Guide To Accounts Receivable Financing Factoring Solutions For Cash Flow !

YOUR COMPANY IS LOOKING FOR CANADIAN FACTORING AND ACCOUNTS RECEIVABLE FINANCING IN CANADA

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WHAT IS A R FINANCING?

Cash flow solutions, thankfully, are a lot more available and well used in today's often challenging business financing environment. Factoring, and other versions of the accounts receivable financing strategy could well be the ultimate solution to working capital needs. Let's dig in.

WHY YOUR BUSINESS SHOULD CONSIDER ACCOUNTS RECEIVABLE FINANCING

Almost all business owners / financial managers looking for SME Commercial Finance solutions are feeling the pain of slow payments from customers of their accounts receivables, including of course those large well known and powerful corporations that can wield accounts payable deferral power on your unpaid invoices! Payment norms seem to be 60-120 days in many cases!

The irony is of course that many customers still post 30-day terms on their invoices and purchase order acknowledgements from their client base. No secret that slow payables = better cash flow.

We should not fail to mention of course that there is one very obvious 'non - financial' solution for your company, and it does not even involve additional financing effort. It is simply to enforce collections more strongly and reduce what is known as your 'days sales outstanding (DSO) to a more manageable level. Any major dent you can put in your 'DSO' will improve working capital and cash flow.

STRUCTURING ACCOUNTS RECEIVABLE FACILITIES

So we have discussed why you want to factor receivables and to some extent what your non-financial solutions are for the right financing arrangement. But let's just make sure we understand what we are talking about. When you are working under a bank facility your receivables are collateralized or pledged as security for an overdraft for financing capital. This is the main difference when using a factoring company for invoice factoring as a financing company as opposed to bank financing.

That's the best and simplest way we have of explaining to clients what factoring is not! What it is, though, is the sale of your invoices, on a daily, weekly, or monthly basis (the flexibility is your choice), thereby increasing your advance rates on those receivables to the 80-90% range depending on the type of facility you have structured.

WHAT IS THE BENEFIT OF ACCOUNTS RECEIVABLE FINANCE?

More cash flow and more immediate cash flow is the most obvious solution to factoring and accounts receivable financing.

UNDERSTANDING ACCOUNTS RECEIVABLE FINANCE

We spoke of the price you have to pay in factoring receivables. When we sit down with clients we advise them there is a real price, i.e. the financing or invoice discounting cost, but, more apparently, the major change in the way day-to-day business changes from a paper flow and customer interaction basis.

If you negotiate the wrong type of facility you might find yourself in the same situation that many of our clients have found when they come to us with financing woes, which is simply that they feel that in spite of the significant cash improvement they in fact feel that their factor firm partner is running their business.

Many business owners who know little about factoring seem to know one thing, that it can be viewed as intrusive by their customers. You can eliminate that 'intrusiveness' by ensuring you have the right type of facility, one that is priced right, has straightforward terms, and works on a day-to-day basis for you and your customers.

THE BEST ACCOUNTS RECEIVABLE FINANCING OPTION?

Have you investigated non-bank asset-based lines of credit and Confidential Receivable Financing? The best factor funding facility, in fact, we feel, is the one that allows you to bill and collect your own receivables, while at the same time reaping all the benefits of accounts receivable discounting as factoring funding is also known.

So what's our bottom line in our cash flow information interchange? It's simply:

Determine if you can achieve self-financing status via the more prompt collection of receivables.

Plan B?! If financing is in fact needed, consider factoring financing as a working capital strategy.

CONCLUSION - IS RECEIVABLES FINANCE BEST FOR YOUR BUSINESS?

FAQ :FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION

WHAT IS ACCOUNTS RECEIVABLE FINANCING

Accounts receivable finance solutions allow a business to receive early payment on unpaid invoices when they have delivered goods or services to clients - Some or all of a firm's outstanding invoices may be financed via accounts receivable financing companies.

Factoring companies allow a business to receive cash to retire outstanding debt on their balance sheet, such as accounts payables. The ability to receive early payment and cash immediately for money owed to the company based on the a/r on the company's balance sheet. Invoice financing/financing receivables relate to business accounts, not consumer debtors.

The receivable finance solution for business financing is a subset of asset based lending and is an alternative source of financing for small businesses and medium-sized corporations. Factoring fees are charged by the lender and this fee is expressed as a discount purchase of the receivable, versus an interest rate charge.

What are account receivable loans?

Accounts receivable loans are in fact accounts receivable financing facilities, a form of asset-based finance for funding receivables that allows a business to receive advance capital based on the value of outstanding receivables on the balance sheet. Business owners need to understand the difference between accounts receivable financing vs factoring when considering an accounts receivable loan. The financing is not a loan per se, but monetization of assets on the balance sheet. A/R finance ' loans' are often part of a business line of credit solutions.

How do accounts receivable loans work?

Businesses looking for accounts receivable loans work with commercial finance companies that advance capital to a business based on the sale or assignment of specific invoices or accounts receivable. Typical advance amounts are in the 80-90% range which is a higher borrowing margin than banks. Businesses receive the balance of the invoice owing less a factoring fee which is a finance charge for the transaction.

Is accounts receivable funding a source of financing?

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

Factoring Accounts Receivable Financing Cash Flow 7 Park Avenue Financial