Accounts Receivable Factoring Financing Costs In Canada

Don’t Let Factoring / AR Finance Become A True Life Horror Story



OVERVIEW – Information on accounts receivable factoring and financing costs in Canada . What can the business owner do to understand, manage and control finance costs to increase profits and cash flow .



Accounts receivable factoring financing costs in Canada. For some business owners and financial managers in the Canadian marketplace this issue either was or has the potential to become a true life horror story. Does it have to be... absolutely not! Let's explain.

To put it another way, wasn't it the Beatles who sang ' misunderstandings all you see ...' in their Strawberry Fields tune. That's probably a better assessment of the conundrum some face when addressing the costs, structure and mechanics of factoring in Canada.

So what we are searching for is actually the answer to the question: ' What is in fact the true cost of factoring? And how do we measure calculate and address those costs?

For the majority of businesses in Canada the actual discount rate (clients confuse that with an interest rate) is in the 1.5 - 2% range. That is based on a turnover of accounts receivable in a 30 day period, which in many cases is unrealistic in today’s business to business environment. This is actually one of the key points in financing receivables in Canada.

The majority, (not all) factor finance firms in Canada, by their nature in effect become your collection dept. when they insert themselves into your business process. If you were to retain control over your own accounts and collections (Yes, Virginia, you can!) and focused aggressively on collecting your accounts you in effect have negotiated one of the most aggressive A/R pricings in Canada.

Furthermore when you factor in all the costs of a bank line of credit including stand by fees, unused facility fees, misc bank charges etc you will find that your total cost to finance in a bank facility is probably quite a bit higher than you may have thought. Also, bank lines are under specified credit limits, and the one of many key benefits of factoring in Canada is that your facility grows in lock step as your company grows.

How do you achieve then the ability to collect your own receivables and finance only the A/R that you choose to finance, when you need to? The answer is a Confidential Invoice Finance facility - one that’s priced aggressively and allowing you the business owner/manager to be MASTER OF YOUR DOMAIN!

So if there is one key point today it's simply that your ability to turnover assets such as receivables effectively reduces your overall financing costs. And the funds you generate from accounts receivable factoring allow you to ship more, sell more, and grow more .. including adding more profits and equity to your business.

Looking for a quick snapshot of all issues affect A/R finance costs in Canada. Quite simply they include:

- The actual discount rate you negotiate

- The holdback on each invoice, which typically should be in the 10% range

- Misc audit, disbursement and wire fees

And, most importantly, a breakage fee should you choose to refinance with another party or financial institutions such as a bank.

Does the industry in Canada do a great job of explaining pricing for this key area of business financing. On balance we would say ' no ' , so seek out and speak to a trusted, credible and experienced Canadian Business Financing advisor who can assist you with your A/R factor financing needs at costs and a structure that makes sense - for you !

P.S. Don’t forget also that funds generated from A/R finance allow you to stay cash flow positive , take discounts with current suppliers ( reduces your overall cost of financing !) , and allows you to take on business and contracts that otherwise might have to be forsaken .





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 10 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 :


ACCOUNTS RECEIVABLE FACTORING FINANCING COSTS





7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com















Stan Prokop

AR Business Funding In Canada . Going Insane Trying To Understand Accounts Receivable Financing ?

Avoiding The Wrong Type Of A/R Financing ? Here’s How!


OVERVIEW – Information on accounts receivable ( ar ) business funding in Canada . Costs and benefits explained





Canadian business owners and financial managers hear a lot about the business funding known as accounts receivable A/R financing. But occasionally when they try and understand how this financing works, what it costs, and what the benefits are they sometimes feel like they are going a bit ... crazy !

Is there a way to uncomplicate what frankly is a pretty simple method of funding your business? We think there is... all you need is some basic clarity!

In fact one way to look at how this whole solution works is to sometimes put yourself into the position of the finance firm offering you this solution. At the essence of your transaction is the very simply concept of selling your sales, aka your ' a/r ' as you generate revenue to monetize that asset into immediate cash flow. Simple as that.

So where do business owners and managers feel themselves going a bit ' crazy ' in trying to understand the process and interpret how this affects, and benefits their firm.

In talking to clients here are the basic issues that typically need some good old fashioned clarity. They include:

Understanding who in fact is using AR Finance and how long it’s been around

What is the pricing and how does that affect profits?


What facility size makes the most sense?

Are there any risks involved?

Are some firms not able to use this financing?

Who should I deal with to ensure this type of funding makes sense to my firm?


Most of our clients probably don't want to be guinea pigs when it comes to finding out they are the first to try something - with all the risks that come with that. So the good news is that Accounts receivable finance has been around for ... hundreds of years! Starting in Europe and moving to North America. Many simply call the industry ' factoring ' and in Latin that word means ' business doer ‘. Many early settlers to North America actually had their trips and early businesses financed by these ' factors '. So... bottom line, don't feel like you're being ' leading edge ' when it comes to new methods of financing your business - everyones doing it!

You only need to understand 3 simple concepts when it comes to cost of AR finance - they are:

The discount percentage you are being offered
The amount that is advanced against your receivables (typically 90%)
The time it takes your client to pay


Once you understand those basics you're close to being an expert in receivable business funding.

The reality is that even one small sale could in fact be financed using this method, on a one time basis. But the closer reality is that typical facilities tend to be in the 100k per month range or higher. And the upper limit? Frankly Scarlett - there isn't one!

We can make the statement that no additional risks in using this method of financing exist - any risk you currently take in extending credit to clients and monitoring their payments essentially stays the same. Customers that don't in fact like ' risk ' can opt to insure receivables.

Any business that generates sales and sells on credit can in fact utilize factoring. The type of facility that we recommend most to clients is a confidential facility, which allows them to bill and collect their own sales - retaining full control and client contact.

Still going crazy trying to understand factoring in Canada. Hopefully not! Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can clear the air. Quickly!

7 PARK AVENUE FINANCIAL
CANADIAN A/R FINANCING EXPERTISE


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/business_funding_accounts_receivable_ar_finance.html


7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com

New Ways To Achieve Accounts Receivable And Inventory Financing - The W/C Finance Loan Facility

Successful business owners and financial managers are always looking for a new... no wait, ' better ' way business financing success. No where that is more obvious than in the quest for accounts receivable and inventory financing, the actual monetization, if you will, of your balance sheet current asset accounts.

So we have dubbed the solution as W/C solution if you will . What's W/C - Why working capital of course, and a variety of ' flavours of this type of financing loan facility are available to your company. It's just that they are not well known - Until now!

Is it unique, or novel to be looking for way to raise cash flow and working capital out of your receivable and inventory investments? Absolutely not, its just that its become a lot more difficult in the past several years - and we're talking from the start up right up to major corporations - No one has been exempt from the pain challenge of raising working capital, that works!

So what sort of ' cash flow products ' if you will, are available? Many clients are skeptical that it is difficult, or impossible to generate a stand along inventory finance facility. There is some truth in their belief, in that the collateralization of your inventory is in many cases tied to the overall collateral that your company offers up, usually in the form of a blanket General Security Agreement given to your lender, in some cases Canadian chartered banks.

However the hard reality, even harsher since the 2008-2009 recession, is that inventory financing in Canada has been difficult to achieve.

So let’s cover off your options in this regard, one of them might well be the option you are looking for. At the top of our order is of course straightforward bank financing that is margined against your collateral, typically the A/R and inventory we mentioned. That’s probably optimal, but the requirements that come with that facility are significant, they are good financials, owner guarantees, strong operating performance... well you know the drill.

However, did you know that there are independent finance firms that offer a working capital facility along the same lines as that chartered banking arrangement we mentioned. The most valuable facility is the asset based loan, a financing arrangement that in many ways is similar to a bank deal, but significantly margins your inventory financing needs simply because real value and appraisals are made on your inventory. There are numerous situations where clients have been able to double, and even triple their overall working capital loan facility with this type of transaction.

A number of what we call ' second tier ' firms step in for many small and medium size transactions, for facilities that generally range from 250k - to 3 Million dollars. These facilities are more expensive, but again give you very solid borrowing power.

And back to our main theme, is it possible to achieve a pure inventory and contract financing in Canada. This solution is more expensive, but non bank in nature, and provides a method in which you suppliers are paid directly , with your rights in inventory and contracts being assigned to the lender an independent finance firm, somewhat boutique in nature . You are simply leverage the actual inventory prior to it being sold and generated into a true receivable, which of course itself can then be monetized.

So, whats our take away here? Pretty basic, yet giving you hope. Various forms of direct inventory, non bank financing, and contract and purchase order financing do exist in Canada. They are becoming more mainstream everyday. Intrigued? Got questions? Have a unique situation? Speak to a trusted, credible and experienced Canadian business financing advisor real world solutions to an inventory financing loan facility in Canada.


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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Confidential Cash Flow Factoring - Turn Accounts Receivable Into Your Best AR Finance Strategy

We are going to demonstrate how a little known, and in our opinion almost a secret strategy can called confidential cash flow factoring can turn your accounts receivable into a virtual cash flow machine, turning past ar finance obstacles into cash flow solutions!

Search engine analysis will show you that thousands of Canadian businesses search everyday for what they hopefully believe will be valuable information around the most popular method of business financing today. Those businesses, of all types and sizes by the way ( even the largest corporations in Canada ) want to know why cash flow factoring offers unlimited unlocking of cash flow based on your sales and receivables .

Initial explanations and overviews to clients sometimes become bogged down in key issues such as the cost of this method of ar finance, and, equally important, is the unwillingness of some clients to accept how invoice discounting (that’s another name for this type of financing) works.

Canadian business owners and financial managers want to like a good thing, at the same time they want to know how it works and how they avoid any pitfalls. Lets discuss the ' how it works ' portion first and then share with you the method we believe eliminates the major pitfall perceptions viewed by many firms considering this type of financing.

We'll focus on small and mediums sized business - the larger corporations have access to all sorts of financing and external finance strategies - while the small and medium sized businesses in Canada tend to rely on their own cash flow to fund their ongoing growth and working capital. In fact many firms realize they have potential to grow sales and profits, but cant because of that lack of working capital.

Back to the 'how it works ‘! Cash flow factoring of accounts receivable is the ongoing sale, in whole or in part of your sales invoices as you generate them and deliver products and services to your customer. The invoices are purchased at 1- 3% discount from yourself, and you receive cash, 99% of the time the same day, for those sales. So, in effect all your sales now fuel that cash flow machine you have turned your company into.

So far, so good, right? Where complications arise, especially in Canada, is the fact that this type of financing requires your client to be notified of the process, directly, or indirectly, and payments are required to be forwarded to your factoring finance firm. Canadian business, in our eyes, has a reluctance to involve their customers in their internal financing policies, and challenges. As a result, many firms are skeptical of entering into ar finance of this manner.

Is there a solution? We told you there was - it’s a breakthrough called confidential invoice discounting. This type of financing comes at the same cost, allows you to bill and collect your own receivables, and gains all the benefits of that cash flow factoring machine we turned your company into.

Speak to a trusted, credible, and experienced Canadian business financing advisor who can put you into a proper ar finance facility, allowing you to reap the benefits of cash flow invoice financing, while at the same time allowing competitors, customers , and vendors to remain exactly where you want them to be, outside your financing strategies and challenges ! Let's let your competitors try and figure our how you're doing so well in both growth and profits.

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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Worried About The Cost Of Business Accounts Receivable Factoring ? Problem Solved !

While many Canadian business owners and financial managers are accepting the significant benefits that come from business accounts receivable factoring what they continue to struggle with is the cost of this type of financing. Let's examine the proper method of looking at this cost of financing and ways to minimize the cost with the choice of an effective partner.

As a basic primer invoice financing is essentially the short term sale of your receivables, or ' AR’ that generates immediate cash flow and working capital for your company. Sounds good so far right? In certain cases it even eliminates all your credit and collections costs, although we must be frank and say that type of financing (turning over your credit decisions to another firm) isn’t our favorite, or recommended strategy. Clearly being able to obtain the benefits of this type of financing and being in total control of your own invoicing and collecting is the optimal solution.

The benefits of accounts receivable financing all come back to cash flow - business owners quickly realize that sales don’t equate to cash, and that can become an ongoing problem . Many entrepreneurs we meet advise they struggle with cash and working capital issues on a daily ( if not hourly !) basis, And given that they cannot obtain all, or the proper financing from their banks it seems logical that business accounts receivable financing is truly the only, and perhaps best, solution.

So, back to our main topic, which is understanding the cost of this type of financing! Canadian business needs to realize that if the lack of financing is stopping you from growing your business then the cost of new financing should probably not be your biggest worry.

Let's look at a real world type example. Take a look at your balance sheet. You probably have limited or minimal cash on hand and significant investment in receivables.

Let's use a firm with 1 million dollars in sales as an example. Lets assume you have some decent, or even great gross margins, or ' cost of sales '. Your overhead costs are fixed, and in control, and you are a profitable company. Since you haven’t any access to bank or traditional financing your net income is positive, but not growing.

If you can grow, or perhaps even double, your business by solving your cash flow problem then the business accounts receivable factoring cost is only associated with your additional growth that comes from accounts receivable financing .

Again, back to our example - your sales are 1 million, you have no financing, and factoring or invoice discounting will allow you to grow your sales to 2 million dollars. The cost of financing would probably be in the 40,000 to 50,000 dollar range - however, your overheads, or your fixed costs have stayed the same. Your profits, minus the factor cost can probably easily double.

Our example above focuses on the concept of opportunity cost, i.e. what you can do with capital by achieving more turnover and profits.

The actual financing cost of business accounts receivable factoring in Canada vary - they typically are between 1- 3% a month. 2% tends to be the norm. Better pricing can be achieved based on the size of your facility, the relative quality of your receivables, as well as the type of firm you deal with when you enter into a receivables financing arrangement. And don’t forget that confidential account receivable finance is also available in many cases - allowing you to totally control your customer base and cash flows.

Speak to a trusted, credible and experienced Canadian business financing advisor so you can truly understand the real cost, and the lost opportunity issues we have provided as an example. It may well be your ultimate cash flow revelations and solution!

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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Invoices To Finance ? Here’s The Best Method Of Factoring Financing In Canada For Accounts Receivable !

We know why you are here. You’ve got them; you just don't know what to do with them. We're of course talking about invoices to finance, and what we think is the best method of factoring financing for your accounts receivable.

There isn’t a day these days when we don’t meet a client like you who isn't challenged by working capital and cash flow challenges.

Let's examine the basics of factoring financing in Canada, with exactly what you need to know, which is simply how does it work and whats the best type of receivable financing arrangement. Oh, and by the way, we'll share some tips on what to look for in that ' perfect' arrangement we are referring to,

So let's weigh in on our subject, which is that you have got accounts receivable, and they are growing , and as everyone is experiencing these days, your clients , as great as they are, are slow to pay. And we won't forget that terrible thing known as the bulge, which is that seasonal or occasional situations when large sales opportunities loom and you need financing to cover those off.

Thousand of Canadian companies can't all be wrong, so there must be something to factoring financing of those invoices, right? We're going one step better and recommending that you investigate confidential invoice financing, which is simply a factor arrangement that has you in control of the show, not the finance firm. And controlling your own destiny is what it is all about.

Accounts receivable financing is simply the sale of your invoices to your finance partner firm - you get the cash immediately. It works best when you have some decent gross margins to absorb the 1-2.5% financing cost that comes along with this type of financing. The cost is what most of our clients are worried about , and they are somewhat more happier when we show them how they have the ability to cut that cost in half using that new found cash flow to execute on strategies such as taking discounts with their suppliers and buying in bulk at better prices .

So here comes that recommended secret we are talking about. We call it C I D, which stands for confidential invoice discounting. Here's where you have the advantage over your competitors. 99% of all factor financing in Canada revolves around your factor firm partner billing and collecting your invoices, with notice to your customer. Our offering eliminates that, you bill and collect your own invoices, when you want, when you need the cash. So you have the same pricing as your competitors, but you are on up on how the facility works.

Things we look out for when we originate these financings are areas such as the total all in rate of your new financing facility. Other somewhat technical issues are the advance rate, of what is advanced against the full amount of your invoices. Some other key issues to look for are the miscellaneous admin fees, the exact calculation your new financing partner uses for their rate, and your ability to terminate the arrangement at no cost.

Some of these latter issues we mentioned can save you thousands and tens of thousands of dollars of a year, so we recommend you use the service of a trusted, credible and experienced Canadian business financing advisor to ensure you have the best method of factoring financing for your firm.
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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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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