Factoring in
-New and increasingly accepted
-Misunderstood
-Different than in the
-Growing more popular every day as an alternative vehicle to business financing
Canadian business owners and financial managers keep hearing about factoring , and when we talk to clients who are pursuing this financing option it is increasingly clear there is a lot of mis information and‘ noise ‘ about this unique type of financing that needs to be clarified .
So why is there so much mis information about factoring and how can business owners in
Factoring, also know as receivables financing, or ‘ invoice discounting ‘ is best utilized when firms are growing rapidly, have sales and verifiable invoices, and require injections of working capital for that a/r investment that otherwise might not be available through traditional sources such as the bank .In 99% of cases that we deal with where a client is a ‘ start up ‘ the initial financing through a factoring facility is a critical and valuable tool in the early growth of the company .
Let’s get back to the confusion around factoring. Traditional factoring in
Does your business receive 100% of the invoice value when you sell your invoices either individually, or bundled in a larger amount of invoices? The answer is ‘no’ – You generally receive on the same day anywhere form 75-90% of the invoice value. The balance is held back as a hold back or buffer, and paid to your firm immediately on final receipt of payment from your customer. At that point factoring would be ‘free ‘, but it isn’t, there is a further deduction for the commission or financing cost by your factor firm. That cost is one of the greatest issues facing Canadian business owners, because it is anywhere in range from 9%/annum to 2-3% / month.
The costs associated with factoring in
So now we have understood what factoring is, and why it has become a tool within the Canadian business financing tool kit.That’s the easy part. The challenge for Canadian business then becomes –
-What type of firm is the best one for my company and industry
-How does this financing work on a daily basis
-Am I comfortable enough to let the factor firm notify my customers regarding invoice verification and payment
-Is there an alternative to involving my suppliers and customers into this financing process
We advise clients that the best factoring facility in
So whats our bottom line summary – it’s simply as follows. Factoring in
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http://www.7parkavenuefinancial.com/Factoring_canada_receivable_financing_that_works.html
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