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What If … You Had All the Solutions & Info You Need About Financing Your Business Cash Flow Requirements
RECEIVABLE FINANCING – FACTORING SHOULD BE # 4 ON YOUR LIST !
Canadian business can be financed in one of four different ways – You need to be able to asses the methods utilized in those four categories and which one, or ones, makes sense for your firm.
Business is financed of course by your own shareholder equity – Equity is expensive because when you give it up, or sell ownership in your business your overall position becomes diluted and your return on investment diminishes.
The three other methods of financing, in lieu of equity of ownership relinquishing are:
Debt
Grants
Asset Financing
Debt of course comes in the form of good debt and bad debt – we would, as an example categorize a commercial mortgage as good debt – a cash flow working capital loan might be another example. However, the reality is that most business owners recognize the dangers of debt and how that increased leverage can be a double edged sword.
Clients are always asking us about ‘governments grants and loans ‘. In our opinion there are only two respectable grant/loan programs in Canada – the SR&ED program, and the CSBF program – the former is a non repayable grant, the latter is simply a great government loan for financing equipment and leaseholds.
So that brings us to # 4- Asset financing. Depending on the type of business and industry you are in your asses include inventory, land, equipment, and receivables.
A very strong case can be made that #4 should in fact be #1 when it comes to working capital and cash flow financing – Simply speaking your assets need to be monetized in the best manner in which to bring you liquidity.
Receivable financing – factoring is in fact the quickest and most efficient manner to bring immediate cash flow to your business. Why is that the case – simply because it involves no debt coming on our balance sheet, no payments are made as in a loan type scenario, cash flow is immediate, and the reality is, that if you have negotiated the right factor facility then you are in control of your overall cash flow requirements?
The benefits of a receivable financing factor facility are very clear once you understand the process. Generally a factor facility, aka an invoice discounting or receivable financing facility can be negotiated in a couple of weeks from start to finish. To the extent that your business is growing you essentially have successfully completed a financing that gives you unlimited cash flow. We say unlimited, because if your sales and receivables grow your cash flow and working capital grow in lock step to that growth!
Cash flow and working capital from a factor facility can be used to increase inventory, take on more purchase orders and contracts, and, in general meet working capital guidelines.
The overall process for a receivable financing –factoring facility is simple. You sell some or all of your invoices to your factor partner firm – You receive generally 90% of that invoice amount that same day as cash in your bank account. When your customer pays the factor firm keeps a ‘discount fee ‘based on the total time it took your customer to pay.
Discount fees, or as clients prefer to call them, ‘factoring rates ‘vary in Canada. Factors (excuse the pun) that affect your fee are the size of facility, who you deal with, the method in which your facility operates, and the overall quality of your customer base.
Speak to a credible, trusted, an experienced business financing advisor – Find out today why the 4thmethod of financing your business might just be the best!
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
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 .
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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