Understanding The Partial Victory Of A/R Financing . There’s No Shutdown Here !
OVERVIEW – Information on A/R Financing in Canada. What role do account receivable factor funding companies play in Business financing
Account receivable factor funding companies provide cash flow financing to Canadian businesses. What is the secret to their success, how do they work, and why is this sought after method of financing your business. We've got some thoughts, and answers on that. Let's dig in.
These days all we hear about on the business news is the U.S. govt shutdown. Well there's no shutdown in Canadian A/R financing solutions - they are alive and well, and open for business.
The use of A/R factor funding in Canada can be considered a triumph of innovative financing. The reality though is that it’s only been around as a business finance tool for hundreds of years. At the heart of the matter is the concept of using your sales, and the business receivables they create as collateral for cash flow.
All of a sudden the time that it takes a dollar to flow through your business (your ' operating cycle ‘) is dramatically shortened... and that’s a good thing.
The cost of financing your receivables depends on who you finance them with. In typical cases it’s done by our Canadian chartered banks under commercial lines of credit; when that isn’t possible that role is taken over by and A/R factor funding firm, typically a non bank. When you finance your sales and receivables through the bank the cost is an annual interest rate based on bank rates available to business.
In the case of A/R finance the cost is not an annual interest rate, it’s a discount. Under that mechanism your arrangement is funded via a sale of your A/R, at a ' discount' as we have noted. Your balance sheet is affected in a very positive manner - receivables disappear and cash appears.
In our two examples the key concept is 'secured borrowing '(the bank) via assigning your receivables as collateral, and the ' SALE ' of your accounts via A/R finance.
Why is factor funding so popular then? It couldn’t be simpler - your firm receives immediate cash for sales made instead of waiting anywhere from 30-90 days these days. Result? Instant cash and working capital. We also note that factor funding is typically provided at 90% of your A/R base; typically banks only advance on 75%. In both cases the balance is a holdback of sorts.
Some of the largest companies in the world sell their A/R in this manner - the Bay street boys
Old style A/R Finance in Canada typically has the factor funding company playing a major role in your billing and collecting procedures. Our recommendation for our clients is
If you want to be part of the triumph of A/R financing in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in utilizing this solid method of cash flow financing.
Stan Prokop - founder of 7 Park Avenue Financial
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 $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :
7 Park Avenue Financial = Canadian Receivable Factor Funding Expertise
Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?
CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ 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 :
http://www.7parkavenuefinancial.com/account-receivable-factor-funding-companies.html
Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?
CONTACT:
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
Stan Prokop
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