Factoring Is A Threat To Working Capital Problems. Alternative Financing Just Might Work

Factoring Is Easier To Understand Than Klingon!




OVERVIEW – .Information on factoring and working capital finance in Canada. Alternative Financing just might be the solution to cash flow challenges – and its not that alternative!


Everyone is talking about ' factoring ' these days, even the people who don't really understand it! While one could maintain that factoring has been around for a number of years in Canada it is absolutely getting more prominence.


We feel that it is getting that prominence for potentially all the wrong reasons, namely that in the current Canadian economic and banking reality financial, cash flow and working capital facilities from traditional institutions such as the banks have been significantly curtailed.


So lets do a basic primer on factoring, and then discuss how it's similarities and differences from what is offered in other parts of the world, and why it works and when it is problematic. We also have a solution for some of the business owner challenges associated with factoring and receivable financing.

Factoring has been around for hundreds of years (if not longer!). What's the basic premise? It's simple. You sell one, (or a number) of your receivables, and you immediately get cash. In our article we will continually try and point out some of the nuances of factoring that get Canadian firms into trouble - here is the first one - when you sell your receivable make sure you understand whether its recourse or non recourse.


By that we mean that on a recourse deal if your customer never pays, goes bankrupt, etc you are responsible for paying back the finance firm. If you arrange what is known as 'non-recourse' financing the finance firm is responsible for the loss, not you. As you can imagine non recourse factoring is a bit more expensive, as you are eliminating all collection risk.


Let's touch on another relatively unknown point in factoring, and that is that it is a key component of a potential asset based lending strategy. Asset based lines of credit are available to Canadian firms - these facilities are generally not with our Canadian chartered banks and are offered by very specialized firms. Not only can the business owner get financing for its receivables, but inventory and equipment and real estate can be included also. As the business owner knows, inventory and equipment are crucial parts of working capital, inventory more so.

When businesses factor their receivables in Canada, they, for the most part, are no longer involved in the collection function of those receivables. Two very important points come into play here -

1. You have just eliminated cost, personnel, and time involved in collections - ( that's a good thing


2. You have just handed over part of the key customer relationship to a third party with whom your customer has no previous knowledge, dealings - (That we feel, is a bad thing!) Avoid that by utilizing a CONFIDENTIAL RECEIVABLE FINANCING PROGRAM!


In summary, we have touched on a few key basics revolving around factoring and receivable financing in Canada - i.e. the history of factoring and why its growing more popular; and, in addition we have focused on some ' nuts and bolts ' of a factor / receivable financing offering with respect to some positive and negative aspects of such an alternative financing facility.


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


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 = WORKING CAPITAL FINANCING EXPERIENCE


CONTACT:
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