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Betting Your Company’s Future On The Right Cash Flow Financing Solutions
OVERVIEW – Information on accounts receivable financing in Canada. Here’s why thousands of businesses are looking to factoring cash flow solutions for their operating funding needs for growth and more financial stability
Accounts receivable financing alternatives were virtually close to unheard of some years back. How did ' cash flow factoring' become so popular and fast growing for business owners and financial mgrs who need to access working capital funding for their businesses. Let's dig in.
If your firm does not have traditional financing in place with a Canadian chartered bank, or, more importantly, can't negotiate that financing, then you are forced to explore alternative working capital solutions.
How long does it take to put an A/R financing solution in place in Canada? If you are well researched or use the services of a trusted and credible experienced advisor our experience is that you access that type of facility within a couple of weeks. This is significantly less time than it might take you to negotiate traditional bank type financing or a working capital term loan with banking / credit union or other traditional sources of capital.
So why then are owners/mgrs looking at this type of solution for their growth and operating needs. While historically some industries have used the financing more than others, we can quite safely say that almost every industry in Canada is currently utilizing this financing solution.
The most typical firm will often be one that has expansion capital needs or is simply growing too quickly. It is somewhat of an irony that banks and more traditional lenders in fact frown on hyper growth because of the imbalance it creates in changing in working capital accounts.
The bottom line - you're simply forced to carry more A/R and inventories. That issue though is the simply reason that working capital funders like your business growth - more assets to finance
In some cases factoring can be a temporary ' stop gap ' solid in financial distress or restructuring - generally firms in this category use factoring for a period of time and then gravitate back to a more traditional type of financing .
Many clients we meet and speak to always want to discuss their perceptions that factoring is a ' costly ' method of financing. Congratulations! You are 100% correct and 100% incorrect!
While the face value cost of financing your receivables in a factoring solution might seem much higher than bank rates let’s make sure to cover off a few key points. First of all it is costing you to carry your accounts receivable. Customer we meet with who sell on thirty day terms are constantly telling us they are waiting 60 and 90 days to collect their receivables.
Remember that savvy business owners comprehend the cost to carry those receivables. All of a sudden factoring seems a bit less expensive. Also, consider this scenario, do you want to sell your product or service once, and wait 60 days to 90 days to collect your funds. Or ... would you rather sell your product or service, get paid the same day for those goods (that’s what factoring does) and then re invest those funds into more goods, allowing you to bill your customer, and generate more revenue and profit?
Firms that have respectable gross and net profit margins can fairly easily absorb the additional costs of A/R finance via a non bank commercial lender. If you have those decent margins you can quickly see that a strong case could be made that factoring is the cheapest method of financing! And remember it’s cheaper and easier than accessing more equity or taking on term debt on your balance sheet. The bottom line of factoring: It cash flows your sales instantly.
We strongly suggest you analyze your own ' costs to carry ' in the context of being able to sell your products and services and replicate that process 2-3 times in a 60-90 day period .
Don’t forget to also check out CONFIDENTIAL RECEIVABLE FINANCING , allowing your company to bill and collect it’s own A/R without any notification to clients, suppliers, other lenders, etc . It’s our recommended cash flow solution as a subset of factoring A/R in Canada.
Perceptions? Reality? Consider utilizing the services of a trusted, credible and experienced Canadian business financing advisor who can help you demonstrate the ' speed test '
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 :
7 Park Avenue Financial
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
' Canadian Business Financing with the intelligent use of experience '
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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