Surgically Removing The ‘ Ouch ‘ Out Of AR Factoring in Canada . Financing Receivables Via A Factor Company Is Not Necessarily What You Think !

Should Your Firm Consider .. Or Avoid Factoring ?


OVERVIEW – Information on factoring in Canada . Financing AR Receivables via the ‘ right ‘ factor company is not what you think !





Our goal... simple... a surgical removal

of the word ' ouch ' from factoring receivables in Canada. Is such a delicate operation even possible? Is there a ( business ) doctor in the house …We think so... let's ' scrub down ' and get started!

There's a real inequality issue among many businesses in Canada... some of them have cash on hand, cash flow, and working capital, and some don't.

If your firm, large or small is in the latter category financing receivables in Canada is one of the most solid and effective solutions to your problem. But how does a factor company work, and where do you find one, and oh yes, what does it cost? That cost, quite frankly, is usually the 2nd or sometimes first reason that the ' ouch ' exists in the mind of the Canadian business owner and financial manager.

The actual tool itself is fundamentally easy to understand. Unlike borrowing against your receivables, which you do via a Canadian chartered bank or business credit union factoring works in the manner of having documentation in place with the factor company that specifies your ongoing actual sales of the receivables .

So the A/R isn’t collateral per se, the cash you receive for them is the proceeds of the sale. That’s the simple basic explanation most clients need to know when we point out the differences between a bank facility and a factor company that’s usually in the sole business of financing receivables.

We do add however that a number of other financing mechanisms can be ' bolted on ' to your factoring facility - typically they include inventory financing, PO finance, or allowing you to borrow against owned equipment. But that whole comprehensive solution we have just described is a conversation for another day - our focus here is just factoring AR.

So how much can a client finance their firm given they have opted to consider an A/R finance strategy. The answer is as much as you want, as long as you have the receivables to back up the solution.

The ultimate size and type of facility you enter into is driven by your firm’s general financial condition, the size of your annual sales revenue, and the quality of your customer base. We explain to clients that in general all your North American receivables can be financed, simply meaning that you can cover U.S. clients also under your factor facility . Foreign, non North American clients might require some sort of credit insurance - but you probably want that anyway.

The actual mechanism of the financing is worthwhile exploring for a moment. Your invoices are sold, via your original documentation agreement with the factor company at a discount of approximately 2% if you are selling on 30 day terms. That 2% reduction in the value of your sale is the factor company’s profit.

The absolute method in which we can assure clients that they can remove the ' OUCH ' factor in financing A/R in Canada revolves around a few basic issues:

Clear understanding of how pricing works

Getting a competitive rate

Dealing with the right firm - Hint - VERY IMPORTANT!

Ensuring you can get a confidential facility in place, allowing you to bill and collect your own receivables. (99% of the firms you might choose to deal with cannot do this for you)

So, operation successful? We hope so. Utilize the services of a trusted credible and experienced Canadian business financing advisor who can assist you with your factoring needs.

7 PARK AVENUE FINANCIAL
CANADIAN A/R FACTORING EXPERTISE

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 7 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 :


http://www.7parkavenuefinancial.com/factoring_ar_financing_receivables_factor_company.html