YOU ARE LOOKING FOR CANADIAN RECEIVABLE FINANCING!
Your Guide To Accounts Receivable Financing In Canada
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RECEIVABLE FINANCE IN CANADA
Receivable financing is cash flow enabling, the top priority for every business owner and their financial manager.
More often than not, firms that search for asset-based loans and asset based lending solutions such as factoring accounts receivable or invoice factoring/invoice financing are looking for a short or intermediate solution - the hard reality is that traditional bank financing from Canadian chartered banks may not be available for firms that need cash immediately.
ASSET-BASED FINANCING SOLUTIONS FOR THE SHORT-TERM AND LONG TERM
In some cases, though asset-based financing solutions from accounts receivable financing companies can work in the long term, newer businesses with less of a track record or high growth / fast-growth companies need access to working capital for unpaid invoices from money owed by clients. Now. In some cases, investments might be made in other aspects of the business, perhaps r&d, or acquiring capital assets. (Note - SR&ED Financing and Equipment Leasing also can alleviate spending in these two areas).
BENEFITS OF ACCOUNTS RECEIVABLE FINANCING: FUNDING DAY-TO-DAY OPERATIONS!
But inevitably, it will come back to short-term daily financing needs requiring a working capital solution around your company's balance sheet. Access to cash means a line of credit or some form of asset monetization for liquidity.
Companies with proven cash flows and historical financial success can, of course, access term loans in the working capital/mezzanine finance area. Receivable funding is short-term access to funds based on your sales growth and billed accounts receivables. Factoring is simply a method of ' selling' receivables instead of 'assigning' them to a bank - allowing your firm to obtain cash for day-to-day operations.
Typically 85-90% of the invoice value is advance the same day a firm generates sales.
RAISING CASH - QUICKLY!
When you examine asset-based financing and a/r factoring specifically, these solutions allow business owners to raise cash quickly to capitalize on short-term opportunities, such as new clients, large contracts, foreign sales, etc. It's no secret that traditional lending sources such as Canadian banks take a significant amount of time to complete when it comes to receivable loans. Commercial a/r financing solutions allow you to manage and reduce client risk and provide you with business capital to fund growth prospects.
ACCOUNTS RECEIVABLE FINANCE VERSUS FACTORING
Any form of accounts receivable financing will solve working capital issues - Business owners have the option of selling receivables to a factoring firm or financing them via a bank loan agreement, which is accomplished by a ' General Assignment Of Accounts Receivable ' with a bank. With the factoring process, your firm will receive 80-90% of the invoice amount on the same day/next day as you generate sales.
Businesses who want to avoid any notification to their clients should opt for non-notification factoring, allowing your firm to bill and collects its own accounts. At 7 Park Avenue Financial, we have termed this ' Confidential A/R Financing. ' Click here to learn more about non-notification financing of receivables and that collection process that is attractive to business owners.
It is a misunderstanding that companies have to finance all their receivables in the factoring process from the financing company - they can fund any amount of a/r they choose to. Many firms choose to use this ' Selective Receivables Finance ' process and, in some cases, finance only their larger best-paying accounts - that minimizes financing costs and provides true liquidity.
THE COST OF FACTORING RECEIVABLES
You may be wondering if invoice factoring is the right solution for your company. You should consider it in light of what you do and how much it will cost!
Asset-based financing such as factoring always costs more than the low bank interest rates - it's the bank receivables financing vs factoring conundrum. Still, the good news is that the asset finance area rates are the lowest they have ever been for a company that wants to raise funds and receive early payment for their goods and services.
All indications point to more of the same! Also, in our firm's experience, 7 Park Avenue Financial, the competition to secure your financing business is the strongest it has ever been from a factoring company. Our recommended solution is Confidential Receivable Financing, allowing your firm to bill and collect its own receivables without notification to any other party. It's balance sheet financing 101!
Rates in the asset financing area are dependent on a couple of obvious factors, i.e. transaction size, quality of assets such as receivables or inventory, and other collateral in the firm such as equipment, etc.
The bottom line is that factoring receivables companies differ in deal size, rates, geographical preference, etc. In some cases, an appraisal, although it might come with a modest cost, can enhance your firm's overall ability to get financed. Your firm's attention to the turnover of outstanding invoices will always reduce the costs associated with carrying receivables.
ENSURE YOU HAVE UP-TO-DATE FINANCIAL STATEMENTS
Having up-to-date and quality financials also is key to successful and abundant asset financing. Your company may always have better access to financing approval with proper up-to-date financial statements and financial information. Your firm's ability to bill and collect might seem simple and basic, but proof of adequate accounting and controls is key to loan approval.
CONCLUSION - AR FINANCING / FINANCING RECEIVABLES
A solid receivables financing solution frees up working capital to fund operations and growth and for small businesses, those are key priorities all the time.
The key benefit of early payment, in fact, immediate payment/cash advance for your eligible sales can't be overlooked by small business owners as well as medium-sized and larger corporations.
Bottom line? Your firm needs cash flow to run and grow the business. Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor with a track record of success who can assist you with your business loan and receivable financing cash flow needs for planned business growth!
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is receivable finance?
Account receivables financing is a method of business financing that is a monetization and the true sale of receivables of a/r that is on a company's balance sheet - Factoring companies charge a fee for same-day funding of the invoices that a business sells to them for their cash inflows. The factor firm is in effect a financial intermediary and this financing allows a business to fund day-to-day working capital needs.
Factoring fees are in effect a discount purchase, and not expressed as an interest rate per se. This method of financing is not an accounts receivable loan and is a popular use of asset-based lending principles. Companies do not necessarily have to enter into long-term contracts and can choose non-recourse financing to avoid bad debt and non-payment issues.
Click here for the business finance track record of 7 Park Avenue Financial
