YOUR COMPANY IS LOOKING FOR ACCOUNTS RECEIVABLE FINANCING VIA A FACTORING COMPANY!
INVOICE FACTORING VIA ACCOUNTS RECEIVABLE FINANCE
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Financing & Cash flow are the biggest issues facing business today
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ACCOUNTS RECEIVABLE FACTORING IN CANADA
Good factoring companies offer essential cash flow solutions by converting unpaid invoices into immediate working capital.
Unlock the hidden cash in your invoices and keep your business moving forward with top-notch factoring services.
BEST OPTIONS FOR BUSINESS FUNDING IN CANADA
Small and medium-sized businesses in Canada almost always face a financial challenge regarding funding to grow and, yes, even survive. Unfortunately, thousands of firms have somewhat limited options to meet their funding challenges.
That’s why accounts receivable financing via a factoring company might solve your business finance needs. While most companies are funded through equity (from the owners) and credit lines from a bank, that facility is not available for all firms.
Choosing a good factoring company can be a game-changer for businesses seeking immediate cash flow solutions. Factoring, also known as accounts receivable financing, allows businesses to immediately cash flow the funds tied up in unpaid invoices, ensuring that a company can meet its short-term obligations
Factoring companies in Canada can help businesses with their financial challenges by providing immediate cash flow solutions tailored to the local market.
Additionally, invoice financing is another viable option for businesses. Unlike invoice factoring, where the factoring company takes over the collection of invoice payments, invoice financing allows businesses to borrow money against their invoices while retaining the responsibility for collecting the invoice balance and repaying the loan.
This makes invoice financing particularly suitable for established businesses with good credit.
A/R FINANCING IS THE ALTERNATIVE TO BUSINESS LOANS WHICH FOCUS ON TAKING ON DEBT
So why do those thousands of small businesses consider a/r financing from factoring companies as an alternative to term loans, or even the costliest method of financing, giving up part of your owner equity?
They are in a position, with the right knowledge, to utilize, rather than monetize one of the largest, if not the largest, assets on the left-hand side of their balance sheet, their accounts receivable via an appropriate type of line of credit. Factoring companies also offer equipment financing as another financial solution for small and medium-sized businesses.
A/R FINANCING / FACTORING ACCELERATES YOUR CASH FLOW AND DELIVERS IMMEDIATE WORKING CAPITAL
A/R financing speeds up cash flow and allows you to finance growth by monetizing your receivable portfolio, in whole or in part.
One of the key benefits of factoring services is effective cash flow management, which is crucial for maintaining operations, covering expenses, and funding new projects.
The process itself is simple; it’s who you partner with and how you structure your A/R financing (and what you pay for it!) that becomes a challenge for Canadian business owners and financial managers.
TWO TYPES OF A/R FINANCING - WHICH ONE IS RIGHT FOR YOUR COMPANY
In Canada, two types of financing accounts receivable via invoice finance are available from an invoice factoring company. Factoring companies advance you the cash pretty well the same day, and they begin a process to collect accounts receivable as they become due from your client.
Invoice factoring services are explicitly tailored for specific industries, such as trucking companies, to help them manage cash flow and cover expenses like fuel and maintenance.
FACTORING COMPANY ACCOUNTS RECEIVABLE
The other alternative, less common but our recommended solution, is the same sale of your receivables, but with you doing all the billing and collecting.
In both circumstances, there is essentially no limit on the amount of financing you can attain - naturally, you have to have the sales to support that financing, but more often than not, with most clients, we talk to, sales aren’t the problem; lender financing is!
We call it CONFIDENTIAL RECEIVABLE FINANCING here at 7 Park Avenue Financial.
In both types of financing, you can select recourse or non-recourse financing depending on your a/r credit profile, which industry you are in, etc. Foreign receivables can also be insured.
If we had to say what confuses or concerns most first-time clients in accounts receivable pricing, we would have to put it down to two issues: the cost and the daily mechanics of this financing vehicle.
UNDERSTANDING FINANCING COSTS AND YOUR COST OF CAPITAL
So, what's the best way to understand and justify the cost of A/R finance for a customer receivables loan solution?
This is where the 'rubber hits the road,' so to speak.
We can explain it to a client to look at the cost of this working capital from several angles. One is that you already carry accounts receivable, so you have a cost. If the clients have low margin profits for you and are taking a long time to pay, that cost is high, often as much or more than the cost of the company's A/R finance.
EXAMPLE OF HOW FACTORING COMPANY ACCOUNTS RECEIVABLE FINANCING WORKS AND WHAT IT COSTS
Another way to look at it is that cash has significant value in your firm's operations. You can maintain solid relations with suppliers and vendors by paying them promptly, taking advantage of discounts, and capitalizing on the buying power of your new-found cash.
When selecting the best factoring companies, consider criteria such as ratings, years in business, services offered, and advantages specific to certain geographic regions.
KEY TAKEAWAYS
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Accounts Receivable Financing: Understand how converting invoices into cash works.
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Cash Flow Solutions: Learn the impact of factoring on business liquidity.
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Invoice Factoring Rates: Grasp the cost structure and fees involved in factoring.
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Non-Recourse Factoring: Know the benefits and protections against bad debt.
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Choosing a Factoring Company: Identify criteria for selecting the best factoring partner.
CONCLUSION - RECEIVABLES FACTORING IN CANADA
Business owners need to understand the differences between AR financing and commercial loans - A commercial loan is a debt solution, and AR Financing is a cash flow monetization strategy. The factoring process is easy to apply, and factoring companies’ services can quickly determine the value and advance rates on your receivables.
Invoice factoring services provide tailored solutions for different industries, converting outstanding invoices into immediate cash.
Are you looking for the best factoring finance tailored to your business needs? Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor.
FAQ: FREQUENTLY ASKED QUESTIONS
What is accounts receivable financing?
Accounts receivable financing involves a business selling its receivables to a third-party financial company, also known as a factor. The business receives an amount equal to a reduced receivable pledge value in advance.
Traditional commercial loans can be tied to restrictions that render them inappropriate for certain businesses ’ requirements. The advantages of factoring are the most cited advantage: the boost it provides to the business's cash flow, rather than wait the 30, to 60-day grace period many clients choose to pay their bills.
What is a factoring company?
A factoring company purchases unpaid invoices from businesses, providing them with immediate cash flow.
How does factoring benefit businesses?
Factoring helps businesses maintain a steady cash flow by converting outstanding invoices into cash quickly, allowing them to meet financial obligations without delay.
What are the costs associated with factoring?
Factoring costs typically include a percentage fee based on the invoice value, which can vary depending on the company and terms of the agreement.
What is non-recourse factoring?
Non-recourse factoring means the factoring company assumes the risk of non-payment by the customer, protecting the business from bad debt.
How do I choose a good factoring company?
When selecting a factoring company, consider factors such as the company's reputation, fees, terms, customer service, and industry expertise.
What industries benefit most from factoring?
Industries with long payment cycles, such as manufacturing, transportation, and staffing, benefit significantly from factoring.
How quickly can a business receive funds through factoring?
Businesses can typically receive funds within 24 to 48 hours after submitting invoices to a factoring company.
Are there any credit requirements for factoring?
Factoring companies usually focus more on the creditworthiness of the business's customers rather than the business itself.
Can startups use factoring services?
Yes, factoring can be an excellent financing option for startups with outstanding invoices.
What is the difference between factoring and a business loan?
Factoring involves selling invoices for immediate cash, whereas a business loan requires repayment with interest over time.
What is the process of factoring?
The process involves selling your unpaid invoices to a factoring company, which then provides you with immediate cash while handling the collection of payments from your customers.
What are the primary benefits of using a factoring company?
The main benefits include improved cash flow, reduced collection efforts, and the ability to meet financial obligations promptly without taking on debt.
How do factoring companies determine their fees?
Fees are typically determined based on the invoice value, your customers' creditworthiness, and the terms of the factoring agreement.
