How To Decide if Financing Receivables Is a Solution for Your Working Capital Funding

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YOU WANT RECEIVABLES FINANCING AND WORKING CAPITAL FUNDING! 

A NEW WAY TO MEASURE WORKING CAPITAL FINANCING NEEDS!

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        Financing & Cash flow are the biggest issues facing business today

   ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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EMAIL -sprokop@7parkavenuefinancial.com

 

The R R Factor: A New Approach to Financing Receivables & Working Capital Funding in Canada

 

 

Understanding the Receivables to Revenue Ratio (R R Factor) 

 

We call it the Receivables to Revenue Ratio or simply the R R factor. Unlike rest and relaxation, the R R factor will guide Canadian business owners in recognizing the right time to explore advanced methods of accounts receivable financing and working capital funding.

 

The receivable-to-revenue ratio is a financial metric that provides insight into a company's ability to turn its accounts receivable into cash. It measures how effectively a company manages its credit sales and collections and helps alert to negative working capital.

 

Here's how you can calculate it:

 

Receivables to Revenue Ratio = (Accounts Receivable / Sales Revenue) x 100

 

 

Interpretation: What does the Receivables to Revenue Ratio Tell  Business Owners 

 

• Accounts Receivable: This is the amount of money owed to the company by its customers for goods or services that have been delivered but not yet paid for.

• Sales Revenue: The total amount of money the company earns from its products or services sales.

 

Measuring Your Receivables Revenue Ratio

 

• High Ratio: A higher ratio could indicate inefficiency in collecting and converting payments into cash. It may mean that a company is extending credit to customers who are not paying their bills promptly, which can impact cash flow and liquidity.

• Low Ratio: A lower ratio could indicate that a company efficiently converts its credit sales into cash quickly. It may imply strong credit policies and collection practices, ensuring that the money owed is collected promptly.

•  

In short, a receivable-to-revenue ratio is essential in assessing a company's liquidity and cash flow management. It offers insight into how well a company manages its credit policies and how quickly it's turning credit sales into cash. If mismanaged, it could lead to potential cash flow problems and increased risk, mainly if a significant portion of sales are made on credit.

 

The Importance of Calculating the R R Factor

 

Here's a powerful tool that's straightforward and potent in assessing cash flow challenges. It's called the receivables to revenue ratio, and by examining your year-end balance of A/R and translating it into weeks of sales, you'll have a historical perspective on your cash flow and working capital needs.

 

Tackling Working Capital Funding Challenges with Receivables Financing

 

But what does a company do when traditional borrowing for working capital seems daunting? Increasingly, Canadian firms are turning to factoring or accounts receivable financing. This method might seem complex, but it's quite simple once you comprehend the pricing and day-to-day functioning.

 

  

The Simple Solution -  Invoice Factoring / Financing Accounts Receivables  

 

Choose daily, weekly, or monthly intervals to sell your receivables on the company's balance sheet. When you make a sale, you receive immediate cash, transforming accounts receivable into an ATM for Canadian entrepreneurs and finance managers. Discovering this ultimate cash flow solution can be a game-changer for small businesses and companies of all sizes. But what are the downsides?

 

   

The Two ‘Catches’ of Financing Receivables

   

While accounts receivable financing might seem attractive, there are two 'catches' that businesses need to understand and address.

 

Cost of Financing

The first is the cost compared to a traditional bank loan / unsecured financing, which typically ranges from 9%  per month in Canada and in some cases, 1.15%/mo, referred to as a discount fee. Though this might seem expensive many business owners do not consider the carrying cost of the receivables and the 'opportunity cost' – the potential for higher profits using cash flow from receivable financing.

 

Why Isn’t Every Canadian Business Using Receivable Financing?

 

The reality might surprise you; large Canadian firms often utilize this financing method for funding a company's sales revenue. Their financial strength allows for more flexibility in managing this facility daily, often enabling them to bill and collect their receivables - something rarely found in the Canadian market. 7 Park Avenue Financial's recommended solution is Confidential Receivable Financing, allowing a business to bill and collect its receivables while achieving all of the cash flow benefits of A/R financing.

  

Conclusion  

Seek out the unique 1% solution that allows this flexibility. Your business can secure competitive working capital funding and virtually limitless cash flow growth.

Call 7 Park Avenue Financial,  a trusted,  credible, and experienced Canadian business financing advisor who will ensure you have the best and lowest cost capital funding solution tailored to your business, allowing you to unlock growth solutions and profits.

 

  

 FAQ:   

 

What is the Cash Conversion Cycle?

The Cash Conversion Cycle (CCC) is a critical metric that measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It encompasses three stages:

1. Days Sales Outstanding (DSO): Time taken to collect payment after a sale.
2. Days Inventory Outstanding (DIO): Time  taken to sell inventory.
3. Days Payable Outstanding (DPO): Time taken to pay suppliers.

The formula for calculating the  company's cash conversion cycle 'CCC ' is:

$\text{CCC}$$<span\; style="font-size:\; 16px;">=</span>\text{<span style="font-size: 16px;">DSO</span>}<span\; style="font-size:\; 16px;">+</span>\text{<span style="font-size: 16px;">DIO</span>}<span\; style="font-size:\; 16px;">-</span>\text{<span style="font-size: 16px;">DPO</span>}$$\text{CCC}=\text{DSO}+\text{DIO}-\text{DPO}$

Keywords related to CCC include working capital management, liquidity, operational efficiency, cash flow management, inventory turnover, and accounts payable/receivable.

 

What is Debt Financing Versus Equity Financing?

 

Debt Financing: This involves borrowing money, typically through loans, bonds, or other debt instruments, to be repaid with interest. It's a way for businesses to raise capital without giving up ownership. Keywords include interest, principal, creditors, leverage, and fixed obligations.

Equity Financing: This entails raising capital by selling shares or ownership in the company. Unlike debt financing, there's no obligation to repay the funds. Instead, shareholders may receive dividends and have a say in the company's operations. Keywords include shareholders, dividends, ownership, dilution, and capital structure.

 

3. What is the Impact of Currency Exchange Rates in A/R Financing?

Currency exchange rates are vital in accounts receivable (A/R) financing, particularly for businesses dealing in multiple currencies. The fluctuation of exchange rates can:

• Affect the value of receivables, leading to currency risk.
• Impact on the cost and availability of A/R financing.
• Create complexities in managing international trade credit.

 

What are Alternative Financing Options for Receivable Financing in Addition to Factoring?

In addition to factoring, alternative financing options for receivable financing include:

• Invoice Discounting: Selling invoices to a third party at a discount but maintaining control over collections.
• Asset-Based Lending: Utilizing assets like receivables and inventory as collateral for a loan.
• Supply Chain Financing: Collaborating with suppliers and financial institutions to optimize working capital across the supply chain.
• Peer-to-Peer (P2P) Lending: Leveraging online lenders and their platforms to match borrowers with individual lenders.

 

 

What is a working capital loan?

 

A working capital loan is a specialized type of loan designed to finance the daily operational expenses of a business. Unlike traditional loans, often used to finance long-term investments or capital expenditures, working capital loans cover short-term needs like payroll, rent, inventory purchases, and other day-to-day expenses.

This type of loan is particularly beneficial for businesses with cyclical or seasonal revenue patterns, where there might be gaps in cash flow. It helps companies maintain smooth operations when expenses or income are high.

There are various types of working capital loans, including:

1. Line of Credit: Offers flexible access to funds up to a specific limit, allowing businesses to draw and repay as needed.
2. Term Loans: Provides a lump sum of capital paid back over a set term with interest.
3. Invoice Financing: Advances funds based on unpaid invoices, enabling businesses to manage cash flow without waiting for customer payments.
4. Trade Credit: Involves obtaining goods from suppliers with a deferred payment agreement.

The primary goal of working capital loans is to ensure liquidity and financial stability in the short term, allowing businesses to continue operating smoothly regardless of fluctuations in revenue or unexpected expenses.

 

What is the difference between a working capital loan and financing receivables?

 

Both working capital loans and receivables financing are essential tools in managing a company's cash flow and liquidity, but they serve different purposes and function in distinct ways. Here's an outline of the key differences:

Working Capital Loan

1. Purpose: Aimed at funding the day-to-day operational expenses of a business, such as payroll, rent, utilities, and inventory. It's a tool to smooth out cash flow fluctuations.
2. Structure: This can be a term loan, line of credit, or other forms of short-term financing. The structure is often flexible, catering to the general working capital needs of the business.
3. Collateral: May or may not require collateral, depending on the lender's requirements and the borrower's creditworthiness. If needed, collateral can include various business assets.
4. Approval & Terms: The lender assesses the overall financial health of the business, including credit history, profitability, and financial stability. The terms can vary widely based on these factors.

Financing Receivables (e.g., Accounts Receivable Factoring or Invoice Discounting)

1. Purpose: Leveraging unpaid invoices or accounts receivable (A/R) to generate immediate cash. It helps bridge the gap between invoicing a customer and receiving payment and avoids the need to borrow money via term debt.
2. Structure: Selling or using the A/R as collateral to get an advance from a financial institution or factoring company. The advance is typically a percentage of the invoice's face value.
3. Collateral: The collateral is the receivables themselves. The lender's security is tied to the quality and collectibility of the financed invoices.
4. Approval & Terms: The lender's focus is often on the creditworthiness of the invoiced customers rather than the company seeking financing. The terms are closely tied to the receivables' value, age, and risk.

While working capital loans provide a more general form of financial support for daily operations, financing receivables is a specialized method tied to leveraging unpaid invoices to improve cash flow. The former takes a broader view of the business's financial health, while the latter is closely related to specific transactions and the creditworthiness of the company's customers.

 

Click here for the business finance track record of 7 Park Avenue Financial

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Financing receivables can be a key ' igniter ' in your firm's search for business credit that works for your cash flow needs. Accounts receivable factoring and the cost of factoring in your search for business funding requires some special analysis and expertise.This method of financing can often ' unfreeze ' your working capital. Let's dig in and show you how to fix the business credit freeze.


How Does Factoring Invoices Function On A Day To Day Basis

The entire FACTORING process is the cash flowing of your receivables after your firm has provided either its goods or services to your client. There is a defined process that allows your company to receive funding on completion of your sale and the invoice to the client.

Factoring clients are best suited to these financial solutions when their business is growing and traditional capital is not available. In fact, while traditional financial institutions are focused on credit limits, annual reviews, etc factoring solutions are very flexible and limits can very easily be raised if your sales are growing. In fact business owners control their own limits based on their decisions as to how much of their receivables they wish to finance and when to submit those invoices for financing.

After your firm has invoiced your client you provide a copy of that invoice to the receivable finance firm you are utilizing . Many firms offer very different types of versions of what we could call ' traditional factoring' but essentially you will receive your funds withing a day or so of invoice submission .  The amount you receive on the face value of the invoice is typically  80-90% of the invoice amount . You receive the balance of the invoice when your client pays, at which time a fee of approx  1-2% is deducted as the ' factoring fee ' .

This latter point of a factoring fee must be stressed and understood when looking at this type of accounts receivable financing . Why ? Many business owners and financial managers view the factoring fee as an ' interest rate ' when in fact it is simply a cost of the service for providing the financing, A better way to think of it is that is a reduction in your gross margin of that 1-2% range that we expressed previously . This whole area is one of the largest misnomers around FACTORING and its true cost. Your true financing cost in factoring will revolve around the agreed upon fee charged, and your ability to negotiate the amount that will be advanced on each invoice. Those are two, but not all, of the  key drivers in calculating your cost of financing .

Why Does Factoring Work ?

Factoring works simply because it turns your sales into working capital, allowing you to accelerate cash flow via the financing of a/r.  Business owners will not be surprised to know that it takes typically anywhere from 30-90 days these days to collect your accounts, your stated payment terms notwithstanding!

It should be noted that the advance rates on each invoice tend to vary by industry - the trucking/freight and staffing industries are two examples of high users of this method of financing sales so the advance rates are quite high - that's a good thing ! It should be noted that some costs considered as ' miscellaneous ' by some such as account set up, bank lockbox fees, and credit checks can add up and should be considered in your total cost analysis.


Accessing the cash allows you to address the day operating cash needs of your business. If your company is in a position of either having to , or offering, extended payment terms for your suppliers and your have sufficient gross margins then FACTORING is a solid potential solution for your business.

In certain cases a business might be able to take advantage of taking on a new or larger client that previously was not able to be considered based on size and the working capital investment your firm would have to make in carrying a/r or funding additional inventory.

A firm having a large number of clients that generate a large number of invoices could utilize  FACTORING as a method to reduce the collection costs and investment in staff to facilitate financing.

A  key benefit of factoring is that it does not bring debt onto your balance sheet - it is not a loan ! Rather it is the monetization of what is typically your largest current asset - A/R. As we mentioned many firms are stalled in sales growth due to their inability to fund the working capital component of sales . The FACTOR solution allows you to take on those clients with ease .

Many firms experience what the pros call ' bulge finance needs ' ; this might be at times of the seasonality of the business , or other reasons . That's when the FACTORING solution makes sense.

Factoring is often viewed as a ' bridge ' to more traditional financing, typically Canadian banks . Being able to demonstrate a successful factor finance facility allows your company to build a track record in stability, thereby improving your commercial credit history .with one of them. In times of economic crisis, pandemics included alternative financing sources such as  AR Financing allow your firm to weather the storm .

Every business owner can relate to the constraints Canadian chartered banks come under  for the financing of business in a downturn -  Downturns might be company-specific or part of a general industry-specific or broad economic downturn. That situation tends to lead to a downward spiral in many firms as business credit tightens . FACTORING COMPANIES typically finance companies in good times and in less than good times.

Can Factoring Improve Profits?

Many businesses considering factoring finance tend to compare it to more traditional business finance solutions such as those services offered by banks. Many suppliers and vendors to your business offer early payment discounts  - one such common offering is' 2% net 10 days '. That allows you to deduct 2% of the suppliers invoice based on paying early. Firms that have incoming cash tied up in a/r are of course unable to take advantage of this discount . But factoring solutions allow you to take that discount, thereby lowering a very significant amount of the factoring fee! In some cases you can purchase in bulk allowing you to further lower your cost of goods , thereby improving margins. As we have noted firms that are constantly battling the cash flow challenges can rarely take advantage of the two examples we have outlined.

Factoring Costs Laid Bare!  Assessment of 3 Critical Facts In Invoice Finance

We have already mentioned the factoring fee, that is the actual charge by your commercial financing partner to finance invoices on an ongoing basis.  The decision on what that fee is becomes based on a number of factors assessed by your factoring firm. Those data points include  your clients overall industry profile, your own firm's general creditworthiness , and the amount of the facility you require.

The next key factor can be significantly  a cost significantly controlled by yourself,  namely your average DSO / collection period. So if you turn over your receivables more quickly that monthly factoring fee stays low, as the charge is based most often on a 30 day collection period. Therefore your costs would increase if your client paid in 60 days. Companies with good credit extension policies are a winner in the factoring game.

 Example Of Factoring Cost :
 Invoice Amount -  $ 20,000
 Factoring fee - 1.5% = $300
In the above example your firm would get 90% of the 20,000 as soon as you invoice, namely $18,000. 
The balance of $2000 less the $300 fee is paid to your immediately on payment by your client.
In the above example you have not incurred debt, become cash flow positive immediately on invoicing, and continue to maintain general creditworthiness with your suppliers, operating costs, etc.
 A  harsher reality of factoring solutions is the fact that many firms these days simply cannot  meet the demands of Canadian banks when it comes to accessing the business credit they need. Alternative finance solutions such as factoring and asset based lending allows your firm to leverage it's assets and sales revenue potential. Thousands of Canadian businesses utilize this method of cash flowing sales when they otherwise could not achieve. While in the majority of cases the factoring firm, or asset based lending firm becomes your ' senior lender ' these facilities also can be complementary to other business credit you have in place. It's all about your total exposure to your lenders versus the amount of  collateral you have in receivables and other assets.Trends now show that thousands of businesses in Canada find themselves unable to get the financing they need. Whether they are ' cut off ' or simply ' restricted' in getting capital into their firm the repercussions can be anywhere from being mild to severe, severe of course meaning closing your business.

So why is receivable finance funding different, and how does the business owner/manager asses the cost of factoring A/R into a sensible arrangemen

The essence of invoice discounting, aka ' factoring, aka ' invoice discounting ' is simply the ability to monetize sales directly into cash as you generate revenue. That in itself is a powerful statement. Where things go wrong is when your business locks itself into a facility that either costs too much, is unwieldy to operate, and simply doesn't mesh with your day to day operations. By the way, that absolutely doesn't have to be the case!

So if banks also margin receivables for cash flow for your business wouldn't Canada's chartered banks be the optimal solutions for cash flow finance. Well they would be that perfect solution if your business qualifies, and if you do qualify do you in fact have access to all the credit you need to grow the business when it comes to seasonality, large orders, cash flow bulges, slow paying clients, etc. The answer is that while our banks in Canada provide the best and most ' low cost ' solution the reality is that not everyone qualifies.

The short answer to bank versus non-bank funding in Canada, when it comes to A/R finance is that the bank bases its decision on your sales, profits, and balance sheet; Factoring, on the other hand, bases its finance formula only on your sales and the invoices generated from that revenue. Oh, and by the way, funding is in fact ' same day '. And it's only as complex as you want it to be, and the industry itself, unfortunately, does not always do a good job of explaining facilities; sometimes employing smoke and mirrors to hide costs and day to day facilitation of the financing. That's when you need clarity!




You have the ability to negotiate what is known as a  ' non recourse ' facility which allows you to transfer all the credit risk to your financing firm - albeit at a cost.

The key to a successful A/R finance program in Canada is your management of the program. The type of facility you enter into, as well as your ability to control what you finance and when is critical. And, as a kicker, our recommendation to clients is ' confidential ' facilities that allow you to bill and collect your own receivables in a manner that allows the competition to do only one thing - figure out where you are getting all that cash . Always keep in mind that the firm financing your receivables is typically more concerned with the overall quality of your customer based, so any firm that is perhaps facing financing challenges is not eliminated from being able to source funding. Knowing you have a strong underwriting partner to fund your sales is a key success factor in any business.

Finally, the concept of ' notification' and ' verification' should be high on the list of factoring due diligence. These two terms arise out of what we at 7 Park Avenue Financial call ' old school ' factoring, and involves occasional or constant verification of invoices with your clients.  At 7 Park Avenue Financial we tend to view this form of factoring as somewhat ' intrusive ', so our recommended and preferred solutions is Confidential Receivable Financing, allowing you to bill, and collect your accounts without any notification to clients, suppliers, etc. All the benefits, and less of the hassle!

Whether you're a start-up, medium-sized firm, or a large corporation, financing receivables can be a huge part of your business success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor today who can assist you with the facility that makes the most sense for your unique needs.



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

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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. He is an experienced

business financing consultant

.

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 financing 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
7 Park Avenue Financial/Copyright/2020

How To Decide If Financing Receivables Is a Solution for Your Working Capital Funding

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We call it the R R factor. And we are not talking about rest and recuperation! The R R factor will give you a sense it its time to consider whether a newer, more popular method of financing receivables is your working capital funding solution.

We're going to provide you with a quick but easy and powerful tool to determine if your cash flow challenges need to be addressed in a more positive fashion. It's the receivables to revenue ration - hence the term R R. First, take you year end balance of A/R, which is of course your uncollected sales revenue at that point in time. Then determine how many weeks of sales that represents. Calculate this ratio historically and you have a method of determining whether your cash flow and working capital requirements are changing.

So how does business address the challenge of working capital funding when it's as challenging as ever to borrow. Many companies are assessing factoring, or financing receivables. It's a simple process that is only made complex and difficult when you don't understand the pricing, how it works on a daily basis, or the important need to align yourself with a partner that offers and matches your business financing needs.
The process is actually quite simple --- On a daily, weekly, or monthly basis - it's your choice, you sell your receivables. So what happens next? Simply that the day you generate that sale you have the same day cash for those receivables. Therefore the Canadian business owner and financial manager have created a true ATM machine out of the investment the company has in accounts receivable. Readers will also begin to immediately appreciate that they have just stumbled upon the ultimate cash flow solution, because every time they sale they have instant cash. So what's the catch?

We believe there are 2 catches, and when the business owner understands and addresses them the receivable financing solution becomes much more clear and common sense.
The first ' catch ' is the cost. The typical Canadian cost of financing a receivable is 1.5- 2% / month. The firms offering the service do not call that an interest rate, they call it a discount fee. You sold something, for cash, i.e. you're receivable, and it was discounted by 1 or 2% for that privilege. Is that expensive. Absolutely... maybe! That is because most business owners don't pick up on the fact that they are in effect carrying those receivables already, which is a cost that is often not intuitively calculated by the business owner. Secondly, the term ' opportunity cost ' comes in to play, because the reality is that if your firm can generate a good return on investment you can use the cash flow from your receivable financing to generate higher profits.

So why isn't factoring or receivable financing the choice of every Canadian business for working capital funding? The reality is, and this is a surprise to many, that the largest firms in Canada utilize this financing. They simply have a stronger ability, due to their financial strength, to determine how the facility works on a daily basis, the best type of facility we recommend to customers is one in which your firm is able to bill and collect its own receivables, which is not offered by 99% of firms in the Canadian marketplace. Search out that 1% solution is what we tell our clients - at that point you will have a competitive financing vehicle for working capital and virtually unlimited cash flow growth.

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












http://www.7parkavenuefinancial.com/financing_receivables_working_capital_funding.html



Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/5263367

How To Decide if Financing Receivables Is a Solution for Your Working Capital Funding

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Know When It’s Time To Look At A New Way of Financing Cash Flow Needs

Information on working capital funding solutions.Financing receivables and other current assets is a solid way to ensure your business can meet it's cash flow needs

We call it the R R factor. And we are not talking about rest and recuperation! The R R factor will give you a sense it its time to consider whether a newer, more popular method of financing receivables is your working capital funding solution .

We're going to provide you with a quick but easy and powerful tool to determine if your cash flow challenges need to be addressed in a more positive fashion. It's the receivables to revenue ratio - hence the term R R . First, take you year end balance of A/R, which is of course your uncollected sales revenue at that point in time. Then determine how many weeks of sales that represents. Calculate this ratio historically and you have a method of determining whether your cash flow and working capital requirements are changing.

So how does business address the challenge of working capital funding when it’s as challenging as ever to borrow. Many companies are assessing factoring, or financing receivables. It’s a simple process that is only made complex and difficult when you don’t understand the pricing, how it works on a daily basis, or the important need to align yourself with a partner that offers and matches your business financing needs.

The process is actually quite simple --- On a daily, weekly, or monthly basis - it’s your choice, you sell your receivables. So what happens next? Simply that the day you generate that sale you have the same day cash for those receivables. Therefore the Canadian business owner and financial manager have created a true ATM machine out of the investment the company has in accounts receivable. Readers will also begin to immediately appreciate that they have just stumbled upon the ultimate cash flow solution, because every time they sale they have instant cash. So whats the catch?

We believe there are 2 catches, and when the business owner understands and addresses them the receivable financing solution becomes much more clear and common sense.

The first ' catch ' is the cost. The typical Canadian cost of financing a receivable is 1.5- 2% / month. The firms offering the service do not call that an interest rate, they call it a discount fee. You sold something, for cash, i.e. you’re receivable, and it was discounted by 1 or 2% for that privilege. Is that expensive. Absolutely ... maybe! That is because most business owners don’t pick up on the fact that they are in effect carrying those receivables already, which is a cost that is often not intuitively calculated by the business owner. Secondly, the term ' opportunity cost ' comes in to play, because the reality is that if your firm can generate a good return on investment you can use the cash flow from your receivable financing to generate higher profits .

So why isn’t factoring or receivable financing the choice of every Canadian business for working capital funding? The reality is, and this is a surprise to many, that the largest firms in Canada utilize this financing. They simply have a stronger ability, due to their financial strength, to determine how the facility works on a daily basis, the best type of facility we recommend to customers is one in which your firm is able to bill and collect its own receivables, which is not offered by 99% of firms in the Canadian marketplace. Search out that 1% solution is what we tell our clients - at that point you will have a competitive financing vehicle for working capital and virtually unlimited cash flow growth.

Speak to a trusted and credible business financing advisor who can assist you to put together a solid working capital funding solution.

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



Click here for 7 PARK AVENUE FINANCIAL 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

Can Financing Receivables Ignite Your Business Funding . Cost and Benefits Of Factoring Funding In Canada

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Know How To Fire Up Business Cash Flow?

Information on financing receivables in Canada. Assessing invoice finance as a finance options , and understanding the cost of factoring a/r in the Canadian business financing funding marketplace.

We'd all agree there’s a major difference in igniting, and on the other hand, freezing your business credit. We maintain to clients that financing receivables is a key ' igniter ' of cash flow funding in Canada when the Canadian business owner and financial manager is experiencing the business credit freeze !


Trends now show that thousands of businesses in Canada find themselves unable to get the financing they need. Whether they are ' cut off ' or simply ' restricted' in getting capital into their firm the repercussions can be anywhere from being mild to severe, severe of course meaning closing your business.


So why is receivable finance funding different, and how does the business owner/manager asses the cost of factoring A/R into a sensible arrangement?


The essence of invoice discounting, aka ' factoring, aka ' invoice discounting ' is simply the ability to monetize sales directly into cash as you generate revenue. That in itself is a powerful statement. Where things go wrong is when your business locks itself into a facility that either costs too much, is unwieldy to operate, and simply doesnt mesh with your day to day operations. By the way, that absolutely doesnt have to be the case!


So if banks also margin receivables for cash flow for your business wouldn't Canada's chartered banks be the optimal solutions for cash flow finance. Well they would be that perfect solution if your business qualifies, and if you do qualify do you in fact have access to all the credit you need to grow the business when it comes to seasonality, large orders, cash flow bulges, slow paying clients, etc. The answer is that while our banks in Canada provide the best and most ' low cost ' solution the reality is that not everyone qualifies.


The short answer to bank versus non bank funding in Canada, when it comes to A/R finance is that the bank bases its decision on your sales, profits, and balance sheet; Factoring on the other hand bases its finance formula only on your sales and the invoices generated from that revenue. Oh and by the way, funding is in fact ' same day '. And it's only as complex as you want it to be , and the industry itself , unfortunately does a good job sometime of employing smoke and mirrors to hide costs and day to day facilitation of the financing . That's when you need clarity!


The key to a successful A/R finance program in Canada is your management of the program. The type of facility you enter into, as well as your ability to control what you finance and when is critical. And , as a kicker, our recommendation to clients are ' confidential ' facilities that allow you to bill and collect your own receivables in a manner that allows the competition to do only one thing - figure out where you are getting all that cash .


Whether you're a start up, medium sized firm, or a large corporation, financing receivables can be a huge part of your business success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor today who can assist you with the facility that makes the most sense for your unique needs.





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

Financing Receivables & Sales Is Best Achieved With These Various Factoring Solutions

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The Rise..And Continuing Rise Of A/R Finance Solutions In Canada

OVERVIEW – Information on business factoring in Canada. Financing receivables is an accepted way of ensuring your company can satisfy critical cash flow needs . Understanding how a/r finance works, what it costs , and how it can benefit your business is important

Factoring, known as the receivable financing solution continues to gain momentum as a financing alternative of choice for Canadian business owners and financial managers. We know why. Let's dig in.

The main reason? It's a case of a common sense approach to improving cash flow and working capital without taking on any debt and at the same time allowing your firm to grow without traditional type financing that might be difficult, or in some cases, impossible to achieve.

A lot has changed in the part of alternative financing, including rates / costs that have improved a great deal!


Clients ask us what risk or cost is involved in locking into a one year contract - the reality is that most firms considering factoring (also known as receivable financing, receivables discounting) actually do stay with this type of facility for at least a year. Firms that factor their accounts receivable usually have two options at the end of a one year fixed term - either move to a competitive factor facility, or in some cases migrate back to or achieve traditional Canadian chartered bank line of credit financing.

Never any doubt that traditional bank financing always has the lower rate, the reality is that it in many cases does not provide you with the amount of working capital you need if you are in high growth mode. Alternatively you may also have trouble meeting some of the bank ratio and covenant guidelines that come with those very respectable bank facilities.

We point out always to customers that the largest corporations in Canada and the U.S. in some cases also use A/R financing type facilities - it simply gives your firm, as well as the large firms, maximum leverage on working capital without taking on debt.
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The amount of your factoring facility and the rate it commands is dependent on three issues -

1 The general overall risk profile of your firm - re growth, profitability, type of industry etc

2. The size of your total receivables

3. The overall customer quality or credit worthiness of your customer base

If you are having financial or growth challenges it is generally not recommended by finance people that you take on more debt - factoring solves this problem nicely - you are simply liquidating your receivables faster without borrowing .

Our most recommended solution for our clients? Confidential A/R financing!.. Allowing you to bill and collect your own receivables while retaining all the benefits of factoring.

Seek out a trusted, experienced and credible advisor in this niche area of Canadian business financing and assess your factoring options relative to type of facility that meets your growth needs. A factor facility with rates, terms and structures that suit your business model and provide you with all the working capital and cash flow you need is a competitive advantage.



7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

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 .







7 Park Avenue Financial

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' 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