YOUR COMPANY IS LOOKING FOR CASH FLOW FINANCE SOLUTIONS!
INVOICE FACTORING VIA ACCOUNTS RECEIVABLE FINANCING
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Financing & Cash flow are the biggest issues facing business today
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Struggling with cash flow? Factoring AR could be the solution your business needs.
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer AR 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”
Factoring AR (Accounts Receivable) in Canada
Accounts receivable factoring solutions in Canada are sold under various ‘pseudonyms,’ including ‘factoring,’ ‘invoice discounting,’ etc.
Not only can the names be confusing sometimes (there are some subtle differences in each type); actual arithmetic around this type of financing is clearly not understood by clients we meet and talk to about factoring companies. Let’s dig in!
Therefore, if there’s a theme or message, it’s both the ‘COST’ and the ‘STYLE’ of this growing method of financing your business.
Factoring AR is a valuable financing solution for leveraging your accounts receivable into immediate cash flow! Delayed payments from your customers will always present a major working capital challenge.
Let 7 Park Avenue Financial demonstrate the benefits of financing your receivables. Accounts receivable financing works for any business that carries commercial or government receivables.
LOOKING FOR THE BEST FACTORING COMPANY SOLUTION? HERE IS THE 7 PARK AVENUE FINANCIAL RECOMMENDATION
When recommending what type of receivable financing solution, we recommend ‘ CONFIDENTIAL RECEIVABLE FINANCING ‘.
An accounts receivable factoring company can provide the necessary services to monetize your sales as soon as they become accounts receivable.
Like traditional factoring, invoice discounting, etc., it is a subset of what we can broadly term ‘ asset finance ‘. The key benefit of this method of business financing is clear—monetizing your sales as soon as they become accounts receivable!
TRADITIONAL RECOURSE FINANCING
Unlike traditional forms of A/R finance, your company is responsible for all billing and collections, and the better you manage your accounts for more cash flow and less financing costs.
Understanding the accounts receivable factoring cost is crucial, as it includes variable rates based on the time customers pay invoices.
In essence, factoring services give you a business line of credit.
THE ABILITY TO KEEP YOUR FINANCING PRIVATE
Why does the business owner want the ability to manage their own business and keep their financing private?
The apparent reasons are pretty simple - Canadian business owners and managers feel that their suppliers, competitors, and other parties don't necessarily need to know how their business is financed.
Most business people would agree that the posture of Canadian business is more conservative than that in the U.S., which is probably why Confidential A/R finance lends itself well to the Canadian market.
KEY BENEFITS OF COMMERCIAL RECEIVABLE FINANCE
Another key benefit of financing receivables in this manner is the ability to get 90% margining of your accounts.
Understanding how accounts receivable factoring works can help businesses improve cash flow and manage their finances more effectively. This differs from the traditional 75% allowed by Canadian banks. Funds received from the cash advance on this financing in this matter enable your firm to:
Reduce payable levels
Take supplier discounts - enhance vendor relations with key suppliers
Negotiate better pricing based on newfound cash ability
EXAMPLE OF THE COST OF FACTORING
As we said, the key to understanding factor companies and why this method of financing might work for your firm is often in the math.
To calculate accounts receivable factoring, you need to determine eligible accounts receivable, calculate the advance rate, and subtract factoring fees. Financing is based on a 30-day collection period, and costs increase on a ‘ per Diem basis for your clients that pay later than 30 days. Beware of any facility that doesn’t quote you a per diem rate.
Using a $1000.00 invoice as an example, it will cost you about 15$ to finance that invoice if your payment terms are 30 days.
THE INVALID COMPARISON OF BANK FINANCING AND INVOICE FACTORING COMPANIES
The danger of understanding A/R finance pricing comes when business owners and managers compare it to bank financing or working capital term loans.
When considering accounts receivable factoring vs. traditional bank financing, it's important to understand each method's unique benefits and operational differences. A better way to look at it is to consider it as if you were offering a discount to your accounts for prompt payment.
KEY TAKEAWAYS
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Invoice financing: Understanding the process of selling accounts receivable to a factor for immediate cash.
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Cash flow acceleration: Recognizing how factoring improves working capital by reducing invoice issuance and payment receipt time.
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Risk assessment: Grasping the importance of creditworthiness evaluation in factoring arrangements around issues such as the factoring fee.
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Fee structure: Comprehending the costs of factoring services, including discount rates on funding outstanding invoices and processing fees.
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Recourse vs. non-recourse: Differentiating between types of factoring agreements and their implications for liability.
CONCLUSION
Factoring AR provides a practical and efficient way for businesses to access immediate cash by leveraging their accounts receivable.
The reality of financing receivables is that a lot of working capital and costs are tied to your investment in accounts receivable.
Factoring receivables allows businesses to improve cash flow and address short-term financing needs. Confidential A/R financing will enable you to operate your company, grow your company, and not take on excessive debt or search for new equity.
Getting paid on your accounts receivables is key to business success. Strong asset turnover and newfound cash flow also allow you to stimulate more sales and generate more profits.
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your business funding receivables factoring cash flow needs.
FAQ
What is Factoring AR and how does it work?
Factoring AR involves selling your accounts receivable to a factoring company at a discount, allowing your business to receive immediate cash.
How can Factoring AR benefit my business?
Factoring AR improves cash flow, enabling your business to cover operational expenses, invest in growth, and avoid debt burden.
What types of businesses typically use Factoring AR?
Small to medium-sized businesses across various industries use Factoring AR, particularly those with extended payment terms from clients.
How does Factoring AR compare to traditional loans?
Factoring AR via accounts receivable financing companies provides faster access to cash without adding debt to your balance sheet, unlike traditional loans, which require repayments.
Are there risks associated with Factoring AR?
While Factoring AR can improve cash flow, it’s essential to consider costs, client relationships, and potential impacts on credit control.
How does Factoring AR impact my customer relationships?
Factoring AR typically involves the factoring company handling collections, so clear communication with customers is key to maintaining positive relationships.
What are the common fees associated with Factoring AR?
Fees usually include a percentage of the invoice value, plus any additional service charges depending on the factoring agreement.
Can Factoring AR affect my business credit score?
Factoring AR generally does not impact your credit score, but it’s important to ensure that the factor’s actions align with your credit management practices
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How do I choose the right Factoring AR company?
Research and compare factors based on their terms, fees, industry experience, and customer service to find the best fit for your business.
Is Factoring AR suitable for businesses with bad credit?
Yes, since Factoring AR is based on your customers’ creditworthiness, it can be a viable option for businesses with less-than-perfect credit.
How quickly can I receive funds through Factoring AR?
Most factoring companies provide funds within 24 to 48 hours after invoice approval, offering a quick cash flow solution.
What happens if a customer doesn’t pay their invoice?
In non-recourse factoring, the factor absorbs the loss. In recourse factoring, your business is responsible for any unpaid invoices.
How does the factoring company handle my receivables?
The factoring company typically takes over the collection process, ensuring timely payments and reducing your administrative burden.
ABOUT 7 PARK AVENUE FINANCIAL
7 Park Avenue Financial originates traditional and alternative financing and asset-based financial services providers that offer lease financing, cash flow and working capital financing, and business acquisition loans.
The company works closely with clients to develop key business strategies based on their unique needs. The company is committed to providing the highest level of customer service and innovation to help businesses succeed.
Combining our experience and solutions, we help our clients achieve profitable cash flow and debt financing and streamline the process with a full range of credit offerings.
