Finance Factoring. Looks Like You Finally Got Answers On Receivable Financing In Canada

Financial Engineering Via A Canadian Business Financing A/R Strategy


Information on finance factoring in Canada. How does a receivable financing strategy from a commercial finance firm differ from standard bank financing ?



Receivable financing in Canada . Canadian business owners seem to have a major point of confusion around finance factoring and why this for of ' financial engineering ' differs relative to bank financing. Let's find out why. Let's dig in!

An A/R finance strategy is not tied to a long term financing via debt. That in general is a good thing, and, as well it delivers constant recurring cash flow and working capital needs for Canadian business.

At the core of understanding the A/R financing process via factoring is the need to understand the difference between ' assigning ' and ' selling'. When you finance your A/R through the bank you provide them with an assignment of your book debts, i.e. your receivable base. In finance factoring the paperwork around your transaction revolves around the actual sale of the receivable as you finance them.

What then are some of the key advantages of invoice financing utilizing a commercial third party finance firm, vs. a bank? They might include:

Constant availability of cash

The ability to address seasonal bulges in financing needs

A strong balance sheet relative to the amount of cash you have on hand

When we talk to clients about those advantages the one negative issue in their mind is the higher cost of this method of financing. Remember though that this higher cost is what we could term a ' rising and falling ' issue. The actual costs of factor finance depends on several key factors - they include how fast you collect your accounts, the discount rate at which your sales are purchased at, and the advance rate on your cash , which is typically 90% of your a/r balance. (Banks in Canada only advance or allow you to draw 75%).

Remember also that we spoke of finance factoring as being a short term day to day cash flow solution. Yes, the business owner/manager could in fact implement a ' permanent working capital solution ‘. But when you weigh the costs of borrowing a large sum for a term of typically 5 years at a fixed rate you will see that the actual financing costs of a permanent bank term loan are in fact significant. Using that example the business owner or financial manager may well find that receivable financing is in fact a better strategy!

So it is very important therefore to analyze the actual costs, and benefits around either pledging (bank) or factoring (commercial finance firm) your accounts receivable base.

If you use a confidential accounts receivable finance solution you also can avoid any notification to your clients that is traditionally required by old school finance factors. That’s a key benefit!

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing engineering around cash flow and working capital.




7 PARK AVENUE FINANCIAL - CANADIAN BUSINESS FINANCING 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 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 = RECEIVABLE FINANCING


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