A/R Factoring Companies In Canada
A/R factoring in Canada is a proven method of business financing in Canada. There probably isn't a time these days when business owners and their financial mgrs have not heard of ' alternative finance ', and many firms are considering business financing in every manner available. One of those is ' Confidential Receivable Financing ' and not all businesses understand the power , value, and real availability of this method of financing your valuable current asset on the balance sheet - A/R!
What information does your company need to know in order to asset if an a/r finance solution is viable for your business. More importantly, are there mistakes and pitfalls you can make when considering this type of working capital solution? Spoiler Alert - there are !
While you may not have heard of the different types of ' factoring ' in Canada we at 7 Park Avenue Financial forgive new clients who are trying to figure out why this method of Canadian Business Financing has become so prominent for thousands of businesses.
The answer is more simple than you might think - simply that Canadian chartered banks are finding it increasing more difficult to funds a/r , and of course inventory for many companies in the SME COMMERCIAL FINANCE sector. Many firms cannot meet the regulated criteria that banks mandate for financial stability, external collateral, personal guarantees, and covenants .
Accounts Receivable Securitization VS. Factoring
As as aside companies in the small and medium sized sector of Canada will be interested to not that even some of the largest and well known companies in Canada consider this type of financing - in effect they use ' securitizing' as a financing strategy similar to factoring . So you're in good company! So whether your firm is large or small,when you have a situation where the actual need for financing is acute, and the benefits and flexibility seems significant it is not hard to see the rise in popularity of such a financing mechanisms.
In our experience here at 7 Park Avenue Financial almost 99% of the time factoring can provide your firm with a greater level of borrowing based on your accounts receivable levels. Typically 90% of your a/r under 90 days old can be financed.
So is it all good news? Not necessarily, as we are always meeting with clients that have chosen the wrong type of funding or factoring, and, even worse, find them locked into contracts they cannot get out of. That is uncomfortable for any size firm as you can imagine.
As with any newer type of financing the playing field is complex. You can be forgiven for not knowing how many factor firms are out there, how they run, what their own limitations are, and , even to a certain extent, do they in fact themselves have the funding to survive, let along finance your firm .
For that reason we cannot over emphasize the need to work with a credible, experienced and trusted professional in this area, ensuring you have the best a/r and sales financing solution available.
Danger of Entering Into The Wrong Type Of Factoring
Lets talk about some of the nuances, we can call them potential ‘pitfalls ‘ also, of picking the wrong factoring partner. For a starter if you choose a firm who itself is not well capitalized, as we said, you might find that the financing commitments made to you cannot be honored. Canadian business has never had to think that the Canadian chartered banks could be ‘out of money ‘but the Canadian landscape is somewhat littered with small and medium sized factor firms that do not have the financial wherewithal to support their funding commitments in all places. That just re – enforces our idea that a trusted industry expert will guide you to the best partner for your firm.
Other issues, again, we can call them pitfalls, to look for include:
- Being Locked Into A Contract
- Poorly explained costs/fees
- Funding rates and credit line limits that don't reflect your business needs being locked into a contract
If we had in our experience to name one pitfall of a/r financing that many firms encounter it's the excessive notification and intrusion with your customers - which is very prevalent in the U.S. model of factoring .
Key Point - Many Canadian A/R Financing firms are branches of U.S. firms )
What Is The Best Type Of A/R Factoring In Canada?
In our opinion it's what we at 7 Park Avenue Financial call ' Confidential Receivable Financing '. This solution allows you to bill and collect your own receivables , without any intrusion or notification to your clients, suppliers, etc. Also this type of facility can easily be bundled into a non bank business line of credit - which is a subset of the broadly used term - Asset Based Lending.
So let’s recap. It’s simply that receivable financing and a/r factoring is growing in popularity. It works because it is providing funding where banks often cannot. If you don’t understand who you are dealing with and the various nuances of this type of financing it becomes a burden, not a solution.
Investigate this great financing mechanism, but ensure you know what you are getting into. Talking to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success always helps – that’s just common sense.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.