Here’s One Method Of Saving Your Company From Cash Flow Challenges!
Receivable financing factoring is a fairly simple process of funding working capital needs. The process? It's as follows - As you generate sales and invoice your clients for goods and services you have delivered ( Yes, service companies can also be financed in this manner!) your finance factor company buys those from you based on an agreement being in place to do so.
HOW DOES FACTORING WORK? WHAT IS THE COST OF FINANCING ACCOUNTS RECEIVABLE FROM A FACTOR COMPANY?
You typically receive 90% of your funds the same day or within 24 hours, the balance is remitted to you as soon as your client pays, less finance costs. In Canada, these costs average 1.5 - 2% per month - that is a fee and not an interest rate! (Various criteria affect your rate, more about that later). The factoring fee is an oft-misunderstood issue in a/r finance.
WHAT IS THE BEST TYPE OF FACTORING FACILITY
In Canada, the majority (99.9% is pretty well a majority don't you think) require that payments by your clients go directly to the factoring company. We're not big fans of that scenario, so that's why our recommended and preferred solution to clients is a CONFIDENTIAL RECEIVABLE FINANCING facility, allowing your firm to bill and collect your own A/R. That is our opinion is the optimal solution.
A CLOSER LOOK AT FACTORING RATES
Back to those accounts receivable financing rates, which tend to be a point of major discussion when we're facilitating this type of solution? Your overall rates are generally based on the following criteria - the size of your receivables is one. However, make sure you understand that if you're dealing with the right firm you are not required to finance your entire A/R portfolio all the time. You choose when you want to fund and in what amount. And that of course means you only pay for what you use. That's a good solution, right? It's a solid alternative to the traditional line of credit and a great way to finance the balance sheet for business growth.
OTHER FACTORS AFFECTING ACCOUNTS RECEIVABLE FINANCING PRICING
Other factors that affect pricing include the general quality of your customer base, the number of clients you have, average invoice sizes over time, and the overall quality of both your own firm’s finances as well as your client’s general reputation. That’s a lot of qualifiers but in almost all cases unless your company is in a death spiral you will get the financing you need. That's why accounts receivable finance is a clear alternative when traditional bank financing is not available.
The thing about accounts receivable finance is being educated on who to deal with, it's one form of business finance where a ' word to the wise ' is a valuable gift! Many Canadian business owners and financial managers are intrigued by f factoring; they simply don’t have enough quality information to digest why it might work for them.
KEY ISSUES TO CONSIDER IN A/R FINANCING / ACCOUNTS RECEIVABLE FACTORING
When we sit down with clients we talk about a number of key issues in the whole A/R financing process.
That includes the 9 key issues -
1.Benefits of Factoring /Accounts Receivable Financing Accounts & Factoring finance
2.The value of an advisor or consultant
3.Cost of Receivables Factoring & Understanding how factoring fees are applied
4.Due diligence required to set up a facility/importance of owner credit history
5.Tips and tricks to enhance maximum cash flow via invoice factoring
6.Your firms newfound ability to take on larger business
7.Why negative perceptions of this type of finance abound
8.Accounting/banking issues that come with this type of short term business funding facility
9. The merits of non-recourse factoring versus recourse factoring
CONCLUSION
If you're looking for the straight goods on dealing with an asset-based factor company seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow needs.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
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.
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
