Factoring Is The Secret Weapon In Canadian Receivables Financing - Here's Why!

Tweet

 

YOUR COMPANY IS LOOKING FOR FACTORING AND CANADIAN RECEIVABLES

 FINANCING! 

Transform Your Cash Flow with Receivables Financing: A Guide to Solutions by 7 Park Avenue Financial

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

        Financing & Cash flow are the biggest issues facing business 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

 

 

 

Exploring Receivables Financing as a Funding Alternative 

 

Bridging the Cash Flow Gap: Explore Receivables Financing with 7 Park Avenue Financial

 

Canadian business owners and financial managers can find an alternate route for financing working capital and cash flow needs in factoring, also known as accounts receivables financing of outstanding invoices.

 

This method can be particularly beneficial when your company experiences rapid growth or struggles to finance day-to-day working capital needs due to significantly larger orders or contracts. Fundamentally, factoring in Canada involves financing through good accounts receivables on the company's balance sheet. Choosing the best technical method of factoring necessitates due diligence on your part.

 

 

 

 

INTRODUCTION

  

 

In Canada's fast-paced business world, keeping cash flowing is critical to staying in the game in your industry. That's where receivables finance comes in; you might also hear it called invoice financing or factoring. It's like a life preserver for businesses, giving them quick cash from unpaid invoices when traditional bank loan financing is unavailable.

 

It's a way for businesses to keep the money rolling between when they deliver a product or service and when they get paid. But that's not all. Besides boosting your cash flow, receivable financing can give you more flexibility, less risk, and more chances to grow your business.

 

The cash flow challenge

 

 

Cash flow issues can hit any business, big or small, and managing it well is vital for survival and growth. If cash is short, a company might have trouble meeting financial needs, paying suppliers, investing in growth, or even covering everyday costs. Slow-paying customers, seasonal ups and downs, unexpected expenses, and late payments can all create cash flow gaps that disrupt business.

 

Receivables financing is a solution here. It allows businesses to turn their unpaid invoices into immediate cash. Businesses can sell their invoices to a financing company, or "factor," giving them around 80-90% of the invoice value upfront.

 

This provides the business with the cash to keep running and growing. Once the customer pays the invoice, the factor takes their fee and gives the rest to the business, ensuring a regular cash flow. This way, companies can deal with cash flow problems and concentrate on their main activities.

 

  What is receivables financing or factoring? 

 

Receivables financing, also known as factoring, is a method where a business uses its receivables (money owed by customers) as collateral in a financing agreement. In this process, a business sells its accounts receivable to a factoring company to receive immediate cash flow rather than waiting for the payment period.

 

  

  

Diving Deep into Non-notification Factoring - aka ' Confidential Receivable Financing "!   

 

One such method recommended is non-notification factoring, which puts you in complete control of your receivables and working capital.

Under this method, while you bill and collect your receivables, as always, you receive immediate cash flow and operating capital when a valid invoice is issued to your customer. This innovative approach enhances the fluidity of your business operations, contributing to seamless growth and financial stability.

 

 Balancing the Costs and Benefits of Factoring 

 

Though factoring can carry higher costs, more intelligent purchases and leveraging discounts can offset these. Traditional payment habits often stretch to 30, 60, or even 90 days. Factoring enables cash generation from these sales 2-3 times quicker, providing much-needed liquidity.

 

1. Flexibility: This type of financing is based on the value of your invoices, not your credit score or collateral. It focuses on the creditworthiness of your customers, who are responsible for paying the invoices.

2. Revolving Financing: As your business produces new invoices, you can continue to get financing. This adaptability allows companies to constantly cope with cash flow changes and grab growth opportunities without needing new loans or credit lines.

3. Reduced Risk: The risk of non-payment or late payment from customers is transferred to the factor in receivables financing. This protective layer allows businesses to focus on their core operations rather than credit and collection responsibilities.

4. Supports Growth: Immediate cash access via receivables financing allows businesses to capitalize on growth opportunities. This could involve investing in new equipment, expanding the team, entering new markets, or introducing new products.

5. Better Supplier Negotiations: Regular cash flow can improve supplier relations, potentially leading to discounts, extended payment terms, or better pricing.

6. Capability to Take on Larger Projects: With instant access to cash, businesses can confidently accept more significant contracts, knowing they have enough working capital to cover costs such as materials, labour, and overheads. This can open new revenue streams and support long-term growth.

 

Factoring as a Bridge to Growth

 

Factoring, in essence, is about working capital turnover. It may not be the ultimate solution for your firm, but it serves as an excellent bridge to your next growth level. Whether your firm is new, faces financial challenges, or grows too quickly for traditional bank financing, factoring offers a solution.

 

Factoring versus Traditional Bank Lines of Credit

 

Factoring and receivable financing (also referred to as invoice discounting) contrast with traditional bank lines of credit.

 

Factoring focuses on your business assets rather than your balance sheet or income statement. Bank lines of credit, conversely, focus on you as the owner, your balance sheet, income statement, industry, and years in business.

 

Choosing the Right Factoring Facility

 

When considering factoring, the focus should be on having financeable assets (receivables) that can be turned into immediate cash flow.

 

The challenge lies in understanding the differences among various factoring facilities, their operation, pricing, whether you prefer a contract or an open-ended arrangement, and your comfort level with the factoring business model. Ensure to engage with a trusted, experienced business advisor in this area to harness the full potential of this financing method for your Canadian firm.

 

Key Takeaways 

 

1. Problem: Cash flow issues can hamper business growth.

2. Solution: Receivables financing converts unpaid invoices into instant cash, improving cash flow.

3. Additional Benefits: Enhances flexibility, reduces risk, and enables businesses to seize growth opportunities.

4. Choosing the Right Provider: Factors to consider include reputation, terms, and fees.

5. Evidence of Success: Many businesses across different sectors and sizes have used this tool to overcome cash flow issues and fuel growth.

6. Action: Don't let cash flow challenges hold your business back. Use receivables financing to achieve long-term success.

 

 

Receivables financing, or factoring, offers an alternative method for financing working capital and cash flow needs in Canada.

 

It allows companies experiencing rapid growth or with large orders or contracts to finance their operations more effectively.

 

One method, non-notification factoring, provides companies with complete control over their receivables and immediate cash flow upon issuing a valid invoice. Factoring, while more costly than traditional methods, can speed up cash generation and serve as an excellent 'bridge' to the next level of growth.

 

The selection of a  receivable financing/factoring facility should be carefully considered, considering factors such as its type, operation, pricing, and the company's comfort level with this model. It's crucial to consult with a credible, trusted, and experienced business advisor to make the most of this financing opportunity.

 

CONCLUSION

 

So, in summary, is it that easy? Yes. And no. We say no because the challenge in setting up a proper factoring facility in Canada is simply understanding the differences in the types of facilities that are set up on your behalf, how they work, how they are priced, determining if you wish to lock into a contract or leave it open-ended, and your overall comfort level with the day to day business model of factoring receivables as you generate sales.

 

Speak to 7 Park Avenue Financial,  a credible, trusted and experienced business advisor in this area and ensure you understand how the benefits of this type of financing can be crafted into a facility that works for your Canadian firm.

 

  

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

  When might a company consider using receivables financing?

    

Companies often consider receivables financing when they need immediate cash flow for day-to-day operations or growth. It benefits companies with large orders or contracts or those experiencing rapid growth that traditional bank financing cannot support.  

 

  

What is non-notification factoring?

 

Non-notification factoring is a method of receivables financing where the company retains control of its receivables and working capital. The company continues to bill and collect its receivables as normal but receives instant cash flow and working capital as soon as a valid invoice is issued to a customer.

 

How does receivables financing compare to traditional bank lines of credit?

 

Receivables financing differs from traditional bank lines of credit in several ways. While bank credit lines focus on the business owner, the balance sheet, income statement, and years in business, factoring concentrates solely on the company's assets. This allows businesses to have unlimited access to working capital potentially.

 

What should a business consider when choosing a factoring facility?

Businesses should consider the different types of factoring facilities available, their operations, pricing, and whether a contract or an open-ended arrangement suits their needs. Considering the comfort level with the business model of factoring receivables is also essential. Consulting with a trusted, experienced business advisor can help make these decisions.

 

What are the different types of factoring?

 

A/R financing makes sense when a company has structural cash flow gaps - numerous solutions are available

 

Types of Receivables Financing Options:

1. Invoice Factoring: Businesses sell unpaid invoices to a factor at a discounted price. The factor then handles the collection, and the factoring company pays and returns the remaining balance to the business after deducting its fee.

2. Invoice Discounting: Businesses use their invoices as collateral for a loan or credit line but keep control over collections. They get upfront cash and pay back as customers clear their invoices.

3. Spot Factoring: Businesses can choose to finance specific invoices on the company's accounts receivable, giving them more control and flexibility. It's great for businesses with large invoices or occasional cash flow gaps.

4. Recourse vs. Non-Recourse Factoring: Recourse factoring means businesses are responsible for any unpaid invoices. In non-recourse factoring, the factor takes on the risk of non-payment / collect payment, giving an extra safety net for businesses.

 

 

 

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

The Cost Of Factoring Shouldn’t Be A Hot Potato ? A/R Rates And Funding Receivables Is Not What You Thought!

Tweet

A New Look At Factoring Pricing In Canada

 

Does the cost of factoring finance, i.e.  AR rates for funding receivables really have to be a  ' hot potato ‘? We don't think so, and here is why.

 

THE ACTUAL COST OF ' FACTORING RECEIVABLES ' IS A FEE - NOT AN INTEREST RATE

 

The cost to finance a receivable via invoice factoring of course revolves around the ongoing sale of your A/R at a discount. That discount is essentially the core of our cost perception issue. Factoring fees are often very misunderstood and confused with interest rates.

 

 Otherwise, things are pretty much the same, meaning that in the ordinary course of business you are still responsible for collecting your accounts in a timely manner, and furthermore, in a worst-case scenario, the customer’s inability or refusal to pay your firm still incurs a bad debt for your company. So far so good, right? We should mention that you can get what is known as non- recourse AR finance, but that is obviously a bit more expensive and essentially tied to the concept of credit insurance.

 

HOW DOES A FACTORING COMPANY ASSESS YOUR TRANSACTION

 

A Finance factor firm is going to look at hopefully the same issues that you look at when you enter into extending credit into your clients - i.e. client references,  credit limits, collection history, etc. That's just Business 101 and the reason why large corporations invest hundreds of thousands/millions of dollars into credit and collection departments that will ultimately drive the company’s cash flow and operational results for sales and collections.

2 KEY BENEFITS OF AR FINANCE

Benchmarked against the costs of funding receivables are of course the benefits. The key benefit is pretty obvious; your firm receives cash essentially the same day as you make your sales. You're now in a position to do something that many of your competitors may not be able to do, and that’s to offer terms and credit limits to many of your clients that even your competition might not be able to do.

 

Second benefit. It's virtually unlimited credit to your firm - you're not going cap in hand to apply or renew Canadian chartered bank lines.

 

THE TRUE COST OF FACTORING YOUR ACCOUNTS RECEIVABLE

 

So let's get down to the nitty-gritty . The cost of receivable finance. The key point we want to make today is simply that many Canadian business owners and financial managers don't really understand the true cost of what they are paying already, even when they are not factoring. Let’s look at our key example today:

 

EXAMPLE OF THE COST TO FACTOR A RECEIVABLE

 

Let's say your firm has a made a $10,000.00 sale and has generated an invoice for your client. Let’s say the customer is very late and pays you in 100 days. If we assume your company can borrow money at today’s rates in the 6% range as an example the cost to carry that receivable, i.e. just wait! is approx. $160.00.   

 

What we have just demonstrated is what is known as the cost to carry a receivable. If your firm had a receivables funding factor facility in place a typical cost to fund that receivable for a 60 day period might be 300.00. With that new found cash that you have obtained immediately, you are in a position to take supplier discounts, buy more inventory, generate another sale, and make more profits.

 

Doing nothing and just waiting for a client to pay, carrying your clients, is obviously not a great thing.

 

FACTORS THAT DETERMINE OF OVERALL A/R FINANCING RATES

 

Generally in Canada factors that determine your AR rates and cost of factoring are your sales volumes, average invoice balances, number of clients, and general perception of creditworthiness of your clients and your industry.

 

IS CONFIDENTIAL RECEIVABLE FINANCING THE BEST AR FINANCE SOLUTION

 

At 7 Park Avenue Financial Our recommended solution is confidential factoring, which allows you to reap all the benefits we have hopefully noted, with your firm being in control of billing and collections - i.e. no third party involvement.

 

Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financial needs when it comes to receivables funding.
 

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

Tweet



Financing receivables can be a key ' igniter ' in your firm's search for business credit that works for your cash flow needs. Accounts receivable factoring and the cost of factoring in your search for business funding requires some special analysis and expertise.This method of financing can often ' unfreeze ' your working capital. Let's dig in and show you how to fix the business credit freeze.


How Does Factoring Invoices Function On A Day To Day Basis

The entire FACTORING process is the cash flowing of your receivables after your firm has provided either its goods or services to your client. There is a defined process that allows your company to receive funding on completion of your sale and the invoice to the client.

Factoring clients are best suited to these financial solutions when their business is growing and traditional capital is not available. In fact, while traditional financial institutions are focused on credit limits, annual reviews, etc factoring solutions are very flexible and limits can very easily be raised if your sales are growing. In fact business owners control their own limits based on their decisions as to how much of their receivables they wish to finance and when to submit those invoices for financing.

After your firm has invoiced your client you provide a copy of that invoice to the receivable finance firm you are utilizing . Many firms offer very different types of versions of what we could call ' traditional factoring' but essentially you will receive your funds withing a day or so of invoice submission .  The amount you receive on the face value of the invoice is typically  80-90% of the invoice amount . You receive the balance of the invoice when your client pays, at which time a fee of approx  1-2% is deducted as the ' factoring fee ' .

This latter point of a factoring fee must be stressed and understood when looking at this type of accounts receivable financing . Why ? Many business owners and financial managers view the factoring fee as an ' interest rate ' when in fact it is simply a cost of the service for providing the financing, A better way to think of it is that is a reduction in your gross margin of that 1-2% range that we expressed previously . This whole area is one of the largest misnomers around FACTORING and its true cost. Your true financing cost in factoring will revolve around the agreed upon fee charged, and your ability to negotiate the amount that will be advanced on each invoice. Those are two, but not all, of the  key drivers in calculating your cost of financing .

Why Does Factoring Work ?

Factoring works simply because it turns your sales into working capital, allowing you to accelerate cash flow via the financing of a/r.  Business owners will not be surprised to know that it takes typically anywhere from 30-90 days these days to collect your accounts, your stated payment terms notwithstanding!

It should be noted that the advance rates on each invoice tend to vary by industry - the trucking/freight and staffing industries are two examples of high users of this method of financing sales so the advance rates are quite high - that's a good thing ! It should be noted that some costs considered as ' miscellaneous ' by some such as account set up, bank lockbox fees, and credit checks can add up and should be considered in your total cost analysis.


Accessing the cash allows you to address the day operating cash needs of your business. If your company is in a position of either having to , or offering, extended payment terms for your suppliers and your have sufficient gross margins then FACTORING is a solid potential solution for your business.

In certain cases a business might be able to take advantage of taking on a new or larger client that previously was not able to be considered based on size and the working capital investment your firm would have to make in carrying a/r or funding additional inventory.

A firm having a large number of clients that generate a large number of invoices could utilize  FACTORING as a method to reduce the collection costs and investment in staff to facilitate financing.

A  key benefit of factoring is that it does not bring debt onto your balance sheet - it is not a loan ! Rather it is the monetization of what is typically your largest current asset - A/R. As we mentioned many firms are stalled in sales growth due to their inability to fund the working capital component of sales . The FACTOR solution allows you to take on those clients with ease .

Many firms experience what the pros call ' bulge finance needs ' ; this might be at times of the seasonality of the business , or other reasons . That's when the FACTORING solution makes sense.

Factoring is often viewed as a ' bridge ' to more traditional financing, typically Canadian banks . Being able to demonstrate a successful factor finance facility allows your company to build a track record in stability, thereby improving your commercial credit history .with one of them. In times of economic crisis, pandemics included alternative financing sources such as  AR Financing allow your firm to weather the storm .

Every business owner can relate to the constraints Canadian chartered banks come under  for the financing of business in a downturn -  Downturns might be company-specific or part of a general industry-specific or broad economic downturn. That situation tends to lead to a downward spiral in many firms as business credit tightens . FACTORING COMPANIES typically finance companies in good times and in less than good times.

Can Factoring Improve Profits?

Many businesses considering factoring finance tend to compare it to more traditional business finance solutions such as those services offered by banks. Many suppliers and vendors to your business offer early payment discounts  - one such common offering is' 2% net 10 days '. That allows you to deduct 2% of the suppliers invoice based on paying early. Firms that have incoming cash tied up in a/r are of course unable to take advantage of this discount . But factoring solutions allow you to take that discount, thereby lowering a very significant amount of the factoring fee! In some cases you can purchase in bulk allowing you to further lower your cost of goods , thereby improving margins. As we have noted firms that are constantly battling the cash flow challenges can rarely take advantage of the two examples we have outlined.

Factoring Costs Laid Bare!  Assessment of 3 Critical Facts In Invoice Finance

We have already mentioned the factoring fee, that is the actual charge by your commercial financing partner to finance invoices on an ongoing basis.  The decision on what that fee is becomes based on a number of factors assessed by your factoring firm. Those data points include  your clients overall industry profile, your own firm's general creditworthiness , and the amount of the facility you require.

The next key factor can be significantly  a cost significantly controlled by yourself,  namely your average DSO / collection period. So if you turn over your receivables more quickly that monthly factoring fee stays low, as the charge is based most often on a 30 day collection period. Therefore your costs would increase if your client paid in 60 days. Companies with good credit extension policies are a winner in the factoring game.

 Example Of Factoring Cost :
 Invoice Amount -  $ 20,000
 Factoring fee - 1.5% = $300
In the above example your firm would get 90% of the 20,000 as soon as you invoice, namely $18,000. 
The balance of $2000 less the $300 fee is paid to your immediately on payment by your client.
In the above example you have not incurred debt, become cash flow positive immediately on invoicing, and continue to maintain general creditworthiness with your suppliers, operating costs, etc.
 A  harsher reality of factoring solutions is the fact that many firms these days simply cannot  meet the demands of Canadian banks when it comes to accessing the business credit they need. Alternative finance solutions such as factoring and asset based lending allows your firm to leverage it's assets and sales revenue potential. Thousands of Canadian businesses utilize this method of cash flowing sales when they otherwise could not achieve. While in the majority of cases the factoring firm, or asset based lending firm becomes your ' senior lender ' these facilities also can be complementary to other business credit you have in place. It's all about your total exposure to your lenders versus the amount of  collateral you have in receivables and other assets.Trends now show that thousands of businesses in Canada find themselves unable to get the financing they need. Whether they are ' cut off ' or simply ' restricted' in getting capital into their firm the repercussions can be anywhere from being mild to severe, severe of course meaning closing your business.

So why is receivable finance funding different, and how does the business owner/manager asses the cost of factoring A/R into a sensible arrangemen

The essence of invoice discounting, aka ' factoring, aka ' invoice discounting ' is simply the ability to monetize sales directly into cash as you generate revenue. That in itself is a powerful statement. Where things go wrong is when your business locks itself into a facility that either costs too much, is unwieldy to operate, and simply doesn't mesh with your day to day operations. By the way, that absolutely doesn't have to be the case!

So if banks also margin receivables for cash flow for your business wouldn't Canada's chartered banks be the optimal solutions for cash flow finance. Well they would be that perfect solution if your business qualifies, and if you do qualify do you in fact have access to all the credit you need to grow the business when it comes to seasonality, large orders, cash flow bulges, slow paying clients, etc. The answer is that while our banks in Canada provide the best and most ' low cost ' solution the reality is that not everyone qualifies.

The short answer to bank versus non-bank funding in Canada, when it comes to A/R finance is that the bank bases its decision on your sales, profits, and balance sheet; Factoring, on the other hand, bases its finance formula only on your sales and the invoices generated from that revenue. Oh, and by the way, funding is in fact ' same day '. And it's only as complex as you want it to be, and the industry itself, unfortunately, does not always do a good job of explaining facilities; sometimes employing smoke and mirrors to hide costs and day to day facilitation of the financing. That's when you need clarity!




You have the ability to negotiate what is known as a  ' non recourse ' facility which allows you to transfer all the credit risk to your financing firm - albeit at a cost.

The key to a successful A/R finance program in Canada is your management of the program. The type of facility you enter into, as well as your ability to control what you finance and when is critical. And, as a kicker, our recommendation to clients is ' confidential ' facilities that allow you to bill and collect your own receivables in a manner that allows the competition to do only one thing - figure out where you are getting all that cash . Always keep in mind that the firm financing your receivables is typically more concerned with the overall quality of your customer based, so any firm that is perhaps facing financing challenges is not eliminated from being able to source funding. Knowing you have a strong underwriting partner to fund your sales is a key success factor in any business.

Finally, the concept of ' notification' and ' verification' should be high on the list of factoring due diligence. These two terms arise out of what we at 7 Park Avenue Financial call ' old school ' factoring, and involves occasional or constant verification of invoices with your clients.  At 7 Park Avenue Financial we tend to view this form of factoring as somewhat ' intrusive ', so our recommended and preferred solutions is Confidential Receivable Financing, allowing you to bill, and collect your accounts without any notification to clients, suppliers, etc. All the benefits, and less of the hassle!

Whether you're a start-up, medium-sized firm, or a large corporation, financing receivables can be a huge part of your business success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor today who can assist you with the facility that makes the most sense for your unique 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

Looking For The Best Accounts Receivable Factoring Company - The Answer Is ' Confidential '

Tweet

A Few Quick Tips to Help You Find the Best Factoring Receivables Company

Most people agree that Canadian business model and the Canadian psyche differ from those of our friends in the United States .


Accounts Receivable Factoring goes back to the 1400's and is an accepted way of doing business . Simply speaking it is the ability of a company to immediately obtain cash for their receivables , thereby augmenting cash flow . Factoring is generally viewed as expensive , as the company views the discount rate as the ' interest rate ' on the transaction .


In both the U.S. and Canada very typical rates on factoring range from 1 1/4 % to 2 % per month. Issues that drive the overall rate are the over all transaction size, the credit quality of the debtor , and the historical time that the debtor has taken to retire invoices .


To be clear, when we talk about the participants in a factor transaction, there are three, the company selling the receivable, their customer ( the debtor ) and the finance or factoring firm .


Customers choose factoring , or are forced into considering factoring, when they do not have bank financing, or the financing that is in place is not sufficient to fund working capital .


Companies in Canada have been slow to utilize factoring - there are numerous smaller finance firms that offer the service, and more predominantly, the landscape is covered with branch firms of U.S. and U.K. companies who are established leaders in their respective countries .


A few in Canada offer factored facilities, a fact not generally known to the Canadian business market .


More often than note smaller and medium firms who don't have access to traditional bank lines of credit utilize factoring . They use this financing facility to grow their business, maintain acceptable levels of cash flow, and ensure debt and government payments re taxes, etc . are made on time .


Typical advance rates on factored invoices are in the 80-90% range . Firms utilizing factoring are often not aware of the mechanics of how these facilities are priced on a daily or monthly basis. Two different business models exist within the industry, recourse, and non- recourse . If the debtor does not pay the invoice a recourse transaction forces the company to pay back the factored amount, or replace it with another invoice .


As stated, many firms do not properly focus on the many nuances of the factoring transaction . These include the amount held back by the factor firm, when the hold back is released, and most importantly the paper flow involved in the transaction.


Canadian firms have tended to view factoring as very intrusive . They , unlike their U.S. and U.K. counterparts , have not appreciated that their customers are contacted regularly by the factor firm to verify invoices, demand payment, etc.

Here's What Really Matters in Factoring Receivables

Ultimately the Canadian market seems to desire a non-notification factor model which is not widely available . 7 Park Avenue Financial calls this Confidential Receivable Financing


Prudent business owners and financial executives , both in the U.S. and Canada , can enhance their use of factoring by negotiating arrangements specific to their business , re receivable size, quality, customer time to pay, etc .

Many firms also quickly realize the cost of the factoring can be significantly offset by the use of additional cash to negotiate supplier discounts, take trade discounts offered by suppliers, and in general , improve supplier relations . Key benefits of factoring, also known as invoice discounting, are improved cash flow and maximized cash flow .





About 7 Park Avenue Financial :
We are located in the Toronto area, but we have financed customers all over Canada, from B.C. to Quebec in the east
Financing solutions from 7 PARK AVENUE FINANCIAL can improve cash flow, enhance key operating efficiencies, strengthen working capital and enhance revenue, improve production capabilities - Ask us how!
You are a business owner who wants options and alternatives and the right financing for your business . Commercial financing can be complex - we will make it simple for you .





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

Don’t Let Your Company Collapse For Lack Of Cash Flow Financing . Canadian AR Finance For Receivables

Tweet

INFORMATION ON ACCOUNTS RECEIVABLE FACTORING FINANCE

AR Finance, i.e. cash flow financing has the ability to save your company when it fact your firm is faced with survival challenges. Let's examine when a receivables strategy works, and what you need to do to facilitate a financing that makes sense. In essence, ' how it works' and ' why '.

Canadian business owners and finance managers that face challenges of raising cash for their firm can utilize an A/R finance strategy, which is in effect the sale and monetization of your receivables to generate working capital. Our comments are focused on your firm being potentially in ' survival ' mode, but of course they apply to daily operations and growth, or even 'hyper growth ' which is a double edge sword.

If you do in fact require an A/R cash flow strategy are you in fact eligible? Let's examine some key requirements around getting a proper facility in place. We say ' proper' because in our opinion there are certain receivables finance structures that certainly aren't optimal for your company.

Getting back to those qualifications! As a general rule only commercial, i.e. ' Business to Business' a/r is eligible for financing . (While there are financing mechanisms for consumer A/R in Canada - securitization / merchant advance etc. ) invoice financing in Canada general pertains to commercial business receivables.

And by the way, your clients can be in Canada, in the U.S. or foreign - cash flow A/R financing has the ability to capture and fund all of these!

Naturally your firm also has to be selling on credit, as a cash sale environment just does not work!

Size more or less counts when in comes to your ability to set up a proper receivables facility. Although very small facilities can be set up a good rule of thumb is that monthly A/R in the 100k+ range is a recommended size. And by the way, there is NO upper limit on the size of your facility in Canada, as facilities exist for tens of millions of dollars if that is in fact required.

The issue of ‘concentration’ of comes up. As a rule of thumb it’s preferable to have your A/R base spread over a number of clients, with no one client becoming a huge part of your overall sales. That issue is certainly able to be resolved if in fact that's the case with your firm, but widespread A/R clients is in fact the preferred business model.

While in almost all cases Canadian business financing vehicles work best with established companies we do point out to clients that a start up firm can in fact set up a proper facility and benefit in the same manner.

While very small invoice transactions can be financed typically larger invoice amounts lend themselves best to this method of finance.

So those are some of the points that define your eligibility for a cash flow financing facility. To originate a facility you must be able to produce aged receivable reports, financial statements, and basic info around your business model.

Our recommended facility is confidential AR FINANCE, which allows you to bill and collect your own receivables. Generally this type of facility has a higher level of due diligence involved, but your firms reaps all the benefits of cash flow financing and remains in full control of all aspects of the day to day routine.

Speak to a trusted, credible and experienced Canadian business financing advisor
who can assist you in setting a proper facility that puts you in full survival, and hopefully growth mode for future sales and profits.





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

Cost of Factoring Finance :Making The Case For Accounts Receivable Financing

Tweet


In The Market For A Liquidity Solution? Try Confidential Invoice Receivable Financing!

OVERVIEW – Information on the cost of factoring finance and why Canadian business owners and financial managers should consider adopting an accounts receivable financing facility with confidential invoice and receivable financing for cash flow and profit growth

Accounts receivable financing is a solid way to overcome the working capital and cash flow challenge your firm faces... pretty well every day. Understanding the true cost of factoring finance, and its benefits is therefore important. Let's dig in.

Let's weigh in on those two issues and try and help you solve your Canadian business financing needs - our comments are mainly addressed to small and medium sized companies in Canada, but we can assure you the big boys come to talk to us about these problems also. They use the same solutions - just with fancier names!

The problem? It's simply that the ability to maintain ongoing liquidity continues to be the largest challenge in business today.

The ability to get proper business financing credit and the perceived cost of factoring finance is always a discussion point we have with clients. Working capital and cash flow are needed to keep up to your day to day operations, let alone grow your business in the manner that you want to.

No naysayers here, so let’s address our real subject here, which is accounts receivable financing, the cost of factoring financing ( that's what it is commonly known as ) as well as the benefits of what we feel is the greatest secret in Canadian business today, a confidential invoice and receivable financing facility.

So what’s it all about? A true accounts receivable financing strategy is actually quite simple. The paperwork has you selling your sales as you generate them - receiving cash, the same day! That of course is better than waiting 1, 2, and yes dare we say 3 months to collect your A/R. That brings us nicely into the area of the cost of factoring finance - which in Canada ranges typically to 1.25 -2% per month.

Is that expensive? Not necessarily, but you decide based on these facts. This charge, which is known in the industry as a discount fee, not an interest rate per se, can be significantly offset by your new ability to take supplier discounts in the same amount, as well as purchase more effectively.

The positive intangible around this is that you will build better supplier relationships than your competitors probably have, simply because suppliers love being paid.

And don't forget what we said early, which is that you , instead of waiting 60-90 days to get paid have cash flow to sell more and creates profits to offset this financing cost .

A winning combo?

Increased cash flow to reduce payables

Unlimited cash flow based on your sales growth

(We have met customers who have negotiated 5% better pricing with their suppliers based on their new found ability to pay cash.
The best type of accounts receivable financing facility in Canada is what we call a Confidential Invoice Financing. You bill and collect your own invoices, unlike your competitors who use traditional ' old style ‘factor financing.

Intrigued? Interested? Hopefully not confused! Investigate the benefits of accounts receivable factoring finance with the use of a trusted, credible and experienced Canadian business financing advisor. It's a cash flow 101 great strategy.


7 Park Avenue Financial :

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 .


7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

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