How to Explain Receivables Financing Vs Factoring to Your Boss

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How to Determine Best Receivable Finance Solution

As a financial manager can you answer the following question - Explain receivable financing vs factoring ?

Thousands of firms in Canada are currently using the factor finance solution. Many consider this form of financing, but often they are also not really sure as to the rate they are paying and how that rate is calculated . Hint - it's not an interest rate !

Unlike bank a/r financing, which is typically part of your bank business line of credit the factoring solution is in effect the sale of your receivables as a part of the financing.

Companies use this form of business finance when they can not obtain traditional financing . They are growing and need the valuable cash flow that comes from a factor facility.

What then are the factors that determine a/r pricing when it's non bank in nature? First of all note carefully that the cost of factoring is really a discount on your receivable sale to the commercial finance firm funding your facility. So it's not a loan per se, nor is it a credit line in the true sense of the word.

Factors that will determine your ' buy rate ' are the size of the facility, the volume of invoices you have, and the general credit quality of your clients. Also, there are a number of commercial lenders and its important to work with the right firm - Some are local, some are small, some are very large, and some are non Canadian but do business in Canada.

Another key factor in factor receivables finance is your advance rate , Typically you get immediately 90% of your invoice, the balance is held back until your client pays . Larger facilities in Canada tend to be very competitively priced and solid facilities can be arrange in the 1 to 1.5% discount rate.

Commercial factoring companies also might have some misc fees associated with your facility, as do the banks themselves.

How to Determine Best Receivable Finance Solution

So the best advice on accounts receivable financing ? Simply that whether its a bank facility of a alternative solution seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record
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7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !


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