Business Receivable Finance: Complete Guide for Canadian Companies | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR  BUSINESS RECEIVABLE FINANCE!

CHOOSING THE RIGHT RECEIVABLE FINANCING OPTION FOR YOUR BUSINESS

UPDATED 05/25/2025

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Financing & Cash flow are the  biggest issues facing business today

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

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EMAIL - sprokop@7parkavenuefinancial.com

 

 

 

"Cash flow is the lifeblood of any business. Without it, even the most profitable company can fail." - Richard Branson

 

 

  

 

Cash Flow Financing Via Factoring Clarified!   

 

Cash flow financing for Canadian business owners and financial managers is about knowing what options are available when external finance solutions are being evaluated.

 

 

Looking for one solution that's incredibly misunderstood in the Canadian business financing landscape. We've found it. Business A/R Finance!  We've got your questions, as well as the answers! Let's dig in.

 

 

  

 

WHAT IS BUSINESS RECEIVABLE FINANCE   

 

 

  

Turn Your Unpaid Invoices Into Immediate Cash Flow

 

Your business is growing, but slow-paying customers are strangling your cash flow.

 

You can't pay suppliers, meet payroll, or seize new opportunities because your money is tied up in outstanding invoices.

 

Let the 7 Park Avenue Financial team show you how Business receivable finance/accounts receivable factoring solves this by advancing up to 90% of your invoice value immediately,  thereby securing financing and transforming your accounts receivable into working capital.

 

Want Proof? -->  We've Got It

 

  

Consider  This!  3 Uncommon Takes on Business Receivable Finance  

 

1. The Hidden Cost of Customer Payment Terms: Most business owners focus on profit margins but ignore how extended payment terms act as an invisible loan to their customers - one where they receive no interest and bear all the risk.
2. Accounts receivable Factoring as Business Intelligence: Beyond cash flow, receivable finance companies provide valuable insights into your customer payment patterns and creditworthiness, helping you make better client selection decisions in the receivables finance process
3. The Scalability Paradox: Traditional loans require you to qualify for larger amounts as you grow, but receivable factoring finance automatically scales with your sales volume and company's accounts receivable grow - the more you sell, the more funding becomes available.

 

 

  

 

TRANSFORMING RECEIVABLES INTO CASH!   

 

 

Accounts receivable will often be the most significant balance on the balance sheet under the category of current assets - those current assets will also include inventories. 

 

These are short-term assets representing liquidity in the business.

 

Receivables financing is a benefit to businesses that sell on credit terms to customers, which creates a cash flow gap in the business as payments are not received while inventory purchases and other short-term liabilities, such as accounts payable, must be pai.d

 

When a company extends longer payment terms to clients, the situations are exacerbated as those regular ongoing sales create cash flow gaps that widen further as the business sells more.

 

Funding solutions for startups and new businesses are also accessible.

 

Many businesses operate in seasonal or cyclical industries that create large increases in cash outflows during peak periods, creating potential cash flow crunches as collections have not yet been made.

 

Receivables finance may be a challenge if a business is experiencing unusually high bad debt volume or has sales that are disputed by clients around issues such as service, damage, quality, et.c

 

Also, businesses with fast turnovers, such as e-commerce clients of some retailers who have short payment term cycles, are not the best candidates for A/R finance.

 

Business lenders in receivable finance will focus on the general creditworthiness of the customers, and funds are drawn down on outstanding invoices. Factoring companies that are non-bank in nature fund receivables immediately as sales are generated and charge a discount fee for the financing service.

 

Businesses need to understand the benefits of receivable financing and the potential drawbacks when they commit to a bank or factoring facility.

 
5 EXAMPLES OF RECEIVABLE FINANCING 
 

What amount of funding can you expect to receive from your A/R base? 

 

Typical advance rates for most facilities revolve around the 90% mark... which assumes you are dealing with the right commercial financier - More on that later.

 

That additional 10% is in effect, a holdback of sorts. We would point out that Canadian chartered banks only margin A/R at 75%, so commercial business receivable finance offers more liquidity. One other key point on funding is that your access to business  capital is virtually 'unlimited' as long as you have sales and legitimately earned receivables.

 

  

 

How does a firm set up a receivable facility?    

 

We generally advise that it takes approx 2-3 weeks to set up a proper facility - that is a general guideline.

You will know, by the way, very early on in the process if you are approved. After that, it's simply a question of documentation. Legal documentation and the paperwork process are very similar to bank financing and full-fledged A/R facilities are secured in the same manner as banks, typically a General Security Agreement.

 

By the way, stop us if you’ve heard us say this before.

 

Still, you should consider CONFIDENTIAL RECEIVABLE FINANCE, allowing you to bill and collect your own accounts with no notification to suppliers, customers, etc. Want to be the talk of the town? You will be among your competitors as this type of NON-NOTIFICATION financing will have competitors wondering how you can finance your business so successfully.

 

Talk to the 7 Park Avenue Financial team about how confidential non-notification a/r financing can benefit your firm.

 

What's the cost of receivable financing /factoring?

 

 Fees and costs. Various factors come into play here: the credit quality of your firm in general (it does not have to be as solid as you think), the size of your facility, the nature of your industry, etc.

 

On balance, a solid business receivable finance fee in Canada is .75-1.15%% if you're billing and collecting on a 30-day term.

 

If your company can absorb a 1 or 2% decrease in gross margins to in effect, obtain all the cash flow/working capital you need, that in effect, should be your consideration.

 

  

  

 What receivables can be financed?     

 

The key point here is that only ' business’, i.e. B2B a/r can be financed in Canada, so those companies with a consumer A/R base cannot take advantage of cash flow financing.

 

Retailers typically look to other forms of finance for finance options in the consumer marketplace - i.e. Working capital loans, inventory loans, Merchant Cash Advance , etc.

 

Any North American receivable can be financed, and if your firm has overseas receivables, a credit insurance policy can assist in the financing of those receivables.

 

  

Age of receivables that can be financed   

 

As a pretty general rule, only A/R that is under 90 days in age can be financed via this method of Canadian business financing.

 

One can safely assume of course, that if you haven’t collected your accounts by that time there is an element of uncollectibility or bad debt in your A/R portfolio.

 

There are potential exceptions to the rule but your ability to turn over receivables based on your published selling terms is critical to successful ' factoring ' finance.

 

  

Statistics on Business Receivable Finance  

 

• 73% of small businesses experience cash flow challenges due to late customer payments

 

• Receivable finance can provide funding within 24-48 hours, compared to 2-8 weeks for traditional loans

 

• Businesses using receivable finance report 35% faster growth rates than those relying solely on customer payments

 

• The average invoice payment period in Canada extends 45-60 days for B2B transactions

 

• Receivable finance approval rates reach 85% compared to 23% for traditional bank loans

 

 Case Study 

 

Manufacturing Company Success Story

 

A  Canadian Manufacturing  company faced a critical challenge when their largest customer extended payment terms from 30 to 60 days, creating a $200,000 cash flow gap. Traditional bank financing was unavailable due to recent equipment purchases that maxed their debt capacity.

 

Through business receivable finance, the company accessed 85% of their invoice values within 24 hours. This immediate $170,000 injection allowed them to maintain supplier relationships, meet payroll, and accept a major new contract worth $500,000.

 

Within six months, their monthly sales increased 40% because they could accept larger orders without cash flow concerns.

 

The receivable finance line automatically scaled with their growth, providing $340,000 in available funding. This financing eliminated collection headaches while focusing on manufacturing excellence and customer service.

 

  

 

KEY  TAKEAWAYS  

 

• Immediate Cash Flow Access: Converting outstanding invoices into working capital within 24-48 hours eliminates payment delays
• Customer Credit Focus: Approval depends on your customers' creditworthiness rather than your business credit score
• Scalable Funding Model: Credit lines automatically increase with higher invoice volumes without additional applications
• Risk Transfer Benefits: Finance providers assume collection responsibilities and potential bad debt losses
• Operational Efficiency: Professional collection services reduce administrative burden while maintaining customer relationships

  

 

  

 CONCLUSION  - CASH FLOW FINANCING FOR GROWING COMPANIES  

 

 

Has confusion gone away? We hope so.

 

The bottom line?  When considering working capital finance via business receivable financing ensure you've got the right information at hand to make an informed decision.

 

Call  7 Park Avenue Financial,  a trusted, credible, and experienced Canadian business financing advisor, for your ability to get on track with cash flow finance with business loan solutions tailored to your business needs and business growth.

 

  

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

 

What is business receivable finance?

 

Business receivable finance is also known as accounts receivable financing or invoice financing and ' factoring ' . Using this type of AR financing allows businesses to generate cash flow / financing capital  based on the use of outstanding invoices the collateral for the financing facility.

 

  

What is cash flow financing?  

Cash flow financing is any type of financing that helps a business access funding based on the anticipated cash inflows of the business. Solutions for cash flow finance include receivable financing via banks, factoring invoices via non-bank commercial finance companies and business lines of credit from asset-based lenders.

 

 How does accounts receivable financing work ? 

Business receivable finance helps a business by providing access to working capital that can be used to fund daily operations and allow the business to manage growth and expansion plans. Funding is based on sales revenues and helps companies with cash flow management.

 

  

What are the benefits of cash flow financing?  

 

The benefits of cash flow financing solutions include better liquidity and the flexibility to access working capital when needed, when cash flow gaps occur in the business's cash flow cycle. Financing receivables speeds up the cash flow cycle of a business and reduces  DSO ( days sales outstanding )

 

Receivables financing is a solid cash solution for small businesses that are growing faster than the borrowing capacity of the business. Companies can accept larger orders and fund seasonal peaks in the business using cash flow techniques in a/r finance management.

 

  

How do I know if business receivable finance or cash flow financing is right for my business?  

If a business is selling on trade credit terms and has cash flow gaps in the business based on the investment the company makes in carrying receivables, receivable financing can assist in funding working capital.

 

 What are 4 forms of receivable financing 

 

Four common types of receivable financing include :

Invoice factoring

Invoice Discounting

Asset-based lending credit lines

Supply chain financing

 

Invoice factoring allows a business to ' sell ' an invoice to a third-party finance company, known as a business factor. The company receives immediate cash for the money owed, and traditional factoring firms will collect the receivable and keep a percentage of the invoice in exchange for the company receiving the cash upfront. Typical advances from factoring companies are in the 90 percent range, much higher than bank advances on accounts receivable.

 

Invoice discounting is similar to factoring accounts receivable financing companies/factoring companies advance a percentage of the invoice value on invoicing by the company so it cans receive early payment on the sale of products and services.

 

Asset-based lenders use receivables to collateralize lines of credit or loans. Funding for an accounts receivable loan is made on a pre-agreed advance rate and as payments are collected by the company, the loan facility is reduced. Asset-based credit lines for receivable loans often combine inventory and equipment assets on the company's balance sheet into one credit facility.

 

Supply chain financing/purchase order financing allows suppliers to receive payment earlier than typical trade credit terms, which can help small businesses.