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Financing & Cash flow are the biggest issues facing business today
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Invoice Discount Financing offers a strategic solution for businesses seeking immediate cash flow from their outstanding invoices.
Unlock immediate cash flow and fuel your business growth with Invoice Discount Financing.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Invoice Discount Financing solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
INVOICE DISCOUNT A/R FINANCING IN CANADA
Financing receivables in Canada. Trust us, it's not magic.
The concept of invoice discounting and receivables lending practices in Canada allows Canadian business owners and financial managers to turn sales into cash in four hours!
In case you haven't considered it a lot, four hours is better than waiting for one, two, and yes, sometimes almost three months for your sales to turn into customer receipts of payment. Talk about bridging the gap when it comes to accounts receivables.
EFFICIENT CASH FLOW MANAGEMENT WITH INVOICE FINANCING
Invoice Discount Financing and invoice finance are effective solutions for businesses needing immediate working capital. They leverage outstanding invoices to unlock cash flow without the challenge of accessing traditional loans and conventional bank financing.
This financing method, essential for maintaining liquidity and fueling growth, provides companies with the flexibility to manage operational expenses and capitalize and exploit opportunities that arise for growth and profits.
Let the 7 Park Avenue Financial team demonstrate the mechanics and benefits of A/R Financing AND how it can significantly enhance a business’s financial position.
A GENERAL COLLECTIONS SLOWDOWN IN THE ECONOMY?
Surely, business owners can’t be surprised to hear that most firms tend to delay paying their bills.
In corporate financing slowing down, payables is part of the formula for working capital calculations! And be honest, you can’t be surprised about that one since your firm is probably in that same majority of firms who, in a calculated manner, only pay suppliers at the last minute.
At the root of the matter, though, is the fact that the slowdown in receipts from your clients creates a problem for your firm. Can it be fixed? Absolutely.
Invoice discount financing can be a better alternative to a traditional business loan, as it provides quicker access to funds without a standard business loan's complexities and security requirements.
FOCUS ON GOOD INTERNAL MANAGEMENT IN YOUR ACCOUNTS RECEIVABLE POLICY
We’ll quickly add that your firm can do a lot internally to accelerate cash—that can be done by stressing payment terms with clients and maintaining a focused (but professional) approach to collecting your accounts.
That type of policy also prevents you from hearing about invoice or, product or service problems much too late in the business operating cycle as it relates to your working capital situation.
Understanding how invoice discounting works can help businesses manage their accounts receivable more effectively by providing funds based on the value of raised invoices. Managing payables is the other half of cash management, directly related to accounts receivable on the other side of the balance sheet!
BALANCING VENDOR RELATIONSHIPS WITH ACCOUNTS PAYABLE PRACTICES AND UNPAID INVOICES
While many firms want a positive business relationship rather than have their valued customers on ‘credit hold,’ it's safe to say this is a tricky balancing act.
One U.S. survey—and we’re pretty sure it is the same in Canada—found that 1000 of the largest corporations in America acknowledged they were paying suppliers more slowly. Of course, we already told you the reason why. Another survey indicated that 50% of all ‘small guys’ were experiencing cash flow concerns! No surprise, right?
Naturally, the concern of the SME business owner and manager revolves around ‘will I lose a client if we have a strict credit policy’ around ar financing? We don’t think so, but at the same time, that is your decision.
We would add that profits, or lack thereof, rarely take down a company, but running out of cash … does. That’s how critical accounts receivable management is and should be for management focus in your company.
An invoice discounting facility can help businesses manage their cash flow while maintaining good vendor relationships by providing funds soon after sending out an invoice.
INVOICE DISCOUNTING AND ACCOUNTS RECEIVABLE FINANCING: SOLUTION TO CASH FLOW CONCERNS!
So, our ‘magic solution’ for turning 500k of promises into cash, as shown in our example, is invoice factoring, aka invoice discounting.
It’s getting cash before your client pays you, and it’s done via legitimate receivable lending firms, typically non-bank in Canada.
An invoice discounting company provides quick access to funds by purchasing unpaid invoices, allowing businesses to receive the money faster while ensuring confidentiality.
HOW DOES INVOICE DISCOUNTING WORK?
Your receivables or receivables are purchased when you issue the invoice, and typically, 24 hours or so later, you have cash in the bank.
A typical advance rate in Canada is 90%, so if you have $550,000.00 in sales, you would receive approximately $500,000.00 in cash. Oh, and by the way, that remaining 10% is yours when your client pays, less the financing cost. Once the loan is repaid, the remaining balance is transferred to your business's bank account.
Accounting for all this is quite simple. Using one invoice as an example, you would CR a/r and DEBIT cash and invoice financing expense. Mission accomplished! Accounts receivable are balanced, and receivables financing is solved!
The largest corporations in North America use a more formal program, typically called ‘ securitization, ‘ whereby they move their assets off the balance sheet to a third party in exchange for immediate cash.
Boy, does that balance sheet look good? No A/R and plenty of cash. So whether you’re securitizing or using an invoice factoring company, it’s a win/win strategy.
KEY TAKEAWAYS
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Invoice Financing: This involves selling unpaid invoices to a financing company for immediate cash, improving liquidity.
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Accounts Receivable Financing: A type of financing where businesses receive advances on outstanding invoices, enhancing cash flow.
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Cash Flow Solutions: Strategies like Invoice Discount Financing help maintain steady cash flow by converting invoices into working capital.
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Working Capital Financing: Using invoices to secure funding ensures businesses can cover operational expenses and invest in growth.
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Factoring vs. Invoice Discounting: Understanding the difference between these methods helps businesses choose the right financing option for their needs.
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Confidential Invoice Discounting: This type of invoice finance allows businesses to gain instant access to cash tied up in unpaid invoices while keeping it confidential from their customers. It enables businesses to retain autonomy over communications and customer service, unlike invoice factoring.
CONCLUSION
The benefits of financing accounts receivable should by now be pretty obvious.
It comes down to customer retention, not running out of cash, better supplier relations, and the ability to feel confident about future sales and growth financing with the potential help of a factoring company. Financing receivables can also be part of an asset-based lending facility that includes key assets such as inventory.
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, to learn about the advantages of invoice discounting. It's not magic—just experience and knowledge!
FAQ
What is Invoice Discount Financing?
Invoice Discount Financing is a financial solution that allows businesses to unlock cash flow by selling their unpaid invoices to a financier at a discount.
How does Invoice Discount Financing benefit businesses?
It provides immediate working capital, helping businesses manage operational expenses, invest in growth opportunities, and maintain liquidity.
What types of businesses can use Invoice Discount Financing?
Any business with outstanding invoices can benefit, particularly those in industries with long payment cycles or seasonal cash flow fluctuations.
Is Invoice Discount Financing different from factoring?
Yes, while both involve selling invoices, Invoice Discount Financing typically allows businesses to maintain control over their sales ledger and customer relationships.
What are the costs associated with Invoice Discount Financing?
Costs vary but usually include a discount fee based on the invoice value and the time customers take to pay the invoice.
How quickly can a business receive funds through Invoice Discount Financing?
Funds can often be received within 24 to 48 hours after submitting the invoices for discounting.
What happens if a customer doesn't pay an invoice?
This depends on the agreement with the invoice discounting provider - Some financiers offer non-recourse financing, where the financier assumes non-payment risk.
Are there any risks associated with Invoice Discount Financing?
The main risk is the cost, as fees can add up. It's crucial to compare costs and benefits before proceeding.
Can small businesses use Invoice Discount Financing?
Yes, small businesses often use it to improve cash flow and manage growth without taking on traditional debt.
What is the difference between recourse and non-recourse financing?
Recourse financing means the business is responsible if the customer doesn't pay, while non-recourse financing means the financier assumes the risk of non-payment.
How does Invoice Discount Financing work?
Businesses sell their unpaid invoices to a financier at a discount, receiving immediate cash while the financier waits for customer payments.
Who are the typical providers of Invoice Discount Financing?
Providers include banks, specialized financial institutions, and independent financing companies.
What are the main advantages of using Invoice Discount Financing?
Advantages include improved cash flow, quick access to funds, and managing growth and operational expenses without traditional loans.
What industries benefit most from Invoice Discount Financing?
Industries with long payment cycles, such as manufacturing, wholesale, and professional services, benefit greatly from this financing. The bottom line is that companies with commercial or government clients can utilize solutions from invoice financing companies.
How does Invoice Discount Financing impact a business's balance sheet?
It converts accounts receivable into immediate cash, improving liquidity without increasing liabilities.
Can Invoice Discount Financing be used alongside other financing options?
Yes, it can complement other financing methods, providing additional liquidity and financial flexibility.
