Unlocking The Benefits Of Receivable Financing & Invoice Factoring In Canada Invoice To Cash - Your Guide To Factoring & A/R Financing In Canada

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YOUR COMPANY IS LOOKING FOR RECEIVABLE FINANCE!

 

HOW INVOICE FACTORING COMPANIES ( CANADA ) WORK

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the biggest issues facing businesses today

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

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

 

 

ACCOUNTS RECEIVABLE FACTORING & FINANCING IN CANADA - YOUR GUIDE TO HOW IT WORKS AND WHAT IT COSTS 

 

 

Considering Receivable Financing in Canada? If you are, your thoughts and answers on two questions should help you out quite a bit when it comes to invoice factoring in Canada.

 

HOW CAN  MY BUSINESS IMPROVE CASH FLOW?

 

One of our favourite business writers recently focused on cash flow management and asked the following 2 questions -

 

1. Does your firm need cash right now?

2. Do you know what your cash balance needs will be a half year from now?

 

The fact that you are even considering an invoice factoring company/factoring fund in Canada suggests your business might be facing cash flow challenges or perhaps that you're smart enough to address a future problem now!

 

 

WHAT IS FACTORING 

 

The basics of factoring finance are easy to understand - setting up a factoring facility allows you to, at your choice, sell invoices to an invoice factoring company, reducing your receivables and adding immediate cash flow to your balance sheet.

 

The ' sale ' is made via a ' fee, 'not an interest rate. It is typically  .75%-1.25% / mo - the fee varies via several factors, including the size of your facility, overall quality and collectibility of the receivables, industry credit risk, etc. - For example, construction industry factoring might be viewed as having more industry risk.

 

Although some business owners consider the whole process as ' factoring loans, ' the reality is that you are simply accelerating a collected account receivable's cash flow benefits. That ' invoice purchasing ' allows you to turn your company into a cash flow machine at your option.

 

 

WHAT IS THE DIFFERENCE BETWEEN INVOICE FACTORING VERSUS ACCOUNTS RECEIVABLE FINANCING?

 

Invoice factoring agreements stipulate the actual sale of outstanding receivables to factoring companies, which are usually independent non-bank commercial finance companies - On the other hand receivable financing as working capital and cash flow management solution use the accounts receivables of a business as collateral to obtain financing.

 

Banks offer unsecured loans via receivable financing solutions, and they typically register a general security agreement on the business's assets. So the receivables are assigned to the bank under this arrangement. Both factoring and a/r financing provide valuable business funding, and each method of small business financing has its advantages and disadvantages.

 

HOW DOES INVOICE FACTORING / ACCOUNTS RECEIVABLE FACTORING WORK IN CANADA? 

In Canada the invoice factoring company has a credit agreement with the customer to purchase invoices at a pre-agreed discount - In traditional ' old school ' factoring many factoring companies also assume the collection role in the funding process. When a client pays the company for the invoice the factoring company charges a fee on the invoice value and sends the company the funds less a fee for financing the invoice when the customer pays -

 

The benefit is that companies can receive cash flow immediately on generating sales of products and services to their customer.  Many factoring companies use invoice tracking and automation systems to fund client transactions.

 

  

 

IS INVOICE FACTORING AND RECEIVABLE FINANCING A GOOD OPTION FOR YOUR BUSINESS?  

 

Both invoice factoring and accounts receivable financing are solid credit risk management and cash flow solutions for small business financing in Canada. Businesses can improve cash flow and focus on collections management while obtaining cash advances for invoices before payment by the end user customer. 

 

However, business owners must weigh the benefits and drawbacks of these financing methods while considering issues around fees, interest rates, and credit risk.  Working with banks and reliable factoring companies is vital in assessing this method of Canadian business financing.

 

THE DIFFERENCE BETWEEN FACTORING AND  OTHER RECEIVABLE FINANCING

 

It's more of a technical issue that shouldn't concern business owners. Still, the paperwork around ' factoring' invoices an agreement to ' sell receivables ' - whereas using a bank credit line as an example, the bank holds security against the receivables because you ' assign ' your a/r to the bank under a traditional business loan arrangement - Somewhat much ado about nothing.

 

 

IMPORTANCE OF CASH CONVERSION CYCLE / OPERATING CYCLE

 

A/R finance allows you to address what's going on with your firm’s working capital rapidly. And by the way, it puts you in control, which you might not be feeling now regarding your firm's overall cash/ business cycle. When we meet and talk to clients quite often, it’s clear they don't necessarily feel in control of their finances.

 

When you can exert control over your cash with a receivable financing strategy, all of a sudden, the uses of cash seem a lot clearer. You can now make or take on new lease payments or reduce debt in other areas such as accounts payable. Keeping those suppliers and preferred vendors on the side is important, pretty well all the time!

 

 MAXIMIZE CASH FLOW VIA FAST FUNDING OF YOUR SALES REVENUES 

 

Let's cover some basics regarding invoice factoring in Canada, also known as invoice discounting. First, it’s a business-to-business financial strategy, so it doesn't really work in a Business to Consumer environment. (By the way, if you are selling into a retail environment, then a merchant cash strategy which finances future retail sales might work for your firm, but we digress...!)

 

WHAT DOES INVOICE FACTORING COST

 

The costs of receivable financing in Canada vary greatly, and it’s probably our most significant discussion point when we explain to clients the benefits and costs of an A/R finance strategy. 

 

What is important here is that you understand that the cost factor around receivable finance, in fact, is the costs you are bearing now, except that now you're winning, and using this financial solution allows you to win.

 

Business owners and financial managers must understand that  overall financing costs take into account a variety of key factors - Some of those factors include:

 

Overall creditworthiness of your client base

The size and the monthly volume of invoices to clients

In some cases, certain industries are major users of factoring - i.e. trucking/staffing companies, distributors, etc

 

 

Factoring costs are expressed as fees, not interest rates, and some factoring companies charge miscellaneous fees around applications, funds transfers, etc

 

On-balance factoring is more expensive than traditional bank accounts receivable financing but provides access to unlimited cash flow that otherwise might not be available from Canadian banks.  Startups in the Canadian economy can also access this method of financing, and firms can benefit from credit insurance and non-recourse financing programs.

 

The cost of receivable financing has to be benchmarked against two or three critical points you might not be considering. One is that you are already in the banking business, whether you like it or not because you are carrying your customers 30, 60, or 90 days already.  Congratulations on doing a great job in growing your client's cash flow - although that’s probably not your goal, right?

 

  

USE THE POWER OF RECEIVABLES FINANCING TO TAKE ADVANTAGE OF GROWTH FINANCING OPPORTUNITIES  

 

Secondly, you are potentially missing the opportunity to grow your business because of the cash flow constraint that invoice factoring in Canada solves under the challenge of carrying a company's accounts receivable investment.

 

At 7 Park Avenue Financial, we work with our factoring clients to ensure they understand the fees and cost of a/r financing and how they can benefit from this type of financing; focusing on a prompt collection of your invoices always reduces your costs of financing  - and we are not big fans of misc fees, set up costs, and locked-in contracts.

 

Our most recommended and successful a/r finance solution is  CONFIDENTIAL RECEIVABLE FINANCING, which allows you to bill and collect your own invoices and receive all the benefits of traditional, dare we call it  ' old school '  Canadian factoring companies.

 

If you want to learn more about invoice financing, how it works, what it costs, and the best facility out there when it comes to being 'in control,' then seek and speak to a business financing expert today.

 

You'll then see clear answers to those two nagging questions: Do you have enough cash today, and will you be able to address your cash needs a half year from now?

 

  

CONCLUSION

Invoice factoring allows your company to fund outstanding invoices via a third-party financing company in exchange for immediate cash, less a feel  Companies accessing receivable financing post their invoices as collateral for an invoice factoring loan/line of credit facility. Managing working capital and accessing business capital are key benefits of these methods of financing sales.

 

Factoring invoices is a solid solution to the cash flow problems of small and medium-sized businesses -  using financing companies in Canada for working capital increases cash, and as cash is added to the balance sheet, no debt is taken on by your company - you are simply monetizing your 2nd most liquid current asset - accounts receivable ( Cash is your most liquid asset !!  ) - In most cases, receivable financing is complementary with other lenders your firm utilizes for banking, loans, leases, etc.

 

Factoring receivables via a factored invoice program in Canada should not be confusing for your cash flow needs. Speak to 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can assist you with your cash flow needs.

 

 

  

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION  

 

 

How does a business qualify for accounts receivable factoring? 

 

To qualify for accounts receivable factoring, a business must be able to meet specific lending criteria in the invoice discounting/factoring process -

1. Factoring is based on the general creditworthiness of  the customer of the businesses, so clients must generally be stable and have reasonable payment track records

2. Factoring is on a B2B basis and factoring does not apply to individuals - Government Receivables qualify for financing

3. Unpaid Invoices eligible for financing must be less than 90 days old -  invoices older than 90 days are generally deemed uncollectible by the accounts receivable financing company

4. Certain factoring companies may require a minimum of monthly or annual sales to ensure factoring makes sense for the factoring company from a cost and time perspective

5. Receivables  must not be encumbered by liens or other financing arrangements with other bank financing or a business loan from other  business lenders

6. Companies must acknowledge in the factoring agreement with the invoice financing company  the advance rates and fees under invoice financing for small business

 

 

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

How Factoring Finance Works As Your Business Cash Flow Solution / Financial Engineering Via A Canadian Business Funding A/R Strategy

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YOUR COMPANY IS LOOKING FOR FINANCE FACTORING!

  

INVOICE FACTORING &  ONTARIO FACTORING COMPANIES  & FACTORING SERVICES IN CANADA  

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing businesses today

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

CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

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

 

 

 

ACCOUNTS RECEIVABLE FACTORING IN CANADA - YOUR GUIDE TO FACTORING RECEIVABLE FINANCING AND WHAT YOU NEED TO KNOW

 

 

  "Cash is king, but accounts receivable is royalty." - Unknown

 

 

Receivable financing in Canada. Canadian business owners seem to have a major point of confusion around  finance factoring and why this form of ' financial engineering ' differs from bank financing. Let's find out why. Let's dig in!

 

 

WHY CONSIDER  INVOICE FACTORING FINANCING  / INVOICE DISCOUNTING? 

 

Growing your product sales/service and profits is job # 1!  When businesses grow they need cash. Your small business cash inflows are tied up in a valuable asset -  accounts receivable waiting to receive a cash payment from clients,  and suppliers who want to ship your product.

 

UNLOCK THE SECRET TO CASH FLOW TODAY

 

Start accessing these funds through custom-tailored financing solutions from accounts receivable financing companies  for fast funding via 7 Park Avenue Financial so we can help make sure all of your funding needs are met without adversely affecting your company's operations or other business loans that are in place.

 

 

 

A/R FINANCING IS SHORT TERM FUNDING FOR YOUR OPERATING NEEDS 

 

An A/R finance strategy is not tied to long-term financing via debt. That, in general, is a good thing, and it delivers constant recurring cash flow and working capital needs for Canadian businesses as you generate sales and receive cash.

 

  

IT IS CRITICAL TO UNDERSTAND THE DIFFERENCE BETWEEN BANK FINANCING AND COMMERCIAL FACTORING SERVICES  

 

At the core of understanding the A/R financing process via factoring is the need to understand the difference between ' assigning ' and ' selling.' When you finance your A/R through traditional bank loans and financial institutions such as a credit union, you provide them with an assignment of your book debts, i.e. your receivable base.

 

UNDERSTANDING FACTORING RECEIVABLE FINANCING

 

In finance factoring from a third-party financial company, the paperwork around your transaction revolves around the general credit strength of your company's customers ( credit checks are sometimes performed ) and the actual sale of the receivable as you finance them via factoring companies. The total amount advanced against a/r when factors buy your financial rights in an invoice  is always more than a bank typical 75%

 

ADVANTAGES OF A/R FINANCING IN CANADA - WHO USES FACTORING RECEIVABLE FINANCE SOLUTIONS

 

What are some of the key advantages of invoice financing utilizing a commercial third-party finance firm vs. a bank? They might include:

 

Constant availability of a positive cash balance as you generate sales-  The company selling its receivables will occur typically within 24 hours of invoicing get paid! Factoring providers have an easy to obtain and very quick approval process around invoice payment

 

The ability to address seasonal bulges in financing needs via a factoring facility

 

A strong balance sheet relative to the amount of cash you have on hand

 

WHAT IS THE COST OF FINANCE FACTORING

 

When we talk to clients about those advantages, the one negative issue in their mind is the higher cost of this method of financing from a factoring company. Remember, though, this higher cost is what we could term a ' rising and falling ' issue.

 

 

5 KEY FACTORS AROUND RATE AND COSTS IN  A/R FINANCE - MAKING THE RIGHT CHOICE FOR YOUR BUSINESS

 

1. The actual costs of factor finance from many factoring companies depend on several key factors

2. How fast you collect your accounts

3. The discount rate at which your sales are purchased,

4. The advance rate on your cash, which is typically 90% of your  a/r balance. (Banks in Canada only advance or allow you to draw 75%) - that's more cash for your day-to-day needs. The remaining balance is in your reserve account, which is paid back to your firm when your client pays, less the ' factor fee' -i.e. the fee the factor takes - typically in the 1-2% range.

5. The invoice value of your accounts receivable is also a factor in your pricing relative to the average size and amount of your invoices and the given period they are outstanding. Good collections = more cash /lower funding fees!

 

All finance terms can vary depending on the variety of issues we have outlined above.

 

Finally, factoring charges are expressed as a factoring fee and not confused with an interest rate - a point often misunderstood.

 

SHORT TERM ' FACTORING LOANS ' VERSUS TERM LOANS

 

Remember also that we spoke of finance factoring as being a short-term day-to-day cash flow solution. Yes, the business owner/manager could, in fact, implement a ' permanent working capital solution, 'which might be a less expensive form of financing, but that typically brings debt to a balance sheet.

But when small businesses weigh the costs of borrowing a large sum for a term of typically 5 years at a fixed rate, you will see that the actual financing costs of a permanent bank term loan are, in fact, significant.

 

Using that example, the business owner or financial manager may well find that receivable financing is, in fact, a better strategy!

 

So it is very important to analyze the actual costs and benefits around either pledging (bank) or to factor (commercial finance firm) your accounts receivable base.

 

Your company also has the option of choosing recourse factoring or non-recourse factoring financing, allowing you, in the case of the latter, to transfer bad debt credit risk to the factoring company if there is a non-payment by your client. Invoice factoring for startups is always available as well.

 

CHECK OUT CONFIDENTIAL A/R FINANCING!  THE BEST FACTORING SOLUTION?

 

Most factoring companies offer only traditional ' notification ' type factor solutions. If you use a confidential account receivable finance solution, you can also avoid any notification to your clients traditionally required by old-school finance factors who require third parties to be notified. Collecting payments remains in your control.

 

At 7 Park Avenue Financial, that is our recommended solution for a/r financing for outstanding invoices you wish to finance for short-term cash needs, solid advance rates, and no long-term contract by the way. That’s a key benefit! Talk to our team about business factoring and financing solutions. Get quick access to cash to keep your business moving forward.

 

DON'T GET CONFUSED BY THE TECHNICAL TERMS

 

At 7 Park Avenue Financial we find our competitors to do a good job of confusing clients with some of the technical terms in receivable finance - Here are some straightforward explanations of some of those terms

 

Lockbox - In certain forms  of receivable finance payments for the company's accounts receivable  are made into a secured account established via the financing company

Credit Insurance -  businesses have the option of taking credit insurance that protects them against losses to due non-payment and bad debt

Factoring Line - A factoring line is similar to a business line of credit and identifies the total amount the factoring company will advance on the business's accounts receivables

Concentration - Some factoring companies are concerned about the amount of financing made available to one single customer when in some instances a large percentage of the company's sales are to one or just a few clients

Factoring Agreement- this is a financing agreement that spells out the terms and conditions around the receivable finance facility - The agreement will identify advance rates, fees, etc,

 

"In a tight economy, factoring can provide a quick source of cash flow to help companies stay afloat." - Tony Robbins

 

CONCLUSION - MAXIMIZE YOUR BUSINESS POTENTIAL BY FACTORING RECEIVABLE FINANCING

 

Seek out and speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing engineering around cash flow and working capital and asset based loan solutions.

 

 

 

FAQ: FREQUENTLY ASKED QUESTIONS 

 

What is factoring finance? 

Factoring finance for small businesses is a  type of business financing often used by small and medium-sized businesses to meet immediate cash flow needs.  Using these financing methods a  company sells its invoices (e.g., unpaid customer bills) at a discount for an advance on future payments from those customers without waiting until they are paid in full or have been collected themselves directly -

 

The actual credit history of your firm is less important than the quality of your client base if your customer pays reasonably well to terms. Invoice financing for growth and expansion is available to any Canadian business selling on trade credit terms to other businesses. Trucking companies and staffing agencies are large users of receivable finance.

The transaction makes it easier for sellers to access funds now rather than wait months before collecting their receivables through regular channels.

 

 What is invoice factoring/debt factoring? 

 

Factoring is an alternative form of financing and is a financial transaction ideally suited to small and medium-sized businesses, especially enterprises that do not have a long and established banking record with a major lender.

Factoring is an innovative way for your business to access funds tied up in accounts receivable through cash flowing your sales immediately. You generate revenues without any obligation to do so if funds are not needed for a specific invoice

 

Why choose  7 Park Avenue Financial for your factoring needs?

 

7 Park Avenue Financial offers customized, flexible financing options and is an expert in working capital solutions. We will ensure you have a solid understanding of all available funding for your business and growth strategy priorities without hidden fees, etc. It's a true form of asset-based lending that strengthens your balance sheet, and your business incurs no debt.

Talk to the 7 Park Avenue Financial team about what your cash flow needs are directly related to day-to-day changes in cash needs and when cash reserves are low in your business cycle as specific industries have different funding needs. Find out how a factor provides the cash you need today

 

Who are the parties directly involved in a factoring transaction?

The three parties in a transaction involving invoice financing and factoring services via factor loans are the company selling its accounts receivables, the factor that purchases those receivables and finally, your customer. 

 

 What are the benefits of factoring receivable financing? 

 

The benefits of factoring receivables include the ability of a business to improve cash flow and access funding immediately upon sales made to clients - This financing process improves cash flow and makes cash management more predictable. Companies using traditional notification factoring can utilize the credit risk services of a factoring company.

When a business uses receivable finance solutions such as debt factoring no debt comes on the balance sheet - the business is simply monetizing assets. Businesses that are unable to access traditional financing from banks and other financial institutions still qualify for factoring solutions. Using a/r finance solutions generates cash available to reinvest in the business and take advantage of prompt payment discounts from suppliers

 

 

 What is the difference between recourse and non-recourse factoring? 

 

The difference in recourse and non-recourse factoring facilities revolves around the amount of risk a company wishes to take in accounts receivable as it relates to bad debt and non-payment. Companies using recourse fatoring assume full credit risk for products and services they sell t clients - Non-recoures finance facilities transfer bad debt and collection non-pyament risk to the factoring company - This additional risk is priced into the factoring fee and is more expensive given the higher risk assumed by the finance company. 

 

Businesses can also choose to offset credit risk by insuring accounts receivable via trade credit insurance.

  

 What are the qualifications for factoring in receivable financing?  

 

The qualification for a business to be successful in obtaining a factoring facility revolve around key actors such as the general overall creditworthiness of the client's accounts receivable. The age of invoices is also important, as invoices over 90 days old are not generally considered financeable . Factoring companies also look at overall facility size, invoice volumes and what industry the company is in.

Many firms such as freight companies and staffing and placement agencies are good client prospects for a factoring company, but any company selling on a b2b basis can access factoring solutions, While the client a/r quality for unpaid invoices is the main focus a company must also be generally financially stable and not in a downward financial spiral, Companies should be able to demonstrate they can provide proper financial statements and a generally reasonable debt to equity ration, and accounts receivable agings with accurate invoice documentation for goods and services delivered.

 

 What is the cost of factoring in receivable finance?  

The cost of factoring in receivable finance for financing fees is determined by the accounts receivable financing business/company and is based on a number of factors including the overall size of average invoices and the creditworthiness within the accounts receivables of the business as it relates to how fast customers pay. Companies choosing non-recourse solutions that transfer bad debt risk to the finance company will pay more for that service compared to a traditional business loan bank arrangement, - Miscellaneous fees also must be taken into consideration and include a setup fee, ppsa search fee, etc,  - A/R financing via factoring and accounts receivable firms is a more expensive solution than bank financing and typical rates from an accounts receivable financing company in Canada range from 8% per annum to .75% per month.
 

 

Selective receivables financing is also available for companies wishing to fund a specific or small amount of invoices - this is also known as ' spot factoring ' in the context of receivables financing.

 

 

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

How To Access Business Factoring For Cash Flow Success Via Receivable Financing

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Receivable financing solutions in Canada, often called  ' business factoring ',  offer a true ' second chance ' when it comes to the business owner/financial mgr’s ability to turn adversity into opportunity. This business finance solution goes by a few names: invoice factoring, invoice discounting, receivable factoring, etc.  There are different forms of factoring, so we forgive new clients at 7 Park Avenue Financial for sometimes getting overwhelmed with the terms!


The ability of your company to turn cash flow for business challenges into a major win in working capital and cash flow might just come from one of Canada's newer forms of business financing, called ' business factoring '. Spoiler alert -  Accounts Receivable factoring it's not that new!

Getting the order, and then getting paid. The old  ' cliché' of  ' the order is not complete until it's paid for '... as trite as that sounds, seems to hold true even today, especially for new, small and medium size firms.

Many clients we meet with are in the enviable position of getting larger orders and contracts than they might have imagined based on their innovative products and services. But with that success, as we noted, comes the challenges of cash flow financing.

During the past few years with all the economic turmoil it seems Canadian business financing options seem either limited or have disappeared - that's certainly how many clients feel. The impact of accounts receivable growth is a huge challenge, not to mention inventory and Purchase Order / Contract funding needs.

 Many companies find that traditional bank financing is restrictive to a point that Canadian banks can't meet their business credit needs. The concept of ' seeling a/r ' to a third party and generating immediate cash as you grow sales has become popular with thousands of companies in Canada.   This differs from assigning accounts receivable to a bank.

Note that almost all of the commercial factoring in Canada is done by non bank commercial lenders. Canadian banks will often refer customers seeing a/r financing to a specialty lender or an experienced advisor familiar with factoring.

Advantages of Factoring Vs. Other Types Of Financing 

There are of course some significant differences between a/r finance and the concept of a ' commercial loan '.  Primary is the fact that this type of business credit is not a ' loan' per se - your company does not take on debt on your balance sheet.  The amount of factoring financing is simply directly related to the amount of your A/R. Canadian borrowers will be happy to know that there is virtually no upper limit to the amount of factoring finance if your firm is growing and has good receivables, domestically or internationally. 

Borrowers know only too well that bank financing is tied to credit limits, annual reviews, and a variety of covenants, personal guarantee focus, and the potential requirement of outside collateral. Many Canadian firms feel the pressure to increase outside equity, and a good receivable financing facility will allow you to potentially avoid that need.

What Type Of Company Utilizes  Accounts Receivable Financing?

Almost every industry in Canada uses Factor financing.  Industries in the oil and gas sector, staff placement, manufacturing, distribution, wholesaling, trucking, technology and business services all are major clients of the receivable financing industry.

Although some businesses that are financially challenged in some manner, the proverbial ' bad credit ' industry statistics show that the factoring industry is experienced strong growth and popularity.


Business cash flow, a la ' cash is king ' has never been more relevant for the economy. Receivable financing allows firms to not be victimized by clients pay 30, 60 or dare we say it 90 days beyond stated payment terms. It's the SME sector that feels that pain the most, as larger corporations have access to more liquidity.

Business factoring can be called a subset of asset based financing - the monetizing of assets without taking on commercial business loans and term debt. The speed at which factoring facilities can be arranged is also an appeal to Canadian business owners and their financial managers. The concept of no installment payments has broad appeal to factoring clients.

Key Points in Determining the Financing Value Of Your Accounts Receivable 

Numerous factors are taken into account when commercial lenders are setting up your accounts receivable financing facility. It's all about the true value and quality of your a/r. When it comes to your accounts receivable ageing it's no secret newer invoices have greater value - numerous industry statistics validate that point.  Who your client is also is important. An extreme example has been given that a receivable owing to your firm from Google has more value than one owing from a local DVD rental store!

As a commercial borrower in a factoring facility the more info you have on your a/r base will result in a more cost effective facility.

What Do Factoring Companies In Canada Require To Set Up Your Invoice Purchasing Facility     

As a general rule borrowers will be pleased to know that the entire application process in setting up your facility is very simple and straight forward. Key information required includes :

1.     Standard credit application 
2.     Agings for a/r and a/p
3.     Confirmation of legal company name - ie articles of incorporation
4.     Sample invoice 

New clients of 7 Park Avenue Financial always want to understand how the advances and cost work when it comes to receivable funding. As a general rule your sales invoices are funding at 90% of their face value.  Your firm receives the balance of the invoice, ie the remaining 10%, less financing costs when your client pays the invoice. Invoice purchasing is now completed!

It should be noted that there is no requirement to finance all your a/r base, although many of our clients choose that route, allowing the facility to mirror a true bank line of credit.

So we have waxed eloquent on the problem- That's easy. You'd prefer a solution though!   Receivable financing, also known as factoring addresses the issues of your customers paying you in 30.60, or dare we say it, 90 days. You can carry those receivables and continue to make a high investment in current assets, or you can turn your sales into immediate cash.

Let's cover off some other basics around how this innovative method of business financing works.  When you sold the product or service you hopefully had enough gross margins in your cost of sales to make the sale profitable. If you are able to sustain another 1- 2% of gross margin erosion you can use receivable financing to turn sales into same day cash, which is what this financing is about. That is known as the factoring discount, which is a cost, and not an interest rate as some people believe.

So how does this all work? We're glad you asked! Let's reveal and recap in a manner that's understandable.  Your purchase orders or contracts must be ' clean ' from a viewpoint of being able to demonstrate you can recognize revenue on your shipment.  We should interject at this point that the banks will finance your receivables also, but that comes with much stricter criteria and limits on the amount you can finance.

That is why factoring has risen in popularity, it provides unlimited... yes... unlimited same day cash flow for your sales. Your challenge is to work with a trusted, experienced and credible business financing advisor who can steer you to the right partner with the type of facility that works for you.


Although traditional factoring along the lines of the U.S. model requires your customer to be notified we are in fact a fan of the type of facility that allows you to bill and collect your own receivables, for all the obvious reasons.  At 7 Park Avenue Financial we've called that Confidential Receivable Financing.

It's important for clients to understand at its most basic how factoring works. You are advanced, on the same day as you invoice approx 90% of funds for your invoice. The remaining 10% is a holdback which creates a reserve and also covers the financing charges. When your customer pays you or the factor you receive the remaining 10% of your invoice amount, less the financing charge.

In Canada the cost of factoring from accounts receivable factors ranges from 1-2% a month.  The cost of factoring revolves around some key points. They include:

Industry specific issues relating to your company  - some industries are occasionally ' out of favour"

Size of your Receivable base - a very general rule is that many facilities start in the 250k range, there is no upper limit, but any size of facility small or large can ultimately be financed with the expertise of a business financing consultant 

General level of creditworthiness of your client base as it relates to any major concentrations or invoice size, geographical location, etc

DSO! Business people need to be familiar with the concept of DSO -  ' days sales outstanding ' It is a key measure of any successful company. The largest and most successful corporations in the world have this a key measure of financial and profit performance. DSO is measured in days, lower is better and the turnover of your a/r can dramatically affect the cost of factoring.



Note that it is also possible to transfer all of the risk of bad debt to your funder, which is known as non-recourse factoring - these facilities naturally cost a bit more and are sometimes abetted by credit insurance. Factoring companies in Canada and advisors can provide your firm with more info on this additional investment in credit risk.



It turns adversity into opportunity because you grow sales with larger gross and net margins, and if you utilize the financing properly you are actually in a position to reduce much, in some cases all of your financing costs by taking discounts with your own suppliers or buying smarter and in larger quantities. Reversing the cash flow for a business problem - That’s a win win in the language of business.


In summary, it is important to realize how factoring works and why it can be valuable to your business, in good times and in less than good times! Your firm accelerates cash flow and literally unties the capital you have invested in sales to clients.


If you are looking to factor receivables seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business factoring and A/R financing 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



















 

What Type Of Receivable Financing & Working Capital Solution Works Best For Your Firm?

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Why Take Chances With The Wrong Type Of Cash Flow Financing ?

Cash flow enabling is of course the top priority for every business owner and his or her financial manager. More often than not firms that search for asset based loans such as factoring or invoice financing are looking for a short or intermediate solution - the hard reality being that traditional financing from Canadian banks may not be available.

In some cases though asset based financing solutions can work in the long term also - but newer businesses with less of a track record, or high growth / fast growth companies need access to working capital..now . In some cases investments might be being made in other aspects of the business, perhaps r &d, or acquiring capital assets . ( Note - SR&ED Financing and Equipment Leasing also can alleviate spend in these two areas )

But inevitably it will come back to short term daily financing needs requiring a working capital solution . Companies with proven cash flows and historical financial success can of course access term loans in the working capital / mezzanine finance area.

When you are examining asset based financing, and a/r factoring specifically . These solutions allow business owners to raise cash quickly to capitalize on short term opportunities, for example new clients, large contracts, foreign sales , etc. It's no secret that traditional lending sources such as Canadian banks take a significant amount of time to complete .

Asset based financing such as factoring always costs more than the low bank interest rates - but the good news is rates in the asset finance area are the lowest they have ever been, and all indications point to more of the same! Also in the experience of our firm, 7 Park Avenue Financial the competition to secure your financing business is the strongest it has ever been.

Rates in the asset financing area are dependent on a couple of obvious factors, ie transaction size , quality of assets such as receivables or inventory, and other collateral in the firm such as equipment, etc. In some cases an appraisal, altho it might come with a modest cost can enhance your firms overall ability to get financed.

Having up to date an quality financials also is also key to successful and abundant asset financing . Your firms ability to bill, collect might seem simple and basic, but proof of adequate accounting and controls is key to loan approval .

Bottom line ? Your firm needs cash flow to run and grow the business. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success who can assist you with your business loan and cash flow 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


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

Receivable Financing Is The Equivalent In Going From Poor To Rich In Business Cash Flow

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Information on the Best Type of Receivable Financing In Canada

Can working capital factoring solutions be our business version of ' poor ' to ' rich '? It's an interesting analogy if only for the fact that the receivable factor firm solution, properly done creates capital you never had. Let's try and 'connect the dots' in those solutions so the business owner / financial manager sees a clear path to business cash flow freedom. Let's dig in.

There are of course options in working capital finance - they include taking on debt under a working capital term loan or mezzanine unsecured cash flow loan; or the traditional route of Canadian chartered bank financing - theoretically available to all but unfortunately not always to those that need it most.

So why does financing your sales via A/R factor financing a logical step to business capital freedom? For a starter that low cost bank line of credit may not be available to your firm for many different reasons. If for any number of reasons your firm does not qualify for bank credit you're back to square one... our version of business homeless!

Many firms have the most incredible problem imaginable - they are too successful and growing too quickly. That ' rush ' from getting a large new contract or purchase order or seeing sudden surges in sales brings working capital nightmares, as more and more funds are tied up in materials, inventory, and finally accounts receivable

In certain situations your working capital is required for expansion needed for lease/loan payments on new assets, or marketing and headcount growth. Many clients we meet do great business only at certain times of the year - that seasonality causes cash flow needs to rise and fall dramatically at certain times, sometimes unexpected.

One final situation is the whole issue of payment terms and collections. Even large corporations are often typically the ones that pay the slowest, and then there’s... the government!

While certain situations immediately disqualify you for bank financing (negative net worth, fluctuating profits and cash flows, huge jumps in sales revenues) it’s these exact situations which make your firm a solid choice to be financed by a receivable factor.

By the way, in many cases a working capital factoring solution can be a component of a ' total ' asset based lending deal, whereby your A/R, inventory and un-liened equipment are combined into on solid business line of credit. It's typically called an ' ABL ' line by the pros.

Is there one type of receivable factor solution that works best? In our opinion it's non -notification CONFIDENTIAL RECEIVABLE FINANCING , allowing you to bill and collect your own receivables, draw cash against sales when you need it, and only pay for what you are using .

If you want some help in connecting the dots in A/R financing solutions seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with in that ' homeless' to ' rich' transition in business capital!






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


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

Cash Flow Financing For Working Capital Solutions. It’s Like A Knife Fight In A Phone Booth Out There!

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INFORMATION ON SOLUTIONS TO BUSINESS CASH FLOW FINANCING CHALLENGES

Cash flow financing challenges and working capital solutions for Canadian business. Keeping your firm solvent / liquid can almost seem like a crisis sometime. We were talking to two of our favorite business marketing guru's the other day and one of them made the comment ' it's like a knife fight in a phone booth ..!’. Wow, we thought, could there be any more a propos comment than that when it comes to business competition and business survival

Naturally it's important to be in a position to ensure you understand the nature of those challenges, why they occur, how to measure or track them, and finally ... put financing in place that ensures business liquidity.

There is a lot of statistics out there that say that a majority of business in the SME sector fail in their first 5 years in business. They simply didn’t have the access to capital they needed to survive. Ever since the 2008 recession/financial debacle cash flow and working capital have become ' job 1' for Canadian business owners and financial managers.

Having observed Canadian business for over 40 years now the one thing that never surprises us is the fact that when a business is enjoying strong success there often exists a general sense of complacency exists within the company. Cash flow seems kind of ok... and if it isn't we've got the bank to support us, right ?The bottom line on that one - fast growth and sales can hide a lot of problems .. for awhile .

The need for working capital for your company arises out of some basic needs - pay suppliers, finance, growth, ensure banks and other creditors are happy .

One term used in business is ' technically solvent ' - the basics on that one are that you have more assets than debts. That's the key to our message today - simply that that is just a calculation, and calculations don't pay bills.

Your ability to finance and monetize those assets is what liquidity is all about. Oh and by the way, if your balance sheet shows more liabilities than assets you're technically bankrupt!

As we have said, you need financing solutions to properly fund those assets, and that growth over time. It also helps that you are focusing on asset turnover - collecting receivables on time, turning inventory within your industry norms, and not mismatching short term cash outflows with long term obligations.

Canadian businesses tend to, on balance, not have a lot of cash on the balance sheet. That's ok if they have the credit facilities to draw on.

How can the business owner or finance manager monitor just how good, or bad the overall situation is? Some very simple calculations such as your days sales outstanding, inventory turns, and debt to equity calculations can provide tremendous insights. Monitoring these over time can provide very relevant information on an approaching crisis.

When your bank no longer seems to support you in a manner that you require we would offer up that they have also been benchmarking those same calculations on your financials. By then it is often too late to mend and repair that bank relationship.

Managing your assets, measuring that performance, and using debt in manner that suits for firm is key for cash flow financing survival.

In Canada the re are a number of working capital solutions for that ' knife fight in the phone booth ' that proverbial battle for cash flow survival.

Those tools include bank facilities for those that qualify.

Other solutions include receivable financing, inventory financing, leasing assets or sale leaseback scenarios, or a true asset based line of credit that margins A/R, inventory and equipment all under on revolving facility. Two other relatively unheard of solutions are monetizing your tax credits and supply chain financing.

Why should you consider these working capital solutions?
Several reasons, including finally have a handle on accurate and timely information. Also, you prefer to manage growth, not fail from it. Managing day to day cash flow crisis is not … fun!

Speak to a trusted, credible and experienced Canadian business financing advisor on how your firm can successfully win the cash flow challenges you face everyday.






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


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