Technically Speaking Let’s Take The Mystery Out Of A/R Financing In Canadian Business
OVERVIEW – Information on financing receivables in Canada . What are the key technical aspects and benefits of factoring / selling receivables for companies of all size in Canada
Financing Receivables in Canada . A large majority of business owners, financial managers, CFO's, Controllers, etc have heard of this stand alone (it doesnt have to be the case) method of Canadian business financing. But do they understand it? Let's dig in.
We maintain, when talking to our clients, that you simply need to know a few key basics to effectively master this finance solution. And by the way, you don't have to be a rocket scientist
to master those. We suppose it's our version of ' Technically Speaking '!however if you don't we can clearly say you' re under advantaged when it comes to understanding benefits and risks re: who you're dealing with and how you're dealing with them . Bottom line, we're talking about what can go write and what can go wrong.
At the end of the day, financing receivables is simply one method to generate cash out of your sales and receivables. All you are doing is shortening what is known as the operating cycle - you’re no longer in the ' waiting room '
when it comes to waiting for customers to pay. In Canada you have two methods of addressing factoring. You can let a third party take over the whole process, or alternatively you can become the manager of the whole process yourself. We call that second method Confidential A/R Financing. We'll call the other method ' Traditional Factoring ‘, and it’s been used for hundreds of years by thousands of companies all over the world. This ain't new!
If you go the traditional route your billing and collecting process is somewhat taken over - in effect your credit and collection process is outsourced and managed. Under a confidential scenario you maintain total control over all your billing and collections, with both methods essentially costing the same. They should cost the same - if they don't you’re not dealing with the right party.
The basic finance charge around this whole process is what is known as the discount rate. That discount rate, which many people understandably, but mistakenly call an ' interest rate ‘is a key element in the overall pricing of this finance solution.
A lot of clients we speak to seem to wrestle with the issue of understanding how this method of growth financing differs from bank finance. It really comes down to how the bank, vs. the receivable finance firm ‘papers ' your transaction. That technical aspect involves two key terms, 'Assigning' your A/R to the bank, or ' Selling ' your A/R to your A/R Finance firm. So that's just the paperwork on the deal, and it's not as complicated as you think.
What You Need To Know: Financing receivables is a method of financing trade commercial receivables. Benefits are fast access to business cash and easier qualification. Who you deal with and how you manage this method of growth/sales financing becomes the risk.
Seek out and speak to a trusted, credible and experienced Canadian business advisor with a track record in financing companies for growth and success.
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 = Financing Receivables Experts
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
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