YOUR COMPANY IS LOOKING FOR RECEIVABLE FINANCE AND
WORKING CAPITAL SOLUTIONS!
LOOKING FOR THE BEST TYPES OF ACCOUNTS RECEIVABLE FINANCING?
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
Oakville, Ontario
L6J 7J8
A/R Financing in Canada comes with a lot of misconceptions. We're not quite sure who starts some of these ' untruths' but we are though quite confident that when it comes to factor finance, also simply known as ' factoring ' and the types of factor solutions in Canada that we can clear up the ' mess ' in helping the Canadian business owner and financial manager understand this method of financing accounts receivable.
CAN YOU HANDLE THE TRUTH ON FACTORING RECEIVABLES?
Our goal - making sure you can handle the truth - let's dig in.
ACCESSING TRADITIONAL BANK FINANCING CAN BE A CHALLENGE
One popular method of financing receivables is of course obtaining Canadian chartered bank facilities - i.e. the ' revolving business line of credit ‘. Where misunderstanding occurs is when the owner/ manager assumes this is the same way that Invoice financing supplies your cash flow and working capital. That's incorrect.
QUALIFYING FOR BANK A/R FINANCING - AKA ' BUSINESS LINES OF CREDIT'
Banks take a collateral security agreement on all your assets, including AR, and allow you to borrow 75% of all your accounts under 90 days on an ongoing basis. Factoring, aka ' invoice discounting' utilizes paperwork that allows you to in effect ' sell ' your accounts as you generate sales. If you have the right facility in place you borrow 90% against your accounts, not the 75% the bank allows.
IS FACTORING EXPENSIVE - YOU DECIDE
A/R finance is expensive, isn't it? That’s one of the most common statements or questions we get from clients in initial discussion with them on how to finance cash flow. We'll let you decide that one - Consider this. For a starter as your company sells its accounts you receive immediate cash!
BANK INTEREST RATES
Banks have a low cost of capital and financing and borrowing costs are incredibly low - typically in the 4-6 % range per annum on your borrowing needs. The banks offset that low return and rate by taking a minimum risk and only granting business credit to firms that have historical and consistent profits, owner equity and positive cash flows. That of course limits both the number of borrowers and the amounts you can borrow under bank lines.
THE TRUTH ON THE COST OF FACTORING - SPOILER ALERT - ' IT'S NOT AN INTEREST RATE '!
Factor finance costs in Canada are handled in a totally different manner. You pay a ' commission' on all accounts you choose to finance, typically in the 1.5- 2% range. So on a 10k invoice, you would pay 200$ for the right to access cash the same day you invoice. We can already see our clients furiously pounding those calculators to come up with a ' financing cost '.
But consider this:
3 KEY ISSUES ON FACTORING COMPANY A/R SOLUTIONS
1. First of all you have access to the capital you might not be able to borrow on from a bank
2. You are already being ' the bank' for your customers already, as you carry accounts receivable, at your expense, for 30, 60... and dare we say it, 90 days.
3. Furthermore the cash flow you gain from the right types of factoring allows you to take discounts with your own suppliers, which decreases your total cost of borrowing significantly. And that newfound same day cash you achieve with financing A/R allows you to quickly generate more sales and more profits.
WHAT IS THE BEST TYPE OF ACCOUNTS RECEIVABLE FACTORING
Don't forget also that while many firms consider this newer method of financing your firm as ' intrusive ' to some degree, that by utilizing the 7 Park Avenue FInancial recommended solution: CONFIDENTIAL RECEIVABLE FINANCING, you can run your own business and bill and collect your own receivables, borrowing what you need when you need it.
The two types of factoring - Small business owners can choose between non recourse factoring and recourse factoring based on their preference for carrying their a/r risk with factoring companies when they are factoring receivables.
CONCLUSION
So there you have it - Total (we hope) clarity on a number of issues surrounding factoring finance in Canada for small businesses. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing account receivable & cash flow finance needs. Invoice factoring is a short term solution for day to day funding needs to grow the sales of your products and services! Let 7 Park Avenue Financial show you how to finance the balance sheet with factoring financing tailored to your needs.
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Stan Prokop
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