Receivable Credit In Canada : How To Properly Finance Trade Receivables In Canada

Here’s The Only Right Way To Finance Receivables

OVERVIEW – Information on receivable credit solutions in Canada. Knowing how to finance trade receivables maximizes cash flow and minimizes costs of financing . Here’s why and how

Receivable credit solutions don't always come from the bank. Any business selling on credit, large or small soon feels somewhat ' tied up ‘.

Those goods and services you've delivered require payment and the ability to finance trade receivables is critical. Let's dig in.

If a Canadian chartered bank or business credit union can't supply the financing you need is there an alternative? You knew there was, and it’s the financing of your A/R through an independent commercial finance company. The problem? Which of their multiple solutions works for you... is one better than the other, and can the costs of such financing be managed properly or reduced?

While the ' street terminology ' refers to this method of financing as ' FACTORING ' there are in reality a number of subsets of this type of commercial finance . Choosing the right one is your key to success,

Haven’t had someone fully or clearly explain how A/R Finance works? You've just received your clearance for a full explanation! --> Based on an up front financing security agreement being signed you can draw down typically up to 90% of the value of your total receivables that are under 90 days old . By the way the banks typically allow you to draw down only 75% of A/R, so one immediate observation is that you just managed to negotiate more liquidity / cash flow for your business,

The balance of 10% is in effect a ' holdback' of sorts, and when your client pays you received that 10% back immediately, less a financing cost that is in the 1.25 - 2% range. So using a 10k invoice as an example your financing cost would be 125 .00 - 200.00 $. Naturally the costs are geared toward your client paying promptly in 30 days, which are very typical commercial trade receivable credit terms...

Two critical points come to bear here:

1. You can reduce financing costs by focusing harder than ever on your management of receivables - That includes:

Considering advance/down payments in some form

Invoice clients the day you deliver your product or service

Offering prompt pay discounts

Improving collection procedures and invoicing clearly and properly

Key point – any time your clients pay over 30 days increases financing costs, and that includes higher financing costs or simply the higher cost of carrying receivables that are unpaid - Example... The carrying cost on $10,000 paid in 66 days at 14% interest rate would be: $10,000 x .014 / 365 x 66 = $253.00


2. Only draw down on your ' factoring’ facility when you need it

Ensure you have a facility that doesn't require you to finance all your A/R all the time - if that’s the case you're dealing with the wrong firm

Focus on the benefits of a CONFIDENTIAL RECEIVABLE FINANCING solution - This is our recommended solution for all our clients, as it allows you to bill and collect your sales without the ' notification' that is required by traditional factoring services

Use your receivable credit facility to reduce overall financing costs - this includes taking prompt pay discounts with your own suppliers, as well as negotiating better prices with suppliers for goods you can pay for on delivery


If you're focused on achieving the best method to finance trade receivables seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success in Receivable Credit solutions.



Receivable credit solutions don't always come from the bank. Any business selling on credit, large or small soon feels somewhat ' tied up ‘. Those goods and services you've delivered require payment and the ability to finance trade receivables is critical. Let's dig in.

If a Canadian chartered bank or business credit union can't supply the financing you need is there an alternative? You knew there was, and it’s the financing of your A/R through an independent commercial finance company. The problem? Which of their multiple solutions works for you... is one better than the other, and can the costs of such financing be managed properly or reduced?

While the ' street terminology ' refers to this method of financing as ' FACTORING ' there are in reality a number of subsets of this type of commercial finance . Choosing the right one is your key to success,

Haven’t had someone fully or clearly explain how A/R Finance works? You've just received your clearance for a full explanation! --> Based on an up front financing security agreement being signed you can draw down typically up to 90% of the value of your total receivables that are under 90 days old . By the way the banks typically allow you to draw down only 75% of A/R, so one immediate observation is that you just managed to negotiate more liquidity / cash flow for your business,

The balance of 10% is in effect a ' holdback' of sorts, and when your client pays you received that 10% back immediately, less a financing cost that is in the 1.25 - 2% range. So using a 10k invoice as an example your financing cost would be 125 .00 - 200.00 $. Naturally the costs are geared toward your client paying promptly in 30 days, which are very typical commercial trade receivable credit terms...

Two critical points come to bear here:

1. You can reduce financing costs by focusing harder than ever on your management of receivables - That includes:

Considering advance/down payments in some form

Invoice clients the day you deliver your product or service

Offering prompt pay discounts

Improving collection procedures and invoicing clearly and properly

Key point – any time your clients pay over 30 days increases financing costs, and that includes higher financing costs or simply the higher cost of carrying receivables that are unpaid - Example... The carrying cost on $10,000 paid in 66 days at 14% interest rate would be: $10,000 x .014 / 365 x 66 = $253.00


2. Only draw down on your ' factoring’ facility when you need it

Ensure you have a facility that doesn't require you to finance all your A/R all the time - if that’s the case you're dealing with the wrong firm

Focus on the benefits of a CONFIDENTIAL RECEIVABLE FINANCING solution - This is our recommended solution for all our clients, as it allows you to bill and collect your sales without the ' notification' that is required by traditional factoring services

Use your receivable credit facility to reduce overall financing costs - this includes taking prompt pay discounts with your own suppliers, as well as negotiating better prices with suppliers for goods you can pay for on delivery


If you're focused on achieving the best method to finance trade receivables seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success with a track record of success in Receivable Credit solutions.






Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :

7 PARK AVENUE FINANCIAL = CANADIAN TRADE RECEIVABLE FINANCING EXPERTISE



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7 Park Avenue Financial
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Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop