High Speed A/R Finance 101!
Are some types of accounts receivable funding and factoring financing better than others? We're often accused of ' pumping’, aka ' promoting' this type of Canadian business financing for firms of all types in Canada. Why is that?
Is receivable financing, on its own or blended in with another financing a ' holy grail ' of business finance? Not really, of course, but it’s an effective solution that's often very misunderstood when it comes to the mechanics of it and the cost. Let's explain.
When times get tough or challenging for small and medium sized firms in Canada business owners and their financial managers can be forgiven for doing everything up to an including panicking . A variety of situations can exist, sales slow down, or the opposite... major opportunities arise that cannot be taken advantage of. The recession that we supposedly are out of now certainly leveled the playing firm for a lot of firms, who saw their competitors in some cases even, disappear.
So, when you consider accounts receivable funding and financing as one of your alternatives what are in fact some of the considerations? In the case of A/R finance it’s a simple one, freeing up assets for working capital and cash flow.
It actually is very possible also for you to consider acquiring a competitor or synergistic opportunity via factoring, as the target firms receivables, and yours could in fact finance the acquisition. Naturally other assets and factors come into play, but it’s certainly possible.
Accounts receivable funding should be viewed as a source of funding that you have already been approved for - especially if you're having some of those challenges we have talked about.
Again, at the risk of ' pumping ‘ / promoting factoring as a business line of credit we maintain its one of the most flexible around . First of all, once your facility is set up you don't have to use it all the time, it’s up to you as to when you draw down and pay for those funds. Think of it as using it like a business credit card, using it when you need funds. You're simply making a borrowing decision that minimizes finance expense.
The amount of funding available is directly related to your sales and receivables. Those amounts of course change everyday as you sell and collect receivables.
As we said, your A/R finance option can be stand alone, or you can combine it with inventory and equipment assets that are all combined into one borrowing facility.
Our recommended solution is a confidential invoice finance solution, one that allows you to go against the grain of other offerings, putting you in a position to bill and collect your own A/R with notice to any clients, suppliers, etc. It's a solid solution when you don't have access to more traditional financing.
When it comes to costs many business owners will find that when they understand the true cost, i.e. the cost of carrying a/r already, as well as opportunity cost... well it simply might make tremendous sense to consider this unrestrictive financing when compared to other... or no.. Solutions.
Speak to a trusted, credible and experienced Canadian business financing advisor for solid advice on this Canadian finance solution.
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/types_of_accounts_receivable_funding_factoring.html
