True Or False? You Understand Receivables Based Financing
OVERVIEW – Information on receivables financing in Canada. The solutions offered by receivable finance companies enhance cash flow and are solid alternatives to working capital challenges
Receivables financing in Canada might well solicit the question: True or False - Do you understand solutions offered by receivable companies in Canada? We're examining the benefits and costs of such solutions. Let's dig in.
Suffice to say there comes a time when your company will require some methods of external financing - your company can only grow so far when it finances itself internally. The main reasons typical external finance solutions are required revolve around expansion of your products and services. In other cases the amount of owner equity you have in the business simply won't carry your operations and growth.
A/R Receivables financing is the solutions that is most often required when it comes to the need to ' smooth out ' day to day operations. Solutions offered by commercial receivable companies in Canada also diffuse the need to either take on debt on your balance sheet and also eliminate the need to raise owner equity, which is always a daunting task in the SME COMMERCIAL FINANCE sector. The reason: you are simply cash flowing your A/R assets!
Many clients we meet are often ' scrambling ' for cash flow almost on a daily basis. How then does the owner/mgr eliminate typical tactics such as delaying their payables or using credit cards and personal collateral for business cash needs?
The answer: A/R Finance. We're of course making the assumption that full bank financing is not available for your firm. Typical reasons your firm can’t access some or all the bank credit it needs are:
New company/ start up
No financial track record
Too much business with just one or two clients
Quality of A/R
Foreign clients
A/R finance solutions make your business a net generator of cash, and if you can't generate ' excess cash ' the feeling of generating enough to run your business is simply a good feeling.
The strategy? Use your receivables to generate a constant flow of cash. The main difference in a commercial receivable facility is essentially ' the paperwork ‘. which specifies that on an ongoing basis as you generate certain, or all of your A/R these are constantly funded as you generate those invoices to clients for products or services delivered.
The cost of receivable companies solutions is calculated as a fee, as opposed to an interest rate, which comes back to the concept of ' selling your a/r ' as opposed to collateralizing it with the bank.
While costs are typically much higher than business credit lines offered by banks the solution allows you to stay in business and have enough cash on hand to run/grow the company. Note also that you can combine A/R with inventory and equipment and lump these three together in what’s called an ' asset based non bank line of credit '. It[s interesting to note that you can also borrow more under A/R financing which typically advances 90% of your a/r. as opposed to 75% at the bank
Our recommended solution in this area is CONFIDENTIAL RECEIVABLE FINANCE, allowing you to bill and collect your own receivables without any notification - that customer notification is typical of ' old school ' factoring offered by the majority of firms in this area.
If you feel that receivables non bank financing is a viable solution for your firm seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in assessing costs and benefits.
7 Park Avenue Financial :
http://www.7parkavenuefinancial.com
7 PARK AVENUE FINANCIAL = CANADIAN RECEIVABLE FINANCE EXPERTISE
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
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 '
ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
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