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Thanks for dropping in for some hopefully great business info and on occasion some hopefully not too sarcastic comments on the state of Business Financing in Canada and what we are doing about it !

In 2004 I founded 7 PARK AVENUE FINANCIAL. At that time I had spent all my working life, at that time - Over 30 years in Commercial credit and lending and Canadian business financing. I believe the commercial lending landscape has drastically changed in Canada. I believe a void exists for business owners and finance managers for companies, large and small who want service, creativity, and alternatives.

Every day we strive to consistently deliver business financing that you feel meets the needs of your business. If you believe as we do that financing solutions and alternatives exist for your firm we want to talk to you. Our purpose is simple: we want to deliver the best business finance solutions for your company.



Showing posts with label invoice factoring. Show all posts
Showing posts with label invoice factoring. Show all posts

Thursday, July 2, 2026

Accelerate Growth with Invoice Factoring: Your Financial Secret Weapon

INVOICE FINANCE FACTORING CANADA: IMPROVE CASH FLOW  FUNDING WITHOUT ADDITIONAL DEBT

 


Table of Contents


    1. What Is Invoice Finance Factoring? 
    2. Why Canadian Businesses Finance Receivables 
    3. How Invoice Finance Factoring Works 
    4. Is Invoice Factoring a Loan? 
    5. Do Canadian Banks Offer Invoice Factoring? 
    6. Five Reasons Businesses Use Invoice Factoring 
    7. The Invoice Factoring Formula 
    8. Benefits of Invoice Finance Factoring 
    9. Common Uses of Factoring 
    10. Key Takeaways 
    11. Frequently Asked Questions 
    12. Conclusion 

 

 

What Is Invoice Finance Factoring?


Asset-based invoice finance solutions, often referred to as receivables financing or invoice factoring, have become a reliable source of working capital for thousands of Canadian businesses.

 


Factoring companies provide financing secured by accounts receivable, helping businesses improve cash flow and access capital that may not be available through traditional lenders.

 


Accounts receivable are often a company's largest current asset after cash. Invoice finance allows businesses to unlock that value immediately instead of waiting for customer payments.

 

A Simple Explanation On Invoice Discounting

 


Invoice finance factoring allows a business to convert unpaid invoices into immediate working capital. Instead of waiting 30, 60, or 90 days for customer payment, a business can access most of the invoice value within days.


Real-World Analogy


Think of invoice finance factoring as cashing a cheque before its maturity date. Rather than waiting for payment, you receive most of the funds immediately and use that cash to operate and grow your business.


Why It Matters - More Working Capital!


Invoice finance factoring helps businesses improve cash flow, fund growth, and reduce the financial strain caused by slow-paying customers.

 

You've Done the Work  / Delivered The Service - Why Hasn't the Money Arrived?

 

You sent the invoice. And now you wait — sometimes 30, 60, even 90 days — while your suppliers, employees, and overhead costs don't wait at all.

 

Cash flow gaps like this don't just create stress; they stall growth and force hard choices.

 

Let the 7 Park Avenue Financial team show you how Invoice finance factoring changes that equation entirely: your outstanding invoices become immediate, usable working capital, often within one business day, with no new debt and no bank approvals required.

 

3 Uncommon Takes on Invoice Funding / Finance Factoring

 

 

  1. Factoring approvals are based on your customers' credit — not yours. The factoring company cares about the creditworthiness of the businesses that owe you money. A thin credit file, startup status, or recent losses rarely block approval — which is why bank-declined and early-stage companies use factoring successfully
  2. Notification factoring may be less disruptive than you think — and confidential factoring less expensive than you expect. Large enterprises and government buyers encounter factoring notices routinely. For industries where perception matters, non-notification factoring exists — and the rate premium over standard factoring is typically smaller than owners assume.
    3. The real cost of waiting 60 days may exceed your factoring fee. Fees of 1.5%–3% per 30-day period sound high until you calculate what slow payment actually costs: forfeited early-payment discounts, emergency credit line draws, overtime to cover cash gaps, and missed volume purchases. For many businesses, factoring is the cheapest option once those hidden costs are tallied.

 


Why Canadian Businesses Finance Receivables Via Invoice Financing

 


Accounts receivable financing provides businesses with a fast and efficient method of financing sales based primarily on the creditworthiness of their customers.


Small and medium-sized enterprises (SMEs) often use this financing when bank funding is unavailable, insufficient, or too restrictive.


Invoice finance can also serve as a simplified version of asset-based lending (ABL). Unlike full ABL facilities, businesses do not need to pledge inventory or fixed assets.

 


Factoring providers often offer:


    • Invoice financing 
    • Credit assessment of customers 
    • Collection support 
    • Accounts receivable management 
    • Cash flow forecasting assistance 

 


Many businesses use factoring as a bridge between startup financing and traditional bank credit.

 

 

How Invoice Finance Factoring Works

 


The process is straightforward.


A business sells goods or services and issues an invoice to its customer. Instead of waiting for payment, the invoice is submitted to a factoring company.


The factoring company advances a percentage of the invoice value, typically within 24 to 48 hours.


The result is immediate access to working capital that can be used for:


    • Payroll 
    • Inventory purchases 
    • Supplier payments 
    • Marketing initiatives 
    • Business expansion 


Because the financing is tied directly to sales, available funding often grows as revenues increase.

 

 

Is Invoice Factoring a Loan?  What Type Of Factoring Works For Your Business

 


No.
Invoice factoring is generally structured as the sale of accounts receivable rather than traditional business loans.
This distinction offers several advantages:

 


    • No new term debt 
    • Funding based on receivables 
    • Easier approval process 
    • Improved liquidity 
    • Flexible growth financing 


Businesses gain access to working capital without increasing traditional borrowing obligations.

 

Do Canadian Banks Offer Invoice Factoring?

 


While some Canadian banks offer limited receivables financing programs, the vast majority of invoice factoring is provided by independent factoring companies and commercial finance firms.

 


Banks generally offer lower rates. However, many businesses cannot qualify for sufficient bank financing due to:


    • Limited operating history 
    • Rapid growth 
    • Customer concentration 
    • Temporary financial challenges 
    • Insufficient collateral 


Factoring providers focus more heavily on customer credit quality than borrower financial strength.


Confidential Invoice Financing

 


Many modern factoring facilities operate on a confidential basis.


Under confidential receivables financing:


    • Customers are not notified 
    • Businesses continue invoicing customers 
    • Businesses continue collecting payments 
    • Cash flow improves without disrupting customer relationships 


This option addresses one of the most common concerns about traditional factoring.

 

Five Reasons Canadian Businesses Use Invoice Factoring

 


Businesses commonly use receivables financing when facing one or more of the following situations:


    • Immediate cash flow requirements 
    • Inability to obtain bank financing 
    • Need for higher funding limits 
    • Rapid growth 
    • Increased investment in inventory and receivables 

 


For many firms, factoring serves as a temporary bridge until conventional financing becomes available.

 

The Invoice Factoring Formula - Your Invoice Factoring Cost is Called the Factoring Fee..


The concept is simple.


Eligible accounts receivable are financed based on invoice quality and customer creditworthiness.


Typical characteristics include:


    • Advances up to 90 percent of eligible receivables 
    • Funding based on invoices less than 90 days old 
    • No traditional loan structure 
    • Funding that grows alongside sales 


Businesses with strong receivables can often access significantly more working capital than through conventional lending.

 

 

Three Less Common Perspectives on Invoice Factoring

 

  1. Factoring as a Credit Intelligence Tool
    Factoring companies continuously evaluate customer creditworthiness.
    Businesses can gain valuable insight into customer payment behavior and credit risk.2. Factoring as a 2.Growth Accelerator
    Funding expands as sales increase.
    Unlike fixed loan limits, factoring capacity often grows alongside revenue.
    3. Factoring for International Expansion
    Businesses entering foreign markets can use invoice finance to reduce payment delays and manage international credit risk.

 

 

Invoice Finance Factoring — Myths & Misconceptions Debunked Around how you sell your outstanding invoices

 


Myth 1: Using factoring signals financial desperation. Factoring is a mainstream working capital tool used by thousands of healthy, growing businesses — not a last resort. Rapid growth creates cash flow gaps by definition; factoring closes them. Many companies that factor are profitable and expanding, simply outpacing what a bank line can support. A third party factoring company solves that challenge!


Myth 2: Factoring is too expensive. The headline rate of 1.5%–2% per 30-day period sounds high until it is compared honestly against the alternatives — emergency credit line draws, missed supplier discounts, and the real cost of turning down contracts. For many businesses, factoring is the lowest all-in cost option available.


Myth 3: Your customers will think less of you. Large enterprises, government buyers, and major manufacturers deal with factoring assignment notices routinely. It is standard commercial practice. In most industries, clients neither judge it nor raise concerns — they simply redirect payment per the notice.


Myth 4: You lose control of your customer relationships. Factoring does not give the factor authority over your customer interactions, pricing, or contracts. Collections on overdue accounts may involve the factor, but day-to-day client relationships remain entirely yours.


Myth 5: Only struggling companies get approved. Approval is based primarily on your customers' creditworthiness — not your own financial history. Invoice factoring involves the ability of  Startups, bank-declined firms, and companies with thin credit files being approved regularly, provided their end-customers are credible obligors.
 


Benefits of Invoice Finance Factoring

 


The primary advantage of invoice finance factoring is improved cash flow.
By converting invoices into immediate cash, businesses can reinvest capital without waiting for customer payments.

 


Additional benefits include:

 

The invoice finance provider provides :


    • Faster access to working capital 
    • Improved liquidity 
    • Greater financial flexibility 
    • Increased growth capacity 
    • Reduced collection burden 
    • Enhanced cash flow predictability 
    • Easier qualification than traditional lending 


Many companies use factoring alongside purchase order financing to support larger customer contracts.

 

Best Practices for Success

 

 


Businesses that benefit most from invoice factoring typically:


    • Monitor receivables closely 
    • Maintain strong invoicing practices 
    • Focus on creditworthy customers 
    • Use proceeds for operating needs 
    • Develop a long-term financing strategy 

 


In many cases, factoring facilities remain in place for approximately 12 to 24 months before transitioning back to traditional bank financing.

 

 

Case Study: Invoice Finance Factoring — Ontario Staffing Agency

From The 7 Park Avenue Financial Client Files - Invoice Finance Factoring Example

 

 


The Problem - A mid-sized Ontario staffing agency was funding weekly payroll for 200+ temporary workers while its manufacturing clients paid on 60-day terms. The bank line was fully drawn with no increase available. Without a solution, the company faced turning down new contracts it couldn't afford to staff.

 


The Solution 7 Park Avenue Financial confirmed that 85%+ of receivables were owed by creditworthy manufacturing clients — making approval straightforward despite the company's own balance sheet constraints. A $2.1M factoring facility was structured and funded in 5 business days, advancing 88% of each invoice within 24 hours of submission.

 


The Results


    • Payroll funded on time every week — cash flow gap eliminated 
    • 34% revenue growth in the 12 months following setup 
    • Two new contracts accepted that would otherwise have been declined 
    • Factoring cost averaged 2.1% per 30-day period — below the company's prior emergency credit line rate 
 


KEY TAKEAWAYS

 


    • Invoice finance factoring converts unpaid invoices into immediate working capital. 
    • Funding is primarily based on customer credit quality. 
    • Factoring is generally not considered traditional debt. 
    • Businesses can often access up to 90 percent of eligible receivables. 
    • Funding capacity grows alongside sales. 
    • Confidential factoring options are available as is Selective Invoice Finance
    • Factoring is commonly used as a bridge to conventional bank financing. 
    • Improved cash flow allows businesses to fund payroll, inventory, and growth initiatives. 

 

Conclusion


Invoice finance factoring allows Canadian businesses to unlock the value of their accounts receivable and transform unpaid invoices into immediate working capital.


While factoring costs more than traditional bank financing, many businesses find the increased liquidity, flexibility, and growth opportunities far outweigh the expense.


For companies facing cash flow challenges, rapid growth, or limited access to bank financing, invoice finance factoring remains one of the most effective alternative financing solutions available in Canada.

 

Frequently Asked Questions

 


How does invoice finance factoring improve cash flow?
Invoice finance factoring converts unpaid invoices into immediate cash. Businesses can use these funds to pay expenses, invest in growth, and maintain financial stability.


What types of businesses benefit most from invoice factoring?
Manufacturers, wholesalers, transportation companies, staffing agencies, distributors, and construction firms often benefit because they commonly operate with extended payment terms.


Can invoice factoring help my business grow?
Yes. Immediate access to working capital allows businesses to accept new contracts, hire staff, purchase inventory, and expand operations.


Is invoice factoring debt?
No. Factoring is generally structured as the sale of accounts receivable rather than borrowing money through a traditional loan.

 


How quickly can I receive funding?
Most factoring companies can provide funding within 24 to 48 hours after invoice submission.

 


What is the difference between invoice factoring and invoice discounting?
Factoring typically includes collections management by the finance provider. Invoice discounting allows the business to retain control over collections while borrowing against receivables.

 


Are there industries that may not qualify?
Businesses with cash sales, very small invoices, high dispute rates, or long-term contract billing structures may face qualification challenges.

 


How does factoring affect customer relationships?
Many providers offer confidential facilities that allow businesses to maintain direct customer relationships while still accessing financing.

 


What should I look for in a factoring company?
Consider:
    • Industry experience 
    • Advance rates 
    • Fee transparency 
    • Contract flexibility 
    • Customer service quality 
    • Reputation and track record 

 


Can invoice factoring help during economic downturns?
Yes. Factoring often provides working capital when traditional lenders become more restrictive.

 


What are the main costs?
Costs typically include:
    • Factoring fees 
    • Discount rates 
    • Wire fees (if applicable) 
    • Administrative charges 


Businesses should evaluate total costs against the benefits of improved liquidity.

 


Can factoring be combined with other financing solutions?
Yes. Many businesses combine factoring with:
    • Asset-based lending 
    • Purchase order financing 
    • Equipment financing 
    • Business lines of credit 
    • Acquisition financing 

 

 

Statistics on Invoice Finance Factoring

 


    • The global invoice factoring market was valued at approximately USD 3.54 trillion in 2022 and is projected to reach USD 5.46 trillion by 2030, growing at a CAGR of approximately 5.6% (Source: Grand View Research).
    • Canadian SMEs account for roughly 98% of all businesses in Canada and contribute approximately 54% of GDP. Working capital constraints are among the top three barriers cited in BDC SME financing surveys.
    • The average Days Sales Outstanding (DSO) for Canadian B2B transactions ranges from 45 to 65 days across manufacturing, construction, and staffing industries — the core verticals for factoring use.
    • Typical advance rates on factoring facilities range from 75% to 92% of invoice face value, depending on customer credit quality, industry, and invoice aging.
    • Non-recourse factoring, where the factor absorbs bad debt risk, typically carries a fee premium of 0.25% to 0.75% above recourse factoring rates.
    • Factoring approval timelines average 3 to 7 business days for initial setup; after that, individual invoice advances are typically same-day or next-day.

 


Citations

 


Bank of Canada. "Small and Medium-Sized Enterprises: Background on Concepts, Research and Financing Data." Bank of Canada, Financial System Review. https://www.bankofcanada.ca

Business Development Bank of Canada. "Small Business Financing in Canada: Annual Report." BDC Research and Analysis. https://www.bdc.ca

Grand View Research. "Factoring Services Market Size, Share & Trends Analysis Report." Grand View Research Industry Report. https://www.grandviewresearch.com

Statistics Canada. "Survey on Financing and Growth of Small and Medium Enterprises." Statistics Canada Catalogue No. 61-203-X. https://www.statcan.gc.ca

Export Development Canada. "Accounts Receivable Insurance and Trade Finance Solutions." Export Development Canada. https://www.edc.ca

Commercial Finance Association. "Factoring and Asset-Based Lending Industry Survey." CFA Annual Report. https://www.cfa.com

International Factoring Association. "Annual Factoring Survey: North American Market." International Factoring Association. https://www.factoring.org

Investopedia. "Factoring: What It Is, How It Works, Types, and Example." Investopedia Finance Reference. https://www.investopedia.com

 

 

 

 

 

 

 

 

 

' Canadian Business Financing With The Intelligent Use Of Experience '

 STAN PROKOP
7 Park Avenue Financial/Copyright/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ABOUT THE AUTHOR: Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

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Tuesday, April 4, 2023

Make Invoice Factoring Loans And Asset Based Lending Work ! Looking For A Business Credit Line Solution?





 

You Are Looking For Canadian Business Financing!

Unpacking the Differences:  Factoring vs. Asset-Based Lending

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

        Financing & Cash flow are the  biggest issues facing businesses today 

               Unaware / Dissatisfied with your financing options?

Call Now!  - Direct Line  - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

Email  - sprokop@7parkavenuefinancial.com

 

Asset-Based Lending and Invoice Factoring: Alternative Financing Options Explained

 


Invoice factoring loans are one area of business finance that has slowed the growth of traditional financing via banks in Canada.

 

It's no secret that asset-based lending is on the rise, while not that long ago, we can vouch, that alternative financing was pretty well unheard of. Industry stats both in the U.S.  as well as Canada indicate more and more companies are turning to asset-based lending solutions.

 

A big challenge of any business is the cash flow challenges in times of economic uncertainty and when a business is focused on growing and expanding market share - traditional bank financing may not be available during times like this - that is when alternative financing options such as receivable financing/ factoring, and asset-based lending tend to be a popular solution - The real challenge is knowing which finance option is best for your business.



So why have asset-based financing solutions become one of the most popular financing methods for your company's working capital and cash flow needs?



Asset-based finance solutions and factoring work for a straightforward reason - they monetize one of the essential assets in your business, letting accounts receivable act as security.

 

 

WHAT IS INVOICE FACTORING? 

 

Invoice factoring is a  business financing option which allows businesses to finance outstanding invoices to a third-party commercial finance company in exchange for immediate cash. In traditional invoice finance factoring services, the financing company assumes management and collection of the receivable - The factoring agreement specifies the invoices are  ' sold ' to the fiance company - in bank financing, invoices are assigned to the bank, typically under a general security agreement.

 

Key benefits of factoring invoices include the ability to access cash immediately without any debt coming onto the balance sheet - the company is simply monetizing a balance sheet asset - accounts receivables.

 

Small and medium-sized businesses that need working capital to fund day-to-day expenses and finance growth use factoring, which is not debt financing on the balance sheet.

 

 

THE INVOICE FACTORING PROCESS 



New clients here at 7 Park Avenue Financial always want to know how these 'loans work.  First of all, it's not a loan per se. It's simply a method of selling and cash-flowing your receivables as your generate revenues. Cash advanced on this type of financing is typically in the  80-90 % range and it's at the business owner's option to cash flow some or all of your a/r.

 

 

 

WHAT DOES FACTORING COST? 
 


Confusion exists if only for the terminology commercial lenders and customers use around describing the cost of this financing.

 

That's because this finance method is costed as a ' fee ', not an interest rate. Factoring fees are typically between .75 - 1.25 %, so if your firm has good margins and a reasonable turnover in receivables you are an excellent candidate for factoring loans.

 

FACTORS INFLUENCING PRICING



Other factors that influence your overall cost include :

Size of your facility,

General creditworthiness of your customer base

The amount of time you use the funds for is probably ultimately the largest cost aspect of the financing.  Good asset turnover and lower days sales outstanding lower financing costs!

 

While bank business credit lines are the lowest cost in Canada it's no secret that thousands of businesses simply can't access all or part of the business financing they require.

 

 

IS CONFIDENTIAL RECEIVABLE FINANCING THE BEST FACTORING SOLUTION? 



At 7 Park Avenue Financial, we strongly recommend Confidential Receivable Financing facilities. They allow you to bill and collect your own accounts, generating the cash flow you need to run and grow your business.

A/R financing collateralizes company assets such as receivables, allowing you to finance the other parts of your business, such as inventory, equipment, real estate, etc.

For smaller to medium-sized firms that have exhausted forms of financing such as business credit cards, friends and family loans, collapsing personal investments asset-based lending via a business factoring loan is a logical step to financing operations and growth.

 

 

 

WHAT IS ASSET BASED LENDING? 

 

Asset based lending is a business finance option that allows a business to use the physical assets of the business as a loan or line of credit. Assets financing under this type of facility include combinations of accounts receivable, fixed assets and equipment, inventories, and in some cases real estate.

 

Key benefits of this type of loan or line of credit include the ability to be flexible in drawing down funds as the business needs them and scale finance as sales and assets grow. Assets financing under the facility remain in the ownership of the company. Asset-based lenders are experienced in assessing values and advance rates on each asset category, ie receivables.

 

WHAT IS THE DIFFERENCE BETWEEN INVOICE FACTORING AND ASSET BASED LENDING?

 

The key difference between factoring and asset based lending lines of credit is the paperwork around the ownership of the invoices - Under a factoring agreement invoices are ' sold ' to the finance company. In contrast, in asset-based lending assets are secured as collateral for the financing.

 

In traditional factoring the factoring company is involved in the collection of invoices, but in asset based lending, businesses retain ownership and the customer relationship around collections.  As we have noted companies choosing  Confidential invoice financing are in fact allowed to bill and collect their own invoices while still enjoying the benefits of immediate cash access.

 

The timing around financing costs is also another difference - In invoice factoring the financing company purchase invoices at a discount. In contrast, interest rates/ financing costs do not start until facilities are drawn down on and used.

 

WHICH FINANCE OPTION IS RIGHT FOR YOUR BUSINESS?


Several factors will define whether  your firm will best benefit from  factoring or a full asset based lending solution - Those factors are:

 

Type of industry

Cash flow needs,

Growth goals

 

Factoring is best suited for businesses with  higher  volumes of invoices and the need for the firm to access immediate cash to cover business expenses and funding day-to-day operations - The ability to finance working capital investment in accounts receivable is a key factor

 

Asset based lending solutions such as term loans or business lines of credit are best suited for companies needing a full business line of credit that funds accounts receivable, inventories and other business assets. Companies that cannot access all the financing they need from traditional bank financing solutions are solid candidates for asset-based lines of credit.

 

Both solutions help companies with cash flow problems

 

 

KEY TAKEAWAYS: INVOICE FACTORING ASSET BASED LENDING

 

Invoice factoring is a solid alternative financing option for small businesses needing immediate cash

Invoice factoring is the sale and financing of outstanding invoices st third-party factoring companies

Asset based loans and lines of credit is a full-service financing facility which funds business assets and combines them into one facility

Both solutions, ie  factoring and asset-based credit lines provide fast access to cash once facilities are improved and set up

A company will determine whether it needs invoice factoring or asset based loan solutions based on cash flow needs and the overall  creditworthiness of the business

 

 
 
CONCLUSION - ASSET BASED LENDING VS. FACTORING 

 

Both invoice factoring financing and asset based lending are creative and alternative finance options that can help a business grow via access to capital around the cash flow needs of the business.



Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor with a track record of success.

 

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK MORE INFORMATION

 

Do I lose ownership of my invoices with invoice factoring?

Yes, invoice factoring involves the selling of outstanding invoices to third-party factoring firms to obtain funds via a cash advance prior to invoice collection - in traditional notification factoring the finance company manages collection and payments.

 

 Does invoice factoring affect my customer relationships? 

In invoice factoring the finance company has contact with customers in the collection relationship, while an asset based lending business credit line allows the company to bill and collect its own receivables as well as manage collections. customers.

 

What industries are suitable for invoice factoring and asset-based lending? 

Any small or medium-sized business that requires working capital to fund operations and growth will benefit from these facilities' cash flow access. More established companies needing full services credit lines to finance a company's assets such as  a/r, inventory and other assets will typically use an asset-based credit line.

 

  

Is factoring considered asset based lending?  

 

Yes, factoring is often considered a type of asset-based lending because it involves selling unpaid invoices to a  commercial lender, who then provides funding based on the value of those assets. Unlike traditional loans, factoring is sometimes non-recourse, meaning that the lender assumes the risk of non-payment by the debtor. The amount of funding available through factoring depends on the borrowing base, which is the total value of the assets/invoices being factored.

Factoring is often used by manufacturing companies and other businesses with rapid expansion and core operations that require additional money to pay invoices and support important differences in payment. The annual percentage rate and additional fees associated with factoring are typically higher than those of traditional term loans, and lenders view factoring from their perspective of collecting payments on the invoice assets purchased. Overall, factoring is a valuable financing option for businesses that require immediate payment and can benefit from the value of funding unpaid invoices.

 

 

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

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Friday, March 10, 2023

Unlocking The Benefits Of Receivable Financing & Invoice Factoring In Canada Invoice To Cash - Your Guide To Factoring & A/R Financing In Canada

YOUR COMPANY IS LOOKING FOR RECEIVABLE FINANCE!

 

HOW INVOICE FACTORING COMPANIES ( CANADA ) WORK

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

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

 

 


ACCOUNTS RECEIVABLE FACTORING & FINANCING IN CANADA - YOUR GUIDE TO HOW IT WORKS AND WHAT IT COSTS 

 

 

Considering Receivable Financing in Canada? If you are, your thoughts and answers on two questions should help you out quite a bit when it comes to invoice factoring in Canada.

 

HOW CAN  MY BUSINESS IMPROVE CASH FLOW?

 

One of our favourite business writers recently focused on cash flow management and asked the following 2 questions -

 

1. Does your firm need cash right now?

2. Do you know what your cash balance needs will be a half year from now?

 

The fact that you are even considering an invoice factoring company/factoring fund in Canada suggests your business might be facing cash flow challenges or perhaps that you're smart enough to address a future problem now!

 

 

WHAT IS FACTORING 

 

The basics of factoring finance are easy to understand - setting up a factoring facility allows you to, at your choice, sell invoices to an invoice factoring company, reducing your receivables and adding immediate cash flow to your balance sheet.

 

The ' sale ' is made via a ' fee, 'not an interest rate. It is typically  .75%-1.25% / mo - the fee varies via several factors, including the size of your facility, overall quality and collectibility of the receivables, industry credit risk, etc. - For example, construction industry factoring might be viewed as having more industry risk.

 

Although some business owners consider the whole process as ' factoring loans, ' the reality is that you are simply accelerating a collected account receivable's cash flow benefits. That ' invoice purchasing ' allows you to turn your company into a cash flow machine at your option.

 

 

WHAT IS THE DIFFERENCE BETWEEN INVOICE FACTORING VERSUS ACCOUNTS RECEIVABLE FINANCING?

 

Invoice factoring agreements stipulate the actual sale of outstanding receivables to factoring companies, which are usually independent non-bank commercial finance companies - On the other hand receivable financing as working capital and cash flow management solution use the accounts receivables of a business as collateral to obtain financing.

 

Banks offer unsecured loans via receivable financing solutions, and they typically register a general security agreement on the business's assets. So the receivables are assigned to the bank under this arrangement. Both factoring and a/r financing provide valuable business funding, and each method of small business financing has its advantages and disadvantages.

 



HOW DOES INVOICE FACTORING / ACCOUNTS RECEIVABLE FACTORING WORK IN CANADA? 



In Canada the invoice factoring company has a credit agreement with the customer to purchase invoices at a pre-agreed discount - In traditional ' old school ' factoring many factoring companies also assume the collection role in the funding process. When a client pays the company for the invoice the factoring company charges a fee on the invoice value and sends the company the funds less a fee for financing the invoice when the customer pays -

 

The benefit is that companies can receive cash flow immediately on generating sales of products and services to their customer.  Many factoring companies use invoice tracking and automation systems to fund client transactions.

 

 

 

IS INVOICE FACTORING AND RECEIVABLE FINANCING A GOOD OPTION FOR YOUR BUSINESS? 

 

Both invoice factoring and accounts receivable financing are solid credit risk management and cash flow solutions for small business financing in Canada. Businesses can improve cash flow and focus on collections management while obtaining cash advances for invoices before payment by the end user customer. 

 

However, business owners must weigh the benefits and drawbacks of these financing methods while considering issues around fees, interest rates, and credit risk.  Working with banks and reliable factoring companies is vital in assessing this method of Canadian business financing.

 

THE DIFFERENCE BETWEEN FACTORING AND  OTHER RECEIVABLE FINANCING

 

It's more of a technical issue that shouldn't concern business owners. Still, the paperwork around ' factoring' invoices an agreement to ' sell receivables ' - whereas using a bank credit line as an example, the bank holds security against the receivables because you ' assign ' your a/r to the bank under a traditional business loan arrangement - Somewhat much ado about nothing.

 

 

IMPORTANCE OF CASH CONVERSION CYCLE / OPERATING CYCLE

 

A/R finance allows you to address what's going on with your firm’s working capital rapidly. And by the way, it puts you in control, which you might not be feeling now regarding your firm's overall cash/ business cycle. When we meet and talk to clients quite often, it’s clear they don't necessarily feel in control of their finances.

 

When you can exert control over your cash with a receivable financing strategy, all of a sudden, the uses of cash seem a lot clearer. You can now make or take on new lease payments or reduce debt in other areas such as accounts payable. Keeping those suppliers and preferred vendors on the side is important, pretty well all the time!

 

MAXIMIZE CASH FLOW VIA FAST FUNDING OF YOUR SALES REVENUES

 

Let's cover some basics regarding invoice factoring in Canada, also known as invoice discounting. First, it’s a business-to-business financial strategy, so it doesn't really work in a Business to Consumer environment. (By the way, if you are selling into a retail environment, then a merchant cash strategy which finances future retail sales might work for your firm, but we digress...!)

 

WHAT DOES INVOICE FACTORING COST

 

The costs of receivable financing in Canada vary greatly, and it’s probably our most significant discussion point when we explain to clients the benefits and costs of an A/R finance strategy. 

 

What is important here is that you understand that the cost factor around receivable finance, in fact, is the costs you are bearing now, except that now you're winning, and using this financial solution allows you to win.

 

Business owners and financial managers must understand that  overall financing costs take into account a variety of key factors - Some of those factors include:

 

Overall creditworthiness of your client base

The size and the monthly volume of invoices to clients

In some cases, certain industries are major users of factoring - i.e. trucking/staffing companies, distributors, etc

 

 

Factoring costs are expressed as fees, not interest rates, and some factoring companies charge miscellaneous fees around applications, funds transfers, etc

 

On-balance factoring is more expensive than traditional bank accounts receivable financing but provides access to unlimited cash flow that otherwise might not be available from Canadian banks.  Startups in the Canadian economy can also access this method of financing, and firms can benefit from credit insurance and non-recourse financing programs.

 

The cost of receivable financing has to be benchmarked against two or three critical points you might not be considering. One is that you are already in the banking business, whether you like it or not because you are carrying your customers 30, 60, or 90 days already.  Congratulations on doing a great job in growing your client's cash flow - although that’s probably not your goal, right?

 

 

USE THE POWER OF RECEIVABLES FINANCING TO TAKE ADVANTAGE OF GROWTH FINANCING OPPORTUNITIES 

 

Secondly, you are potentially missing the opportunity to grow your business because of the cash flow constraint that invoice factoring in Canada solves under the challenge of carrying a company's accounts receivable investment.

 

At 7 Park Avenue Financial, we work with our factoring clients to ensure they understand the fees and cost of a/r financing and how they can benefit from this type of financing; focusing on a prompt collection of your invoices always reduces your costs of financing  - and we are not big fans of misc fees, set up costs, and locked-in contracts.

 

Our most recommended and successful a/r finance solution is  CONFIDENTIAL RECEIVABLE FINANCING, which allows you to bill and collect your own invoices and receive all the benefits of traditional, dare we call it  ' old school '  Canadian factoring companies.

 

If you want to learn more about invoice financing, how it works, what it costs, and the best facility out there when it comes to being 'in control,' then seek and speak to a business financing expert today.

 

You'll then see clear answers to those two nagging questions: Do you have enough cash today, and will you be able to address your cash needs a half year from now?

 

 
CONCLUSION


Invoice factoring allows your company to fund outstanding invoices via a third-party financing company in exchange for immediate cash, less a feel  Companies accessing receivable financing post their invoices as collateral for an invoice factoring loan/line of credit facility. Managing working capital and accessing business capital are key benefits of these methods of financing sales.

 

Factoring invoices is a solid solution to the cash flow problems of small and medium-sized businesses -  using financing companies in Canada for working capital increases cash, and as cash is added to the balance sheet, no debt is taken on by your company - you are simply monetizing your 2nd most liquid current asset - accounts receivable ( Cash is your most liquid asset !!  ) - In most cases, receivable financing is complementary with other lenders your firm utilizes for banking, loans, leases, etc.

 

Factoring receivables via a factored invoice program in Canada should not be confusing for your cash flow needs. Speak to 7 Park Avenue Financial, a trusted, credible, experienced Canadian business financing advisor who can assist you with your cash flow needs.

 

 

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

 

How does a business qualify for accounts receivable factoring?

 

To qualify for accounts receivable factoring, a business must be able to meet specific lending criteria in the invoice discounting/factoring process -

1. Factoring is based on the general creditworthiness of  the customer of the businesses, so clients must generally be stable and have reasonable payment track records

2. Factoring is on a B2B basis and factoring does not apply to individuals - Government Receivables qualify for financing

3. Unpaid Invoices eligible for financing must be less than 90 days old -  invoices older than 90 days are generally deemed uncollectible by the accounts receivable financing company

4. Certain factoring companies may require a minimum of monthly or annual sales to ensure factoring makes sense for the factoring company from a cost and time perspective

5. Receivables  must not be encumbered by liens or other financing arrangements with other bank financing or a business loan from other  business lenders

6. Companies must acknowledge in the factoring agreement with the invoice financing company  the advance rates and fees under invoice financing for small business

 

 

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

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Thursday, August 1, 2019

Receivable Financing Problems : Here's What Really Matters



















Creative Ways to Solve Working Capital Challenge : Steps to a Successful Receivable Financing Problems



Receivable financing problems grow out of the need for a businesses inability to grow cash flow as you run and grow your business. One strategy we recommend to clients is to grow cash flow and ' lose money'. That's not a trick statement of course, and when business owners understand several forms of receivable finance
via invoice factoring can solve their challenge they want to know more. Let's dig in!

A/R financing is a source of working capital - it's not debt or a loan per se. In technical terms it's the sale, or ongoing sale of your A/R generated out of your sales. That transaction is accomplished via a ' discount' basis, typically in the 1 to 2 per cent per month basis if you're on top of your collections. That's where ' the loss' comes in - it's a financing cost but at the same time has delivered all the cash flow you need. Suffice to say your business should be able to handle that 1 or 2 per cent drop in gross margins with the result being - Cash Flow!

Invoice factoring allows you to run and grow your business, sell more by taking on being orders and contracts, and also has the unique ability to allow you to negotiate solid supplier prices . Why ? Because you have the cash!!

This form of receivable finance is used by almost every industry in Canada . Even those Bay Street boys use it also - they apply a fancier name - Securitization.

What then are two major benefits of this method of Canadian business finance. It's simply the ability to get a cash advance on your sales and of course the quick turnaround- typically 24 hours! Bottom line - pretty well same day funding

Yes factoring is more expensive than Canadian chartered bank financing = that's the perception. But that must be balance against the hard reality that thousands of businesses do not qualify for all, or even some of the cash flow financing they need. And when you're carrying a/r 60=90 days even that bank credit line doesn't help.

The best form of account receivable cash flow financing? We call it Confidential A/R Finance - You bill and collect your own receivables, reaping the benefits and eliminating disclosure.



We're open enough to say that the majority of firms who in fact entertain receivable factoring can't get financing elsewhere, particularly at their bank. But don't forget also that many instances involve firms such as yours who are growing too quickly or who have landed that ' big contract' or order.

It's at this time that business owners appreciate the fact that their net worth, profitability, debt coverage, or operating losses aren't under the microscope anymore. And your firm is free to explore other methods of debt financing outside your A/R assets.



Speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success in this key area of Canadian corporate finance.





7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769


Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !







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Thursday, July 11, 2019

Excuse Us For Pumping Up Types Of Accounts Receivable Funding In Canada !












Intrigued By Factoring Finance In Canada?

Receivable Financing Lessons That Will Pay Off




Are some types of accounts receivable funding and factoring financing better than others? We're often accused of ' pumping’, aka ' promoting' this type of Canadian business financing for firms of all types in Canada. Why is that?

Is receivable financing, on its own or blended in with another financing a ' holy grail ' of business finance? Not really, of course, but it’s an effective solution that's often very misunderstood when it comes to the mechanics of it and the cost. Let's explain.

When times get tough or challenging for small and medium sized firms in Canada business owners and their financial managers can be forgiven for doing everything up to an including panicking .

A variety of situations can exist, sales slow down, or the opposite... major opportunities arise that cannot be taken advantage of. The recession that we supposedly are out of now certainly leveled the playing firm for a lot of firms, who saw their competitors in some cases even, disappear. Inventory and accounts receivable financing solutions are highly sought after.


So, when you consider accounts receivable funding and financing as one of your alternatives what are in fact some of the considerations? In the case of A/R finance it’s a simple one, freeing up assets for working capital and cash flow.

It actually is very possible also for you to consider acquiring a competitor or synergistic opportunity via factoring, as the target firms receivables, and yours could in fact finance the acquisition. Naturally other assets and factors come into play, but it’s certainly possible.

Accounts receivable funding should be viewed as a source of funding that you have already been approved for - especially if you're having some of those challenges we have talked about.

Again, at the risk of ' pumping ‘ / promoting invoice factoring as a business line of credit we maintain its one of the most flexible around . First of all, once your facility is set up you don't have to use it all the time, it’s up to you as to when you draw down and pay for those funds. Think of it as using it like a business credit card, using it when you need funds. You're simply making a borrowing decision that minimizes finance expense.


The amount of funding available is directly related to your sales and receivables. Those amounts of course change everyday as you sell and collect receivables.

As we said, your A/R finance option can be stand alone, or you can combine it with inventory and equipment assets that are all combined into one borrowing facility.

Our recommended solution is a confidential invoice finance solution, one that allows you to go against the grain of other offerings, putting you in a position to bill and collect your own A/R with notice to any clients, suppliers, etc. It's a solid solution when you don't have access to more traditional financing.

When it comes to costs many business owners will find that when they understand the true cost, i.e. the cost of carrying a/r already, as well as opportunity cost... well it simply might make tremendous sense to consider this unrestrictive financing when compared to other... or no.. Solutions.

Speak to a trusted, credible and experienced Canadian business financing advisor for solid advice on this Canadian finance solution.







7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769


Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .


' Canadian Business Financing With The Intelligent Use Of Experience '


ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.





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Sunday, November 26, 2017

Working Capital Factoring – Invoice Factoring Canada









Cash Flow Financing For Your Business Should Not Be ' Lost Hope ' : Alternative Finance To The Rescue




Information on working capital factoring in Canada . Understanding the benefits of alternative finance solutions such as factoring and asset based lines of credit is key to cash flow success when traditional bank financing is not available



Working Capital via factoring continues to be a viable solution for Canadian business owners and financial managers. The process at first glance is quite simple – your firm ‘sells’ its invoices to generate immediate same day cash for those invoice assets.


Clients ask us how this is different from a bank operating line of credit based on receivables. Simply speaking the difference is simply the method in which the asset – the receivables, is secured. In a Canadian chartered banking type arrangement your receivables are ‘assigned ‘, not ‘sold’ to the bank. The bank holds that assignment as a security for their advances on your receivables – they do not call the security unless your firm defaults on its obligations with the bank.


For those firms that can achieve bank operating line of credit financing in Canada that solution is absolutely the most cost effective – yet in many instances Canadian firms cannot achieve the amount of credit they need because the receivables financing is closely tied to your balance sheet and income statement from a credit perspective .


The majority of factoring ( also known as invoice discounting ) in Canada is done on a recourse basis, which simply means that although you get immediate cash for your receivables you are still responsible for any bad debts relative to your customer base .


In Canada most of factoring is done via a U.S. based model of doing business, which has the factor firm essentially verifying and collecting those invoices from your customers. We advise our clients on an alternative method, known as non notification factoring. This type of facility, which we term as a working capital facility, allows you to bill and collect your own receivables and avoid some of the negative stigma that Canadian business owners attach to factoring.


Factoring should most often be considered when your business is growing quickly or has large orders from generally credit worthy customers. Your ability to turn your receivables over more quickly will lead to more sales and greater profits. The cost of factoring is significantly higher than bank financing, but your ability to make use of the cash flow to buy smarter, take advantage of discounts, and purchase and resell more inventory faster significantly offsets a very large part of the cost of factoring in Canada, which can range anywhere from 1-3% on a monthly basis . We caution clients to view this cost as an operating expense as opposed to a financing or interest charge, which allow them to much better rationalize moving to this type of working capital facility.


In summary, factoring is an alternative to bank receivables financing. The facility, when properly set up, allows you to immediately monetize a large asset, your receivables. The best type of facility in Canada, in our opinion, is the non-notification type facility, allowing you to cash flow your receivables similar to a banking arrangement. When properly utilized the facility can help you grow and profit from faster working capital turnover.


7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8



Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .



' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.






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