A Factoring Program Via An Account Receivable Financing Strategy Is A Great Reason To Reverse A Tsunami Cash Outflow

Unlocking The Curse Of Carrying Receivables

OVERVIEW – Information on account receivable financing in Canada. How does a factoring program and A/R finance solution offset the risk and cost of carrying customer accounts



Account receivable financing in Canada is sort of the Canadian business owner/financial manager’s way of reversing the curse. The curse? It's of course carrying your accounts receivable. And a receivables factoring program is one solid method of eliminating that curse. Let's dig in.

For Canadian business the level and importance of carrying A/R is dependent on several key elements. They include the quality of your customers, the size of individual transaction/invoices, and whether your product is a product... or a service.

A/R financing addresses all of those issues. If your firm cannot qualify for traditional bank financing, but can generate clean invoices that demonstrate your clients have received the products and services they have bought or contracted for you in effect have unlimited access to business credit . That's a surprise to many clients who often feel challenged in their ability to obtain business cash flow/capital.

The other key point around a successful invoice factoring program is the ability of your firm to take on an unlimited amount of business. Again, that's a surprise to the Canadian business owner / manager who feels constrained in their ability to grow their business.

There is an interesting analogy we can make about the pricing around A/R finance. Many Canadian businesses offer a discount to their clients for prompt payment, that discount typically is in the 2% range. While the majority of your clients can't take that discount (they have their own cash flow problems!) the pricing around a factoring program is quite similar. By that we mean that financing receivables works in essentially the same manner - you forgive that 2% to get all your A/R, or as much as you want, financed immediately the day you bill for your products and services. Talk about co-incidence!


One of the key ' power issues' around a receivables factoring program revolves around the issue of ' turnover'. While many view the financing more expensive than bank financing (we’re assuming they think they qualify for unlimited bank financing!) the reality is that if your sell, finance your A/R, generates profits, and keep selling more and repeating that process your firm is an instant winner in the profit/growth game. So yes you should always weigh the cost of account receivable financing against all your alternatives more often than not you will find it's always there, and always available.

By the way, owners, investors in your firm, and any lenders you have, term or otherwise will always look at the way you manage you cash flow, predominant via current asset mgmt.

Why are you always going to need some level of AR financing? If you're growing the amount of receivables you have will grow commensurately with your level of sales. (That situation will worsen when if you manage your accounts poorly).

By the way your gross profit margin is always a factor in considering how you finance your A/R effectively. In a perfect world you will have high margins and high turnover and good clients. (It’s not a perfect world by the way!) A great way to track your effectiveness in A/R mgmt and financing needs is simply to chart sales levels and A/R levels together.


So yes, carrying A/R is a curse of some manner. But don’t forget it allows you to grow sales, generate profits, and take your company to the next level. An effect factoring program via account receivable financing is a great way to address the issue. Our recommended solution is by the way is CONFIDENTIAL A/R FINANCING, allowing you to circumvent the traditional factoring program and bill and collect your own accounts. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business financing solutions.


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 = Accounts Receivable Financing Expertise


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South Sheridan Executive Centre
2910 South Sheridan Way
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Phone = 905 829 2653

Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

Stan Prokop

You Have Factoring Questions – Tips on Best Factoring Program and Factoring explained

We forgive you, and we are sure everyone else does also... for what...? Simply because you keep asking about the best factoring program out there and quite frankly you have factoring questions on this ‘relatively’ newer form of business financing.

So, factoring explained. Let's cover off some key basics and arm you with data to make an informed decision as to whether his type of Canadian business finance works for you.

Step 1 - understanding what we are talking about. It couldn’t be more simple. As you generate sales and receivables you enter into a ' program' to sell those receivables to a third party. As can be imagined, you receive a discounted price for your receivables , because you are getting cash today for something that would normally be collected 1, 2, and three months out .

The cost of factoring is always a key discussion point with our clients. The industry refers to this as a ' discount fee', and in Canada that fee is quite frankly all over the place. We can make a general statement thought that typically the fee is in the 1- 3% range. We can hear our clients already. ‘We’ll take the 1% please!". The reality is that you do have some control over the pricing in your factoring program, because the key drivers of the pricing are quite simple - the size of you A/R portfolio, the number of customers, where they are located, and their overall credit quality.

While customers tend to always focus on price in this discussion we frankly tell clients that the factoring questions they should be focusing on are more important - how does the program work on a day to day basis and how does it affect my clients and my business processes.

On a day to day basis you are advanced, as you generate invoices, approximately 90% of the invoice value - generally the same day you cut the invoice. Why only 90%. Simply because the finance firm holds back that 10 % as a reserve or buffer and it also covers off the financing cost. Let’s demonstrate a clear example. If you generated an invoice today for $100.00 you would receive via wire transfer 90$ into your bank account today. If you customer paid in 30 days ( you wish!) and the factor firm priced your program at 2% then when your customer paid the invoice you would receive your other 8 dollars back, the 2$ being the finance charge . It's as simple as that.

Its not hard for our clients to see some of the immediate benefits - all of a sudden ' factoring explained ' requests become quite clear - it frees up cash flow instantly for general working capital purposes, suppliers can be paid on time, and you can purchase additional products and services that you need to grow your business on a daily basis .

Factoring , aka ' receivable discounting' is different from banking - it comes at a higher cost , and works on a day to day basis significantly differently than if you were able to facilitate a bank line of operating credit . The harsh reality is that while many banks are pushing back on receivable and inventory facilities for small and medium business the factoring industry has kicked into hyper growth mode, seizing the opportunity to finance the liquidity gap in Canadian business.

Speak to a trusted, credible and experienced Canadian business financing advisor who will guide you through the process for success in Canada's newest mainstream business financing strategy.
on factoring questions raised by Canadian business . How does a factoring program work, what does it costs . Factoring explained from the terms of benefits and daily processes .
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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 6 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/factoring_questions_factoring_explained_program.html