YOUR COMPANY IS LOOKING FOR A/R FINANCE SOLUTIONS!
ACCOUNTS RECEIVABLE AR FUNDING
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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
Direct Line = 416 319 5769
Stop Waiting, Start Growing: AR Finance Solutions
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer A/R Finance 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”
What is AR Financing: Understanding Accounts Receivable Financing
A/R Finance in Canada seems straightforward to most Canadian business owners and financial managers.
However, if you are not dealing with the right receivable financing company under conditions that reflect how you do business… well, let’s just say… Confusion can set in.
Accounts receivable refers to the money owed to a business by its customers for goods or services provided on credit.
INSTANT CASH FLOW FROM UNPAID INVOICES!
Those unpaid invoices and expenses keep piling up -with slow collections straining supplier relationships and challenging growth.
Let the 7 Park Avenue Financial team show you how to gain immediate access to cash flow - eliminating that waiting and allowing you to grow sales and profits.
Understanding Accounts Receivable
Accounts receivable (AR) is crucial to a company’s financial well-being. It represents the amount of money owed to the business by its customers for goods or services provided on credit.
Understanding accounts receivable is essential, as it directly impacts a company’s cash flow, liquidity, and overall financial health.
Accounts receivable are recorded as assets on a company’s balance sheet. They indicate the amount of money expected to be received from customers within a short period, typically within a year.
The accounts receivable balance is a key indicator of a company’s financial health, as it reflects the efficiency of its collections process and the creditworthiness of its customers.
Efficient accounts receivable management ensures that a business maintains a steady cash flow, which is vital for meeting operational expenses and investing in growth opportunities.
Two Uncommon Takes on Receivable Finance
- Financing Receivables can improve customer relationships by removing payment tensions.
- Using Accounts Receivable Finance strategically can help negotiate better supplier terms.
You Wanted to Know!
How quickly can I get funding through Accounts Receivables Finance?
Funding typically arrives 24-48 hours after approval, with same-day funding available in urgent situations.
What percentage of my invoice value can I access?
Most factoring providers advance 80-90% of the invoice value upfront, with the remainder (minus fees) paid when your customer settles the invoice.
Do I need to finance all my invoices?
No. You can select specific invoices or customers for financing, maintaining flexibility in your cash flow management.
How Accounts Receivable Financing Works
Accounts receivable financing is a financial solution that allows businesses to access immediate capital by leveraging their outstanding invoices.
This type of financing is beneficial for companies that experience cash flow gaps due to slow-paying customers or seasonal fluctuations in sales.
The accounts receivable financing process typically involves the following steps:
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A business sells its outstanding invoices to a finance company or lender.
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The finance company or lender provides cash in advance based on the value of the outstanding invoices.
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The business repays the advance plus fees when the invoices are paid.
Accounts receivable financing can be structured in various ways, including factoring, invoice discounting, and accounts receivable loans.
Each option has benefits and drawbacks, and businesses should consider them before choosing a financing solution. By converting unpaid invoices into immediate cash flow, companies can bridge the gap between sales and payment, ensuring smoother operations and the ability to seize new opportunities.
YOUR CASH FLOW FINANCING SOLUTION
So, let’s share some pearls of wisdom around the cash flow financing mechanism ( known as factoring ) that works great… when you understand what’s happening via solutions from ‘ factoring companies’ for your outstanding invoices.
Accounts receivable financing companies provide cash flow solutions by offering competitive rates, quick funding, and efficient invoice processing.
A/R FINANCING DELIVERS NO DEBT TO THE BALANCE SHEET
Rather than taking on debt to finance your firm's ongoing working capital needs, many small businesses choose instead to monetize their 2nd most liquid asset - A/R.
A/R financing delivers no debt to the company's balance sheet, as accounts receivable is classified as an asset. (Cash on hand is of course your most liquid asset - it’s just not as plentiful as you want it to be!)
RECEIVABLE FINANCING BECOMES YOUR BUSINESS CREDIT LINE
If your firm meets bank criteria for cash flow/working capital needs, you’re, in effect, using that A/R as collateral for what most call a business line of credit.
Financing accounts receivable is a pivotal strategy for managing working capital, allowing businesses to unlock capital tied up in their accounts receivable.
That’s not really how Account Receivable financing works—under the ‘paperwork’ involved, you are constantly selling your accounts for a discounted amount at your discretion.
HOW MUCH FINANCING CAN YOU OBTAIN
The amount you receive, typically 80-90%, becomes immediate cash on the balance sheet—pretty much the same day you generate a sales invoice.
In effect, you’re simply shortening your business's total operating cycle..... and you can trust us that the costs associated with carrying your accounts receivable, risking lousy debt, and missing out on opportunities to move your business forward because of a lack of cash are very nicely offset by your costs in the invoice-to-cash conversion via a Receivable financing company.
The amount of financing is often based on the accounts receivable balances, which play a crucial role in determining the value and terms of financing agreements.
FINANCING APPROVAL
Underwriting is a critical component of the accounts receivable financing process.
Finance companies and lenders carefully evaluate a business's and its customers' creditworthiness before approving a financing agreement.
The underwriting process typically involves reviewing the business’s financial statements, credit history, and accounts receivable aging report to determine the level of risk involved.
This thorough evaluation ensures that the financing solution is tailored to the business’s needs and financial situation.
THERE ARE 2 CHOICES IN RECEIVABLE FINANCE
Canadian business owners have two choices when it comes to financing sales cash flow under the financing mechanism we’ve been talking about:
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They can let an AR Financing firm run, manage, administer and finance all their accounts.
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They can bill and collect in their own name, letting the finance firm remain quietly in the background. This method is what we call CONFIDENTIAL A/R FINANCE.
When we talk to clients who have used or are thinking of using such an invoice discounting process, we stress that it’s all about the quality of the financing companies you are dealing with.
Ultimately, you want a firm that understands your business model, prices competitively, and has the capital to grow with your business.
Managing both accounts receivable and accounts payable is essential for maintaining liquidity and avoiding financial pitfalls.
By the way, some of the largest and most successful corporations in Canada figured out this same type of financing a long time ago.
They call what we’ve been describing ‘ SECURITIZATION ‘. As your firm should be doing, they focus on keeping inventory low and turning accounts receivables into cash on hand as quickly as possible.
Factoring vs Invoice Discounting
Factoring and invoice discounting are two popular forms of accounts receivable financing.
Factoring involves selling outstanding invoices to a finance company, which then collects customer payments.
This method provides immediate cash flow but may involve higher fees and a loss of control over the collections process.
On the other hand, invoice discounting allows businesses to access a higher percentage of the invoice value, often around 90%, while retaining the responsibility of collecting payments from customers. This option offers more control but may require a stronger internal collections process.
Both factoring and invoice discounting have advantages, and the choice between them depends on the business's specific needs and circumstances. By understanding these options, businesses can select the most suitable receivable financing method to enhance their cash flow and support their growth strategies.
Accounts Receivable Loans
Accounts receivable loans are funding where a business borrows against its accounts receivable.
The lender provides cash in advance based on the value of the outstanding invoices, and the business repays the advance plus fees when the invoices are paid.
Businesses often use Accounts receivable loans that require a more flexible financing solution. They allow for ongoing access to capital based on receivable balances.
Underwriting is a critical component of the accounts receivable financing process. Finance companies and lenders carefully evaluate a business's and its customers' creditworthiness before approving a financing agreement.
The underwriting process typically involves reviewing the business’s financial statements, credit history, and accounts receivable aging report to determine the level of risk involved. This thorough evaluation ensures that the financing solution is tailored to the business’s specific needs and financial situation.
By understanding the concept of accounts receivable and the various financing options available, businesses can make informed decisions about managing their cash flow and improving their financial health.
WHY ACCOUNTS RECEIVABLE FINANCING MAKES SENSE
The ' PERFECT STORM ' in AR finance happens when your firm is:
1.GROWING
2. HAS GOOD GROSS MARGINS ALLOWING YOU TO ABSORB THE FINANCING COST
3. FOCUSING ON GOOD ASSET TURNOVER AND MEASURING THAT TURNOVER
4. UTILIZING A RECEIVABLE FINANCING COMPANY TO FACILITATE GROWTH, NOT HIDE MISMANAGEMENT OF ASSETS
DID YOU KNOW?
- 60% of Canadian SMEs face cash flow challenges
- Average payment terms extend to 45-60 days
- AR Finance industry is growing at 15% annually
- 89% of businesses cite improved cash flow after implementing AR Finance
- $180 billion in annual financing volume in North America from accounts receivable financing companies
KEY TAKEAWAYS
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Quick access to working capital transforms unpaid invoices into immediate cash flow, enabling rapid business growth.
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Credit risk assessment shifts to the finance provider, reducing your business exposure and administrative burden
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Flexible funding grows with your sales volume, creating a scalable financing solution that adapts to business needs.
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Professional collections management improves customer relationships while maintaining your focus on core operations.
CONCLUSION
Will this method of business financing work for your firm?
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can provide your company with the ' words of wisdom' it needs to maximize the challenges of business financing and growth.
Short-term invoice factoring is a bridge back to traditional Canadian business financing and business lines of credit, solving your current liquidity challenges and business needs.
FAQ
What immediate impact does AR Funding have on business operations?
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Provides instant access to working capital
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Eliminates waiting periods for customer payments
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Improves supplier relationships through prompt payments
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Enables quick response to growth opportunities
How does Financing a/r improve business planning?
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Creates predictable cash flow patterns
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Enables confident growth strategies
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Provides clarity on available working capital
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Supports better inventory management
What advantages does A/R Finance offer over traditional loans?
How does A/R Finance affect customer relationships?
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Professional payment management
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Consistent communication
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Improved service delivery
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Enhanced business reputation
What cost benefits come with Financing a/r ?
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Reduced collection costs
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Lower administrative expenses
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Early payment discounts from suppliers
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Improved cash flow planning
What criteria must businesses meet to qualify for AR Finance?
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A business-to-business sales model is required
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Minimum monthly revenue thresholds
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Clean, corporate credit history
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Verifiable customer base
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Professional accounting systems
How is A/R Finance different from traditional bank financing?
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Based on invoice quality rather than company credit
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No fixed repayment schedules
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Scales with business growth
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Faster approval process
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More flexible terms
What documentation is needed for AR Finance approval?
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The previous three months of bank statements
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Accounts receivable aging report
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Customer payment history
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Business registration documents
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Tax compliance records
How does the AR Finance process work in practice?
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Submit invoices for immediate financing
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Receive up to 90% advance within 24 hours
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The finance company manages collections
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The remaining balance paid minus fees
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Flexible invoice selection options
What industries benefit most from AR Finance?
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Manufacturing companies
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Service providers
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Distribution businesses
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Technology firms
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Professional services
What are the typical costs associated with AR Finance?
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Factor rates from 1-2%
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Processing fees
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Setup costs
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Monthly minimums
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Early termination fees
