Avoiding Emotional Reactions Via The Wrong A/R Financing In Canada . Learn From These Mistakes
OVERVIEW – .Information on receivables discounting in Canada . What does the Canadian business owner need to know when it comes to putting the right finance factoring solution in place. Avoid costly mistakes with this information
Receivables Discounting in Canada. We can't even imagine the positive feeling the Canadian business owner / financial manger knows when they have avoided the mistakes made by others when entering into a Finance Factoring facility. Let's explain!
Your business is (hopefully!) profitable and growing. The only challenge (as usual) is cash flow and working capital. One method that gets a bit more popular everyday is using an A/R financing strategy to ensure you've got sufficient capital to meet your business financing obligations, at the same time growing your business.
Receivables discounting is the method that allows you to ' cash flow ‘your sales at the same time you generate receivables. All of a sudden you're in a position to compete with the big boys when it comes to taking on new orders, contracts, etc.
While business owners and mangers would like to be able to ' train'
their clients to pay promptly the reality is that can often be a life long project. All of a sudden those great clients are in fact the same ones holding you hostage to the sort of business opportunities you need and want to take advantage of.Working capital term loans require a major long term commitment - receivable financing addresses the challenge immediately and moves lock step with your sales growth, whether that's seasonal bulges or just continued steady growth.
But, while thousands of firms in Canada are gravitating to this method of finance you can clearly avoid some mistakes others have made along the way. Here's how!
6 KEY POINTS
1. Utilize A/R financing for your day to day business - funds used from your working capital accounts should in general NOT be used for long term financing needs.
2. If you are growing or just have a long collection cycle invoice finance works well - if you are in dire straits and sales are plummeting this method of financing is generally not the right one.
3.The majority of factoring finance facilities offered in Canada involves notification to your clients on amounts financed. Can you avoid this? You sure can, by considering instead a confidential A/R facility that allows you to bill and collect your own receivables.
4.Also, don’t think that this method of A/R finance avoids bad debts and collection issues. You are always going to be paying for what you have borrowed - just as in a bank arrangement - so prudent credit polices and good collection policies are still VERY important.
5. The general Canadian landscape for receivable finance facilities is in the 1.5-2% per month range. That means it will cost you 200$ on a 10,000.00 invoice if your terms are 30 days, and if you've enforced those terms as we have recommended above.
6. Also, dont forget to beat your competitors at the same game - used new founds funds to take discounts from suppliers and purchase more efficiently. You can reduce 1/2 of your financing costs if done properly.
In summary, finding solid finance solutions is always a good feeling. If you have avoided the mistakes made by your competitors it’s even a greater feeling! Avoid the emotional reactions from bad financing decisions when it comes to cash flow finance. Seek out and speak to a trusted, credible and experienced Canadian business financing advisorto assist you with your cash flow needs.
7 PARK AVENUE FINANCIAL = A/R FINANCING
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
Stan Prokop
