Time To Revisit Receivables Discounting Solutions Debtor Factoring In Canada

YOUR COMPANY IS LOOKING FOR DEBTOR FACTORING / DISCOUNTING OF RECEIVABLES

ACCOUNTS RECEIVABLE FACTORING IN CANADA

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Financing & Cash flow are the biggest issues facing business today

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Oakville, Ontario
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factoring finance invoice factoring

Receivables discounting solutions in Canada. Not understanding something in business can often be simply confusing - sometimes it's downright dangerous. So let's take a basic look at short term debtor factoring solutions; how do they work, what do they cost, and why in the heck you would consider such a Canadian business financing solution. Let's dig in.

FACTORING HAS A LONG HISTORY IN BUSINESS FINANCE

First of all, invoice discounting is nothing new, that’s for sure. It's a method of financing credit terms that have been around for only hundreds of years! We’ve heard it originated when the Dead Sea was simply ill!

HOW RECEIVABLES DISCOUNTING DIFFERS FROM BANK FINANCING

Often confusing with bank lines of credit that are receivable based, it's simply a process where you arrange, on a one time, but usually on an ongoing basis to sell your accounts receivable for immediate cash as you generate sales for your goods and services. If we were keeping things really simple we would tell you that you generate an invoice for $ 100,000.00 dollars and you receive that cash into your bank account right away, as we have said. Well almost, the actual process has you receiving % 90,000.00 - the balance is a holdback to cover off any short payments or extended pay issues. That 1k balance, ' the holdback ' is remitted back to you, again, immediately, as soon as your client pays. Deducted from the 10k is the accounts receivable discounting fee, which customers tend to refer to as the finance charge for the transaction.

EXPLAINING THE DIFFERENCE IN BANK FINANCING VERUS ACCOUNTS RECEIVABLE FINANCING / FACTORING

So what don't Canadian business owners and financial managers often understand? The reality is they tend to view of confuse the whole process with bank loans. While the bank registers pretty well the same security against the A/R as the finance firm helping you with factoring, the issue is simply that the bank lends on an ongoing basis against the receivable invoice value , and other security they hold as collateral. The challenge in accessing bank credit lines is that your firm must have clean balance sheets, profits, cash flows, personal guarantees, and other qualifiers that ' sometimes' make it challenging to access A/R finance.

ANY COMPANY CAN QUALIFY FOR RECEIVABLES INVOICE FINANCE

Oh and by the way, if you're a start-up or experiencing intense hyper-growth that challenge of accessing bank financing is even more daunting. So as we have said, you'll understand receivables discounting a lot better when you separate it from what Canadian chartered banks do with A/R, and how the daily process actually works. Hopefully, we've already brought some clarity to the problem of understanding your different working capital and cash flow solutions - they all achieve the same goal, it's just that sometimes they work and cost a little differently. If you are looking for funding without recourse - ie the factoring company holding the credit risk, that solution is also available. Non recourse finance is available but is a bit more expensive.

UNDERSTANDING THE COST OF COMMERCIAL NON-BANK A/R FINANCING

The issue of cost is always a matter of ' mass confusion' when it comes to debtor factoring. Bank lines of credit are the cheapest and most flexible form of financing in Canada. That’s a safe statement we can make. But when that type of business credit can't be accessed then it's alternative financing solutions that make sense. Yes, the cost more via the ' factoring fee ', aka the ' invoice discount ' but that cost from factoring companies is offset against all the cash flow your firm now has access to. Quite frankly we can comfortably make the statement that you have unlimited cash flow, with no upper limit, if your firm has the sales and receivables to backstop your facility.

CONCLUSION

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your factoring company receivables discounting solutions to enhance cash flow and access to capital. The value of the invoice you finance is determined by your company.

P.S. There are different types of factoring, and it's easy to get confused in the terminology with solid help. Don't forget to ask that advisor about CONFIDENTIAL A/R FINANCE, allowing you to bill and collect your own receivables in a manner that suits your firm and your client relationships. It's a very common subset of asset-based financing providing immediate cash. Any accounts under 90 days can be financed.