Factoring In Canada – Invoice to Cash Conversion – Benefit of Alternative Financing

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YOUR COMPANY IS LOOKING FOR FACTORING IN CANADA FOR BUSINESS FINANCING! 

Instant Cash Flow Solutions: Understanding Factoring Financing in Canada

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?

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Receivable Financing in Canada: The Ultimate Strategy for Business Growth 

 

Introduction -  Understanding Factoring Financing for Accounts Receivable in Canada

 

In today's economic climate, Canadian business owners and financial managers are constantly exploring alternative financing options.

 

Factoring in Canada, known as receivable financing or discounting, stands out as an increasingly popular strategy. This guide will help you understand how it works and its many benefits tailored to the Canadian market.

 

The Emergence of Factoring in Canada

 

Factoring/invoice financing may seem like a recent trend, but it's a method that's been around for a century in Canada.

 

With the constant need for innovative cash flow and working capital solutions, businesses of all sizes have started to embrace this form of financing to cash flow unpaid invoices for a ' factoring fee', versus unsecured bank financing. Banks do not offer factoring services - as they finance receivables under bank business lines of credit.

 

Debunking Myths and Understanding the Process

 

At 7 Park Avenue Financial, we feel the mysterious aura around factoring needs to be dispelled. It's time to focus on the actual merits of this strategy for business owners, especially in the context of an immediate working capital solution and cash flow financing.

 

 

 Traditional Financing Options 

 

Canadian businesses can choose from various asset financing solutions, such as working capital term loans. However, these often can lead to increased debt levels and can negatively affect the balance sheet and overall leverage.

 

 

 Equity Financing: A Double-Edged Sword 

 

Another alternative is injecting additional equity into the company, which may dilute ownership. This option is usually less attractive to many Canadian business owners.

 

  

  

 Factoring as a Win-Win Solution    

 

Factoring is a unique solution that doesn't increase debt or dilute ownership. Financing current assets like receivables allows you to maintain control over your business while enhancing cash flow.

 

 Factoring as an Alternative Financing Mechanism

 

Factoring is the immediate sale of accounts receivable invoices, offering a flexible and customized approach. Business owners can factor in one,  several invoices or all, retaining complete control over their operations.

 

  

Benefits of Factoring  

 

This method provides immediate cash flow, enabling businesses to pay suppliers, buy more inventory, and generate sales and profits without additional debt.

 

 Determining if factoring financing is right for your business depends on your specific needs and financial situation. Factoring may be an excellent solution if you have outstanding accounts receivable and need immediate cash flow.

 

Consider factors like your cash flow needs, your industry, and the terms you usually have with clients. Consultation with a financial advisor or a factoring specialist in Canada can provide tailored insights based on your unique situation around different factoring companies and their financing solutions.

 

• Debt-Free Funding: Since invoice factoring is not a loan, it provides funding without adding debt.
• Non-Dilutive Capital: It doesn't dilute ownership or control over the business.
• Unlimited Access to Capital: There's no ceiling on the amount that can be obtained through factoring.
• Faster Turnaround Time: Compared to bank financing, factoring offers quicker access to funds.
• Saves Time on Accounts Receivable: Factoring helps manage accounts receivable, saving time that might be spent chasing unpaid invoices.

 

  

 Choosing the Right Factoring Partner in Canada  

 

The challenge is not factoring itself but selecting a trustworthy and experienced partner. Competitive rates, control over the process, and maintaining customer relationships are essential. Missteps in these areas could lead to undesirable consequences. Talk to the 7 Park Avenue Financial team!

 

 Pricing and Expert Guidance

 

Pricing is a critical aspect in Canada. Without guidance from a credible business financing advisor, setting up a non-optimal facility at a non-competitive price is risky.

 

 

 Conclusion:  Factoring in the Canadian Business Landscape

 

 

For owners and financial managers of small and medium sized companies  Canadian business borrowers seeking to thrive in a competitive market, factoring could be the key to unlocking untapped potential.

 

Factoring allows businesses to fill cash flow gaps without committing to a long-term loan, enabling them to cover recurring expenses like payroll, rent, and utilities while waiting for clients to pay their invoices.

 

Additionally, it offers the financial flexibility to fund growth strategies, invest in new equipment, and make other significant purchases that promise strong returns on investment. It also provides an opportunity to capitalize on seasonal business trends, such as buying inventory in bulk, thus leveraging timely market opportunities.

 

In conclusion, factoring remains a vital and popular financing strategy in Canada. It is a flexible solution that allows business owners to liquidate accounts receivables within the balance sheet's current assets as needed. Funds are available instantly, enhancing the potential for growth in sales and profits.

 

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can provide you with all your business financing needs.

 

 

  

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

 

 

 What Is Factoring Financing, and How Does It Work in Canada?

Factoring financing is selling accounts receivable invoices to a third party, called a factor. It provides immediate cash flow to Canadian businesses, enabling them to pay suppliers and invest in growth without additional debt.

 

How Can Factoring Help My Canadian Business Grow?

Factoring services allow your company to convert unpaid invoices/receivables into instant cash, providing liquidity that can be invested back into the business. This enables Canadian companies to buy inventory, pay suppliers promptly, and take advantage of growth opportunities without waiting for clients to pay invoices.

 

Are There Risks Associated with Factoring Financing in Canada?

 

 Like all financing options, non-bank accounts receivable financing has its risks, such as selecting the wrong factoring partner. Working with a reputable and experienced partner such as 7 Park Avenue Financial, a leading finance company,  can mitigate these risks and ensure that you secure a competitive rate without damaging customer relationships.

 

The business owner/ and financial manager should also clearly understand factoring fees, as the lender price is a fee, not an interest rate per se.

 

If an invoice remains unpaid, the company is still responsible for the invoice if they have not chosen a non-recourse factoring solution.

 

• Customer Contact Required: Invoices must be verified, which may require contacting customers. This could potentially affect relationships with customers. At 7 Park Avenue Financial, we recommend Confidential Receivable Financing as the optimal solution - allowing clients to bill and collect their own invoices while retaining all the benefits of receivable finance.
• Complicated Bookkeeping: Factoring can be complex to record in accounting, adding a layer to financial management.
• Potential Hidden Fees: Some factoring companies may charge hidden fees like service fees or minimum volume fees, though it's noted that not all companies, such as FundThrough, have these fees.

 

If an invoice remains unpaid the company is still responsible for the invoice if they have not chosen a non-recourse factoring solution.

 

Does Factoring Financing Bring Debt to My Business?

No, receivable factoring financing is not considered debt. Instead, you are selling your receivables at a discount to a factoring company, converting assets into liquid cash without adding liabilities to your balance sheet.

 

How Can I Find the Right Factoring Partner in Canada?

 

 Finding the right invoice factoring companies for your business requires due diligence. Look for a reputable firm with a business financing reputation. and experience in your industry, competitive rates, and transparency in their process.

Seeking guidance from a credible business financing advisor in Canada can also help you identify the best fit for your needs regarding factoring companies in Canada.

 

 What Types of Businesses Can Benefit from Factoring Financing in Canada?

Factoring financing can benefit various businesses in Canada, from start-ups to established enterprises. Industries that deal with extended payment terms or seasonal fluctuations in cash flow often find factoring companies particularly helpful. It's a versatile financing option tailored to suit different business needs and sectors under a factoring contract / factoring agreement.

 

Are There Any Specific Legal Regulations for Factoring in Canada?

 

Yes, invoice factoring is subject to various legal regulations in Canada, and it's essential to comply with these laws. Engaging with a factoring partner who understands the legal landscape, such as licensing, consumer protection, and privacy laws, ensures a smooth and lawful process. It's advisable to consult with a legal or financial professional familiar with Canadian regulations to navigate the complexities.

 

How does factoring Work?

 

1. Selection of a Factor: Many independent and bank-affiliated factoring companies specialize in different business sizes, volumes, or industries (e.g., textiles).
2. Review Process: The chosen factor will assess the client's creditworthiness and your past success with invoice collection.
3. Negotiation: If approved, you will negotiate with the factor to sell your invoices. Typical arrangements might include paying 85% to 90% of the invoice's face amount and advancing a percentage based on factors such as client creditworthiness.
4. Fees and Charges: Expect to pay fees ranging from .8% to 1.5% of the total invoice amount for every 30-day unpaid period after factoring. These fees might be negotiable and can vary between factors.
5. Payment Process: Payments are usually advanced within one to three days. The factor then collects the total invoice value from your client, and once paid, they will pay the remaining balance to you, minus any fees.

 

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

Why Do Companies Factor Receivables ? Cash Flow !

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YOUR COMPANY IS LOOKING FOR CANADIAN FACTORING FINANCING!

Cash Flow Revolution: How Factoring Receivables Could Be Your Business's Secret Weapon

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

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Revolutionizing Canadian Business Financing: Unveiling the Power of Receivables Factoring

 

 

INTRODUCTION 

 

Receivables invoice factoring has a rich history in Canada, spanning over four decades. However, the surprising reality is that numerous business owners and financial managers remain unfamiliar with this potent financing tool and its mechanism of pledging receivables. This article delves into the factoring world, highlighting its dynamics/benefits.

 

 

SOME BACKGROUND ON FACTORING RECEIVABLES FOR CASH FLOW 

 

Interestingly, the origins of A/R factoring can be traced back to the fashion and garments industry. It's a peculiar twist of fate that factoring itself is now in vogue across various sectors. This section explores the evolution of factoring, highlighting its diverse applications and growing significance.

 

FACTORING VERSUS TRADITIONAL BANK LOANS - THE NEW SHIFT IN FINANCING

 

While many companies lean towards pledging receivables to secure a line of credit from traditional banks, the harsh reality is that numerous firms fail to meet the stringent criteria set by Canadian chartered banks.

 

As a result, alternative financing solutions like factoring and invoice discounting come into play, offering similar cash flow solutions albeit at a higher cost. This section compares the merits of factoring against traditional bank loans, emphasizing the accessibility and flexibility of factoring for businesses.

 

 

HOW DOES FACTORING WORK? 

 

For most Canadian business owners and financial managers, the limitations of a capped line of credit are well-known.

 

The borrowing facility is often tethered to personal guarantees, collateral, and loan covenants that curtail business operations. This segment uncovers the intricacies of factoring, detailing its function as an avenue to unlock immediate advances against accounts receivable. The constraints of traditional credit lines are contrasted against the advantages of factoring, highlighting its potential to accelerate growth.

 

 

DIFFERENT TYPES OF FINANCING TAILORED TO YOUR BUSINESS NEEDS 

 

In the realm of factoring, diversity thrives. Various options cater to different business requirements, from full notification invoice discounting to asset-based lending.

 

This section delves into the different facets of factoring, elucidating the nuances of each type. Traditional vs. non-notification facilities are explored, emphasizing how Confidential Receivable Financing empowers businesses to retain control over credit relationships and operational decisions.

 

 LET THE 7 PARK AVENUE FINANCIAL TEAM DISPEL FACTORING MISCONCEPTIONS 

 

 

Factoring in Canada is defying stereotypes that associate it solely with distressed companies. Contrary to these assumptions, many prominent corporations in Canada leverage factoring through asset-based lending arrangements. This segment challenges common misconceptions and underscores factoring is a strategic tool that drives growth and profit enhancement.

 

  

EMBRACE NON-NOTIFICATION FACTORING  

 

The path to optimal factoring involves collaborating with a seasoned business financing advisor with a proven track record. By gaining expert insights, businesses can harness the advantages of a proper non-notification working capital factoring facility. This section emphasizes seeking guidance to make informed decisions that amplify growth and financial success.

 

  

 KEY TAKEAWAYS  

 

  

 Unlock Your Business's Capital: Invoice Factoring Is Fast and Flexible Funding for Small Business Owners

 Invoice factoring cash flows tied-up capital from outstanding receivables.

 A/R Financing is a reliable funding option for predictable cash flow. Numerous factoring companies cater to new, growing, and established Canadian businesses.
  The Process of Factoring: From Submission to Cash in Your Bank Account

   Businesses submit invoices for funding.

   Business owner receives cash minus a fee.

  The customer pays the factoring company as per invoice terms.

   Exploring Factoring Types: Tailoring Financing Solutions to Your Business

   Whole turnover, selective, and spot factoring options for small businesses

   Recourse and non-recourse factoring structures.

   Pros of Factoring: Debt-Free Funding and Quick Access to Capital

   Debt-free and non-dilutive financing.

   Faster turnaround compared to traditional bank loans.

   Unlimited capital access and time-saving benefits.

   Cons of Factoring: Considerations and Drawbacks to Keep in Mind

    Verification of invoices may require customer contact for companies not using Confidential  Receivable Financings.

    Understanding Factoring Costs: Funding rates are 9% / annum - 1.125% / mo range.
    Factoring applies to businesses of all sizes and industries.

    A common practice for commercial clients in staffing, oil and gas, freight factoring / trucking companies, and other manufacturing and distribution sectors 

 

CONCLUSION  

 

Factoring receivables is more than a financial transaction; it catalyzes transformation. As Canadian business owners embrace the diverse benefits of factoring, they pave the way for innovation, expansion, and sustainable growth. Want to work with a leading financing company/business advisor who wants to be a business partner?

 

Call 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor helping reshape Canadian companies' business financing landscape.

 

 

  

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

 

What exactly is receivables factoring, and how does it differ from traditional bank loans?

 

Receivables factoring is a financing solution where a business sells its accounts receivable to a third-party (factor) at a discounted rate in exchange for immediate cash. This contrasts with traditional bank loans that involve borrowing money and repaying it over time with interest. Factoring provides quicker access to funds without incurring debt.

 

 How does factoring help businesses overcome the limitations of capped lines of credit?

Traditional credit lines often come with restrictions like personal guarantees, collateral, and covenants. Factoring eliminates these constraints by converting outstanding invoices into cash, allowing businesses to maintain a healthy cash flow and fuel growth without relying solely on credit limits.

 

What are the different types of factoring available for Canadian businesses?

 Factoring comes in various forms, including full notification invoice discounting, asset-based lending, and non-notification facilities. Full notification involves managing credit and collections, while non-notification options like Confidential Receivable Financing let businesses maintain control over customer relationships and credit decisions.

 

Is factoring mainly for struggling companies, or can successful businesses also benefit?

 Factoring is not just for distressed companies. Many thriving businesses, including some of Canada's largest corporations, use factoring to optimize their working capital and enhance cash flow. Factoring can act as a strategic tool for growth and profitability.

 

 How can I ensure I'm making the right decision with factoring?

Seeking guidance from experienced business financing advisors such as 7 Park Avenue Financial is crucial. They can help you understand the nuances of factoring, tailor a solution to your business needs, and ensure you leverage the advantages of a non-notification working capital factoring facility for sustained growth and financial success while providing competitive factoring fees.

 

Is cross-border factoring available?

Yes, cross-border factoring is available from most firms who offer factoring services - Cross-border factoring involves companies from different countries engaging in factoring transactions. However, it can be more complex due to variations in legal and business practices between countries.

 

Is factoring available for startups also?

 

Yes, factoring can be available for startups from different factoring companies, although it might depend on the specific circumstances of the startup. Some factoring companies might require a certain level of operational history for smaller or a minimum volume of receivables from medium sized businesses before providing financing.

 

How does Receivable Financing / Factoring impact the balance sheet?

 

Factoring involves selling accounts receivable to a third party (the factor) at a discount. This transaction affects the balance sheet by increasing cash (or reducing accounts receivable) and increasing liabilities. The sale of receivables generates immediate cash but also creates a liability to the factor.

 

How Can Factoring Help With Business Expansion?

 

Canada Invoice Factoring /invoice financing can help business expansion for SME / Mediumsized companies by providing immediate cash flow from unpaid invoices. This cash can be reinvested into the business for various expansion activities such as purchasing inventory, hiring new employees, expanding marketing efforts, or entering new markets.

 

Is credit insurance available when factoring receivables?

 

Credit insurance is often available for receivable factoring from many of the best factoring companies as an add-on to factoring services. It protects the business against the risk of non-payment by customers if an invoice remains unpaid for goods and services delivered. This can be especially important when dealing with high-value invoices or customers with uncertain creditworthiness.

 

How does factoring a/r compare to traditional financing?

 

Factoring and traditional financing (like bank loans) differ in several ways. Factoring companies in Canada provide quick cash for immediate working capital based on outstanding invoices for a factoring fee. Traditional loans and bank financing involve borrowing a lump sum with periodic repayments. Factoring is often easier to qualify for and is linked to a business's receivables, while loans may require collateral and a strong credit history.

 

How is factoring a tool for working capital and cash flow management?

 

Factoring/accounts receivable financing via an invoice factoring company improves working capital and cash flow by converting unpaid invoices into immediate cash. Instead of waiting for customers to pay their invoices, a business can receive a significant portion of the invoice value upfront from invoice factoring companies via invoice factoring services that can help to cover operational expenses, meet payroll, invest in growth initiatives and meet their cash flow needs.

 

How do you qualify for factoring?

 

Companies with commercial clients selling on trade credit terms to generally credit-worthy customers are eligible for factoring finance solutions. Typically, companies do not qualify for traditional bank financing and are incorporated in Canada with reasonable sales revenues.

 

Do businesses need good credit for factoring?

 

Companies that do not have solid financial or good business credit are still eligible for factoring finance solutions. Financing is based on the credit quality of the clients of the business.

 

What documents do factoring companies need?

The requirements from a factoring company include the following:

Copies of invoices that are to be financed showing proof of goods and services delivered

General business application

Aged accounts receivable listing - invoices older than 90 days are not eligible for financing

Business bank account information

Articles of Incorporation / Ownership details / Business I.D. #

 

 

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

The Secret Of Factoring & Invoice Financing In Canada

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Get Rid Of Cash Flow Problems Once And For All With Accounts Receivable Factoring Companies

Factoring in Canada continues to be more and more of a financing option for Canadian business owners and financial managers.  Generally speaking, factoring in Canada is a great synonym for alternative financing. When Canadian businesses cannot raise traditional financing for working capital and cash flow solutions, factoring via invoice discounting becomes one of several viable alternatives.  

 

IS FACTORING INVOICES  A GOOD IDEA? WHO USES FACTORING

 

Factoring invoices work for all companies that sell on business credit, require money for day-to-day operations and who have a creditworthy customer base. The cost of this type of financing is quoted as a fee and not an interest rate, and companies should be able to absorb this method of finance.

 

WHEN DOES INVOICE FACTORING WORK WELL?

 

Invoice factoring works well for business owners that need money quickly, have reliable customers that have a history of paying invoices on time and can afford the fees that come with selling invoices to a third party - that party is accounts receivable factoring companies. If this sounds like your business, you might benefit from an invoice factoring solution!

 

FACTORING FACILITIES CAN BE SET UP QUICKLY AND EASILY

Part of the appeal of a Canadian factoring finance solution is a firm's ability to put this financing facility in place fairly quickly. In our experience, the facility generally takes about two weeks to finalize, from start to finish. When we compare this against a firm's time spent negotiating traditional Canadian chartered bank financing, we can easily see this as a key advantage.

 

WHAT INDUSTRIES IN CANADA USE FACTOR FINANCE

 

Almost every industry in Canada has the potential for factoring invoices. The process is also referred to as invoice discounting.  Companies that maximize the factoring process are generally those that are expanding and growing very quickly – this is probably the optimal use of factoring as an alternative financing vehicle, but in many cases Factoring in Canada is simply a survival or restructuring strategy of a temporary basis. Factoring companies in Canada are often referred to as a 'bridge' back to traditional financing.

 

Most business owners and financial managers are keenly aware of both the cost of carrying their receivables and at the same time the amount of management time that is spent on monitoring this asset, which quite often represents the largest or second-largest ‘ current asset ‘ they have on their balance sheet. (Inventory is 2nd). 

 

 

  

WHAT IS THE TYPICAL CHARGE FOR FACTORING / INVOICE FACTORING RATES? 

 

The average costs of factoring is between 1-2% and depends on factors such as monthly volume, overall credit quality of your receivables and the average invoice value. These costs are expressed as a fee, not an interest rate.

 

So when you don’t want to wait 30 to 90 days, or in some cases 90 days as seeming the norm being the norm, accounts receivable factoring is the quick and effective solution. It is somewhat more costly than traditional financing, but savvy business owners can turn the perceived high costs of factoring around in many creative ways. 

 

This can be done in very basic ways, such as increasing pricing by 1 or 2% or utilizing part of the cash flow generated from factoring to take prompt payment discounts with suppliers and negotiating better pricing on goods and services. Imagine a financing solution that gives you unlimited cash flow and whose costs can be effectively managed by smart business decisions in your business and operational and purchasing model!

 

FACTORING FINANCE IS NOT DEBT ON YOUR BALANCE SHEET

The process of factoring is really one of the key issues around why factoring was much slower to catch on in Canada, and business owners are highly recommended to research this type of financing with an experienced and credible partner. If properly structured, your Canadian factoring solutions will not require additional collateral, and they should not be confused with term debt or additional borrowing. You are simply ‘monetizing’ immediately your largest liquid asset, those receivables!

 

SOME BACKGROUND AND HISTORY ON FACTORING

 

So why has factoring become a cash flow solution of choice for Canadian businesses? If it’s so great, why haven’t you heard more about it? The truth is that factoring has been in place for hundreds (some claim thousands!) of years.  When I first heard of factoring is was always in conjunction with the textile or garment industry in Canada, much of that out of Montreal. Nowadays, factoring is pervasive in every industry.  We can easily maintain that if your firm has good receivables and your overall gross margins can handle factoring, you should consider this financing a potential alternative.

 

So what’s the ‘Canadian’ spin on factoring? We know that in the U.S., there are probably over a thousand-factor firms - these firms are looking for financing relationships with U.S. businesses. In Canada, the market and the players are, as usual, smaller in size.

 

We strongly believe that one of the reasons factoring in Canada did not catch on as quickly was simply that Canadian business owners did not like the concept that their receivable is managed via a notification process to their customer.

 

DO BANKS OFFER FACTORING

 

Banks do not offer factoring as a general rule. Instead, they take an assignment of your accounts receivables, and these ongoing receivables are collateral security for the loan or line of credit. They have security on your A/R receivables loan, unlike the factoring process, which sells a receivable.

 

So if your overall business philosophy does not foster the idea of a finance company notifying and collecting your receivable for you, you should strongly consider a non-notification financing factoring facility. This again is where you need the services of a trusted, credible, and experienced financing advisor to steer you through the Canadian factoring process.

 

In summary, Factor companies in Canada are, relatively speaking, a  newer form of financing – but has been in place in Europe and the U.S. for hundreds of years. It has major cash flow benefits, is a great alternative financing strategy, and, if managed properly, is cost-effective. 

 

One of the best Canada factoring solutions is Confidential Receivable Finance - allowing you to bill and collect your own receivables without any notification to any clients, suppliers, etc. Companies can choose between non recourse factoring and recourse factoring depending on what level of typical bad debt risk they wish to maintain of transfer.

 

Are you looking to fast-track your liquidity as a small business? Factoring services will turn your outstanding invoices into cash immediately, either the same day or within 24 hours. Talk about accelerated working capital via factoring financing!

In some cases, PO financing might be an additional service that is complementary to A/R Finance.

CONCLUSION

Processes that Canadian owners may not necessarily like around the paperwork and customer intrusion from ar factoring companies can be managed and negotiated carefully with the assistance of an experienced Canadian business financing advisor like 7 Park Avenue Financial, with a track record of success in this area of factoring program and accounts receivables as a key asset of your business.
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

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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/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Factoring In Canada | 7 Park Avenue Financial

Working Capital And Factoring In Canada. Business Financing Advice You Can’t Buy

The Past Is A Foreign Country . They Do Things Differently There


OVERVIEW – Information on working capital solutions in Canada. Factoring and Receivable Type Solutions Just Might Work



Factoring and Working Capital in Canada . We’ve been mesmerized lately by our favourite new saying - The Past Is a Foreign Country. They Do Things Differently There! It’s from the novel ‘The Go Between ‘. Can it pertain to Canadian Business Financing? We think so! Let’s dig in.

The cost of credit is the cost of not taking credit terms extended for business financing. When Canadian business owners extend, or receive business credit the credit terms are expressed as the amount of discount that is given for prompt payment, when the prompt payment discount expires, and when the invoice is due.

Let's look at an example. We might say that we are being offered 2% ten, net 30. What does that mean? It means that if we pay the invoice in 10 days we can subtract 2% of the invoice amount for our payment. We can assure you that your supplier, if it is your firm being offered the discount truly means ten days! Not take 2% and pay in 30 days as some try to do. (Those discounts are charged back.)

Let's work through an example. Supposed you are being offered 9000.00 of credit on 2% ten net 30 days. You can either pay 9000.00 x 98% = 8820$ in ten days, or of course, as we have noted, pay the full 9000.00 in 30 days. If your company is in a position to take the discount you can save a significant amount on your purchase price from that supplier.

If you wait the full 30 days you effectively borrow 8820 for 20 days, paying 9000- 8820, or 180$ of interest.
So what is the 'credit cost' in borrowing this money? The calculation is done as follows:
Credit cost = % discount / 100-%discount x 360days/ credit period - discount period.
If you work through the numbers in our example the credit cost = 36.7%.

As our example shows, the annual percentage cost of being offered a 2 % 10 day/ net 30 days scenario is almost 37%. Remember also that this discount is continually offered, so it was offered 18 times a year the effective annual credit cost is 43%!!


Selling on credit is an accepted an important part of business. From the customer perspective it's a source of financing, because you receive goods or services that you don't have to pay for until a specific future point in time, usually 30 days more often than not. As business grows between a supplier and customer the amount of financing being extended or taken grows.

So what is the final point of interest in our article? Its is as follows. More and more Canadian firms are looking at factoring and working capital financing facilities outside of bank financing. If our business could pay cash for goods and services we would take the discounts and arrange with our bank to allow us to pay for everything in Cash!


Unfortunately our balance sheets and income statements don't allow us to generate those sorts of bank facilities.
Factoring is the immediate sale of our accounts receivable for cash. It also can cost anywhere from 1 - 3% per month in 'discount fees that are taken by the factor firm.

Is that expensive? Yes. And maybe not! Because as we have seen if we can sell our receivables immediately for cash and then take supplier discounts we can offset a large portion, ( maybe all ) of the financing costs. Oh, and by the way . Confidential A/R finance allows you to regain and maintain total control over your own business . You bill, collect and still get the cash flow you need.

That allows us to be in the best of stead with our suppliers - We have cash to pay our bills and we receive immediate cash for our invoices. In a high growth scenario that's worth its weight in gold so to speak!

Factoring can serve the dual purposes of generating significant cash flow and receiving significant price or payment discounts from our preferred major suppliers.

That is a winning cash flow combination! So, yes, times are changing in business finance. It’s not the past. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow needs.



Stan Prokop - founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :


7 Park Avenue Financial = Working Capital And Factoring Solutions






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
















Stan Prokop

Why is everyone talking about Factoring and Accounts Receivable Financing in Canadian Business Circles?

There continues to be a fair amount of press about the alternative financing method known by a number of different names – These include Factoring, Working Capital Financing, Cash Flow Financing, Invoice Discounting, etc!! Let’s keep it simple and we’ll just call it factoring for our purposes.

The old cliché that the ‘cheques is in the mail ‘probably has never run more true for Canadian business owners and financial managers. Receivables, on balance, tend to be in most cases either the largest (or pretty close to it) liquid asset of the company, next to cash. And there is never enough cash.

As the economic challenges of 2008-2009 massively affected business credit liquidity all over the world, including here in Canada the other cliché of ‘cash is king’ became even more important. Many business owners we talk to continually say they are devoting too much time to collection of receivables and their working capital issues, rather than focusing on running and growing their business.

We should mention that as Canadian business owner’s work on liquidating their receivables into that much needed cash that it is, many times, the larger corporations that are paying them as slowly as their smaller customers. Larger corporations by delaying payables can increase their own cash flow rations significantly, and the smaller customer or supplier, your firm, has little leverage with such large corporations. (We won’t name any names to protect the innocent!)
Standard payment terms for most industries, more often than not, is 30 days, but it is of course not unusual for suppliers to stretch out to 60 and sometimes even 90 days.

So where does factoring come in. It certainly can be a consideration for Canadian business owners, as it alleviates the problems we have mentioned above – namely high investment in current assets of receivables and inventory, and prolonged delays of payment from even the largest customers.

The ‘factor ‘ purchases the account receivable, withholds a fee for doing that, and advances cash immediately, almost the same day, against those invoices .

Factoring has been around over a hundred years or more, and has gained huge acceptance in Europe and the U.S. – It certainly never caught on in the past to the same degree in Canada as it has in other places. Some analysts estimate that in the U.S. it’s a 100 Billion dollar business, and in Canada it’s a 4 Billion dollar business.

So let’s get back to our core theme – why is everyone talking about Factoring. Again, it’s the instability of the financial markets and the difficulties that smaller and medium sized firms have in arranging ‘adequate’ business financing. We emphasize adequate because yes, it is great to get a line of credit at your bank of say $ 100,000 at current Canadian rates of 5 or 6 per cent per annum, but if you need 300,000.00 and all your collateral is tied up what good does that do – not a lot.

We believe factoring has done when primarily because of the tightening of chartered banks – Business owners go where the money goes, so alternative non traditional financing such as factoring will continue to do well when banks tighten credit facilities
As Canadian business optimism improves, but credit remarkets remain unstable to a certain degree factoring continues to be a solid viable solution. If your firm has assets such as receivables and in some cases inventory or purchase orders the Canadian business owner can obtain immediate cash for those assets. Most of these firms would not qualify for larger term oriented loans with various financial requirements such as other collateral, debt covenants, operating covenants, etc.

Depending on which type of factor facility the Canadian business owner chooses the facility can also reduce his collection and administrative work.

The best candidate for a factoring facility is a high growth firm with good gross margins. That profile is very important. Why is that? It’s because factoring is more expensive than bank financing, so the firm gets all the cash it needs, but margins are eroded by a couple per cent age points. A low margin, commodity type business is not optimal for a factoring solution...
In Canada, as we have noted, factoring is still not widely accepted, in the U.S. it is dominated by a couple of huge players and probably a thousand smaller firms.

In summary, factoring continue to gain traction in the Canadian business financing marketplace. It is more expensive than bank financing, but provides a lot of liquidity that could otherwise not be found. Business owners need to thoroughly investigate this type of financing if they feel it’s appropriate, or engage the services of a trusted financing advisor in this area with credibility and solid partner firms in this area.