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Receivable Financing In Canada – Did You Know That …
OVERVIEW – Information on Business receivable finance in Canada . Cash flow financing via factoring and a/r financing – explained and clarified!
Cash flow financing
for Canadian business owners and financial managers is all about knowing what options are available when external finance solutions are being evaluated. Looking for one solution that's incredible misunderstood in the Canadian business financing landscape. We've found it. Business A/R Finance! We've got your questions, as well as the answers! Let's dig in.
Question 1 - What amount of funding can you expect to receive from your A/R base? Typical advance rates for most facilities revolve around the 90% mark... that assumes you are dealing with the right commercial financier - More on that later. That additional 10% is in effect a holdback of sorts. We would point out that Canadian chartered banks only margin A/R at the 75% level, so commercial business receivable finance offers more liquidity. One other key point on funding is that your access to capital is virtually ' unlimited' as long as you have sales and legitimate earned receivables.
Question 2 - How does a firm set up this facility? We generally advise that it takes approx 2-3 weeks to set up a proper facility - that is a general guideline. You will know, by the way, very early on in the process if you are approved. After that it's simply a question of documentation. Legal documentation and the paperwork process are very similar to bank financing and full fledged A/R facilities are secured in the same manner as banks, typically a General Security Agreement.
By the way, stop us if you’ve heard us say this before, but you should consider CONFIDENTIAL RECEIVABLE FINANCE, allowing you to bill and collect your own accounts with no notification to suppliers, customers, etc. Want to be the talk of the town? You will be among your competitors as this type of NON NOTIFICATION financing will have competitors wondering how you're able to finance your business so successfully.
Question 3 - Often, unfortunately, the only question our clients seem to ask when we're discussing business A/R finance. What's the cost?
Fees and costs. Various factors come into play here, the credit quality of your firm in general (it does not have to be as solid as you think), the size of your facility, the nature of your industry, etc. On balance a solid business receivable finance fee in Canada is 1.5 - 2% if you're billing and collecting on a 30 day term. If your company can absorb a 1 or 2% decrease in gross margins to in effect obtain all the cash flow/working capital you need, that in effect should be your consideration.
Question # 4 - What receivables can actually be financed? The key point here is that only ' business’, i.e. B2B a/r can be financed in Canada, so those companies with a consumer A/R base cannot take advantage of cash flow financing. Retailers typically look to other forms of finance for finance options in the consumer marketplace - i.e. Working capital loans, inventory loans, Merchant Cash Advances, etc.
Any North American receivable can be financed, and if your firm has overseas receivables a credit insurance policy can assist in the financing of those receivables.
Question # 5 revolves around the age of receivables that can be financed. As a pretty general rule only A/R that is under 90 days in age can be financed via this method of Canadian business financing. One can safely assume of course that if you haven’t collected your accounts by that time there is an element of uncollectibility or bad debt in your A/R portfolio. There are potential exceptions to the rule but your ability to turn over receivables based on your published selling terms is key to successful ' factoring ' finance.
Confusion gone away? We hope so. The bottom line? When considering working capital finance via business receivable financing ensure you've got the right information at hand to make an informed decision. Speak to a trusted, credible and experienced Canadian business financing advisor for your ability to get on track with cash flow finance.
Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Email = sprokop@7parkavenuefinancial.com
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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