AR Funding Via Selling Receivables Is A Solid Asset Finance Strategy .. Sometimes

Are A/R Financing Mistakes Leading To Bad Results ? Secret Tricks To Successful Invoice Finance

OVERVIEW – Information on selling receivables as an asset finance strategy for Canadian business. AR funding.. done right

Selling receivables via (A/R) AR funding is often a solid move as part of an overall asset finance strategy. But can this financing move lead to bad results? It only can, if done improperly. Here's our views on ' secret tricks'

to successful invoice financing when helping clients with the right moves in cash flow financing. Let's dig in.

Carrying receivables is one the largest liquidity challenges for any size business - from start up to major corporation. The (hopefully) profits locked up in A/R can contribute to major cash flow issues if not funded properly. By the way, it sure helps if you can turn those invoices into cash faster - with or without financing!

How does the ' traditional’ asset finance strategy of selling receivables work? The fundamentals are simple - it when we get down into the weeds that there are potential problems. A/R Funding is simply the sale of your receivables on an ongoing basis, for instant cash. It's interesting that advances on your A/R in this manner are even more generous than banks. (Banks finance 75% - the right invoice finance facility delivers a 90% financing.

Business owners/mgrs should not get caught up in security paperwork behind an AR asset finance facility. Similar to banking it collateralizes your receivables, and, very much like bank facilities places a blanket security on your firm. The right commercial A/R finance partner will always allow you to finance equipment, inventory and other needs separately.

What are the key factors in how a lender assesses your A/R portfolio? Typically they look at:

Non North American Receivables - Cdn and U.S. accounts are ok to finance

Typical amts and size of your invoices

Quality of your aged receivables - invoices over 90 days old can't really be financed




Why do businesses consider non bank AR Funding? Reasons include:

Faster approval for such facilities

Generally straightforward paperwork

Less reliance/emphasis on owner guarantees

Good quality receivables and your mgmt thereof ensure almost unlimited financing capability - you've turned your firm into a cash flow machine

General credit quality (often a factor of what industry you are in)

Commercial A/R financiers love high growth (banks don't necessarily ascribe to hyper growth, favoring stability in sales and finances)

So what about those ' BAD RESULTS ' when it comes to asset finance and selling receivables for a revolving credit facility need? Things can go wrong when you don't understand the higher cost of non bank A/R asset financing. Clients we initially meet are both surprised and confused around how various firms price these facilities.

Additionally many clients we meet don't fully understand this is often an interim solution - its higher cost with unlimited capital that more often than not takes clients back to a traditional finance solution.

The largest negative in selling receivables? Opinions vary but we believe strong that most Canadian business owners and financing mgrs don't like the ' notification' aspect which traditional A/R finance demands - i.e. advising your clients this financing is in place. Do we have as solution? Your bet! Consider a CONFIDENTIAL INVOICE FINANCE strategy, allowing you to bill and collect your accounts, all the while maintaining your client relationships while having access to unlimited funding.

So, is selling receivables a solid asset finance move? Speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your asset finance needs. It’s all about those tips, tricks and secrets for successful financing of your business.



Stan Prokop
7 Park Avenue Financial :
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 . Info /Contact :

7 PARK AVENUE FINANCIAL = CANADIAN ASSET FINANCE AND A/R FINANCING EXPERTISE




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


' 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.







Stan Prokop

Is Selling Receivables Via AR Finance Factoring A Viable Cash Flow Solution?

Assessing Viability of Canadian Receivable Finance Strategies


OVERVIEW – Information on selling receivables as a cash flow financing strategy in Canada . Why AR finance, aka ‘ factoring ‘ offers a viable business capital solution for Canadian business owners and managers.


It's not only a great legitimate question... it's a great question. Is selling receivables via AR Finance factoring a solid way to generate cash flow and growth for Canadian business? We're all for painting a balanced view of this common question so let's examine some key facts.

Factoring in Canada is not borrowing - it's selling. So just that simple concept is critical to understanding how A/R financing differs from traditional bank commercial credit lines. It's fundamental to understand the paperwork and legal concepts behind this process - and quite frankly it’s not that difficult. Let's use a $ 10,000 invoice as an example. If your terms are 30 days and you client actually pays you in that time frame (some don’t by the way!) then here's how the process works.

No loan is in place here. You sell that 10k invoice at a discount, which is typically, using our example at a discount of 150-200$. You are in a position to receive those funds, if you choose, immediately upon issuance of your invoice to the client. In effect you have transferred the ownership and the rights of that ownership in your sale to your factor firm.

Here is where some additional clarification is required. Two key points come to mind. One is that the majority of factor firms in Canada (let’s say 99 %!) typically take over the collection process. After all they have purchased your accounts and given you funds, right?

Not so fast mister!

An even better solution at this point is to utilize a confidential receivable financing facility. Under this program you still are 100% in charge of collecting your accounts, and maintaining the client relationship. And you still have received the benefits of that instant cash flow. Talk about the proverbial double whammy!

Are there any guarantees in life and business? We can think of one, which is that the debate on the cost of selling receivables under an AR Finance program will probably never end! We can though strive to provide some clarity around the issue, which is simply that you need to have a handle on three aspects of invoice factoring.

What are those three key underpinnings then? They are as follows:

The holdback that is imposed by the factor firm

The actual discount percentage (clients mistakenly refer to this as ' the rate ')

The advance amount under your borrowing facility

You will also recall that when we used our 10k example we made the assumption that your clients will pay in 30 days. As we joked, no really we were joking... many firms don't pay in your stated terms. How then does the A/R financing industry handle this? Well, if you're dealing with the right firm your costs will be then calculated on a per diem basis, so that if you clients pay in 47 days you will only be charged a fee that reflects those additional 17 days.

Why then to experts maintain that the cost of factoring is in fact not as expensive as perceived. It comes down to some basic reasons:

Your cash flow accelerates immediately

By turning over more sales and assets with those new funds you generate more profits - You are no longer ' the bank' for your own clients, as you never intended to be! What we are really talking about is a trade off between more financing costs than the bank but the ability to earn profits on more sales and asset turnover. Oh and by the way, some firms seem never to be able to be in a position to get approved for bank financing - but there will always be an A/R solution to their working capital problems.

One quicker example. Let's say your company determines it needs 250k of extra working capital. You could, if your firm is bankable, approach your bank for a 250k working capital cash flow term loan. Typical term might be 3-5 years. You might well find that these costs are much higher than a factoring facility which is all about asset turnover.

Today’s key point? Simply that keeping an open mind to selling receivables as a cash flow strategy might just be the most viable finance structure you have looked into! Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your A/R financing needs.

7 PARK AVENUE FINANCIAL
CANADIAN CASH FLOW FINANCING EXPERTISE



Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

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

http://www.7parkavenuefinancial.com/selling-receivables-ar-finance-factoring.html



7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com








Stan Prokop