YOUR COMPANY IS LOOKING FOR BUSINESS FACTOR FUNDING!
ACCOUNTS RECEIVABLE FACTORING - YOUR SMALL BUSINESS FUNDING SOLUTION
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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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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Invoice financing companies offer businesses a lifeline by converting unpaid invoices into immediate cash flow, fostering stability and growth.
Struggling to maintain cash flow? Invoice financing companies can transform your unpaid invoices into quick cash!
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer INVOICE FINANCING solutions that solve the issue of cash flow and working capital – Save time, and focus on profits and business opportunities
INTRODUCTION - INVOICE FACTORING COMPANIES IN CANADA
Business factor funding in Canada.
7 Park Avenue Financial is often quoted as a proponent of new and alternative working capital strategies for immediate and short-term cash flow financing strategies. But truth be told (similar to fashion!), one AR Financing strategy seems new but is about 4000 years old. Recycling is hotter than ever, so let's dig in!
Invoice financing companies play a significant role in Canada for SMEs that can't obtain some or all of the bank financing they need to run and grow a business.
This financing solution bridges the cash flow gap between issuing an invoice and receiving payment for your goods and services -
That ensures ensuring constant cash flow availability and operational stability. Whether you're a small business struggling with cash flow issues or a large enterprise looking to optimize your working capital, understanding how invoice financing works can significantly impact your business financing needs and growth prospects.
Although we were pretty aware that business factoring - aka ' receivable finance ' is ONLY about 4000 years old, supposedly during the reign of King Hammurabi of Mesopotamia, from that, it grew even faster in medieval times as it helped growing garment and textile industries in Europe and North America.
So, that quick history tour of the factoring company brings us up to today, where thousands of Canadian business owners and financial managers find themselves in what we can only often describe as challenging times in business finance. So cash flowing your invoices via AR finance, previously deemed as an ' alternative,' is now simply one of the fastest-growing business finance methods. Additional credit protection via non-recourse solutions is also available.
HOW DOES FACTORING WORK?
We often find ourselves almost ' over-explaining ' why and how invoice financing factoring works. A simple explanation is to say that it's not ' borrowing ‘... it's ' selling.' The paperwork around the accounts receivable financing solutions allows you, at your will and choice, to generate immediate cash by invoking the AR finance mechanism ' factoring'.
IT'S NOT BORROWING - IT'S ' SELLING'!
So while many business owners/managers think of ' borrowing ' for business finance, they might just want to think more of ' Selling'. As they generate those sales, they get immediate SAME DAY advance on their revenue. By the way, the right A/R financing solutions allow you to sell invoices when you want, and certainly not all the time - only when you need the cash. Typically business owners tend to utilize the power of Factoring at key cash flow disbursement times approach - that might be payroll, term loan obligations, CRA payments, etc.
HOW TO UNDERSTAND THE ' ADVANCE RATE ' IN A/R FINANCING
Understanding the concept of advance rate and invoice factoring cost within this financing mechanism is essential. Typically, more often than not, the cash advances will be 90% - known as the advance rate. That is to say, if you have a 100k sale, which has been, in fact, ' earned' by shipping your product or providing your service, you will receive from invoice factoring services that same invoice day, if you choose, 90k as immediate cash flow funding. The 10% is a holdback that’s remitted to you as soon as your client pays. In the case of our 100,000.00 invoice, that holdback will typically have a 2k financing charge attached to it if your client honours typical 30-day terms.
The cost of factoring is expressed as a monthly fee and is typically in the 1.5 to 2% range. Companies with decent gross margins can easily absorb this profit reduction and receive immediate cash flow benefits on their sales. Receivables factoring typically delivers cash on your sales within 24 hours, eliminating the need to wait for client payment.
ASSET TURNOVER AND THE RIGHT FINANCING EQUALS ACCOUNTS RECEIVABLES FUNDING SUCCESS
If your firm has significant amounts of capital tied up in current asset accounts such as inventory and receivables you will benefit from immediate same-day cash flow received from the solution provided by factoring companies. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in your working capital solutions.
KEY TAKEAWAYS
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Accounts Receivable Financing: This uses unpaid invoices as collateral to secure a loan or line of credit. It provides immediate funds to businesses, enhancing liquidity without waiting for customer payments.
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Factoring involves selling invoices to a third party (factor) at a discount. The factor then collects the payments from the customers. This method provides quick access to cash and offloads the collection process.
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Invoice Discounting: Unlike factoring, it allows businesses to retain control over their sales ledger while borrowing against unpaid invoices. The company remains responsible for collecting payments.
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Cash Flow Management: Effective cash flow management involves monitoring, analyzing, and optimizing cash inflow and outflow. It ensures a business can meet its financial obligations and invest in growth opportunities.
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Working Capital Solutions: These solutions help businesses efficiently manage their short-term liabilities and assets. They include various financing options, such as invoice financing, to maintain smooth operations.
CONCLUSION
Accounts receivable financing, commonly known as ' factoring ' is an accepted way to cash flow your sales and generate the working capital and cash flow financing you need to run your business. It's an effective solution to your business line of credit needs via real-world financial services.
Invoice financing companies can tap into a vast pool of underbanked small businesses, providing Canadian businesses with critical cash flow solutions and allowing business growth. Call 7 Park Avenue Financial for your business cash flow needs.
At 7 Park Avenue Financial, we recommend and offer Confidential Receivable Financing as the best solution from invoice factoring companies. This allows you to bill and collect your receivables without notifying clients, etc. Your firm receives all the benefits of traditional factoring for your cash flow needs.
FAQ
How does invoice financing work?
Invoice financing allows businesses to receive immediate cash by using their unpaid invoices as collateral. This process ensures continuous cash flow and operational stability.
What are the benefits of using an invoice financing company?
Invoice financing companies provide quick access to cash, improve liquidity, reduce the risk of bad debts, and offer flexible financing options tailored to business needs.
What is the difference between factoring and invoice discounting?
Factoring involves selling invoices to a third party at a discount, while invoice discounting allows businesses to borrow against unpaid invoices while retaining control over the collection process.
Who can benefit from invoice financing?
Invoice financing can benefit businesses of all sizes, especially those with cash flow challenges or long payment cycles. It is also beneficial for SMEs looking to maintain financial stability.
Are there any risks associated with invoice financing?
While invoice financing offers many benefits, it also comes with risks, such as higher costs than traditional loans and the potential impact on customer relationships if factoring is used.
What are the costs associated with invoice financing?
Costs typically include a service fee and interest on the advanced amount. These costs can vary depending on the financing company's terms and the risk associated with the invoices.
How do invoice financing companies assess credit risk?
Invoice factoring companies evaluate the creditworthiness of the business and its customers. Factors include payment history, financial stability, and the overall risk of default.
Can startups use invoice financing?
Yes, startups with reliable and creditworthy customers can use invoice financing factoring services to manage cash flow and support growth.
How quickly can a business receive funds through invoice financing?
Funds can typically be received in your business bank account within 24 to 48 hours after the financing company submits and approves the invoices.
How does invoice financing impact a business's balance sheet?
Invoice financing can improve a business's balance sheet by converting accounts receivable into cash, thus enhancing liquidity and reducing outstanding receivables.
How does invoice financing affect customer relationships?
If managed correctly, invoice financing should not impact customer relationships. Communication with customers might be necessary with factoring, but with invoice discounting, the business retains control over collections.
What happens if a customer does not pay an invoice or the full invoice value?
Depending on the terms of the agreement, the invoice factoring company might require the business to repay the advanced amount to the financing company.
Are there industry-specific invoice financing solutions?
Some financing companies offer specialized solutions tailored to specific industries, such as manufacturing, logistics, and services, addressing unique cash flow challenges.
