longer via traditional banking approvals. Accounts receivable factoring provides more flexibility via the asset based solution of lending.


Accounts receivable loans work like any other loan, but instead of collateralizing a bank account, they use unpaid invoices from the business. Small business owners can use a company's accounts receivable as the only collateral for the loan - eliminating the need for small businesses to provide other outside collateral as the company sells invoices.

What benefits does receivable financing offer to businesses?

Immediate liquidity, flexible financing that grows with your sales, and no additional debt incurred, make it a smart choice for managing cash flow. Different industries such as staffing agencies , trucking, wholesale distributors are large users of this type of financing.

How does accounts receivable financing work in comparison with traditional  loans?

Unlike a bank loan, receivable financing does not create debt or require collateral, focusing instead on your invoices' value. Accounts receivable financing rates are expressed as  a financing fee , versus interest rates associated with bank financing

What types of companies can benefit from receivable financing?

Companies facing rapid growth, seasonal sales fluctuations, or extended invoice payment terms find this type of financing especially beneficial.

Are there any risks associated with receivable financing?

The main risks include dependency on customer relationships and potentially the fees around accounts receivable financing rates, which vary based on the invoice amount and payment terms.

How quickly can I access funds through receivable financing?

Funds are typically available within 24 to 48 hours after the invoices are submitted and verified, providing a rapid solution to cash flow needs.

What is the eligibility criterion for receivable financing?

Businesses must have commercial clients, outstanding invoices, and a history of reliable transactions to qualify.

How does receivable financing impact business credit?

It generally does not affect your credit score as it's not a loan; however, responsible use can indirectly enhance creditworthiness through improved cash flow.

Can receivable financing be used for all types of invoices?

Financing via receivable financing services typically covers invoices for completed work or delivered products, not for progress billings or pre-invoices.

What happens if a customer fails to pay an invoice?

Depending on the agreement for a/r business funding, the risk may either fall on the business or the financing company, commonly addressed in non-recourse and recourse factoring terms.

Are receivable financing agreements flexible?

Terms in factoring accounts receivable financing can vary widely, including recourse clauses and percentage advances, offering tailored solutions to different business needs.

How do receivable financing companies determine the value of invoices?

The value is assessed based on the customer's credit strength, invoice amount, and historical payment behaviours, ensuring alignment with perceived risk. Factors look at history such as business bank statements which are a good identifier for collection history.

What kind of fee structure can be expected with receivable financing?

Fees are typically a percentage of the invoice value, influenced by the agreement's term length and the perceived risk of the debtor's credit. Borrowers should understand any hidden fees and miscellaneous charges.

How does invoice discounting differ from factoring?

Invoice discounting allows businesses to borrow against their invoices' value while maintaining control over their sales ledger and customer relationships, unlike factoring which involves a third party collecting the receivables that arise from cash flow issues and slow payment.