Revolutionize Your Cash Flow with Receivables Business Financing & Factoring

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Instant Capital: Transform Your Receivables into Cash

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        Financing & Cash flow are the biggest issues facing businesses 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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Mastering Business Receivables Financing : A Factoring Strategy for Growth

 

Discover the untapped potential of factoring because your receivables could be the key to immediate cash flow and growth

 

  

The Factoring Advantage: Funding Solutions for Modern Businesses  

 

 

Introduction to Receivables Financing

 

Have you forgotten something? Perhaps it is just a case of overlooking or not knowing all your alternatives in business financing for working capital. Factoring receivables for cash flow is just one of those strategies you may have missed, not heard about, or not have fully understood accounts receivable financing, or investigated.

 

Understanding Factoring

 

 

Let's do a basic 'primer' on this somewhat unknown or misunderstood form of business financing. Many Canadian business owners or financial managers mistake factoring or the selling of your receivables as a 'loan'.

 

That is not the case, it’s simply the case of monetizing or cash-flowing your probably largest current asset, your receivables, and paying a financing charge or discount fee for the service.

 

  

How Factoring Works  

 

In general, approximately 90% of the value of an invoice is advanced to you pretty well the same day that you issue your invoice. Your regular obligation is to provide proof of delivery or acceptance of that invoice related to your goods and services.

 

Factoring is Not Just for Small Businesses  

 

We think that factoring receivables seems to be viewed as a small business financing tactic. Still, we can assure readers that some of the largest corporations in Canada utilize the tactic also - in some cases, it's simply jazzed up with a fancier name such as 'securitization' or financing via 'asset-backed commercial paper ', etc. So the big boys are doing it also! Don't forget that.

 

  

Factoring as a Gateway to Global Expansion

 

An uncommon perspective on receivables business financing is viewing factoring as a stepping stone to international trade.

 

By utilizing factoring services, companies can more readily finance international sales without the typical barriers associated with cross-border transactions, such as currency fluctuations, differences in legal systems, and the increased risk of non-payment.

 

Debt Factoring can provide the necessary cash flow to explore new markets and maintain operations while waiting for payments from overseas clients, effectively allowing businesses to scale globally with less financial strain.

 

Choosing the Right Factoring Partner

 

When clients talk about moving forward on this type of business financing, the largest challenges seem to be their ability to understand pricing, pick the right firm to work with, and finally, ensure that the daily flow of paperwork around this type of business financing makes sense.

 

If the wrong factor partner is selected, there are countless stories of firms that have experienced a negative level of customer intrusion around the whole factoring receivables process.

 

So choose your partner well, and probably the best info or advice we share in this regard is to seek the services of a trusted, experienced and credible business financing advisor who can steer you toward financing and cash flow success.

 

Qualification and Costs

 

A common question related to our 'primer' on factoring (also called invoice discounting or receivable financing) is: 'Do we qualify?'

 

The short and positive answer is absolutely!: if you have receivables, you qualify, that's what this form of business financing is about.

 

Addressing Factoring Financing  Concerns

 

Many business owners or their financial managers struggle with the cost of this type of financing which typically is in the 1 to 1.5% range in Canada.

 

The bottom line on the costs is simply that they will vary relative to the size of your receivables, the perceived credit quality, and the type of firm you contract with in this regard. That’s where the help of a Canadian business financing expert can help you immensely.

 

In fact, more often than not that expert can demonstrate how you can significantly reduce the cost of financing receivables to almost zero in some cases, but certainly a reasonable amount in most situations.

 

Understanding the cost implications of factoring is pivotal for businesses considering this financial tool for cash flow management. Factoring rates, often perceived as higher than traditional lending rates, must be assessed in the context of their impact on a company's cost of capital.

 

These fees are generally a percentage of the invoice value and can range from 1% to 2%, depending on the industry, volume of receivables, customer creditworthiness, and the factor's policies.

 

While these rates may initially seem steep compared to conventional loans, the overall cost of capital might be lower when considering the ancillary benefits, such as improved cash flow, credit risk mitigation, and administrative savings.

 

Negotiating factoring rates is a strategic approach to lowering the overall cost of capital. Businesses must conduct due diligence to understand the fee structure — which might include service fees, credit check fees, and other potential costs — and compare them with the comprehensive costs of other credit facilities.

 

It is essential to engage in transparent discussions with factors, armed with a clear understanding of one’s outstanding invoices and the credit quality of customers, to negotiate more favourable terms. The key advantage here is that, unlike fixed traditional lending rates, factoring fees can be more flexible and tailored to a company's specific needs and risk profile.

 

Companies might find that the effective rate of capital through factoring is competitive, especially when they account for the speed of access to cash, the reduction in bad debt expenses, and the elimination of the costs associated with managing receivables internally.

 

 

Benefits of  Factoring and A/R Financing Strategies

 

 

Optimizing working capital and balancing cash flow are critical aspects of a business's financial health. Factoring and Accounts Receivable (A/R) financing are two tools that can effectively manage these areas. Here’s how a business can leverage these options:

 

• Immediate cash flow from credit sales via factoring, enhancing liquidity.
• Reduced collection period due to factors managing collections.
• The creditworthiness of customers is critical, benefiting businesses with strong clientele but weaker credit.
• Capital from factoring is used for reinvestment, discounts, or growth without debt.
• Factoring doesn't increase debt ratios; it's off-balance-sheet financing.
• Factoring lines grow with receivables, offering flexible funding based on need.
• Non-recourse factoring transfers bad debt risk to the factor, stabilizing cash flow.
• Savings on in-house credit and collections department costs with factoring for companies using traditional factoring versus Confidential Receivable Finance
• Predictable cash flow from factoring aids in financial planning and reporting.
• Businesses can concentrate on core activities as factoring handles A/R management.
• Factoring firms' credit assessments assist in setting customer credit limits.
• Factoring provides cash flow to manage seasonal demand, supporting inventory or staff increases.

 

 

Factoring as a Financial Health Indicator:

 

Rather than just a tool for immediate cash needs, factoring can be leveraged as an indirect indicator of a company's financial health and efficiency.

 

Companies that engage in factoring can use their funding speed, the discount rate they receive, and the ease of the transaction process as metrics to assess their creditworthiness and operational efficiency. These factors can reflect how the market views its credit strength, the quality of its customer base, and its internal processes.

 

Continuous improvement in these areas, mirrored by more favourable factoring terms over time, can signal to stakeholders that the business is on a solid financial trajectory.

 

 

Key Takeaways 

 

1. Understanding that factoring is not a loan but a way to sell your accounts receivable at a discount for immediate cash can be considered the cornerstone of receivables financing. This gives businesses immediate working capital instead of waiting for the payment terms of 30, 60, or 90 days.

2. The Process of Factoring: Comprehending how factoring works is crucial. Essentially, when a business invoices its client, a factoring company pays the business a significant percentage of the invoice value upfront (usually around 90%) and then collects the total amount from the client. Once the client pays, the business receives the remaining 10%, minus a fee for the factoring service.

3. Costs of Factoring: Grasping the costs involved, typically a percentage of the invoice value, gives an understanding of the trade-off between the immediate availability of funds and the expense of the service. The fees can range from 1% to 2.5%, which can be critical for cash flow planning.

4. Qualification Criteria: Knowing that essentially any business with accounts receivable can qualify for factoring provides insight into its accessibility as a financing option.

 

Conclusion: Embracing Factoring as a Canadian Business Financing  Solution

 

So, what's our primer summary on receivables and business financing via factoring? If you’re reading this you probably have a business financing challenge. A/R financing is a method to eliminate that challenge.

 

Working hard on your finances is commendable; working smart with an expert is necessary. Investigate the solution that will bring cash to your firm’s door tomorrow.

 

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

 

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

 

What is factoring in business finance?


Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party (a factor) at a discount to obtain immediate cash.

How does factoring improve cash flow?


Receivable Factoring provides immediate cash against your outstanding invoices, reducing the waiting period for customer payments and enhancing your cash flow for operational needs.


Is factoring considered a loan?

No, factoring is not a loan. It is the purchase of your accounts receivable for immediate cash, so it doesn't add debt to your balance sheet.

What are the typical costs associated with factoring?

Costs for accounts receivable factoring can vary but typically range from 1% to 1.5% of the invoice value, depending on factors important to the accounts receivable financing company such as the volume of receivables and the creditworthiness of your customers.

Who can use factoring services?

Any business that issues invoices can use the services of factoring companies. It is suitable for businesses, from small enterprises to large corporations to use an accounts receivable factoring company to improve their cash flow.


Can start-ups or small businesses benefit from factoring?

Factoring is especially beneficial for start-ups and small businesses that need to stabilize cash flow and manage working capital when a business line of credit is not available and the factoring cash advance solution for unpaid invoices provides a working capital solution.

 

Does factoring affect my business's relationship with clients?

Factoring can be managed discreetly without impacting client relationships. It's essential to choose accounts receivable factoring companies with a good reputation reputable and respect client confidentiality.

What is the difference between recourse and non-recourse factoring?

Recourse factoring means the business must buy back any unpaid invoices from the factor, while non-recourse factoring does not require this, offering more risk protection.

How quickly can I get funds through factoring and how does accounts receivable factoring work on getting paid?

Funds are typically available almost immediately after the factor verifies the invoices, often the same day or within 24 to 48 hours.


What documents do I need to start factoring?


You must provide your invoices, proof of delivery for the goods or services billed, and possibly other documentation related to your customers and accounts receivable for a proper invoice factoring solution.


 

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

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

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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

Cash Flow Finance Solutions In Canada : Are You Part Of The Factoring & AR Financing Boom ?

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YOUR COMPANY IS LOOKING FOR  FACTORING A/R FINANCE!

ACCOUNTS RECEIVABLE FINANCING AND ACCOUNTS RECEIVABLE FACTORING SOLUTIONS

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?

CONTACT:

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

 

Harnessing Accounts Receivable Financing Solutions: An Effective Solution for Business Cash Flow

 

Cash flow finance solutions in Canada are somewhat misunderstood and growing in popularity. To ensure you are a strong candidate for the A/R Financing boom it's, of course, necessary to understand what this short-term finance tool, aka ' factoring,' is all about

 

 

INTRODUCTION 

 

Accounts receivable factoring is a game-changer in business financing, providing a practical way for companies to stabilize their financial situation and drive growth. But what exactly does factoring entail, and how can it strengthen your company's cash flow?

Factoring and financing account receivables is crucial in managing liquidity by allowing businesses to sell their receivables. This enables a company to quickly access cash, reducing credit risk and improving cash flow. Additionally, the infusion of immediate capital empowers companies to fuel their expansion, covering daily operational costs and potentially expanding their product lines or services.

 

 

WHAT IS AR FINANCING FACTORING?

 

Accounts receivable financing through factoring is a financing method that enables businesses to promptly convert their unpaid invoices into immediate cash by selling them to a third-party company. This eliminates the need for businesses to wait for their customers to settle their invoices before accessing the funds required to sustain their operations. Instead, they can sell their invoices to a factor and receive a portion of the invoice value upfront.

 

Factoring AR financing is appealing, particularly for small and medium-sized businesses, as it offers a swift and streamlined alternative to traditional financing. It enables these businesses to quickly obtain the necessary funds without enduring the lengthy and often complex procedures associated with conventional financing. Furthermore, it saves companies valuable time and resources by relieving them of the responsibility of pursuing customers to pay outstanding invoices.

 

UNDERSTANDING THE ROLE OF THE FACTORING COMPANY IN CANADA

 

The terms  'factoring and accounts receivable ' are often intertwined and sometimes misunderstood - We're going to clarify some issues and debunk some of the misconceptions about how your firm can and should be financing its most liquid asset - accounts receivable! (Next to cash, that is!) So why would a small business need cash flow finance solutions? Let's dig in!

 

When a company can't leverage bank financing through traditional sources, and if they are unwilling to take on debt via working capital loans, then factoring is one solid solution to leverage cash flow and working capital. 

 

When appropriately financed, your accounts receivable can also help address other issues on your balance sheet, such as accounts payable and government super-priority payments. Key point - when financed properly!

 

WHAT IS THE DIFFERENCE BETWEEN FACTORING AND BANK FINANCING?

 

 

At 7 Park Avenue Financial, we get that a lot - Banks in Canada do not offer traditional factoring of accounts receivable. They use your invoices are collateral for a business loan.

Factoring companies purchase your receivables, while the bank registers security against your receivables and reserves the right to contact your clients for payment if you default on a loan.

 

The easiest way to understand it revolves around who owns your receivables, i.e. Banks or financial institutions that have purchased your a/r, or the factoring company. That's the most common misconception about accounts receivable factoring and a traditional bank loan or bank line of credit.

 

Factor solutions deposit the money into your business account usually the same day, or the next date latest, as you generate sales! The sale of A/R at your option is what factor finance is all about.

 

Bottom line? Accounts receivable financing is a loan, while factoring is simply the process of cash flowing through your sales. If a bank rejects financing for your business, factoring is an obvious solution and easily accessible as long as you understand the available fees and type of facilities.

 

The advance rate on factoring finance is usually in the 80-90 percent range, which we note is also much higher than a typical bank advance on receivables which tends to be in the 75% range for your company's AR.

 

 

 

ARE THERE ALTERNATIVES TO FACTORING  AS A CASH FLOW FINANCE SOLUTION  

 

As we have hinted, factoring via accounts receivable finance is not the only be-all and end-all solution. You can add new owner equity to your business or take on debt via a cash flow loan or term debt (Bridge loans or sales leasebacks come to mind).

 

Those, of course, are fixed options and must be met, come ' hell or high water' as your lender will note. So working capital solutions such as non-bank A/R financing add no debt to the balance sheet, yet they supply the needed cash.

 

Sales revenues via your receivables investment generate profits for your firm. The goal is to ensure that key assets - your sales & receivables are financed properly - keeping your balance sheet stable. Additional term debt can render your firm 'unstable’ given that not all customers pay immediately!

 

DON'T LET A LACK OF FINANCING LIMIT GROWTH PROSPECTS

 

Not all firms must secure and access business credit lines like bank facilities or commercial factoring solutions. However, when you don't, you'll often limit growth prospects. Self-financing companies are often viewed as stable and prosperous - it's just that without external financing, they don't often grow.

 

So the solution to growth finance. It's financing your accounts receivables as you generate sales. That helps to meet business goals, increase additional profits and grow the total value of your business.

 

ADDRESSING THE COST OF WORKING CAPITAL

 

When business owners / financial managers address the cost of external financing, several scenarios become very obvious:

 

-  Continue to self-finance and limit growth and competitiveness - including the apparent challenges around working capital and daily cash flows and payment of outstanding invoices

-   Borrow on a term debt or subordinated debt basis

-   Sell receivables as you generate them - increase sales and profits and capture all the opportunity costs of additional working capital

 

Somehow our third option remains more appealing!

 

So why do we not hear more about Canadian business owners who have discovered the holy grail of financing? When we talk to customers, we know the answer - they have entered the wrong factor facilities. By the way, every industry in Canada can access a/r financing if they are selling on a business-to-business basis for money.

 

WHAT IS THE BEST WAY TO FINANCE ACCOUNTS RECEIVABLE FOR A SMALL BUSINESS?

 

The fragmented U.S. influence on factoring in Canada has many firms entering into the wrong type of facilities. We advocate CONFIDENTIAL RECEIVABLE FINANCING, also called 'non-notification factoring' with no locked-in contracts and fair, competitive pricing from the financing company. You manage your receivables until the invoice is paid, and you control the number of invoices your firm sells as cash is needed for day-to-day needs of funds.

 

 

WHAT ARE THE BENEFITS OF  ACCOUNTS RECEIVABLE FINANCING  

 

• Fixing  cash flow gaps :

  • Businesses can access cash by selling outstanding invoices to a factor.

  • No need to wait for customers to pay invoices, improving cash flow.

  • Especially beneficial for companies with extended payment terms or slow-paying customers.

• Reduced Debt:

  • Factoring AR financing helps reduce debt compared to traditional financing options from a traditional financial institution

  • No need to take on additional debt through loans.

  • It helps maintain a healthy financial position and avoid financial strain.

• Increased Flexibility:

  • Factoring AR financing offers flexibility for businesses.

  • No collateral or strict credit requirements.

  • Businesses with less-than-perfect credit can still access financing.

  • Choose which invoices to sell, giving control over cash flow.

  • Particularly useful for businesses with seasonal cash flow fluctuations or unexpected expenses.

• Leveraging Client Credit History:

  • Factoring AR financing leverages the good credit history of clients.

  • Business credit history is not typically considered.

  • Allows businesses to benefit from their clients' creditworthiness and fund day-to-day operations, paying suppliers, etc

 

 

HOW DOES A BUSINESS QUALIFY FOR AR FINANCE FACTORING?

 

To qualify for factoring AR financing, businesses typically need to meet the following criteria: Creditworthiness. While factoring in AR financing does not require businesses to have perfect credit, they still need to demonstrate that they are creditworthy.

Factors will typically look at the creditworthiness of the business's customers when evaluating whether to purchase their outstanding invoices. Outstanding Invoices To qualify for factoring AR financing, companies must have outstanding invoices to sell to a factor. Factors will typically only buy invoices that are due within 90 days.

 

Factors will typically work with businesses that are profitable or have the potential to become profitable shortly.

 

CONCLUSION - CANADIAN BUSINESS FINANCING OPTIONS

 

Business owners should ensure they understand the benefits of customer invoice factoring and selling accounts receivables, which can be done via receivable recourse factoring or non-recourse factoring, depending on whether your business wishes to maintain the credit and bad debt risk in your A/R - Non-notification AR financing offered via many factoring companies proves that   Confidential receivables finance is a solid solution allowing you to bill and collect your accounts.

 

Accounts receivable factoring allows the business owner a solid and easy way to boost cash flows and eliminate cash flow problems as they generate additional sales before your customers pay the invoice. Numerous invoice finance solutions can address your business needs and be similar to a business line of credit with competitive pricing and service fees.

 

You can also access an asset-based credit line, which is a facility that allows you to borrow against the combined value of receivables, inventories, fixed assets and real estate if the latter is applicable.

 

Cash flow success is at the heart of small businesses in Canada.  Check out the benefits of selling invoices /financing accounts receivable and receivable finance by working with Canada's best factoring and accounts receivable factoring companies to address cash flow issues.

 

 KEY TAKEAWAYS -

 

Solution for Cash-Flow Crunches:

• • Factoring provides a quick alternative when traditional loans are not readily available.

  • Offers a quick injection of cash into the business to address cash-flow challenges.

• Fast Money Injection:

  • Factoring enables companies to raise money rapidly, providing immediate cash infusion.

• Streamlined Collections Process:

  • Factoring helps expedite collections, eliminating the need to chase overdue invoices.

• Debt-Free Financing:

  • Unlike conventional loans, factoring allows companies to generate funds without incurring new debt.

• Alternative for Challenging Bank Loan Qualifications:

  • Factoring is an excellent option for businesses struggling to qualify for a bank loan due to strict lending criteria.

• Assistance with Collection Efforts:

  • Factoring can support businesses with limited or non-existent collection departments.

• Improved Cash Flow and Timely Payments:

  • Factoring ensures fast payment, enhancing the business's cash flow and maintaining healthy supplier relationships.

• Stress Reduction for Critical Payables:

  • Factoring reduces the stress of meeting terms for important payables.

• Enhancement of Customer Portfolio:

  • Factoring often results in acquiring better-paying customers, leading to an improved customer portfolio.

 

  

CONCLUSION -

 

AR Financing: The Cash Flow Solution Your Business Has Been Waiting For!

 

 

Factoring AR financing/invoice discounting offers valuable benefits for businesses seeking swift cash access with outstanding invoices. Companies can enhance cash flow, reduce debt, and gain flexibility by selling these invoices to a factor. However, businesses must evaluate factors such as fees and other considerations when selecting a factoring company. This guide equips businesses with the necessary information to decide on the suitability of factoring AR financing for their specific needs.

Speak to 7 Park Avenue Financial,  a trusted, credible, experienced Canadian business financing advisor who can assist you with your capital and cash flow needs with tailored financing services.

 

FAQ: FREQUENTLY ASKED QUESTIONS

 

What is factoring?

The cash flow solution known as factoring is an AR Financing financial solution that allows a company to sell receivables to a third party for cash via a financing company, ' the factoring company. ' Factoring companies buy the receivables at a discount, not an interest rate but a ' factoring fee. '

 

How does accounts receivable factoring work?

You send invoices to the factoring company as your business sells its products and services. Your business receives 80-90% of the invoice value immediately, and the remaining balance is paid to you when the customer pays the invoice - less a factoring fee in the .75-1.5% range.

 How can accounts receivable factoring benefit my business? 

 Accounts receivable factoring provides immediate cash flow, which can help businesses meet urgent financial obligations. It also reduces the burden of debt collection and relies on the creditworthiness of your clients rather than your credit history. Furthermore, it can support business growth by providing the necessary funds to invest in new opportunities.

 

  

Are there any downsides to accounts receivable factoring?  
 

Yes, like any financial solution, factoring has some downsides. These include the factoring fees you must pay, which may result in receiving less money than if you waited for the customer to pay. It's essential to weigh these costs against the benefits for your specific business situation.

  

What types of businesses can benefit from accounts receivable factoring?   

 

Any business generating B2B or B2G invoices can benefit from accounts receivable factoring. This includes businesses in various industries like manufacturing, transportation, wholesale, and more. It can benefit small to mid-sized companies or those with cash flow challenges.

Any business generating B2B or B2G invoices can benefit from accounts receivable factoring as the factoring company pays the company a cash advance as sales and invoices are generated. These cash advances ensure positive cash flow for the company. This includes businesses in various industries like manufacturing, transportation, wholesale, and more. It can benefit small to mid-sized companies or those with cash flow challenges.

 

 What is Recourse Factoring? 

Recourse factoring is when a business sells its outstanding invoices to a factor but remains responsible for collecting payment from its customers. If a customer fails to pay an unpaid invoice, the business must buy back the invoice from the finance company.. Recourse factoring is typically less expensive than non-recourse factoring but carries more risk for the company.

 

 What is Non-Recourse Factoring 

Non-recourse factoring is when a business sells its outstanding invoices to a factor, and the factor assumes the risk of non-payment by the customers. If a customer fails to pay an outstanding invoice, the factor absorbs the loss, and the business is not responsible for paying the invoice. Non-recourse factoring is typically more expensive than recourse factoring, but it carries less payment risk for the company.

 

 What are Common Misconceptions About Factoring AR Financing 

 

There are several common misconceptions about factoring in A/R financing. Here are a few of the most common:

 

Factoring AR Financing is a Last Resort

Many businesses believe that factoring receivables is a last resort and should only be used when all other financing options have been exhausted. However, factoring AR financing from commercial finance companies can be a viable financing option for businesses of all sizes and stages of growth.

Factoring AR Financing is Expensive

While factoring AR financing can be more expensive than traditional financing options, it is often more affordable than taking on additional debt or missing out on business opportunities due to cash flow shortages. Factoring AR Financing is Complicated

Factoring invoice financing is often less complicated than traditional financing options. The process is straightforward, and the accounts receivable factoring company/finance company typically handles much of the administrative work involved in collecting payment from the customer. When traditional notification factoring is utilized, the factoring company takes responsibility for collections.

 

 

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

Factoring and Invoice Cash Can Boost Your Business

 

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Unlocking the Benefits of Factoring and Invoice Cash: A Comprehensive Guide

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SOLVING THE CHALLENGES OF BUSINESS CASH FLOW

 

 

INTRODUCTION 

 

Businesses often face  numerous challenges when it comes to managing their cash flows and the ability to maintaining a steady cash flow is vital for any business to stay afloat.  With often limited resources, many businesses may struggle to secure loans or lines of credit from traditional financial institutions.

That is when invoice financing / factoring comes in as a viable solution - allowing a business to cash flow their receivables / unpaid invoices , thereby improving cash flow without the need to take on any balance sheet debt .

 

  

WHAT IS  INVOICE FACTORING AND HOW DOES IT WORK?  

 

Invoice cash - can a factoring or working capital facility actually reduce your financial expenses and allow your business to grow at any rate profitably?  Invoice factoring involves 3 parties - the company , the customer, and the factoring company.

Factoring is a business financing solution that allows business to finance accounts receivable in exchange for immediate cash . Under traditional ( we can call them old school ) invoice factoring companies can also assume responsibility for payments to the company -  At 7 Park Avenue Financial our recommended solution for factoring finance is Confidential Receivable Financing, allowing a company to bill and collect  its own invoices, with no notification to clients.

Businesses that have good quality receivables can receive approx 90% of the invoice value as invoices are generated - ie the factoring company pays same day! The balance of 10% is returned to the company when the client pays, less financing factoring cost.

 

 

 

TRADITIONAL FINANCING OPTIONS FOR BUSINESS  

 

Traditional financing options for businesses / small business owners in Canada  include term  loans, lines of credit, business credit cards, etc.However, these options may not be suitable for all  businesses and  bank loans require collateral and a strong business  credit history as well as a good personal credit history from owners . Some traditional finance options take on additional debt to the balance sheet which can add an additional layer of risk for the business.

 

 

 FACTORING / FINANCING ACCOUNTS RECEIVABLE A GREAT SOLUTION  FOR BUSINESS CASH FLOW?

 

When is comes to  understanding the challenges of business cash flow it often becomes an issue of being unable to predict  sales revenue and cash inflows. 

 

Businesses will experience fluctuations in sales revenue for a variety of factors - Some of those factors include:

 

Seasonality or Cyclical trends in the business and industry

General economic downturns in the economy

Unexpected expenses

Inability to access  working capital loans or business lines of credit from traditional financial institutions due to their limited financial history or lack of collateral.

This can make it difficult for small businesses to access the capital they need to grow and expand their operations.

 

FACTORING FINANCING IS A GROWING TREND IN A BUSINESS FINANCING STRATEGY

 

Canadian business owners and financial managers keep hearing about firms that 'factor' their accounts receivables, their 'invoices. ‘  This is a growing trend in Canada that has caught on to a financing strategy that has been successful in the U.S. for several years. Any company with outstanding invoices and  good receivables can qualify for invoice factoring , aka invoice discounting and can use invoice factoring profitably.

 

WHAT DOES  INVOICE FACTORING  COST?

 

Is there a ' perfect ' financing solution for your firm that provides you with unlimited working capital and is actually cheaper than bank financing when you realize that you are carrying receivables 30, 60, and 90 days on your balance sheet? 

 

While we might agree there is no 'perfect' financing solution for all Canadian firms everywhere, we strongly feel that we can very EASILY demonstrate that invoice cash, known as factoring or receivable discounting, will take your firm to the next level of sales and profits.

 

IS FACTORING A CHEAPER ALTERNATIVE TO BANK FINANCING? YOU DECIDE

 

Let’s get back to our statement of how you can reduce your financial expenses and grow your sales at any growth rate. We will even add that you can 'profit' from this financing strategy.

 

HOW FACTORING CAN REDUCE FINANCE EXPENSES AND GROW SALES REVENUE AT ANY RATE PROFITABLY

 

We have to get a little technical here, but bear with us! --

 

AN EXAMPLE OF A FACTORING  TRANSACTION

 

Let’s say your firm has sales of 1 Million dollars, you have 40% gross margins, and you have operating costs of 38%, leaving you a 2% net income on your sales. Included in those costs are your bank financing costs from, for example, a Canadian chartered bank. We would point out that your bank credit line has a limit, and at a certain point, your customers are paying you in 30, 60, and 90 days. You are fully utilizing your line of credit.  Are you able to take new orders and contracts without new external financing - we don’t think so!

 

DOUBLED SALES / NO EXTERNAL FINANCING / INCREASED PROFITS

 

So what's the solution?! We have one for Canadian business owners or their financial managers. Let us set up a working capital factoring facility for you. The kind that we prefer is 100% non-intrusive - that is to say, you will continue to bill and collect your own accounts receivable.

 

We call it non-notification. Ask any other firm if they like how their factoring facility works. If they don’t have a non-notification facility, they will tell you they don’t necessarily like it for several reasons, mainly customer intrusion, etc.

 

So we have our facility set up. You take on new orders and contracts and double your sales to 2 Million dollars.

 

 Your competitors start talking about you!

 

Using the factoring or invoice cash facility, you get paid the same day that you invoice clients.. At the end of the year, your sales are 2 million, they have doubled! Your net profit would be 130k, not 20k; you would have paid 70k in factoring and financing costs and still have made a lot more profit - in our example 110k more profit.

 

  

THE CASH CONVERSION CYCLE - FACTORING AND ASSET TURNOVER IMPROVE RETURN ON ASSET / RETURN ON EQUITY AND NET PROFIT !

 

  

Again, we realize we're getting a little technical and accounting oriented in our example and explanation - so what is the layperson's bottom-line explanation of what just happened - It is as follows -

 

You doubled your sales, you had no concerns about external financing or taking on new debt, and your profits went up a lot!

 

Technically what happened is what KPMG calls on their website the ' Cash conversion cycle ' - you have turned over assets much quicker. Therefore you have a greatly improved return on assets, return on equity, and net profit.

  

BENEFITS OF FACTORING FOR  A BUSINESS FINANCE SOLUTION  

 

Benefits of factoring for business include

 

Improved working capital  - companies can meet short term obligations and avoid temporary cash flow shortages

No additional debt or financial obligations - Factor Finance does not add debt to the balance sheet

Access to capital - companies unable to access traditional financing can secure business capital to grow and expand

Reduced administrative burden -  Businesses who utilize notification type factoring  can transfer credit and collection responsibility to the factoring finance company

 

 

 CONCLUSION - 

 

Factoring offers several benefits -  including improved business  cash flow, access to capital, and reduced administrative expenses around the credit and collection cycle . Factoring is not a loan per se , so small businesses do not take on additional debt or financial obligations. Choosing the right factoring company is essential for small businesses to maximize the benefits of factoring. Factoring can be a viable solution for small businesses that are experiencing working capital shortages or need access to capital to grow their operations.

 

In summary, invoice cash, factoring, receivable discounting, or whatever you want to call it (at our firm, we call it a working capital facility) works. It can work for you.

 

Call  7 Park Avenue Financial,  a trusted, credible, and expert business financing advisor, and run the numbers. You will find you just got off the cash flow merry-go-round, and that’s a good thing.

 

 

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

 

 What are Common misconceptions about factoring 

There are several common misconceptions about factoring - so it is important to understand how to use this financial tool -

Factoring  business receivables is expensive -

Factoring fees can vary depending on the size of the accounts receivable and the creditworthiness of the customers as well as the size of the credit facility However, factoring fees are typically lower than the interest rates charged by traditional financing options such as long term loans - In some cases factoring can be less expensive than bank financing

Factoring will damage customer relationships -

Factoring companies are experienced in handling customer relationships and will work to maintain positive relationships with the customers. Additionally many companies have the option of considering non-notification factoring financing solutions - allow them to bill and collect their own invoices -  factoring can allow a  business to offer more flexible payment terms to their customers, which can improve customer satisfaction and increase sales Slow paying customers can also be financed, as long as the  unpaid invoice is less than 90 days old.

Factoring is only for businesses with poor credit -

Factoring is used by companies of all size, including large corporations - Factor finance is based on the creditworthiness of the accounts receivable base , so any company with good customers can benefit from receivable finance.

 

 How do business owners  choose the right factoring company for a business?

Choosing the right factoring company is essential for small businesses to maximize the benefits of factoring. When choosing a factoring company, small businesses should consider the following:

 Fees - financing costs  vary, so small a company considering a/r finance  should compare fees from different lenders  to ensure they are getting a competitive rate.

Customer service  - Businesses should choose a factoring company that offers excellent customer service, including prompt  same day payment and efficient collection of accounts receivable.

Industry experience

Some factoring companies specialize in certain niche industries, for example trucking and staffing agencies - Businesses should choose an invoice  factoring company that has experience working with businesses in their industry and is properly geographically located

Companies should carefully review the contract terms offered by the factoring company, including the length of the contract, the termination clause, advance rates,  and any miscellaneous  fees that occur when comparing invoice factoring vs other types of working capital financing or bank loan financing.

 

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

Unleashing the Power of Factoring: The Ultimate Working Capital Financing Solution / Does Your Cash Flow Need Have An Identity Crisis? Here’s One Solution!

 

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Working Capital Financing Made Easy: The Benefits of Confidential Receivable Financing

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        Financing & Cash flow are the biggest issues facing businesses 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

 

 

 

CASH FLOW FREEDOM - EMPOWERING YOUR WORKING CAPITAL FINANCING NEEDS 

 

Cash flow is almost always the focus of business owners and financial managers. Most realize it turns about to be a full-time job! It's relevant if only for the fact that working capital financing is all about growth in sales and hopefully profits.

 

One solution, among several available, is receivable financing and  'factoring'.

 

  

WHAT IS WORKING CAPITAL FINANCING?  

 

Working capital financing is the funding a business uses to finance day-to-day operations of the business When using accounts receivable factoring ' as a working capital solution the business finances its receivables with a third-party finance company, called a  'business factor'   The business receives immediate cash for the goods and services they have provided to their customers.

 

One popular method of factoring is Confidential Receivable financing which allows a company to maintain control over both billing and collections while at the same time receiving same-day cash for the outstanding invoices the company wishes to finance.  Financing provided by accounts receivable financing providers improves cash flow and eliminates the waiting for payments to be made from customers.

 

 

BREAKING THROUGH THE CASH FLOW BARRIER 

 

Businesses need working capital to cover expenses in the day-to-day operations of the company. But for many businesses in Canada the access to capital is limited for a number of different reasons, so ongoing healthy cash flow is not always abundant!  A/R finance helps a business overcome the cash flow gap while eliminating the financing challenges a business faces.

 

 

The 2008-2009 world economic crisis drastically affected business liquidity. Every financial institution in Canada, i.e. Banks, trust companies, life insurance companies, third-party independent finance companies, etc. all had liquidity issues and concerns, and these were the lenders! And let us not talk about Covid and Pandemics and the worldwide  economic challenges of 2022-2023 around supply chain struggles as well as increasing interest rates after a period of low financing costs / aka ' easy money '

 

 

THE SME FINANCING CHALLENGE! 

 

Larger companies can look at equity financing, long-term permanent working capital, and other esoteric solutions the 'big boys' use.

 

But what about SME COMMERCIAL FINANCE needs? Start-up, smaller and yes even medium sized firms have to ' scramble ' to fill the void that top experts acknowledge exists in the Canadian business financing arena.

 

 

UNDERSTANDING RECEIVABLE FINANCE / FACTORING 

 

Factoring is a receivable finance cash flow strategy, allowing a business to finance their accounts receivable t commercial factoring companies in exchange for immediate cash. Traditional " old school'  factoring has the finance company then assume collection of the receivable from the business customer. The company pays a fee based on a percentage of the total invoice amount. The finance company pays the balance of that ' holdback' amount when the client pays the invoices, less a financing fee. Simple as that.

 

For businesses that can't, or do not want to!.. wait for clients to pay in 30-60 days ( or more?!) the factoring financing solution delivers immediate cash as a company generates sales - allowing the business to meet their obligations for key areas such as payroll, inventory purchases, and growth opportunities.

 

 

WHAT ARE THE DIFFERENT TYPES OF FACTORING

 

Business owners should understand that are some different types of factoring, and the industry at times makes it hard for customers to understand how basic these different solutions are

 

Recourse factoring is a/r financing with the company continuing to assume full bad debt and collection risk in terms of a potential non-payment from a client. If the company has received funding from the invoice factoring company for that now uncollectible invoice it must pay back the finance firm, or provide an invoice of equal value as payment.

Non-recourse factoring is when a company chooses to transfer the risk of bad debt to the finance company - although this method of financing is typically more expensive when collection risk is transferred to the finance firm.

 

Confidential Receivable Financing

 

Confidential receivable financing is a method of receivable factoring that allows the company to enjoy all the benefits of traditional factoring for unpaid invoices while maintaining full account control and communication with its client - The company continues its normal billing and collection process while still receiving immediate cash for sales that are generated and invoice to clients - This solution provides positive cash flow and keeps client relationships the same as they were in the past without any knowledge of how the business is financing its business.

 

Additionally,  the factoring fee in confidential a/r financing does not cost more!

 

So why factoring as a cash flow financing vehicle?  Yes, it will always have a higher cost, but... it's available, and it works. CONFIDENTIAL RECEIVABLE FACTORING even mirrors traditional bank lines - i.e. you can bill and collect and manage your own A/R without notification to any other firm, i.e. your customers.

 

IMPROVING CASH FLOW VIA FACTORING  AND A/R FINANCING

 

Factoring financing is a proven financing mechanism used by thousands of companies in Canada - providing a quick and efficient method of cash flow generation - allowing a business to operate efficiently and meet its day-to-day operational needs around cash flows.

 

What then are any challenges around factoring receivables? Although it's historically been around for almost forever it's incredibly misunderstood. Many players aren’t Canadian, (which doesn't necessarily have to be a concern) but the real truth is the way these firms operate and deliver on your financing. Also, prices and fees vary.

 

But whatever challenges come from factoring A/R it's safe to say that the ability to turn sales into 'immediate cash' is the greatest selling point to clients we talk to.

 

THE DIFFERENCE BETWEEN WORKING CAPITAL LOANS AND  RECEIVABLE FINANCING

 

At 7 Park Avenue Financial, we are often asked about the difference between working capital loans are a term loan structure, versus invoice financing .  Each method has its own benefits. While banks and other business lenders offer working capital loans for short-term ash needs these loans to have long amortizations and require regular installment payments. They can be viewed as a source of permanent working capital.

Invoice financing is the receipt of immediate cash for invoices which are the collateral for the cash - Companies receive the cash immediately and the company pays a fee on the invoice they choose to finance.

In general, receivable finance is easier to get approved versus long credit checks and due diligence performed by working capital providers.

 

  

KEY ISSUES TO UNDERSTAND IN FACTORING FOR WORKING CAPITAL NEEDS  

 

Things to both understand and consider when looking at factoring working capital financing include:

 

The requirement to finance all your A/R & Sales - Spoiler alert - you don't have to!

 

Rates/cost/fees -

 

Security arrangements - in all cases the key collateral is of course your A/R

 

Size of facility and quality of your customer base

 

Amount of financing extended against invoices - typically it should be at least 85-90%

 

THE DOWNSIDE OF TRADITIONAL FACTORING - IS THERE A SOLUTION? SPOILER ALERT !! YES, THERE IS!

 

Factor firms have very different levels of involvement in your business when you have such a facility. The factor financing can have a strong level of daily 'intrusion' into the Canadian firm's business - the invoice factoring company might insist on delivering invoices to your customer, notifying them of the financing arrangement, and yes, you guessed it, even calling the customer and collecting the receivable.

 

  

UNDERSTANDING CONFIDENTIAL RECEIVABLE FINANCING / FACTORING  

 

Naturally in a perfect world, most firms would rather perform these functions themselves as part of the overall 'customer relationship '. That's why we don't recommend that solution to our clients, instead, we prefer CONFIDENTIAL A/R FINANCE.

 

CONCLUSION - Unlock Your Business Potential with Factoring: The Working Capital Financing Strategy for Cash Flow Success

 

If you're focused on winning the working capital financing game,  call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who is focused on the cash flow and factoring solution you need to grow and survive.

 

Find out why 7 Park Avenue Financial is your best choice for a business financing partner for financing solutions tailored to your firm's needs. Use our industry experience and reputation to ensure you have access to the best business finance solutions.

 

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

 

Does factoring decrease working capital?

No factoring does not decrease working capital -  it allows a business to improve cash flows and to have the ability to run and grow a business. Factoring monetizes accounts receivable into cash.

 

 

Is there a drawback in factoring in receivables? 

While factoring receivables improves cash flow for a company cost is often seen as a potential drawback as it is a higher cost of financing in the majority, but not all cases. Companies who choose traditional factoring versus confidential a/r finance might view this method of financing as a negative to their reputation which is not really the case.

 

What are the benefits of working capital financing? 

Working capital financing provides businesses with numerous benefits, including:

 1. Ability to be  cash flow positive

2. Providing flexibility in cash flow management

3. Improved chances to access growth opportunities in areas of expansion staffing, technology access, etc

4. Minimizing credit and collection risk and management while providing positive working capital to the business

 

 Why do companies utilize factoring as a working capital solution? 

 

Factoring allows a business to meet the obligations of the business as is a popular financing tool in many industries - Businesses can have ongoing positive cash balances and cash control around different aspects of the business.
Businesses should focus on the tradeoffs in financing costs versus their ability to generate a positive return on capital in their business operations.

 

Traditional factoring solutions provide credit information on new clients, manage risk on approved non-recourse accounts, a well as providing a collection process without the need for additional staffing investment in managing an accounts receivable investment.

 

How does  The Factoring Process Work

The factoring process is a basic financial transaction around the initial setting up of the account facility as well as the ongoing financing of receivables.

Initial approval requires a business to submit a standard business application as well as a detailed account receivable  aging and sample client invoices - Typical other requirements include copies of several months' bank statements and info on business owners  and incorporation details,

Once the facility is established and a facility limit is approved factoring companies send out a notice of assignment to customers of the business - Companies submit invoices for financing and funds are remitted to the company, usually on the same day. Typical advances are in the 90% range and when the customer pays the company receives the balance of funds on the invoice, less a financing cost.

 

What are 5 Important Terms In Factoring Financing That Business Owners Should Understand  In Working Capital Factoring

Reserve Account - This is the amount that is held back on each invoice  in the factoring account until the client pays, typically in the 10% range

Spot Factoring - Spot factoring allows a company to finance a single invoice when required - it is often a more expensive solution for financing specific accounts receivables.

Advance rate - This is the amount the factoring company advances on each invoice,

Monthly minimums - clients must determine whether they will finance all of their invoices or only some of them at their choice

Discount rate - This is the financing fee for factoring - typically between 8% per annum up to 1.25% per month, depending on a number of factors such as size, overall risk profile and credit worthiness, trends in customer payments, type of industry, etc.

Many different industries are frequent users of accounts receivable factoring, such as commission advances, medical receivables, government receivables, construction, trucking,  staffing, etc. - Many factoring providers specialize in certain industries where asset-based lending solutions are a solid alternative to traditional financial institutions who would provide a line of credit.