YOUR COMPANY IS LOOKING FOR A/R FINANCE AS A CASH FLOW ALTERNATIVE!
ACCOUNTS RECEIVABLE FINANCING & ACCOUNTS RECEIVABLE FACTORING SOLUTIONS IN CANADA
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Financing & Cash flow are the most significant issues facing business today.
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Accounts receivable lending in Canada as a viable alternative to debt and equity options. You bet that’s why thousands of firms in Canada have turned to an invoice factoring and financing service as a healthy alternative to taking on long-term debt or diluting equity ownership if, in fact, an equity raise is a viable alternative. That's the factoring company solution via 7 Park Avenue Financial. Let's dig in.
DEBT VERSUS NEW OWNER EQUITY
We have assumed that many companies in the SME Commercial sector (small to medium enterprise) could, in fact, access debt capital or raise equity financing. The reality is that only the smallest percentage of companies in SME could realistically be successful.
ARE BANKS THE ANSWER TO YOUR A/R FINANCING NEEDS?
When it comes to a credit line and cash flowing your outstanding invoices to grow a business, it basically comes down to a traditional bank loan/receivables loan solution or an alternative financing strategy and solution to address your working capital need. The traditional ' go-to ' is our traditional bank via our Canadian chartered banks. However, requirements are stiff in the view of many business owners. From the banks perspective, they feel a strong financial track record and balance sheets and income statements that reflect profit and success are an absolute pre-requisite.
OTHER ALTERNATIVES FOR BUSINESS CAPITAL
So let us assume your firm is, in fact, eligible for debt or equity financing as a growth alternative. (We can dream, can't we?) Equity investors such as venture capital folks, private equity groups, or even much lower down the scale, angel investors and friends and family can rightfully demand a significant piece of ownership and board direction.
THE CHALLENGE OF BRINGING DEBT TO YOUR BALANCE SHEET
Debt solutions such as term loans, mezzanine financing, mortgages, etc., come with fixed repayment obligations and can dramatically change the structure of your balance sheet.
LET 7 PARK AVENUE FINANCIAL SHOW YOU THE A/R FUNDING ALTERNATIVE
So is there a viable third party alternative? As we have noted, financing via accounts receivable lending from factoring companies allows you to generate cash flow from sales while avoiding taking on debt. All you are doing is monetizing assets you already have.
WHAT IS THE BEST TYPE OF FACTORING FINANCE?
An invoice factoring service (Our recommended solution is CONFIDENTIAL RECEIVABLE FINANCING) involves generating cash flow as you create revenue and generate client receivables. While this financing cost is higher than bank financing, it's VERY MUCH lower than diluting equity and involves no new debt on the balance sheet. There is a fee, not an interest rate charged on the invoice amount - typically in the 1-2 % range for asset-based a/r funding of a factored invoice. That fee is the ' factoring income' , not the interest earned by your factor companies.
Factoring of receivables accounting should be set up with your accountant.
WHAT DOES FACTORING COST?
That factoring fee is often confused with an interest rate, which it is not. Getting your customers to pay more promptly will always reduce factoring fees and help your cash flow. Until that invoice is paid your investment in your receivables will hinder cash flows. In the short term, factoring allows your business to properly fund day to day operations. For the business owner, it in fact becomes a type of line of credit and this financing may become your stop-gap on day to day funding needs.
A FACTORING EXAMPLE!
A simple example - Let's say your firm has a 100k invoice you have just generated from a service sale or delivery. You would typically receive 90% of this balance the same day you generate a client invoice. The balance is remitted to you directly after your client pays, less a finance charge in the 1.5 -2%. In essence, you have generated cash of 98,500$. That immediate cash allows you to operate your business and grow more revenue.
WORK WITH 7 PARK AVENUE FINANCIAL FOR THE RIGHT FACILITY
Where businesses go wrong is aligning themselves with an invoice factoring firm that does not meet their needs. The ability to work with a credible firm with clean documentation and a strong record of client satisfaction is key.
HOW CAN THE BUSINESS OWNER OFFSET FACTORING COSTS
Oh, and those ' higher costs. ' They can almost always be easily offset, sometimes 100% by simply altering your pricing strategy and using new found immediate cash flow to take supplier discounts and negotiate better terms and pricing with vendors.
While invoice factoring services for receivable factoring had in years gone by a certain stigma about small businesses attached to it, the reality is that some of the largest corporations in Canada use this type of financing. And the use of our recommended CONFIDENTIAL A/R FINANCING allows you to bill, collect, and cash flow your small business with no knowledge of any other party such as a supplier or client.
You can also choose between non recourse factoring and recourse factoring - the former transferring the credit and bad debt risk to the factoring company.
CONCLUSION
If you want to determine if factoring and accounts receivable financing is a healthy alternative to growth for your company, seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with an accounts receivables lending and factoring financing strategy that matches your company and industry needs
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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