Accounts Receivable Financing Factoring: Unlocking Business Growth | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR FACTORING IN CANADA AND

ACCOUNTS RECEIVABLE FINANCING ! 

Maximize Liquidity with Effective Receivables Financing Solutions

You've arrived at the right address! Welcome to 7 Park Avenue Financial 

        Financing & Cash flow are the  biggest issues facing businesses 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

Unlock cash trapped in your invoices today – Boost your business’s liquidity without waiting

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ACCOUNTS RECEIVABLE FACTORING FINANCING  solutions that solve the issue of cash flow and working capital  – Save time and focus on profits and business opportunities

INTRODUCTION

Receivable financing in Canada continues to play an important role in the newer ways to finance a business.


Also known by the general term ' Factoring ', this solution works best when it involves 'growth ' - simply speaking clients tell us that they cannot access traditional financing to handle new sales opportunities. Let's dig in on accounts receivable loan finance around those a/r liquid assets!

Accounts Receivable Financing Factoring is a valuable tool for businesses striving to maintain cash flow and grow their business without the traditional challenges of accessing bank lending.

A/R Financing allows companies to convert their accounts receivable into immediate cash, offering a lifeline to businesses that need to fund day-to-day business operations, cover expenses, or capitalize on growth opportunities.

By financing outstanding unpaid invoices businesses can bypass the lengthy waiting periods for customer payments, turning their receivables into working capital and valuable cash flows.

A/R financing is one of the components of asset-based lending for outstanding invoices - It focuses solely on the immediate conversion of your receivables into cash - allowing a business to maintain a positive cash balance.

Your company can also combine A/R finance with inventory and equipment to get a total business credit line solution - it's the bank alternative albeit at a higher interest expense in the context of the need for more capital for your business.


When businesses choose factoring or receivable financing (also known as invoice discounting) as a financing mechanism they have options on how to structure that facility. The challenge - working your way through the different product and service maze that's lumped together in that term 'factoring '! as part of a loan agreement acceptable to your firm.

 
7  REASONS TO CONSIDER A/R FINANCING 

Let’s recap why you would consider non-bank commercial A/R financing from a finance company in the first place. Some of those reasons might be:

UNDERSTANDING THE STANDARD FACTORING AGREEMENT PROCESS

Understanding why this solution works is all about what's known as your cash conversion cycle - you have operating cash tied up in receivables.

Part of your overall growth strategy might be to offer extended payment terms to key creditworthy customers. To do that you can utilize factoring by offering those terms, yet at the same time converting the receivables into cash.


Additional cash from factoring can be used to purchase more inventories, which is in turn converted into receivables, allowing your cash conversion cycle to come full circle. In simple terms, it's all about tracking how a real dollar of cash moves through your company.

DO I QUALIFY FOR FACTORING?

Clients ask us what size their firm has to be to be considered for this type of facility. The reality is that it works for firms of any size, whether your firm has 250k in sales or 25 Million. (Even some of Canada's largest firms factor their receivables, you just didn't know that!) That includes both public and private companies by the way.

HOW FACTORING RECEIVABLES WORKS 

When considering invoice factoring cost is often raised as an issue by our clients. So what does factoring cost? In Canada, the cost ranges from 9% per annum to approximately 1 - 1.5%  /  month - note this fee is expressed as a factoring fee by the industry and not an interest rate per se. Clients focus on these rates as annualized interest costs when in reality the best way to look at them is a reduction in gross margin with offsetting benefits of immediate cash flow and working capital.


Here's how we prove to our clients how over a long period the financing solution from factoring companies can offset perceived higher costs. Are any of the following important to your term?


Immediate cash flow and working capital from the invoice factoring company  in an unlimited fashion (if you have sales you can always finance those sales - you don’t have a limit per se)

Better supplier relations

Ability to offer extended terms to customers that generate good profits for your firm - non recourse factoring may also be available for receivable loans

The ability to now take supplier discounts and take advantage of better pricing based on your ability to pay cash


When evaluating your options the best advice we can share is to understand what’s happening in the Canadian factoring market. Work with a trusted advisor who can take you through the various industry nuances such as:


Recourse factoring - Recourse factoring credit lines are less expensive than non-recourse factoring.

Full notification to the account debtor

Non-notifications - We consistently recommend CONFIDENTIAL RECEIVABLE FINANCING as the best solution in Canadian Accounts Receivables  finance - talk to the 7 Park Avenue Financial team about non-notification factoring

Annual contracts or open contracts when a company sells invoices

Pricing is based on your facility size and customer base



In summary, naturally, Canadian business owners and financial managers realize there is no one single Holy Grail of business financing.


But if you want immediate cash flow, no focus on your balance sheet by the factor firm, better supplier relations, ability to finance your business as you grow, etc. then you should consider factoring as an option. The weight of evidence might just suggest that factoring is the right financing right now for your business.

KEY TAKEAWAYS  

1. Invoice Discounting: Selling unpaid invoices at a discount to a factoring company to access immediate cash.
2. Cash Flow Management: Utilizing the funds received from factoring to efficiently manage business operations and expenses.
3. Working Capital Solutions: Enhancing a company’s ability to meet its short-term obligations and fund day-to-day operations.
4. Credit Risk Assessment: Evaluating the creditworthiness of a debtor, which the factoring company often undertakes to determine the risk of factoring an invoice.
5. Accounts Receivable Management Strategies: Strategies to optimize the process of issuing, collecting, and selling invoices to maximize financial efficiency and liquidity.

  
CONCLUSION - ACCOUNTS RECEIVABLE FACTORING SOLUTIONS  
 

If I had to run a company on three measures, those measures would be customer satisfaction, employee satisfaction, and cash flow.”  Attributed to Jack Welch - GE Capital

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with the right cash flow solution and solid financial advice for your business.

  

FAQ: FREQUENTLY ASKED QUESTIONS / MORE INFORMATION / PEOPLE ALSO ASK  

Is factoring better than a bank line of credit? What are  Issues to consider around an accounts receivable line


If a business is spending more money than it's earning, they have a cash flow problem. It is important to monitor your cash flow to prevent problems that could lead you to take out loans with higher interest rates.

A factoring line of credit is a financial transaction that is simply a way to borrow money from a company that will advance 90% on outstanding accounts receivable with funds being deposited into your bank account usually the same day or the next.

The factoring company focuses on the ability of a company's accounts receivable to pay invoices. Most factoring companies have a simplified application process.

A factor will not be concerned with the credit score and credit history of the business owner and less of a focus on the firm's financial statements because they are not a lender and do not lend money.

They are simply funding the company's accounts receivable to an agreed-upon invoice value - Any credit risk is directly related to the collectability of the company's accounts receivables purchased- unliked traditional bank financing and unsecured credit lines.

The process of getting a business credit line or bank loan is not an easy one. To get bank loans or a traditional business loan, companies have to fill out a lot of paperwork and can be denied for various reasons.

Factoring costs are expressed as fees that are a business expense,  and not interest rates, which is often confusing for the borrower when they consider a dependable cash flow solution. Creditworthiness is key for growing small businesses. No additional collateral is involved in factoring solutions.

How does accounts receivable financing factoring benefit my business?

By selling your outstanding invoices to a factoring company, you get immediate cash, enhancing liquidity and enabling you to cover operational costs or invest in growth opportunities without waiting for clients to pay.

What makes factoring different from a traditional bank loan?

Factoring AR Financing provides immediate funds based on your invoices, without the need for collateral or extensive credit checks, making it faster and more accessible than traditional loans while waiting for the collecting payment process with clients.

Can factoring improve my business's cash flow management?

Yes, by converting receivables into cash quickly via a factoring arrangement, factoring helps manage your cash flow more effectively, ensuring you have the funds to operate and grow your business.

Is accounts receivable financing suitable for all businesses?

Factoring is particularly beneficial for businesses with long invoice payment cycles or those looking to streamline cash flow quickly, regardless of their credit history. Accounts receivable factoring works for any business that has commercial or government receivables.

How does the accounts receivable factoring process work?

After you sell your invoices to a factoring company, they advance you a percentage of the invoice value immediately. The factor then collects payment directly from your clients, deducting a fee before remitting the balance to you.

What are the typical fees associated with factoring?

Fees can vary based on the volume of receivables, the creditworthiness of your clients, and the factoring company, typically ranging from a small percentage of the invoice value.

How quickly can I access funds through factoring?

Funds are often available within 24 to 48 hours after you submit your invoices for financing, making it a swift solution for cash flow needs.

Do I lose control over my accounts receivable when I use factoring?

No, you maintain control over your accounts receivable management, but the factoring company handles the collection process for the invoices they purchase.

Can factoring help my business with credit management?

Yes, many factoring companies offer credit analysis and risk assessment services for your clients, helping you make informed credit decisions.

What's the difference between recourse and non-recourse factoring?

In recourse factoring, you must buy back any invoices that the factoring company cannot collect on, while in non-recourse factoring, the factor assumes the risk of non-payment.

How does factoring address immediate business financing needs?

Factoring converts your accounts receivable into cash quickly, providing an immediate  cash advance boost before the customer pays,  to your working capital and addressing urgent financing needs without the delays of traditional lending,

What impact does factoring have on business growth?

By ensuring a steady cash flow, funding via an accounts receivable factoring company allows businesses to invest in growth opportunities, such as expanding operations, increasing inventory, or entering new markets, without the constraint of waiting for customer payments.

How do businesses qualify for accounts receivable invoice financing &  factoring?

To qualify for factoring and accounts receivable financing companies must demonstrate the creditworthiness of their clients and the value of their receivables, making it an accessible financing option for many businesses, including those with limited credit history. Aged receivables and business bank statements are key pieces of the application.