Factoring Financing :Accounts Receivable Finance & Cash Flow Solutions

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A Perfect Business Cash Flow Solution? You Decide !

Information on cash flow financing solutions for Canadian business . Factoring financing is a solid solution for accounts receivable cash flow

Factoring financing , also known as invoice discounting in Canada is a lesser known by very important part of the Canadian business financing mosaic. Increasingly it is a major source of business financing and funding form small and medium sized companies in Canada. (We would also add that a form of factoring is utilized by many of Canada’s major corporations also)

When Canadian business owners and financial managers think of financing their receivables historically they have thought of a bank ‘overdraft ‘or an ‘operating line of credit ‘. With today’s low rates those facilities (when you can get them) are among the best financing facilities in Canada from a viewpoint of cost of capital. However, many new, smaller, and even medium sized established firms cannot meet the criteria that our chartered banks require to get such facilities in place. This is very simply because these type of facilities require excess collateral, strong personal guarantees, and the ability to meet various ratio and covenant formulas that the banks wish to have as back up collateral to their lending decisions .

Factoring financing or the immediate discounting of your receivables provides your firm with a greater level of borrowing against what is often your largest current and most liquid asset, you’re A/R.

When clients come to us looking for a factoring facility we are very clear that the largest challenge is not getting them that facility, but moreso, getting the right facility. The Canadian factoring landscape is littered with many firms who have facilities that don’t meet their needs from a cost perspective, but more importantly, getting a facility that meets the ways in which they do business in their own industry and geography.

In Canada there are hundreds of small and large factoring companies – (think of it, there are only 6 or so charted banks!). What most business owners don’t know that these firms are either very small privately funded independents, or, alternatively, subsidiaries of large branch operations in the U.S. and the U.K.? The later, the U.S. and U.K. firms have brought their way of doing business into Canada, which is not always, in our opinion, what works for your firm.

Also, many Canadian business owners don’t also realize that they can compliment, with the right partner firm, their receivables with an inventory and equipment facility – in some cases that can immediately double your available liquidity from a viewpoint of cash flow and working capital.

The main challenge we see for business owners, is their inability to navigate the difficult terminology and jargon of this relatively new type of financing in Canada. Business owners can therefore be forgiven that they don’t know what the following terms mean, and what impact they have on your business.

Discount rate

Advance Rate

Borrowing Base

Notification

Holdback reserve



Guess what? These terms have a huge impact on why you’re factoring financing and invoice discounting facility will be a success or failure.



Business owners prefer, when they have the choice, to be well informed. They also want to take advantage of products and services, (in our case financing) that maximizes the benefits they are looking for.

Speak to a trusted, credible and experienced advisor in the area of factoring financing. Understand why this type of financing is working in Canada, and more importantly, how it can help your firm grow revenues and profits.

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.

Stan Prokop

Finance Your Sred Claim Now . Take Advantage Of Your Grant Today

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SR&ED financing - A Solid Cash Flow Strategy !


Information on how Canadian firms utilizing the SR&ED program can finance their sred claim. Cash flowing your sr&ed refund is a solid source of working capital and cash flow for companies committing r&d capital

Your ability to finance your sred claim (aka ‘sr&ed claim) simply signifies the cash flowing of your non repayable government grant. We think that anytime you can hasten cash from the government and turn that into immediate cash flow and working capital, well... that is a good thing.

SRED grants, (sr&Ed grants) are of course the funds you received from Canada Revenue Agency based on the filing of your Scientific Research and Experimental Development (SR&ED) claim. These funds have never been more generous and many Canadian business owners and financial managers are not aware that the program even exists, let alone their ability to partake in the billions of dollars of non repayable grants issued by this department within CRA Canada. Essentially it is the largest support for research in Canada. Many clients are always asking us if there are ‘government grants and loans ‘. We are of the opinion that the two best programs in Canada to finance your firm are the federal BIL/CSBF loan and of course the SRED program.

Your firm ability to generate a claim immediately turns into a non repayable cash grant. Timing is everything, and you have the ability to finance that claim if you want to monetize those funds and get them working inside your firm. For many early stage and start up firms the ability to finance their sred claim is often the largest receivable the firm has that year. And the beauty of the program is of course that as along as your firm is a private corporation you can partake in these funds.

As companies, and even as consumers we generally use an ‘expert ‘to prepare our taxes and file them. It is certainly no different with SRED and we recommend that you use a sr&Ed consultant to ensure your claim is prepared properly. Naturally using their own expertise, or the governments self assessment tool you want to be sure you are eligible for the grant, given that it takes time to prepare and file the claim.

Naturally after filing a professionally prepared claim you are of course entitled to wait for you cheque – that timeframe can be anywhere from a couple of months to potentially close to a year depending on some key factors as your first time filing, and the due diligence that SRED employees do on the technical and financial aspects of your claim .

So you are eligible for Sr&Ed. You have filed a claim. You have been made aware you can finance the claim, but you are not sure how. In general the banks in Canada don’t finance these sorts of claims – that’s a general statement, but 99% of the time we are pretty sure we are correct in making that comment. Therefore it is strongly recommended you contact a business financing advisor who specializes in sred finance. At that point it’s a relatively simply process, and we encourage clients to view it as they would any business financing, from a lease to a loan arrangement. There is standard application information, and the whole process, up to an including funding, can be completed in a manner of weeks.

As a general rule it makes sense to finance claims that are over 250k in size, but quite frankly smaller claims can also be financed. There is no challenge to the amount of financing re the size of a sred filing – Claims well in excess of a million dollars can be easily financed.

The key advantage of financing a claim is that you are not undertaking any debt; you are just discounting a receivable that you have – that receivable being the sred claim itself. The sr&ed filing itself is the actual collateral for the financing – and if you want more good news then you should be aware you don’t makes payments on a sred claim finance. The funds advanced are netted out from your final chq from the government. Usually sred claims are financed at 70% of their filed value that leaves a buffer in case part of the claim is downsized when approved.

Cash flow is king, if you have a sred claim be aware that claim is financeable , and your ability to get those fund working again usually puts you in a more competitive stance within your industry , and allows those funds to be used for further research or any general working capital purpose . Speak to a trusted, credible and experienced advisor in this area to ensure you are aware of the benefits of sr&Ed finance – claim those funds!

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.

Stan Prokop

Factoring & Receivables Financing ... Works !

How Well Is Your A/R Financing Really Working?





Information on factoring and receivable financing in Canada - What it costs.. why it works

Factoring in Canada is four things:



New and increasingly accepted

Misunderstood

Different than in the U.S.

Growing more popular every day as an alternative vehicle to business financing

Canadian business owners and financial managers keep hearing about factoring , and when we talk to clients who are pursuing this financing option it is increasingly clear there is a lot of mis information and ‘ noise ‘ about this unique type of financing that needs to be clarified .



So why is there so much mis information about factoring and how can business owners in Canada get the ‘real story ‘. Part of the problem is that factoring, in our opinion, means different things to different people, both within the industry itself, and also to the Canadian business owners. Similar to the terms ‘ cash flow ‘ and ‘working capital ‘ the use of the term is interchanged in a variety of ways . Also, factoring isn’t a home grown solution, and migrated to Canada from the U.S. and Europe, where it has been in place for hundreds of years.



Factoring, also know as receivables financing , or ‘ invoice discounting ‘ is best utilized when firms are growing rapidly, have sales and verifiable invoices, and require injections of working capital for that a/r investment that otherwise might not be available through traditional sources such as the bank . In 99% of cases that we deal with where a client is a ‘ start up ‘ the initial financing through a factoring facility is a critical and valuable tool in the early growth of the company .



Let’s get back to the confusion around factoring. Traditional factoring in Canada is in fact simply the sale of your receivables, and their purchase to a factor firm. The most immediate benefit is the immediate receipt of cash, which eliminates the need to wait for anywhere between 30-90 days for payment from your customer. Over the years it is inherently obvious that every firm out there recognizes that delaying payments to your suppliers is an instant form of cash flow. However, when you are on the receiving end of that, waiting for your money, that is poor consolation!



Does your business receive 100% of the invoice value when you sell your invoices either individually, or bundled in a larger amount of invoices? The answer is ‘no’ – You generally receive on the same day anywhere form 75-90% of the invoice value. The balance is held back as a hold back or buffer, and paid to your firm immediately on final receipt of payment from your customer. At that point factoring would be ‘free ‘, but it isn’t, there is a further deduction for the commission or financing cost by your factor firm. That cost is one of the greatest issues facing Canadian business owners, because it is anywhere in range from 9%/annum to 2-3% / month.



The costs associated with factoring in Canada have to be viewed in the context that although they are higher than traditional bank financing that point becomes moot because your firm probably cannot qualify at this point for a true Canadian chartered bank operating facility. So factoring simply allows you to grow your firm when you can’t obtain sufficient financing otherwise.



So now we have understood what factoring is, and why it has become a tool within the Canadian business financing tool kit. That’s the easy part. The challenge for Canadian business then becomes –



What type of firm is the best one for my company and industry

How does this financing work on a daily basis

Am I comfortable enough to let the factor firm notify my customers regarding invoice verification and payment

Is there an alternative to involving my suppliers and customers into this financing process

We advise clients that the best factoring facility in Canada is one in which your firm can bill and collect its own receivables. That type of facility is called non notification and is as close to traditional financing mechanics as one can get.



So whats our bottom lien summary – it’s simply as follows. Factoring in Canada is only mis understood because business owners don’t have access to solid unbiased information on how it works, what it costs, and how it benchmarks as an alternative to traditional financing. Certain factoring facilities in Canada exist that are very transparent to your firm and its customers. Factoring has higher costs, but those costs can grow your sales and profits considerably. Seek out the advice of a trusted, credible and experience advisor in this somewhat misunderstood area of Canadian business financing.

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.

Stan Prokop

What Do I Need to Know When I Am Buying a Business?

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I often wonder if business owners who are looking at purchasing a business take the same sort of outlook as when they are buying something in the stock market.

Let's take some thoughts from the way Warrant Buffet looks at a company and determine if we could be using those same successful strategies.

Those strategies tend to be summed up in a very concise manner -> make sure you understand what you are buying, ensure the industry prospects are favorable, and if management is going to stay on in some capacity make sure they know what they are doing!

Many owners I meet look to buy into businesses, or franchises for that matter, in an industry they don't understand. We would say that if you can't positively feel good about knowing the real sales potential, how expenses occur, what is the cash flow cycle of the business then you should not by look to purchase that business. Naturally many business owners will often get a strong sense of missing a major opportunity - the business owners forgets that Buffett once said 'above average results... are often produced by doing ordinary things'.

Many business owners like to focus on buying a turn around business, a business that has been either abandoned or poorly managed by its previous owners. While there are clearly some great turn around stories out there, more often than not these transactions become large challenges and financial nightmares. More simply speaking: The business was cheap to buy for a reason!

In a perfect world, (and we realize it's not!) it is optimal to consider purchasing a business that has a solid product and reputation.

The people aspect of purchasing any business is also important, and great investors such as Buffet place a large emphasis on management. Obviously the business purchaser has the focus of either keeping management or replacing management. Naturally management that has a focus on the bottom line and on long term growth are to be very valued.

At a certain point it gets down to 'price'. Business acquirers should focus as much on return on equity as just net income. That is one the key areas in a Buffett type purchase decision. A huge mistake is to also focus on volume as opposed to profit margins. Most business acquisitions involve the buyer assuming or generating debt. The overall focus, it goes without saying is to minimize debt.

Getting back to our legendary investor, Buffett creates a formula for what he calls owner earnings - which formula is as follows:

Net profit + deprecation - Capital assets needed to be acquired

We would agree that this is a great way to look at profit potential in any business being acquired.

Buffett modeled his career on one book, a famous finance book entitled 'The Intelligent Investor ', by a fellow named Ben Graham. As dry and out of date this huge text might seem to today's business person, we could still all use a little ' intelligent investing' assistance when make a major decision to buy a business.

Stan Prokop is the founder of 7 Park Avenue Financial. See http://www.7parkavenuefinancial.com The company originates business financing for Canadian companies and is a specialist in working capital and asset based financing of all types. For more information or contact details please see: http://www.7parkavenuefinancial.com/Home_page.html

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.

Stan Prokop





















Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/3644137

5 Tips For Selecting The Right Leasing Company For Your Equipment Finance Needs

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Equipment Financing Lease Solutions In Canada - The Not So Radical Way To Finance Asset Needs





Information on equipment finance solutions in Canada . Working with the right leasing company solutions is the best method to address capital equipment needs

Partnering is more often than not the right thing. Bad partnerships don't work and can adversely of course affect your business. That’s why it is so important to select the right firm to originate your equipment finance needs.

The right leasing company on a long term basis will ensure that you are investing properly in the assets you need to run your business for your customer base.

Let’s look at 5 key tips we can provide you to ensure you are putting the right financial strategy in place around asset acquisition. Successfully working and negotiating through these tips with the right leasing partner guarantees you business equipment lease financing success.

Its all about getting approved of course , and getting an approval quite frankly is the biggest decision your lessor has to make around the transaction - that approval can be significantly influenced by yourself - it is important to present both the positives around your firms financials, as well as the challenge you may have, or may be facing,

Chance of getting approved is significantly reduced if negative information about your firm or its financials arises after your submission. Factors that affect your approval are your time in business, your ability to have sourced financing in the past - i.e. other lessors, banks, etc. Other key areas of focus are trade references and the ability of the owners to demonstrate they run their personal lives in a fiscally responsible manner also. This is usually accomplished by the lessor drawing a credit bureau report. On transactions over 50,000.00$, as a general rule financial statements are required, and areas of focus will be your overall balance sheet health and the ability to generate positive cash flow to repay the lease .

Lets move on to rate, we are never under surprised with how much our clients focus solely on rate and their ability to drive down the lessors yield . In Canada leasing equipment is very competitive, and all we can say is that if you have presented your financials properly the market will ensure you have a competitive rate. Naturally you can spend all the time in the world securing a ' better deal ', but consider management time and total savings. A quick example: If you leased a 75k piece of production equipment and were quoted a rate of 10.25% and you spent a lot of time in sourcing another quote, re submitting your financials to a new firm, etc , and got a rate of 10.00% you would be saving twenty dollars a month. We'll let you decide the value of your time.

We have covered off credit approval and rates, Documentation are important also. You should be prepared to provide a proper invoice or quote to the lessor, as well as a certificate of insurance. The equipment lease and your acceptance of delivery are key to the lease commencement. Smaller transaction in Canada has been greatly simplified, so you should typically be provided with a one or two page lease agreement. Larger transactions are of course more complex.

The type of lease you choose and your analysis of the lease versus buy decision is also a key area of focus. Look at your cash flow Vis Vis payments you will make on a lease versus a loan basis. As a general rule leasing tends to be more expensive, but is easier to obtain and is less of a drain on your cash flow.

Two is the magic number. There are two types of leases you should inquire about, a full payout capital lease, as well as an operating lease where use of the asset is more important than owning the asset.

Your overall lease financing decision should be focused on a very simple question - namely:
- is the asset acquisition important to your business profitability and productivity. If new assets and proper financing position your business for competitiveness you have made the right financing decision.

We have covered off 5 key areas in the selection of a leasing company in the equipment finance area. If you find the information and the challenge overwhelming speak to a trusted, credible and experienced business financing advisor who will help you achieve lease financing that meets your goals.

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.

Stan Prokop

Factoring Financing – Three Things You Need to Know About Receivable Financing In Canada

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Fiction vs. Reality - Debunking Factoring & A/R Myths In Canada



Information on factoring and financing and receivable finance solutions in Canada. Debunking the misunderstanding around how it costs, how it works !

You have made the decision to consider factoring financing as an overall business financing strategy. In some cases you may be factoring and receivable financing currently, but are not happy with a number of key issues that weren’t discussed when you set up your facility. Let’s explore the three things you need to know around factoring financing in Canada, and debunk some of the myths and misinformation that is out there on this subject. These are:


All factoring Companies are the same

Factoring is expensive

Factoring is intrusive to my customers and suppliers, but my firm has to live with that


The reality in Canada is that as a country we came late to the factoring party. Factoring started in the U.S. and Europe, and has been established for hundreds of years. As a result the factoring that tends to dominate Canadian business financing, both in business model and pricing is heavily influenced by a small number of foreign firms.

We should probably do a very short ‘primer’ on factoring to ensure we’ve got the basics in place. Factoring, or receivable financing is the sale of your invoices or accounts receivable to a third party. It is very dominant in certain industries, i.e. trucking and transportation, staffing, etc, but quite frankly is now prevalent throughout Canada in many industries. What differentiates factoring is really the three points we’ll discuss – who is offering it to you, what it costs, and how does it work.

We recommend to clients that they deal with Canadian firms when considering a factoring option. Because this business financing is somewhat unique, and mis understood we strongly recommend you work with a trusted, credible, and experienced advisor in this area who can guide you through what many consider the factoring maze.

So let’s get back to our three key areas: First factoring firms vary in Canada by size, geography, and financial capability. You need to align yourself with a party that is most suited to your type of business, the size of your receivables portfolio, and the ability to deal on a one on one basis on any issues that come up .As we stated, it seems common sense that your best partner will be a Canadian firm who as direct representation in your geographical area.

Lets move on to point # 2 - Is factoring expensive? We always hate saying this, but the answer is that it depends. Receivable financing certainly has the aura of being expensive, and unfortunately most clients we meet are always focus on rate. A few key points need to be made, so let’s be clear on this issue. First of all factoring in Canada has a discount rate of between 1-3% per month. We use the term discount rate because the industry itself doesn’t view the rate as an interest rate; it views it as essentially a reduction in your overall gross margin. Let’s use a quick, clear example. Let’s say you have an invoice for $ 100,000.00. Factoring allows you to get approx 90% of the funds on that invoice the day you generate the invoice. (The balance, 10%, is paid to you when your customer pays,) and out of that holdback comes, say a 2% discount fee to the factor firm) the factor industry view that 2% as a commission for financing your invoice. If your customer pays in 30 days Canadian business can be forgiven by saying – I paid 2% per month, that’s 24% per annum that is expensive.

One of the main points we can make when advising clients on a proper factor financing facility is that the funds you get on immediate cash conversion can be used to purchase inventory at a better price for cash, or alternatively, you can take the many 2% net ten day discounts many suppliers offer . If that was the case on all your business we can make the statement that you are recovering 100% of your financing costs via this strategy, plus you have unlimited working capital .That’s financial power.

For our third and final point we address the issue of customer intrusiveness. We alluded the U.S. and U.K. firms who follow a very clear process on the receivable financing for your firm – they send your invoice to your customer on your behalf, they corresponded with the customer , and they call your customer for money .But , and this is a large ‘ but’ did you know that with proper negotiations and the use of a proper advisor you can negotiate and implement a facility that allows you to bill and collect your own receivables, while at the same time getting all the benefits of factoring – i.e. immediate working capital and cash flow?

In summary, factoring can be easily mis understood. Assess what you think is wrong or might not work with this method of financing, and develop a receivables financing strategy with the knowledge that you will not be making the mistakes of others who are less and ill informed.

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.

Stan Prokop