OVERVIEW – Information on receivable finance in Canada. The right Commercial AR Factoring solution delivers on classic business credit line attributes
Most business owners know the drill - customers have always been slow to pay, and that's not getting any better. On top of that cash flow requirements change daily as your business addresses working capital needed to finance inventory and receivables, and at the same time managing investments in ongoing operations, debt payments, commitment to suppliers, etc.
Is there a solution to those challenges? We know there is. Is it as expensive as you may have heard, we are pretty sure it is not. The reality is that commercial AR factoring solutions have dramatically dropped in pricing over the last few years.
So what is A/R financing, and what solution, traditional or alternative, works for your firm?
Commercial factoring is the ongoing sale of receivables for instant cash. For many customers it always comes down to the rates and pricing they have heard about this type of financing. In Canada those costs range from anywhere from 9% per annum to 1-2% per month.
Let's talk about costs. . When many customers calculate their 'all in 'cost of borrowing from banks it is often a lot higher than they might think -despite those low bank rates . So it is important not to get 'seduced 'by your low rate expectations around traditional Canadian bank financing- not to mention the rigorous criteria banks impose for those low rates and flexibility .
We're big supporters of banks - when our clients qualify - which isn't always the case. Many clients we meet with simply can't meet the requirements, (the banks call them covenants) for borrowing on a revolving ongoing basis for working capital, particularly receivables and inventory. So the conversation around pricing becomes somewhat moot.
Instead of worrying b about the cost of factoring consider the following - If you have money tied up in accounts receivable for , as an example, 60 days, then you are losing the opportunity to receive payment and re invest in your business and increase your overall return on equity . The more quickly you can get paid allows you to reinvest in further sales for your firm, those sales create more profits.
Looking for unlimited working capital/cash flow for your business - Consider factoring, since as long as your sales and orders grow so does you access to cash flow - In essence unlimited!
A bottom line - Most business owners view cash flow as unpredictable, and commercial factoring removes that unpredictability - you in effect control the cash flow valve - financing all or a part of your receivables...when you chose.
A/R financing is growing all over the world, North American no exception, and certainly in Canada it has been on the rise also.
Some of Canada's largest corporations use this type of financing - when it comes to larger corporations fancier finance terms like ' securitization ' are used. Bottom line, General Motors factors, why shouldn't you? So even if your firm may have had some financial losses, or is in a turnaround situation, etc - you are still a solid candidate for this type of business financing!
Factoring is the ultimate in off balance sheet financing - you are simply monetizing your receivables and generating cash instantly. The secret of factoring costs, or their perceived costs, is your utilization of those funds. You can use cash flow generated from receivables sales to pay invoices from suppliers and take a discount, or negotiate better terms and pricing for your products .
When you have additional working capital you can grow sales and revenue and increase profits - that financial flexibility is what this type of financing is all about. Sometimes it is a 'bridge 'solution, in certain cases it can easily become your long term ongoing working capital solution.
So what’s our bottom line? Seek out and speak to a trusted, credible and experienced working capital advisor to ensure you understand the benefits of this unique type of business financing in Canada.
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 13 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
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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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