YOUR COMPANY IS LOOKING FOR A/R FACTOR FINANCING!
ACCOUNTS RECEIVABLE FINANCING FOR CASH FLOW NEEDS
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the most significant issues facing business today.
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CONTACT US
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer A/R FACTORING and working capital solutions – Save time, and focus on profits and business opportunities
7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
A/R FACTORING COMPANY SOLUTIONS
Business cash flow pretty well always comes with challenges.
The A/R factor has emerged as a reliable solution that has stayed constant through turbulent and regular times.
What are the benefits of such solutions, which type is best, and how do things work? Let's dig in.
Cash Flow Crunch? AR Factoring Could Be Your Solution
Cash flow gaps from unpaid invoices can cripple business operations and growth opportunities. Late-paying customers and lengthy payment terms strain working capital, making it difficult to meet payroll or pursue new opportunities.
Let the 7 Park Avenue Financial team show you how AR factoring companies offer quick access to funds by purchasing your receivables, providing immediate cash flow relief without adding debt to your balance sheet.
3 Uncommon Takes on A/R Finance
- AR factoring can strengthen customer relationships by enabling more flexible payment terms.
- Factoring companies often provide free credit monitoring of your customers
- Using AR factoring can reduce accounting overhead by outsourcing collections
How AR Factoring Contributes to Your Cash Flow and Business Performance
In business, performance is everything, and the ability to generate cash flow and working capital from A/R financing can substantially contribute to that performance.
Effective cash flow management through services like invoice factoring and asset-based lending can significantly enhance a business's financial stability and growth opportunities.
UNDERSTANDING CASH FLOW AND FACTORING
Cash flow is the lifeblood of any business, and managing it effectively is crucial for success. However, many companies face cash flow challenges due to slow-paying customers, seasonal fluctuations, or rapid growth.
This is where factoring comes in – a financial solution that can help businesses improve their cash flow and achieve stability.
By converting outstanding invoices into immediate cash, businesses can maintain smooth operations, invest in growth opportunities, and avoid the pitfalls of cash flow shortages.
WHAT IS FACTORING?
Factoring is a type of accounts receivable financing in which a business sells its unpaid invoices to a third-party company known as a factoring company.
The factoring company advances a percentage of the invoice amount to the business, typically within 24 hours, and then collects payment from the customer. This process allows businesses to receive immediate cash flow rather than waiting for customers to pay their invoices.
Factoring companies handle the collection process, freeing up your time and resources to focus on other critical aspects of your business.
HOW DOES FACTORING WORK?
The factoring process typically involves the following steps:
-
A business submits its unpaid invoices to a factoring company.
-
The factoring company reviews the invoices and advances a percentage of the invoice amount to the business.
-
The factoring company collects payment from the customer, usually within 30 to 90 days.
-
Once the customer pays the invoice, the factoring company remits the remaining balance to the business minus a small fee.
This straightforward process ensures that businesses can quickly access the funds they need to cover expenses, invest in growth, and manage day-to-day operations without the stress of waiting for customer payments.
WHY CHOOSE AN A/R FACTOR?
Why does a business owner/manager choose accounts receivable factoring over more traditional Canadian chartered bank financing?
Once we explain it to clients, the process seems simple enough - it’s your company’s ability to generate immediate cash against your sales. At your choice, this can happen periodically, i.e. weekly, monthly, etc., or constantly… i.e. all the time!
BANK LENDING VERSUS A/R FACTORING - WHAT'S THE DIFFERENCE
It should be no secret that this method of Canadian business financing requires your actual accounts receivable as the primary ‘collateral’.
In contrast, business loans from banks rely on that same collateral but greatly emphasize historical and present profits, clean balance sheets, and business and personal collateral. Suffice to say that that latter combination provides a strong safety net for our Canadian banks.
FACTORING ALLOWS YOUR COMPANY TO GROW
Utilizing an AR factor in Canada is almost always a short-term or intermediate solution for a growing company or one that has faced and is fixing some challenges.
Asset-based lending is another key service offered to businesses across various industries, including manufacturing and transportation. It provides tailored financial solutions for quick access to working capital.
Using Europe as an example, top experts tell us that anywhere from 15% to 30% of all businesses in the SME sector (small to medium enterprise) have used A/R financing solutions offered by commercial finance firms. Those same experts also conclude that financing A/R outside of the bank plays a large role in economic development.
BENEFITS OF INVOICE FACTORING FOR BUSINESSES
USING CASH FLOW FOR GROWTH AND DAY-TO-DAY FUNDING
Supply chain financing and cash flow generated from an A/R factor solution from a factoring company are used for various reasons, such as ‘asset monetization’. It is not term debt of any sort.
For that reason, the business owner/manager can use funds for immediate needs primarily related to growth and operations. Think of it as a ‘buffer’ to ongoing working capital requirements.
DIFFERENT TYPES OF FACTORING COMPANIES ARE AVAILABLE
Business owners can choose between various factoring services, including non-recourse factoring and recourse factoring, depending on the level of credit risk they wish to carry. If desired, any account receivable can also be insured.
WHAT ARE MISCONCEPTIONS AROUND ACCOUNTS RECEIVABLE FINANCING
So why don’t more businesses access cash flow via A/R financing and receivable management? Studies tell us that one primary reason is that Canadian companies are unaware of this solution.
They also tell us that there are key misconceptions about what type of company uses these methods. It might surprise many business owners/managers that the largest and most well-known corporations access this same financing vehicle.
In some instances, the Bay Street gang gives it a fancier name, such as Securitization.
CHOOSING THE RIGHT FACTORING COMPANY
With so many factoring companies in Canada, choosing the right one can be overwhelming. Here are some key factors to consider when selecting a factoring company:
-
Industry expertise: Look for a factoring company with experience working with businesses in your industry. This ensures they understand the unique challenges and opportunities your business faces.
-
Flexible funding solutions: Choose a factoring company that offers flexible funding options, such as invoice factoring, accounts receivable financing, and purchase order financing. This flexibility can help you find the best solution for your specific needs.
-
Competitive rates: Compare rates among different factoring companies to ensure you get the best deal. Look for transparent pricing with no hidden fees.
-
Excellent customer service: Select a factoring company that provides exceptional customer service, including quick response times and dedicated account managers. Good customer service can make the factoring process smoother and more efficient. Trucking companies, staffing firms, telecom companies and manufacturers can all use this method of financing.
-
Reputation: Research the factoring company’s reputation online, checking for reviews and testimonials from other businesses. A good reputation is a strong indicator of reliability and trustworthiness.
-
Security: Ensure the factoring company has robust security measures to protect your sensitive business information. Most factoring companies place a high level of security on information. Data security is crucial in maintaining the confidentiality and integrity of your financial transactions.
-
Scalability: Choose reputable factoring services that can grow with your business, offering scalable funding solutions to meet your evolving needs. This ensures that your financing solution can adapt as your business expands.
Considering these factors, you can find a factoring company that meets your unique business needs and helps you achieve financial stability and growth.
WHAT IS THE COSTS OF FACTORING
Cost also plays a factor in adopting an AR Factor when considering invoice factoring services and factoring financing.
Understanding that this financing method works best in a standard or high-growth environment is critical.
Companies in a downward sales spiral would not benefit from the solution. This method of financing, sometimes called ‘ discount factoring,’ charges a factoring fee.
It is not an interest rate but a factoring discount on your receivables—the key difference is often misunderstood. Understanding this allows you to understand the real definition of factoring.
Still, others feel it’s complex to administer daily. While that might be true, our recommended client solution, CONFIDENTIAL RECEIVABLE FINANCING, allows the business to bill, collect, and cash flow its sales confidentially.
One factor that may surprise you about approval is the lesser focus on personal credit history and owners' net worth—which is almost always a bank focus!
CASE STUDY:
Company Profile: Canadian-based industrial equipment manufacturer with $5M annual revenue Challenge: 60-day payment terms from major customers straining operations
Initial Situation:
- Monthly payroll: $180,000
- Materials cost: $250,000/month
- Cash reserves depleting
- Unable to accept new orders due to working capital constraints
- Losing early payment discounts from suppliers
AR Factoring Implementation:
- Established $2M factoring facility
- 85% advance rate on qualified invoices
- 48-hour funding timeline
- Online invoice submission portal
- Professional collections management
12-Month Results: Financial Impact:
- Immediate access to $1.7M working capital
- Reduced DSO from 60 to 2 days
- Revenue growth from $5M to $7M
- Supplier early payment discounts: $48,000 savings
- Production capacity increased by 45%
Operational Improvements:
- Hired 12 additional staff
- Purchased new equipment
- Increased inventory levels
- Accepted larger orders
- Reduced overtime costs by 30%
Customer Relations:
- Offered more competitive payment terms
- Faster order fulfillment
- Increased order sizes
- Better customer satisfaction scores
- No disruption to existing relationships
ROI Analysis:
- Factoring costs: 2% per month
- Cost savings: $112,000 annually
- Additional profit: $450,000
- Net benefit: $338,000 first year
KEY TAKEAWAYS
-
Understanding factoring fees and advance rates drives optimal usage
-
Proper invoice documentation ensures quick funding approval
-
Customer creditworthiness directly impacts factoring terms
-
Clean accounts receivable aging maximizes funding potential
-
Regular communication with factors optimizes the relationship
CONCLUSION - FACTORING FINANCE
So bottom line, receivable factoring is NOT a loan, it’s not a bank overdraft facility, it’s simply a method to cash flow sales on an ongoing basis in an unlimited manner.
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your A/R financing and growth needs.
If you’re looking for a factoring company for invoice factoring, call us at 7 Park Avenue Financial. Any small business can get started as soon as you wish.
FAQ
How quickly can I receive funding for my invoices?
Funding typically occurs within 24-48 hours after invoice verification.
What percentage of the invoice value can I receive?
Most AR factoring firms advance 80-90% upfront, with the remainder paid when your customer settles the invoice.
Do my customers need to know I’m using factoring?
This depends on the type of factoring arrangement - notification factoring requires customer awareness, while non-notification factoring maintains confidentiality.
What makes AR factoring different from traditional loans?
-
No debt added to balance sheet
-
Approval based on customer credit
-
Faster funding process
-
Scalable with business growth
How quickly can my business receive funds?
-
Initial setup: 3-5 business days
-
Subsequent funding: 24-48 hours
-
Online portal for submissions
-
Same-day funding options available
Do I lose control of customer relationships?
-
Professional collection practices
-
Optional notification factoring
-
Maintain direct communication
-
Regular reporting provided
What documentation is required?
-
Articles of incorporation
-
Recent financial statements
-
Accounts receivable aging
-
Customer credit information
-
Sample invoices
