Solving Business Cash Flow Problems with Receivable Factoring

YOUR COMPANY IS LOOKING FOR RECEIVABLES FINANCING!

Reimagining Business Financing: The Power of Receivables Factoring

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Financing & Cash flow are the biggest issues facing business today

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commercial accounts receivable financing

"Commercial accounts receivable factoring stands as a cornerstone for businesses aiming to optimize their cash flow and accelerate growth in a competitive market landscape."

"Unlock the secret to financial flexibility and bid farewell to cash flow woes with commercial accounts receivable factoring."

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Commercial Accounts Receivable Financing solutions that solve the issue of cash flow and working capital challenges – Save time and focus on profits and business opportunities

Commercial Accounts Receivable Financing: A Confidential Approach

We hear a lot these days about 'privacy’ and confidentiality in business. Well, here's a twist on that.

How would you like to be the firm with a confidential receivables financing facility when all your competitors and other firms are using traditional commercial finance factoring funding for their cash flow/working capital? Sounds interesting, right?

The Advantages of Confidential Receivables Financing Over Traditional Factoring

The hard reality these days is that financing receivables has emerged as an 'in fashion' alternative to traditional financing that is often unavailable to thousands of medium and smaller businesses in Canada.

(Oh, and by the way, larger corporations also use a subset of this financing!)

We're often amazed at how long some firms continue to use commercial finance factoring. There are all sorts of reasons why.

One not-so-obvious one is that Canadian banks will often calculate interest on your firm’s entire approved credit line, even if you only use part of it. It seems a bit unfair. The receivables financing strategy is the ultimate in 'paying for what you only use'.

We admit that’s one smaller reason thousands of firms in Canada have factoring agreements in place.

The reality is that most businesses are interested in the total flexibility of this business financing solution. If we had to be pinned down and identify one main reason firms factor in receivables, it might be that your credit facility grows as your sales increase. So, bottom line, no more annual reviews or bulge crises when things don’t work out temporarily. It’s the end of 'fighting fires' in cash flow and working capital.

How Does Confidential Accounts Receivable Financing Work?

Financing receivables is a subset of asset-based lending in Canada. Your firm sells its A/R either on a one-time or ongoing basis. A hefty advance, usually in the 90% range, is made against the most valuable of current assets: your customer accounts. You have just generated instant cash flow. Once your client pays that 'holdback' of 10% or so, it is refunded to you, the client, with less financing costs.

Those financing costs in Canada average anywhere from 1-1.5% a month, and quite frankly that middle range, i.e. 1.5% is a typical fee for each invoice based on a standard industry credit term of 30 days. Factors that affect your rate are the size of your portfolio, your general overall financial condition, and the quality and size of your A/R and client base.

So, that privacy issue. What's that all about, ask clients. Well, we would prefer that you consider a confidential receivables financing alternative. Under this type of facility, you bill and collect your receivables, the bottom line your financing arrangements are known only to you and your receivable finance partner.

What an advantage! Simply because thousands of other firms, including your competitors who utilize commercial finance factoring, have to go through a somewhat intrusive process of having traditional factor firms notify clients and are involved in collecting your accounts.

Key Takeaways

The Factoring Process: Understanding how businesses sell their invoices to a third party (the factor) at a discount to receive immediate cash.
Costs and Fees: Grasping the structure of accounts receivable financing rates/fees associated with factoring, which typically includes a percentage of the invoice value.
Impact on Cash Flow: Recognizing how factoring provides immediate cash flow, enabling businesses to invest in growth or cover operational costs via innovative receivable loans
Choosing a Factoring Partner: Knowing the criteria for selecting a reputable factoring company for an accounts receivable loan that aligns with your business needs and goals.
Customer Relationships: Understanding the implications of factoring on customer relationships, as the factor will be collected directly from them.

Conclusion

So, bottom line? If you don’t mind the whole world knowing about how you finance your firm's business, then consider a traditional commercial finance factoring strategy.

If on the alternative you want all the benefits, the exact cost by the way, and want to run your own business from a cash flow and working capital standpoint... well, you know what to do!

Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, to learn how confidential receivables financing can work for you!

FAQ: FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

How does commercial accounts receivable factoring work?

Invoice Factoring involves selling your outstanding invoices to a third party, the factor at a discount, providing you with immediate cash flow.

What are the main benefits of accounts receivables factoring for my business?

There is immediate cash flow, no need for collateral, and the ability to manage better and predict your cash flow via the accounts receivable financing process.

Is my business eligible for accounts receivables factoring?

Understanding how accounts receivable financing works, businesses with outstanding invoices from government and commercial creditworthy customers are eligible for factoring / AR financing

How quickly can I access funds through receivables factoring?

Funds via receivables loans / factoring can typically be accessed within 24-48 hours after the factoring agreement.

Does receivables factoring affect my relationship with my customers?

Factoring can be discreet, and many factors offer non-notification factoring, where your customers are unaware of the financing arrangement.

What's the difference between recourse and non-recourse factoring?

Recourse factoring requires you to buy back unpaid invoices to the accounts receivable finance company , while non-recourse factoring does not, offering more excellent risk protection.

Can I factor invoices from all my customers?

Factors may assess the creditworthiness of your customers and choose which invoices to finance.

Are there any industries that particularly benefit from receivables factoring?

Industries with long invoice payment cycles, like manufacturing and wholesale, often benefit most from factoring.

How does the factor collect payment from my customers?

The factor takes over the collection process, directly contacting your customers for payment.

Can I continue conducting business with my customers as usual during the factoring process?

Yes, you can continue business operations normally, though the factor will manage invoice collections.

How does the factoring fee structure work?

Factoring fees from accounts receivable financing companies are typically a percentage of the invoice value and vary based on the invoice amount and the customer's creditworthiness.

How can I ensure my customers are treated fairly by the factor?

Choose a reputable factoring partner known for ethical practices and discuss their collection methods before signing an agreement.

What happens if a customer fails to pay an invoice under a non-recourse factoring agreement?

In non-recourse factoring, the factor assumes the risk of non-payment, and you are not required to reimburse the factor for that invoice.

Commercial Accounts Receivable Factoring: Solving Business Cash Flow Problems | 7 Park Avenue Financial