5 Things You ( Probably ) Didn’t Know About Canadian Business Receivable Finance & Advantages Of Receivable Financing For Business

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Financing & Cash flow are the  biggest issues facing business today

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Cash Flow Financing Via Factoring Clarified!

 

Cash flow financing for Canadian business owners and financial managers is about knowing what options are available when external finance solutions are being evaluated. Looking for one solution that's incredibly misunderstood in the Canadian business financing landscape. We've found it. Business A/R Finance!  We've got your questions, as well as the answers! Let's dig in.

 

 

WHAT IS BUSINESS RECEIVABLE FINANCE 

 

Business receivable financing ( aka receivables financing ) is a method of business financing that allows a business to transform accounts receivables via a financing facility via a bank or commercial finance company. Funding is for invoices issued to customers for products and services provided to clients with payment not yet made - allowing for the financing of structural cash flow gaps in the company business model.

 

 

TRANSFORMING RECEIVABLES INTO CASH! 

 

Accounts receivables will often be the most significant balance on the balance sheet under the category of current assets - those current assets will also include inventories.  These are short-term assets representing liquidity in the business.

 

Receivables financing is a benefit to businesses that sell on credit terms to customers, which becomes a cash flow gap in the business as payments are not received while inventory purchases and other short-term liabilities, such as accounts payable, must be paid; when a company extends longer payment terms to clients, the situations are exacerbated as those regular ongoing sales create cash flow gaps that widen further as the business sells more.

Funding solutions for startups and new businesses are also accessible.

 

Many businesses operate in seasonal or cyclical industries that create large increases in cash outflows during peak periods, creating potential cash flow crunches as collections have not yet been made.

 

Receivables finance may be a challenge if a business is experiencing unusually high bad debt volume or who have sales that are disputed by clients around issues such as service, damage, quality, etc - Also, businesses with fast turnovers, such as e-commerce clients of some retailers who have short payment term cycles are not the best candidates for A/R finance.

 

Business lenders in receivable finance will focus on the general creditworthiness of the customers, and funds are drawn down on outstanding invoices. Factoring companies that are non-bank in nature fund receivables immediately as sales are generated and charge a discount fee for the financing service.

 

Businesses need to understand the benefits of receivable financing and the potential drawbacks when they commit to a bank or factoring facility.

 
5 EXAMPLES OF RECEIVABLE FINANCING 
 

What amount of funding can you expect to receive from your A/R base? 

 

Typical advance rates for most facilities revolve around the 90% mark... which assumes you are dealing with the right commercial financier - More on that later. That additional 10% is in effect a holdback of sorts. We would point out that Canadian chartered banks only margin A/R at 75%, so commercial business receivable finance offers more liquidity. One other key point on funding is that your access to capital is virtually 'unlimited' as long as you have sales and legitimately earned receivables.

 

 

How does a firm set up a receivable facility?  

 

We generally advise that it takes approx 2-3 weeks to set up a proper facility - that is a general guideline. You will know, by the way, very early on in the process if you are approved. After that, it's simply a question of documentation. Legal documentation and the paperwork process are very similar to bank financing and full-fledged A/R facilities are secured in the same manner as banks, typically a General Security Agreement.

 

By the way, stop us if you’ve heard us say this before. Still, you should consider CONFIDENTIAL RECEIVABLE FINANCE, allowing you to bill and collect your own accounts with no notification to suppliers, customers, etc. Want to be the talk of the town? You will be among your competitors as this type of NON-NOTIFICATION financing will have competitors wondering how you can finance your business so successfully.

Talk to the 7 Park Avenue Financial team about how confidential non-notification a/r financing can benefit your firm.

 

What's the cost of receivable financing /factoring?

 

 Fees and costs. Various factors come into play here, the credit quality of your firm in general (it does not have to be as solid as you think), the size of your facility, the nature of your industry, etc. On balance, a solid business receivable finance fee in Canada is .75-1.15%% if you're billing and collecting on a 30-day term.

If your company can absorb a 1 or 2% decrease in gross margins to in effect obtain all the cash flow/working capital you need, that in effect, should be your consideration.

 

  

 What receivables can be financed?   

 

The key point here is that only ' business’, i.e. B2B a/r can be financed in Canada, so those companies with a consumer A/R base cannot take advantage of cash flow financing. Retailers typically look to other forms of finance for finance options in the consumer marketplace - i.e. Working capital loans, inventory loans, Merchant Cash Advances, etc.

 

Any North American receivable can be financed, and if your firm has overseas receivables, a credit insurance policy can assist in the financing of those receivables.

 

  

Age of receivables that can be financed   

 

As a pretty general rule, only A/R that is under 90 days in age can be financed via this method of Canadian business financing. One can safely assume of course, that if you haven’t collected your accounts by that time there is an element of uncollectibility or bad debt in your A/R portfolio. There are potential exceptions to the rule but your ability to turn over receivables based on your published selling terms is critical to successful ' factoring ' finance.

 

 CONCLUSION  - CASH FLOW FINANCING FOR GROWING COMPANIES

 

Has confusion gone away? We hope so. The bottom line?  When considering working capital finance via business receivable financing ensure you've got the right information at hand to make an informed decision.

Call  7 Park Avenue Financial,  a trusted, credible, and experienced Canadian business financing advisor for your ability to get on track with cash flow finance with business loan solutions tailored to your business needs.

 

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

 

What is business receivable finance?

 

Business receivable finance is also known as accounts receivable financing or invoice financing and ' factoring ' . Using this type of financing allows businesses to generate cash flow based on the use of outstanding invoices the collateral for the financing facility.

 

  

What is cash flow financing?  

Cash flow financing is any type of financing that helps a business access funding based on the anticipated cash inflows of the business. Solutions for cash flow finance include receivable financing via banks, factoring invoices via non-bank commercial finance companies and business lines of credit from asset-based lenders.

 

 How can business receivable finance help my business? 

Business receivable finance helps a business by providing access to working capital that can b used to fund daily operations and allowing the business to manage growth and expansion plans - Funding is based on sales revenues and helps companies with cash flow management.

 

  

What are the benefits of cash flow financing?  

 

The benefits of cash flow financing solutions included better liquidity and the flexibility to access working capital when needed when cash flow gaps occur in the business's cash flow cycle. Financing receivables speeds up the cash flow cycle of a business and reduces  DSO ( days sales outstanding )

 

Receivables financing is a solid cash solution for small businesses that are growing faster than the borrowing capacity of the business. Companies can accept larger orders and fund seasonal peaks in the business using cash flow techniques in a/r finance management.

 

  

How do I know if business receivable finance or cash flow financing is right for my business?  

If a business is selling on trade credit terms and has cash flow gaps in the business based on the investment the company makes in carrying receivables, receivable financing can assist in funding working capital.

 

 What are 4 forms of receivable financing 

 

Four common types of receivable financing include :

Invoice factoring

Invoice Discounting

Asset-based lending credit lines

Supply chain financing

 

Invoice factoring allows a business to ' sell ' an invoice to a third-party finance company, known as a business factor. The company receives immediate cash for the money owed, and traditional factoring firms will collect the receivable and keep a percentage of the invoice in exchange for the company receiving the cash upfront. Typical advances from factoring companies are in the 90 percent range, much higher than bank advances on accounts receivable.

 

Invoice discounting is similar to factoring as commercial finance companies/factoring company advances a percentage of the invoice value on invoicing by the company so it cans receive early payment on the sale of products and services.

 

Asset-based lenders use receivables to collateralize lines of credit or loans. Funding for an accounts receivable loan is made on a pre-agreed advance rate and as payments are collected by the company the loan facility is reduced. Asset-based credit lines for receivable loans often combine inventory and equipment assets on the company's balance sheet into one credit facility.

 

Supply chain financing/purchase order financing allows suppliers to receive payment earlier than typical trade credit terms which can help small businesses.

 

 

What is the difference between accounts receivable financing and invoice financing?

 

Both accounts receivable financing and invoice financing/factoring are similar in that they both fund outstanding invoices, which are the collateral for the financing. The main difference between the two methods is the ownership of the invoices in the financing agreement/financing facility.

 

Under invoice financing /factoring, the finance agreement specifies the sales of invoices to the financing company, and the finance company typically assumes collection- In receivable financing, using banks as an example, the business retains ownership of the invoices, which are used as collateral.

 

In certain types of non-recourse invoice financing, the finance company assumes bad debt and collection risk. In contrast, receivable finance solutions specify the client is responsible for collection and non-payment. Businesses also have the option to purchase accounts receivable insurance/credit insurance in a commercial relationship with the finance firm.

 

Invoice financing and factoring are typically more costly than account receivable financing, but advances in factoring and invoice finance are higher, providing higher loan-to-value funding.

 

Invoice financing is the transfer of control of the collection process, while typical bank receivable financing is the company still responsible for collecting payment and client interaction.

 

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Unlocking Business Cash Flow Financing

Business cash flow financing often requires some ' straight talk ‘. The ability to finance your company with the right loan / loans properly is one of the most powerful success forces in Canadian business. But how does the business owner/financial mgr determine where new cash flow and working capital will come from, and where it went? Let's dig in.

Working capital type loans have a multitude of purposes; in some cases it might be long term growth planning in typical business initiatives such as traditional marketing or even digital marketing initiatives, r&d capital spending, or a more robust ' feet on the street ' salesforce.

In other cases new influxes of working capital and cash flow might be required for current facilities which may be ' maxed out ' due to the constant replenishing requirement of working capital as you invest in inventory, receivables, and the purchase of new assets. It's important to note that new assets that have a longer useful economic life should never be financed with short term credit facilities.

That's a cardinal rule of business financing that many business owners / financial managers realize a little too late! Equipment leasing and financing as well as standard equipment loans are best suited for the purchase of assets. The majority of companies in North America (industry statistics say 80% )utilize lease financing. A subset of the lease finance option is ' sale leaseback ' finance, allowing your firm to keep the asset, refinance it for additional cash flow, and regain ownership of the asset at the end of the term. Commercial real estate can also be addressed as part of the leaseback process.

The new paradigm in business today is often tied to a firms investments in technology. Technology finance and tech funding needs can require a major investment of business capital. The good news is that ' IT ' (information technology ) needs can easily be accommodated in the world of lease financing. Also, it is hopefully no surprise that software, albeit an ' intangible ', can be financed, and companies can also raise working capital/cash via financing their ' SAS ' ( software as a service ) contracts.


In many cases cash flow financing makes sense because your company might not be ' asset rich ' which is certainly the case in the new economy of service-based industries that are less capital intensive. That of course means they don't have that ' hard collateral ' that typically Canadian banks are looking for.

Often the case is that your firm requires a permanent working capital injection, typically best satisfied by a working capital term loan. Here the focus is on the cash flow of the business and the ability to satisfy monthly payments which are usually over a 3-5 year term. Here the key requirement for your company is to present a defendable cash flow projection which is usually included as part of an updated business plan.

In any working capital loan or asset refinancing considerable discussion should be generated around the flexibility of repayment


There is in fact a very harsh and simple reality around your business cash flows. The answer? You've simple bought assets, or generated new assets such as receivables and inventory via monies spent.


There is a natural flow in business - it's all about paying down your debt, keeping taxes up to date, building working capital assets, and generating and taking profits


How does the owner/mgr make the right choices in raising funding for your business and keeping your financials understandable - i.e. understanding where the cash in your business is ' flowing '.


Many firms are challenged by low owner equity, which compounds the owner's ability to take cash out of the company.


Is there a simple secret to managing and financing your cash flow? The pros call this whole process ' operating cash flow ' it’s simply your profit or loss for the month plus or minus your changes in working capital accounts - we’re back to those receivables and inventories again.


External financing for your business will come from either term debt of business credit lines. By the way those business revolving credit facilities will come from either a bank or alternately a commercial finance company offering asset based credit line facilities.


When it comes to business credit lines the facilities that are most manageable are those when the credit line fluctuates significantly. Banks or finance firms will always look more favorably on your ability to constantly draw done and replenish the facility via your receivable and inventory turnovers.


Assets that need to be financing in your business might include plant and equipment assets, vehicles, as well as technology / software etc. Here a term debt options such as lease financing will almost always make the most sense.


What's the bottom line in accessing outside funding and managing your balance sheet properly. We summarize as follows:


- Develop a strong sense of how cash flows in your business- a good cash flow forecast based on your historical inflows and outflows helps


- Ensure your provincial and federal taxes are paid on time- If you have tax arrears they can often be consolidated into a new re-financing of your business


- Determine your business line of credit needs - this is a critical area of business cash flow financing. Remember that Canadian chartered banks are NOT the only credit line providers


- Finance those long term assets with long term leases or loans


- Focus on building equity in your business via good gross margins and profits

The overall quality of your ability to generate cash flow will be a dominant focus for any commercial lender. The a/r turnover and types of customers you sell to will also be a factor, and in general your accounts payable turnover should be consistent with your 'DSO ' (days sales outstanding ) performance. Taking a holistic approach to these points via what the pros call ' the cash conversion cycle ' will determine your loan success. Other ' soft factors' such as the lenders impression of your mgmt team and experience as well as personal credit histories etc should never be overlooked as a component of any loan submission.

In any commercial loan proposal there are always some key documents and information that should never be overlooked or omitted. A business plan and cash flow are key, and it should cover your requirement and use of funds, management overview, company background, as well as historical financial statements. At 7 Park Avenue Financial we prepare that document for clients with a focus on financials, not ' marketing ' or an infomercial on the company that is high on promises and short on financial delivery!


Firms with positive cash flow will always have a better chance of obtaining the required amount and type of loan they need. Every firm at certain times in its history experiences the ' cash flow crunch ' and growing too fast is not the worst problem to have, if you have the right financing solutions in place to address that situation. The ability to access funds to take on larger contracts, obtain preferred pricing from suppliers is a positive need for cash flow financing.

That growth in business often leads to a larger investment in receivables, sometimes augmented by slow-paying customers. In that instance solutions such as a/r financing, factoring, asset-based lines of credit, or Confidential Receivable Financing, the latter being our most recommended solution at 7 Park Avenue Financial. This type of facility takes away the 'notification' issue found in standard ' factoring' offerings and allows you to bill and collect your own a/r which at the same time achieving all the benefits of a bank type line of credit, ie the ' revolving credit facility '.

The Difference Between Cash Flow Loans & Asset Based Financing

KEY POINT: It is important to understand the difference between business cash flow term loans versus monetizing your assets across the multitude of solutions in the Asset Based Lending universe.

While both types of loans are ' secured ' monetizing your assets does not bring additional debt to the balance sheet. Each type of these two loans offers different benefits and risks. In each case your ' collateral ' is, in the case of the working capital loan the cash flow, while in an asset based loan it is the underlying collateral.

Working capital cash flows are always ' credit quality ' based, so the criteria we have talked about already such as historical cash flow, profit, type of industry, etc are key drivers in the approval process. Companies will typically want to be able to demonstrate good profit margins and a relatively clean balance sheet with acceptable debt/equity ratios.

UNSECURED CASH FLOW LOANS

Unsecured short term cash flow loans are all the rage these days - they come with higher rates by virtue of their unsecured status, but at the same time are much more easily accessible. A good rule of thumb is that your company can achieve loan approval for 10-15% of your annual sales volume. The popularity of these loans arose out of the Merchant Advance Loan industry in the U.S. which grew out of providing loans to retailers based on .. future sales and credit card receipts !.

These loans, unsecured for the most part, often fix a cash flow gap/cash crunch. They can fix the seasonality of many small to medium-sized businesses and can address those unplanned for emergencies that befall any business. Loans are often based on a one year term and payments can be made weekly or monthly at the discretion of the lender. Short term opportunities in buying product at an advantageous price.

ASSET BASED LENDING

The required amount of financing you need can often easily be acquired via the ' Asset Based Lending' process. These facilities mirror a bank line of credit, and allow you to margin and borrow against, on an ongoing basis your receivables, inventory and equipment/fixed assets. These are the ' collateral' components of the loan and historical cash flow is really a secondary factor in the approval process.


Asset lenders typically focus on larger deals and typical candidates are asset rich firms that might have profit and cash flow challenges. This is one way in which the non cash rich company can grow its business. Typical borrowing amounts are receivables at 90%, inventory at 30-50%, and the value of appraised assets. Companies requiring SME COMMERCIAL FINANCE needs can quickly see this type of financing will provide significantly more financing they could ever achieve via a bank. Customers are required to report, usually monthly at a minimum, on their a/r, inventories and payables. Your firm is a good candidate for asset based lending if you can report properly on your financial performance and are prepared to cooperate in the due diligence process leading towards an offer to finance.


Borrowing does not have to be a negative process - in many cases it allows your company to capitalize and seize on new market opportunities to grow your business. Most borrows can often easily find they can generate a solid return on investment for every dollar borrowed. A recent survey by a leading business capital provider in the U.S. stated that small businesses can achieve a 5x return on every dollar borrowed based on their planned use and turnover of capital borrowed.


If you’re focused on accessing the right finance solutions for your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your long term funding and working capital 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.


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







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Business Cash Flow Financing In Canada: Improving & Understanding Access To Loans

Business Financing Cash Flow On Auto Pilot ?

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What Is Cash Flow Financing?

Business cash flow financing for many firms in the SME sector involves the necessity to turn receivables into liquidity for the company, in effect we're talking about ' invoice cash ' , that is the sort of financing that clients here at 7 Park Avenue Financial are looking for - i.e. cash flow lending That term is synonymous with cash flow challenges that hit many firms all the time. How then does the use of an AR finance company assist in meeting that challenge?

Sooner, rather than later is the need for business owners who want cash flow to support their company requirements. In many cases certain industries demand a lot more cash for companies that participate in the sector. That might mean more focus on capital assets or even research into new products and services.

What happens though when you can't get the credit financing you need from traditional banks / business-oriented credit unions, etc? That's where an AR Finance company comes in.
Your ability to quickly and efficiently set up a receivable discounting facility allows you to immediately remove the problem of waiting 30, 60 or even 90 days for receipt of client funds for your goods and services.

To receive full funding for your receivables from a Canadian charted bank there is of course an extensive loan and business application, with a lot of emphasis spent on historical cash flow analysis, balance sheet analysis, income statement and operating ratios, etc! Invoice cash services eliminate 90-95% of that type of waiting and negotiation.

So why then does ' factoring ‘, the more technical name for invoice cash work and in fact showing more popularity every day when it comes to  ' cash lending ' solutions. The answer is simple, an immediate flow of funds based on your sales revenues. That becomes most of the solution to what the pros call your ' working capital cycle '. That cycle, simply speaking, is the amount of time it takes a dollar to journey through your company and makes it back onto the balance sheet as cash.

When you finance through an invoice cashing - also called invoice discounting facility, you are not borrowing funds on a long term basis. Your balance sheet does not accumulate debt; you are simply liquidating current assets in a more efficient manner.

Is there one type of facility in the area of ' invoice cash ' that works better than others? We're glad you asked! We constantly recommend Confidential Receivable Financing, it's the 'non-notification' part of this solution, allowing you to bill and collect your own accounts, bank your own funds, and choose how much financing you need on an ongoing basis. It's classic ' pay for what you use ' financing when you're working with the right partner.

What Is A Cash Flow Loan? What Are My Firm's Options Financing Cash Flow?

A/R Finance is not always the ' only ' way to fund cash flow needs. Other strategies might include:

Working capital short term loans

Sale-leaseback strategies

Inventory finance

Tax credit finance ( sr&ed refunds are financeable)

Mezzanine Financing - (Unsecured cash flow loans)


Long term solutions of course involve scenarios such as new equity.




To receive full funding for your receivables from a Canadian charted bank there is of course an extensive loan and business application, with a lot of emphasis spent on historical cash flow analysis, balance sheet analysis, income statement and operating ratios, etc! Invoice cash services eliminate 90-95% of that type of waiting and negotiation.


Long term financing activities of course might involve scenarios such as new equity by owners.


So let's recap: Your business requires additional cash flow. You either have facilities in place and they aren't working, or you are self-financing and need cash flow to pay suppliers, employees, etc. Seek out and speak to a trusted, credible and experienced Canadian business financing expert who can deliver on invoice cash for your firms need.



7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
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 more than 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.
Before 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

What Is A Cash Flow Loan ? Invoice To Cash Financing Alternatives

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Cash Flow Loans For Business - Here Are Your Alternatives

Invoice To Cash Financing should always be a top priority for Canadian business owners and their financial mgrs. Whether it is a cash flow loan, factoring your receivables, or utilizing a combination of asset based lending solutions available to your firm it's always about ensuring you have the best strategy to convert sales revenues into much needed working capital and cash flow .

No secret that even the largest corporations in Canada place a significant emphasis on ensuring the right strategies and people are in place to monetize sales revenues. Accounts receivable financing solutions such as factoring ( those Bay St boys have a fancier name - ' Securitization ' but it's pretty well the same ) are gaining tremendous popularity with Canadian business.

So business wants to know more - what those solutions are, why they work and how to ensure your company has the best strategy in place . These solutions are particularly applicable to those looking for SME COMMERCIAL FINANCE solutions - that small and medium sized sector of Canada that powers a huge portion of the economy . Interestingly definitions of SME always vary, depending on who you are talking to - with governments usually using under 100 employees as the benchmark ! We wish !

For those that buy into the concept of looking at 'alternative financing solutions' it should be a priority and focus to ensure they are entering into the right facility - it's all about avoiding financial pitfalls .


The Canadian alternative financing marketplace is significantly different from the U.S. and European markets where these forms of financing such as factoring and asset based lending and working capital loans originated. It is therefore important for Canadian business to consider which type of receivable financing , sales financing and inventory finance solutions come with what options and benefits and how they work on a daily and long term basis.

NOTE - Many non traditional financing services often simply act as a bridge to bring the client back to solutions offered by banks, etc.

That is because Canadian non bank business financing companies - we can group them together as ' Asset Based Lenders ' , fill the gap when a firm cannot obtain satisfactory receivable financing from their Canadian chartered bank. That also will often include the challenges of inventory finance, purchase order finance, and equipment financing and leasebacks .

Many clients of 7 Park Avenue Financial tell us they do have some for of bank financing in place, but it essentially does not meet their needs re growth and facility size. In many cases clients had a challenging 2008-2009 , or have been impacted by ' COVID ' and have no financing facilities in place , resorting to self financing or looking at our alternate solutions we have mentioned.

Many firms are start up, early stage revenue, and virtually have no ability to qualify for standard Canadian operating facilities that are enjoyed by more larger and established firms, via Canadian chartered banks and insurance companies.


As an example ,factoring works for your firm when you have decent receivables but there are issues on your balance sheet and income statement that prohibit you from obtaining the amount of financing you need on an ongoing basis . This working challenge is further exacerbated when you have large new contracts or volatile growth spurts based on the uniqueness of your industry. At 7 Park Avenue Financial we will often focus on a combination of a/r financing and purchase order financing to ensure our client can successfully monetize sales, enter into new contracts, explore new markets, etc.

BUYER BEWARE ?

We have spoken about the importance of ensuring you enter into the 'right' finance strategy . Example : There are two types of factoring in Canada, ‘notification factoring ‘, and non- notification factoring. Both work well if you understand how they are structured and priced, however we favor non notification factoring in our recommendations since we feel it more closely suites the Canadian way of doing business. At 7 Park Avenue Financial we are a huge fan of Confidential Receivable Financing .

HOW DOES A/R FINANCING WORK

In ' old school ' notification type factoring the process is very simple and mechanical:


Your firm invoices your customer

You generate an invoice

You receive a large, almost same day cash advance against that invoice (typically 90%)

Your factor firm verifies the invoice with the customer prior to disbursing funds

The factor firm more often than not collects the invoice, an remits to your firm the remaining balance due yourself, less their financing fee - typically 1-2%

WHY CONFIDENTIAL RECEIVABLE FINANCE ?

Non notification factoring is dramatically different - with this type of facility more due diligence is spent on your firm and its way of doing business, invoicing, creating proper financial records, etc. Your company bills and collects all its invoices, and you receive funds immediately after you ship and provide proof of delivery.


Factoring pricing in Canada has dramatic price swings. Factoring rates range from 10% per annum and for some firms 1-2 % per month.

WHAT FACTORS CONTRIBUTE TO HOW A/R FINANCING IS PRICED ?

Factors that determine your price are the over all facility size, your usage of the facility, the overall quality of your customer based, and ,unbeknownst to your firm, how the factor firm itself is funded, usually either privately or institutionally .


In summary , alternative financing does work, and is working in Canada. Choosing the right facility shouldn't be a leap of faith of having to guess at how these concepts work . Take a hard look at solutions such as a/r financing, sale leasebacks, purchase order finance, short term working capital loans, and larger non bank business lines of credit - They work, and are working every in Canada.


Speak to a trusted, credible and experienced Canadian business financing with a track record of business financing success . Ensure you understand the benefits of this valuable and popular method of Canadian business financing.



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

How To Finance A Business In Canada

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Traditional and Alternative Debt Financing Solutions To Run - Grow - Or Start Your Company In Canada

How to finance a company in Canada - It is not secret that the ability to start a business, fund it for operations, and , as importantly , grow the company is a key challenge facing business owners, financial mgrs, and start up entrepreneurs.

There are basically only 3 ways to finance your company -

Equity


Debt


Cash Flow Financing Assets/Sales

Lets take a look at some key basics surrounding how these solutions can be accessed , and in some cases ' cobbled together' to identify the right source of business capital for your firm. Our comments will not focus on the ' equity ' component of your business ; private and public equity is a subject for another day .

In business the old adage ' timing is everything' is critical . Naturally financing your business in a healthy economy when your company is firing on all cylinders is much easier than a faltering economy or with your company experiencing financing challenges. The right amount of debt and cash flow is often the life blood of any firm . Companies large and small go out of business due to their inability to get the proper mix of financing in place.


Banks and commercial finance companies are of course your ' financial partner ' when it comes to generating financial support for your firm. As companies growth they need additional cash flow financing to support sales, a/r and inventory levels, etc. It should not, but it might ! come as a surprise to many that companies can fail when they grow too quickly.

As we noted the main providers of business financing in Canada are our chartered banks and commercial finance firms . Some of these commercial finance firms offer traditional financing - many of them are 'bank alternatives ' ,providing capital to firms who cannot access bank credit.

Debt And Cash Flow Financing Options in Canada

Banks are often the first ' go to ' when it comes to business looking to access financing solutions in Canada. When companies have the right amount of owner equity, corporate and personal assets and collateral the rates, terms flexibility, and amount of capital is virtually unlimited.

Unfortunately the banking system in Canada does not support the many thousands of firms who have basic or specialized needs and can't qualify under bank criteria. These companies just don't have the ' secondary repayment sources' and outside the business collateral often required by the SME COMMERCIAL FINANCING sector in Canada.

So what then are the options to finance a company . The options are asset based lenders and other ' alternative finance ' firms that provide

Non bank lines of credit,

A/R financing,

Inventory financing,

Purchase order financing

Tax credit finance solutions.

Sale Leaseback financing

Short Term Working Capital Loans

And it is safe to say that these firms do not require the same qualifications required by banks . It's a bit of an over simplification but the two main requirements for alternative financing are

Sales


Business Assets


Equipment financing, aka leasing your key assets is also a very effective method of financing your firm. It also relieves the larger cash outlays your business needs when it acquires assets.


Start up and small businesses have access to the Government SBL loan program - This is a government guaranteed loan which has great rates, terms and structures when it comes to acquire assets and even financing leaseholds and real estate. Many franchises in Canada, as well as business acquisitions in the SME sector are financed by the Industry Canada govt loan program .As stated the majority of the loan is guaranteed to the bank by the Federal government. A partner you might not have known you had !


Cash flow financing, or ' Asset Monetization ' can be accomplished by utilizing receivable financing, inventory finance, and even selling your tax credits such as those under the SR&ED program . The SR&ED program provides billions of dollars in non refundable credits and these credits are easily financed.


One of the best methods of cash flow financing comes your a partner you know only too well - yourself and your firm. By managing your assets such as inventory and A/R you can generate internal cash flow through your business operations.


Speak to a trusted, credible and experienced Canadian business financing advisor who has a track record of business finance success on those debt and cash flow financing options when it comes to how to finance a company in Canada.



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

Staying Afloat Via Cash Flow Financing - Cash Flow for Business Solutions

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5 Great Cash Flow For business Solutions

So we're all in agreement, right? Staying afloat is better than sinking... and talking to clients seeking cash flow for business seems to be mostly what we are doing these days.

 

Cash flow financing for your business, whether you like it or not is at the top of the ' worry pile' for Canadian business owners these days.

We'll discuss the problem, how you measure the problem, and, most importantly, some great solutions both traditional and alternative. And by the way, alternative is fast becoming traditional, but more about that later!

In talking to clients about business financing and business cash flow we always get the distinct impression they feel their business is unique - and that may be so but the truth of the matter is that the cash flow financing challenges you face are being faced by everyone else in and out of your industry.

As a business owner you can be forgiven for thinking your

business cash flow

financing challenges are unique, probably because of the mix. What do we mean by the mix? Simply that each h company and industry has difference levels of inventory, receivables, payables, all of which factor uniquely into the working capital challenge.

In fact, whether you like it or not, about 80%, yes 80% of all you assets are in receivables, inventory, and to some extent prepaid.

Your ability to ' turnover' these assets is what makes your business successful, or not.

Each industry has different gross margins, and if you have great gross margins then you can withstand a bit less turnover that is required in inventory and receivables. If you are in a low gross margin business turnover is absolutely critical. And you measure that turnover by three key metrics, inventory turns, days sales outstanding or collection turnover, and finally days payable outstanding.

Turnover drives working capital and many business owners kind of know that, but more often than not aren't focusing on improving that turnover.

So, lets get back to staying afloat, which is what its all about!There are a number of cash flow financing solutions that allow you to address cash flow financing for your business. If it was a perfect world you would have all the liquidity you need from you bank, but bank financing is always a challenge for business, and in many cases inventory is not part of the financing mix that is available.

There are at least 5 great cash flow for business solutions available to help you succeed in Canadian business financing. These include the selling of your receivables, which can be done confidentially, and thereby generating instant cash flow for your company. For firms with 250k+ in assets and receivables you are in a position to be a candidate for a fully margined A/R and inventory working capital facility, available through a non bank solution. Larger firms with significant investments in working capital (receivables and inventory) are eligible for asset based lending which is in our opinion the ultimate Canadian working capital solution.

Most business owners don't know they can access cash flow financing via the financing of Purchase Orders (p o' s) and contracts. They allow you to consider orders significantly higher than you could have ever handled in the past. And, finally firms with relatively good financial standing can access unsecured cash flow working capital term loans via non bank lenders.

So whats it all about. We think we have been fairly clear, and hope you agree. It's about understanding your cash flow financing challenges, measuring them via the turnover of working capital accounts, and finally, accessing any one of the five, yes 5! solutions we have provided.

Speak to a trusted, credible and experienced Canadian business financing advisor as to what makes sense for your firm.





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











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


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