AR Accounts Receivable Finance Business Factor 7 Park Avenue Financial

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5 Advantages Of AR Accounts Receivable Finance In Canada. Using A Business Factor Funding Program Works.
Looking For Some Solid Benefits In A/R Finance In Canada?

 

 

YOUR COMPANY IS LOOKING FOR AR FINANCE IN CANADA!

BUSINESS FACTOR FUNDING FOR CASH FLOW

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

Financing & Cash flow are the biggest 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

 

Thousands of Canadian business owners and financial managers perceive AR Accounts Receivable Finance as a solid strategy for financing their firms. Let's examine 5 key advantages of this method of working capital finance. But first, let’s take a quick step back and ensure we understand the product and the mechanics of this type of finance service as it relates to your accounts receivable and outstanding invoices.

 

The heart of the AR finance strategy is of course your receivables.    This financing differs significantly from a bank loan or more commonly the Canadian chartered bank line of credit. What is that main difference? Simply that under a bank facility the financing is based on your firm’s creditworthiness, with the receivables being assigned to the bank as collateral.

 

The difference then? It's simple and basic. AR financing is not a loan to your company per se, instead its the purchase of your accounts receivable, generally on an ongoing basis,  This sale of a/r, via our business factor funding arrangement enhances your cash flow and working capital... Immediately!

 

WHAT IS FACTORING  FINANCE / AR FINANCING

 

Factoring accounts receivable is a financial solution for cash flow allowing you to ' sell ' accounts receivable to a third party who advances cash to your firm against the receivable as security. There is a fee for the service, which is often confused as being an ' interest rate ' - which it is not.  This type of receivable financing is a subset of ' Asset Based Lending ' in Canada and has become a very popular financing transaction between Canadian businesses and commercial factoring companies. Also known as a factoring loan it is not really a ' loan ' per se, just the cash flowing of your sales, so a loan concept does not reflect the meaning of factoring as it pertains to ' factoring companies '.

 

THE COST OF FACTORING RECEIVABLES

 

One of the main points of confusion that we find continually exists around this method of invoice factoring finance  is the pricing. While the bank facility charges your firm an annual interest rate (plus some miscellaneous fees here and there!) invoice finance is the sale of your A/R, at a discount, allowing you to receive funds and replace A/R on your balance sheet with cash, immediately as you make sales. The ' discount fee ' for the factoring costs approximately 1.5-2% and factors affecting your cost are the time that the invoice is outstanding, the size of your a/r portfolio, the general credit risk profile of your customer base/industry.

 

THE BEST RECEIVABLE  FACTORING COMPANY / FACTORING SERVICE

At 7 Park Avenue Financial, we believe your firm deserves a cost-effective a/r financing facility that takes into consideration numerous factors around issues already mentioned such as the size of the facility, the general credit quality of your sales, and whether you wish to bill and collect your own receivables while still allowing you to achieve all the benefits of factoring. At 7 Park Avenue Financial, we have called this ' Confidential Receivable Financing ' and it is our most recommended solution for clients who qualify. It is important the business owner understand the different forms of factoring, and how they work.

 

RECOURSE OR NON-RECOURSE AR FINANCE ?

 

In general, certainly more often than not, invoice receivable finance in on a recourse basis, just as if you had a bank facility in place. Simply speaking, you're responsible for any credit losses. The purchase of business credit insurance can eliminate bad debt risk, especially if you have foreign or concentrated receivables. Ensure you understand non-recourse factoring and how it can play a role in your business growth.

 

 

Finally, let’s get on to those advantages we spoke of. Here are just five of them, and if you are having challenges in accessing bank financing these advantages should have a significant appeal to your firm via a third-party financing company.

 

FACTORING ACCOUNTS RECEIVABLES IS SHORT TERM FUNDING FOR YOUR OPERATIONAL CASH FLOW NEEDS

 

First of all, it’s a classic short term funding strategy without additional collateral requirements or major emphasis on guarantees of the owners of the company.

FACTOR FUNDING IS ALL ABOUT TIMING!

 

The second advantage of  accounts receivable factoring is timing, and we're firm believers that timing is everything in business. The hard reality is that invoice financing provides you with cash flow on the same day as you generate sales. That shortens your overall credit extension cycle by... you guessed it, 100%.

 

FINANCING YOUR RECEIVABLES DOES NOT ADD DEBT TO THE BALANCE SHEET

 

Our third advantage of AR Accounts receivable finance is simply flexibility. No debt goes on your balance sheet, you’re just monetizing assets and funds can be used for any general corporate purpose.

 

Our 4th advantage is somewhat of a double-edged sword. Traditional AR finance in Canada has the business factor funding your receivables as an extension of your credit department. We would point out that under the right circumstances your firm can acquire a confidential AR Finance facility which allows you to do all the billing and collecting yourself. Bottom line, it’s your call.

 

FOREIGN RECEIVABLES CAN ALSO BE FINANCED!

Finally, if your firm has a lot of U.S. or foreign receivables, invoice finance is a solid way to address receivables financing via the business challenge of carrying out of country clients. Even the exchange rate is taken care of in this situation.

CONCLUSION

You owe it to yourself to check out and understand the factoring of accounts receivable in Canada. Do any of our listed advantages make sense for your firm? Accounts receivable financing , properly done and understood can dramatically change the cash flow / working capital position of your firm.

 

If so, speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in the solution for a proper facility in ar factoring from a factoring company dedicated to your  business capital needs.

' Canadian Business Financing With The Intelligent Use Of Experience '

 STAN PROKOP
7 Park Avenue Financial/Copyright/2024

 

 

 

 

 

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