Accounts Receivable Financing Factoring Cash Flow Solutions

YOUR COMPANY IS LOOKING FOR FACTORING ACCOUNTS RECEIVABLE SOLUTIONS IN CANADA FOR BUSINESS FINANCING!

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

ACCOUNTS RECEIVABLE FINANCING CANADA

Accounts receivable financing just might be one of the fastest-growing ways to generate cash flow and working capital for your business. Thousands of firms in Canada utilize this strategy as a primary method of funding their business. Why? Simply because when traditional bank financing can't or won't get you there cash flow factoring solutions deliver. Here's why and how - so let's dig in.

Let’s examine why this business financing strategy works and how you can best assess if a factoring receivable solution is the best choice for your firm.

WHY IS ACCOUNTS RECEIVABLE FINANCING IMPORTANT

We also point out to clients that the Canadian landscape for this type of financing is somewhat different from the U.S. models of this type of financing, and one of the most important decisions you can make after choosing to enter into such a strategy is simply picking the best partner for your particular needs.

Almost every business study or report you read these days has business owners and financial managers bemoaning the lack of business financing and funding for their business.

ACCOUNTS RECEIVABLE FINANCING VS FACTORING

Business prospects have clearly improved, but business access to capital has been very slow to catch up. Most Canadian business owners and financial managers turn to those banks when they need financing. However, if your firm doesn’t have very decent financials, or isn't generating profits and operating cash flow your chance of getting the funding for unpaid invoices that you need to run and grow the business is low.

So we come full circle to how does factoring work and why is it a potential solution for your firm. It works in a very simple manner - you sell your invoices, either one at a time, all at once, or regular periodically at your choice. The key word is selling. When you sell something, you get cash, and factoring receivables is your method of obtaining immediate cash for outstanding invoices.

DO YOU QUALIFY FOR ACCOUNTS RECEIVABLE FACTORING?

Businesses should be able to demonstrate good invoice procedures around pricing and payment dates for the trade credit they extend to businesses, Also, invoices must represent work and services that are delivered and provided and due for payment. Any commercial invoices to businesses or governments are eligible for financing. The personal credit scores of business owners do not play a role in a/r financing.

The complexity of factoring, if we can call it that, is simply how it works on a day-to-day basis within your own business model, and more importantly, how it affects your customer base. Using traditional factoring as our explanation your firm issues an invoice, and you are advanced immediately approximately 90% of the funds of the invoice value, i.e. almost the same day! and when your customer pays, you get the rest of our funds immediately, less a financing charge.

ACCOUNTS RECEIVABLE FINANCING RATES- HOW MUCH DOES ACCOUNTS RECEIVABLE FACTORING COST?

That aforementioned financing charge becomes the most important point of focus for many of our clients given that factoring rates in Canada on a monthly basis range from .75% - 1.5% per month.

When clients address that issue of cost around accounts receivable financing companies we point out to them that if they have solid gross margins, can turn over receivables, and have the ability to purchase more effectively with the new cash the cost of factoring inevitably becomes somewhat of a non-event, based on the fact that this facility provides you ‘unlimited’ working capital on a long term basis. A/R financing is really a subset of the asset based lending revolution.

KEY POINT - We strongly recommend Confidential Receivable Financing/Factoring for firms that want to bill and collect their own receivables and manage their cash flow needs around their trade credit investment.

In Canada, the challenge becomes finding the firm that works best for you with respect to the receivable strategy we have outlined. Many of the small nuances around how factoring is marketed, explained, and works on a daily basis become the bone of contention for our customers.

Other short-term cash flow and working capital solutions are also available inside the world of asset based financing, where 'factoring' resides. These include:

Non-bank asset-based credit lines combine borrowing power around your total A/R, inventory and equipment.

CONCLUSION - ACCOUNTS RECEIVABLE FINANCING - HOW IT WORKS AND WHAT IT COSTS

As a business owner, you want to increase cash flow and reduce potential credit problems - The ability to get cash upfront versus waiting for payment is key to successful business cash flows.

What is accounts receivable financing?

The accounts receivable financing solution is a financial transaction and is provided by the factoring industry. Through the invoice discounting process, a business receives a cash advance as early payment from a client. to whom they have extended credit terms. Also called an accounts receiveable loan the financing process allows a company to sell or finance some or all of its a/r. Receivables factoring is not a business loan per se and brings no debt to the balance sheet - A factoring fee is charged on the transaction, as opposed to a bank interest rate when it comes to the financial accounting of the transaction, Most factoring companies offer non recourse factoring which transfers bad debt risk to the financing company,

Is accounts receivable a source of financing?

Accounts receivable loans and ar financing / factoring facilities are a source of short term financing for a business selling unpaid invoices - Borrowers use their accounts receivables as pledged or sold collateral for day to day business funding as the factoring company pays . Factoring companies typically margin a larger face value of the receivable, compared to banks, which is a key benefit of this method of business funding. This method of financing is not a term loan structure.

What is a receivables financing agreement?

A receivables financing agreement allows a business to borrow against some or all of its outstanding receivables, receiving cash advances for the transaction - Advances against an invoice are typically in the 80-90% range. The ability to receive early payment as invoices are generated provides access to working capital.

How does account receivable factoring work?

Accounts receivable factoring is a form of financing/business loan where a company sells invoices for a cash advance. Factoring companies provide invoice factoring against a company's accounts receivable balance. In order to understand how does accounts receivable factoring work you need to understand that a company sells its receivables via a factoring agreement, unlike assigning them to a bank - Many factoring companies not only provide invoice financing but will also provide nonrecourse factoring solutions which transfer credit risk to the accounts receivable factoring company - although not all factoring companies will guarantee or ensure a company's accounts receivable.

The factoring industry charge factoring fees for the invoice discounting factoring service they provide. The cash advance interest expense and cost of financing a/r are factoring fees which are expressed as a fee, not an interest rate

' 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