Factoring Receivables: The Ultimate Cash Flow Solution for Canadian Businesses | 7 Park Avenue Financial

YOUR COMPANY IS LOOKING FOR FACTORING IN CANADA FOR BUSINESS FINANCING!

ACCOUNTS RECEIVABLE LOANS & FINANCING SOLUTIONS

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        Financing & Cash flow are the biggest issues facing businesses today 

      ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

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  WANT TO FIX YOUR CASH FLOW ISSUES? HERE'S HOW!    

What Is Accounts Receivable Factoring Financing? What Is The Best Type Of Factoring Company?

Canadian business owners' cash flow needs usually fall into one of two camps: they have unlimited cash resources (doubtful!) or are constantly hampered by day-to-day challenges in growing and managing their business (probable!).

Cash Flow Crisis? Factoring Receivables Could Be Your Lifeline  

The Problem: Your business is thriving with steady sales, but lengthy payment terms leave you cash-strapped and unable to fund daily operations or growth initiatives.

While waiting 30, 60, or even 90 days for customer payments, you're missing crucial opportunities, struggling to pay suppliers, and potentially facing financial instability.

Let the 7 Park Avenue Financial team show you how accounts receivable factoring converts your pending invoices into immediate cash, providing the working capital and immediate cash flow you need without adding debt to your balance sheet.

Uncommon Takes on Factoring Receivables  

1. Unlike traditional financing that focuses on your company's credit history, factoring receivables evaluates your customers' creditworthiness, making it accessible for businesses with limited credit profiles but reliable clients.
2. Factoring can serve as a strategic customer vetting tool, as factors thoroughly assess your clients' payment histories before purchasing invoices, potentially identifying problematic accounts before they affect your business.
3. While often viewed as a last resort, proactive factoring can enhance growth by enabling businesses to accept larger orders or contracts they would otherwise lack the working capital to fulfill.

 WHAT IS RECEIVABLES FINANCE   

Accounts receivable finance solutions via factoring companies could well solve all your problems - receiving cash immediately upon invoicing! This method of trade finance allows your cash flow to become 'predictable', thereby avoiding the proverbial 'cash flow crunch'.

Are you focused on :

Cash flow from sales?
Increasing cash without debt
Growing your business without ownership dilution?
Addressing seasonal cash flow patterns
The  ability to accept large orders or contracts
Finding an alternative to a lack of bank financing?

Let's dig in!

WHAT ARE THE ADVANTAGES OF FINANCING RECEIVABLES FOR YOUR BUSINESS?

Business owners and their financial managers can't afford to let the accounts receivable financing gap between invoicing and collection grow larger. A/R financing allows businesses to convert sales on business credit or trade credit into cash.

Don't find your business being cash dependent all the good-paying clients seem almost the norm these days!

WHAT IS DEBT FACTORING?  

Debt factoring is a term for selling accounts receivable to a third-party lender at a discount. This enables a business to unlock the cash flow tied up in the company's accounts receivable investment.

The ability to not wait to receive payment almost automatically increases cash flows to the business.

Canadian business owners and financial managers face daily, real-world cash flow challenges.

Let’s look at an example of why accounts receivable finance can be the holy grail of working capital financing. Cash flow financing goes by several names in Canada, which is part of the confusion we always try to navigate on our client's behalf.

Owners and finance managers choose this method of financing to shorten their cash flow cycle. This type of financing accelerates cash and allows the company to meet short-term, day-to-day obligations related to the credit terms it offers its customers.

As company sales grow, so does the level of A/R and inventory that you carry, which ties up working capital.

Note also that these financing facilities grow as your sales revenues increase.

There is virtually no upper limit to your company's ability to cash flow sales. A/R financing via asset-based facilities tends to be a bridge to a firm's access to more traditional bank-type finance.

Smaller and growing companies want to avoid equity dilution, and asset monetization strategies such as factoring allow your firm to grow with the need for additional owner equity.

Various terms apply to this type of business receivables financing.

They include receivable factoring, invoice discounting, A/R financing, invoice factoring, and our favourite and most recommended solution - Confidential receivable funding.

Depending on how your transaction is structured and who you are dealing with is the key issue - It's not about what the financing is called!

Clients always want to know if they are a candidate for business receivables finance. There are some perfect candidates, so let’s look at a profile or two so that you can determine if you fit.

Generally, you will have accounts receivable outstanding invoices that pay fairly regularly but occasionally slowly.

Investigating this cash flow finance solution is not about a business loan—it's simply about monetizing your current assets!

Another key benefit for firms considering funding receivables and cash flow/working capital loans, also known as ' Merchant Advances ' is avoiding fixed repayments under a term loan type of financing versus account receivable loans.

Your bad debt experience has probably been in the satisfactory/respectable column.

  Your invoice and stated terms for your customers is 30 days, but guess what?  Some or many clients pay in 60 and 90 days. Bottom line - you're in the category of needing an A/R finance solution from a commercial financing company

Does size count? Of course, it depends on what you're talking about! Cash flow financing doesn’t.

Generally, if you have at least $50,000 of monthly invoices, you are a candidate for accounts receivable finance. Corporations with millions of dollars in receivables also utilize this form of financing.

It is essential to understand that in A/R financing from a factoring company, the factoring cost is determined as a fee, not an interest rate.

WHAT ARE THE FACTORS THAT AFFECT OVERALL FINANCING COSTS IN RECEIVABLES FINANCE?  

1. Size of Facility

2. Type of Industry you are in

3. The general level of creditworthiness around your customer base

4. Average collection period of your receivables, i.e. your 'DSO'

However, the business owner and financial manager must determine whether they want recourse or non-recourse financing, i.e., the transference of the collection risk.

Also, at the start of your facility, you can determine if your or the commercial lender carries the credit risk associated with bad debt.

At 7 Park Avenue Financial, our recommended solution for A/R factoring is Confidential Receivable Finance. This allows your firm to bill and collect its A/R while retaining all the benefits of invoice financing.

Where size might count a bit is that it has a potential effect on your overall financing cost. 

In our experience, if you have a large facility, you can potentially reduce the cost of your accounts receivable finance facility by close to 1% per month. However, we spend many hours and meetings educating Canadian businesses on factoring pricing, which is grossly misunderstood by most clients looking into this type of business financing.

THE BOTTOM LINE?

So, the bottom line is that you should not let your company size or any other challenges you might be facing (temporary financial losses, restructuring, etc.) affect your ability to implement an accounts receivable finance strategy successfully.

Many times, the decision to factor in receivables comes from directly related issues to collections. Sometimes, your client's slow pay may affect your ability to purchase inventory or meet payroll. This is a classic situation that drives clients to seek outside financing assistance.

HOW DO ACCOUNTS RECEIVABLE AFFECT CASH FLOW?    

When you finance (in effect, you are selling) your receivables under this type of facility, you immediately receive a 90% advance on your invoicing, allowing you to meet obligations and expand your business.

Traditional sources of business financing in Canada, i.e. chartered banks, have made it challenging for firms to finance receivables in a manner that makes sense for the business owner.

In some cases, as we noted, your business has had challenges that prohibit you from temporarily sourcing cash flow financing from banks.

A commercial finance company might often be your best bet in alternative financing choices. No bank loan applications are required!

No debt is added to your company balance sheet when you finance receivables.

Even the largest corporations in Canada use a similar method of financing—it just has a fancier name: Securitization!

Case Study: Benefits of Factoring Receivables  

A mid-sized Canadian industrial equipment producer faced a significant challenge when it won a contract with a major client that would increase its business by 40%. While exciting, this opportunity required substantial upfront investment in materials and additional labour, creating a cash flow gap its existing resources couldn't bridge.

Rather than declining the opportunity or taking on debt, the company implemented a factoring receivables solution. Within 48 hours of signing with the factor, they received an 85% advance on their existing $175,000 in accounts receivable, providing immediate working capital of $148,750.

As they fulfilled the new large contract, they factored each invoice upon delivery, maintaining consistent cash flow despite the client's 60-day payment terms on the value of the invoice.

This strategy enabled them to:

• Accept the large contract without cash flow constraints
• Pay suppliers on time, maintain good relationships and qualify for early payment discounts
• Hire additional temporary staff to meet increased production demands
• Avoid taking on debt that would have impacted their balance sheet
• Focus on production quality rather than collections and payment timing
•  

Within six months, the company had successfully grown their business by 35%, increased profitability by 22%, and established the cash flow foundation needed for sustainable expansion—all without traditional financing or equity dilution.

10 Specific Use Cases for Factoring Receivables  

1. A manufacturing company needs to purchase raw materials for a large new order but lacks immediate cash while waiting for payment on delivered goods.

2. A staffing agency must meet weekly payroll obligations while clients operate on 30-60-day payment terms.

3. A seasonal business requires working capital to build inventory before peak selling season while still managing off-season expenses.

4. A growing company wants to take advantage of supplier early payment discounts but lacks cash due to outstanding receivables.

5. A transportation company needs immediate funds for fuel, maintenance, and driver payments while waiting for shipper payments.

6. A construction contractor requires materials and labour funding for new projects while previous project payments are still in progress billing cycles.

7. A technology service provider faces cash flow gaps between project milestones with long payment intervals.

8. A medical practice needs operational funding while waiting for insurance reimbursements that typically take 45-90 days.

9. An export business requires protection against international payment risks while accessing immediate cash for continued operations.

10. A company experiencing rapid growth needs working capital to hire additional staff and expand facilities without taking on traditional debt.

CONCLUSION - ACCOUNTS RECEIVABLE FINANCING

Small business owners, as well as mid-sized companies, can't afford to neglect and address their cash flow needs -

Call 7 Park Avenue Financial, a trusted, credible and experienced business advisor, and focus on getting into a facility that meets your needs regarding day-to-day working capital while addressing business growth and raising cash utilizing Canada's most popular form of asset-based lending.

Let our team address receivable financing problems and the solutions available for business funding options.

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

What is receivables financing?

What are the different types of Accounts Receivable Financing?

Invoice factoring is a common type of AR financing for money owed to a company. A business receives early payment as the factoring company pays based on invoices on the company's balance sheet for products and services provided to the company's customers; the supply chain finance timeline in a business can be lengthy - so the account receivable cash advance under a loan agreement/ factoring agreement from factoring companies benefits the cash flow of a business. Companies should generally try to avoid long-term contracts with factoring companies. Factoring fees are based on various factors that reflect lender risk, etc.

Larger businesses and corporations use receivable finance asset-backed securities, such as securitization techniques, which operate similarly—i.e., the company sells its a/r for cash. Understanding receivable financing vs. factoring is essential in the decision to fund receivables. Receivable financing is generally done via unsecured credit lines from banks or secured loans from asset-based lenders.

How does AR factoring work?