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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
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 .
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
