Working Capital Factoring – Invoice Factoring Canada

Cash Flow Financing For Your Business Should Not Be ' Lost Hope ' : Alternative Finance To The Rescue

Information on working capital factoring in Canada . Understanding the benefits of alternative finance solutions such as factoring and asset based lines of credit is key to cash flow success when traditional bank financing is not available

Working Capital via factoring continues to be a viable solution for Canadian business owners and financial managers. The process at first glance is quite simple – your firm ‘sells’ its invoices to generate immediate same day cash for those invoice assets.


Clients ask us how this is different from a bank operating line of credit based on receivables. Simply speaking the difference is simply the method in which the asset – the receivables, is secured. In a Canadian chartered banking type arrangement your receivables are ‘assigned ‘, not ‘sold’ to the bank. The bank holds that assignment as a security for their advances on your receivables – they do not call the security unless your firm defaults on its obligations with the bank.


For those firms that can achieve bank operating line of credit financing in Canada that solution is absolutely the most cost effective – yet in many instances Canadian firms cannot achieve the amount of credit they need because the receivables financing is closely tied to your balance sheet and income statement from a credit perspective .


The majority of factoring ( also known as invoice discounting ) in Canada is done on a recourse basis, which simply means that although you get immediate cash for your receivables you are still responsible for any bad debts relative to your customer base .


In Canada most of factoring is done via a U.S. based model of doing business, which has the factor firm essentially verifying and collecting those invoices from your customers. We advise our clients on an alternative method, known as non notification factoring. This type of facility, which we term as a working capital facility, allows you to bill and collect your own receivables and avoid some of the negative stigma that Canadian business owners attach to factoring.


Factoring should most often be considered when your business is growing quickly or has large orders from generally credit worthy customers. Your ability to turn your receivables over more quickly will lead to more sales and greater profits. The cost of factoring is significantly higher than bank financing, but your ability to make use of the cash flow to buy smarter, take advantage of discounts, and purchase and resell more inventory faster significantly offsets a very large part of the cost of factoring in Canada, which can range anywhere from 1-3% on a monthly basis . We caution clients to view this cost as an operating expense as opposed to a financing or interest charge, which allow them to much better rationalize moving to this type of working capital facility.


In summary, factoring is an alternative to bank receivables financing. The facility, when properly set up, allows you to immediately monetize a large asset, your receivables. The best type of facility in Canada, in our opinion, is the non-notification type facility, allowing you to cash flow your receivables similar to a banking arrangement. When properly utilized the facility can help you grow and profit from faster working capital turnover.

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

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 100 Million $ of financing for Canadian corporations .

' 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