Receivable Financing Company: Empowering Your Cash Flow | 7 Park Avenue Financial

YOUR COMPANY IS LOOKING FOR CANADIAN FACTORING AND  BUSINESS FUNDING FOR CANADIAN RECEIVABLES! 

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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?

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

EMAIL - sprokop@7parkavenuefinancial.com

Receivable financing companies transform credit sales into immediate operational cash, offering vital liquidity to businesses.

Unlock cash tied up in invoices today—empower your business's growth tomorrow!

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer ACCOUNTS RECEIVABLE FINANCING solutions that solve the issue of cash flow and working capital  – Save time and focus on profits and business opportunities

INTRODUCTION  

Factoring, known as the receivable financing solution, continues to gain momentum as a financing alternative of choice for Canadian business owners and financial managers. We know why. Let's dig in.

Receivable financing companies provide an important business financing service for companies experiencing cash flow issues due to delayed payments from customers.

By converting sales on credit terms from the company's accounts receivable, into immediate cash, these A/R Financing companies enable businesses to maintain operations and meet business debt schedule obligations without having to wait for customer payment.

This stabilizes cash flow but also empowers companies to reinvest in operations, expand their customer base, and manage supplier commitments more effectively.

 
WHY IS FACTORING RECEIVABLES SO POPULAR

 

The main reason?  It's a case of a common-sense approach to improving cash flow and working capital without taking on any debt and at the same time allowing your firm to grow without traditional type financing that might be difficult, or in some cases, impossible to achieve.

 

A lot has changed on alternative financing, including rates/costs that have improved a great deal!

 

 
HOW FACTORING RECEIVABLES IN CANADA BENEFITS YOUR COMPANY'S BALANCE SHEET

 

The world of business is changing and becoming more competitive every day. To stay in the game, you must have a strong balance sheet. One way to achieve this is through factoring receivables with the right factoring company, which can benefit your company's cash flow and the balance sheet.

 
FACTORING IS A VALUABLE TOOL FOR EXPORTERS

 

Factoring is a process that enables  Canadian exporters to collect up to 80% of the value of their sales invoices upon delivery. Factoring can provide many advantages for export businesses, such as cash flow acceleration on outstanding invoices and increased ability to grow revenues due to cash flow availability and acceleration.

 

Trade credit, political risk insurance or credit insurance is a large sector of trade finance and has been increasing in demand.



Trade credit refers to the capital provided by financiers to their firms purchasing products, so they do not have to pay suppliers from their own balance sheet at the point of purchase. This provides customers with longer repayment periods, freeing up cash flow for these companies who need it now more than ever. If your firm needs credit insurance on your receivables, the 7 Park Avenue Financial team can help if you need a non recourse factor solution.
 

 
FACTORING VERSUS BANK FINANCING - THE COSTS

 

Never any doubt that traditional bank financing always has a lower rate. The reality is that it, in many cases, does not provide you with the amount of working capital you need if you are in a high growth mode. Alternatively, you may also have trouble meeting some of the bank ratio and covenant guidelines that come with those very respectable bank facilities.

 

The need for additional financing is common in a business's growth. Banks might not have the credit requirements to meet your needs, so you may want to explore other options such as invoice factoring or asset-backed lending programs.

 

Bank requirements require a/r facilities to be paid and revolve according to bank expectations - There is also a ' credit limit ' set by banks which puts a cap on the amount a firm can borrow. Suffice to say that banks approve receivable credit lines based on your firm's operating strength around key issues such as balance sheet ratios, covenants,  profitability, etc.!

 
HOW DOES ACCOUNTS RECEIVABLE FINANCING WORK? INVOICE FACTORING IS QUICKER FUNDING THAN BANK LOANS!

 

Many small businesses in Canada are frustrated around the time it takes for banks to approve lending.

Start-up financing is difficult to obtain for new businesses as an ' operating ' history of at least 12 -24 months is required - a factoring company can fund a startups accounts receivables.

 

With a receivable financing solution, many issues around your firm's ability to access financing are resolved! That is because there is not new debt on the balance sheet. Any amount of funding can be approved if you have the sales to support it and approval takes days, not months, with the total focus being the quality of your receivables and customer base.

 

When banks reach their maximum lending capacity, they will often refer clients to 7 Park Avenue Financial for additional financing needs. They know that we will quickly and efficiently serve our clients by taking care of the client and maintaining their deposit relationship with the bank.

 

We point out always to customers that the largest corporations in Canada and the U.S., in some cases, also use A/R financing type facilities - it simply gives your firm and the large firms maximum leverage on working capital without taking on debt.

 

 
3 KEY ISSUES IN FACTORING PRICING

 

The amount of your factoring facility and the rate it commands is dependent on three issues:

 

1. The general overall risk profile of your firm - growth, profitability, type of industry, etc.

 

2. The size of your total receivables

 

3. The overall customer quality or creditworthiness of your customer base

 
HOW DOES THE FACTORING PROCESS WORK

 

Factoring companies have many different terms, but the bottom line is that they are buying your invoices to fund your firm before client payment. You're selling off the collection rights for payment - and there are two ways it can work out: this type of transaction typically comes with an advance (up-front cash) in the range of 80-90% -

 

It's important to understand your ' advance rates, ' which vary by firm  - ultimately, the combination of the advance rate and the factoring fee determines your total cost of financing.

 

 

When your client pays, the balance is paid to your firm, less a 'factoring fee, 'typically in the 1-2% range. Companies with good gross margins can easily absorb the factoring fee - which is a fee and not expressed as an ' interest rate' by factoring companies.

 
FACTORING FINANCE ADDS NO DEBT TO THE BALANCE SHEET

 

If you are having financial or growth challenges, it is generally not recommended by finance people to take on more debt - factoring solves this problem nicely - you are simply liquidating your receivables faster without borrowing.

 
 

 
 WHAT IS THE BEST TYPE OF FACTORING

 

 

When it comes to cash flow, Factoring financing in Canada is a smart option for the SME sector. The ability to cash flow your receivables as you generate sales and access funds without impacting operations or continuing capital expenditures.
 

One of its newer forms - non-notification invoice financing  / confidential receivable finance might be more relevant in today's market conditions and provide some much-needed relief from financial constraints faced by smaller enterprises who need ar financing.

 

Our most recommended solution for our clients? Confidential A/R financing!... Allowing you to bill and collect your own receivables while retaining all the benefits of factoring.

 

7 Park Avenue Financial will ensure you have the ability to choose which invoices you wish to the financier without committing to fund all your receivables if you don't need to. This will lover costs and ensure you have no minimums in place.

KEY TAKEAWAYS

• Invoice Factoring: This is the essence of receivable financing, where invoices are sold to financiers at a discount to gain immediate cash.
• Accounts Receivable Management: Efficient management ensures that credit sales convert to cash quickly and reliably.
• Cash Flow Improvement: Central to the service's value of the accounts receivable loan, enhancing cash flow stability allows for smoother business operations and growth.
• Credit Risk Assessment: Critical for determining the risk of extending credit to different customers, which influences financing terms.
• Debt Collection Strategies: These are integrated into the services to mitigate the risk of non-payment and enhance financial stability.

 

 
CONCLUSION: FACTORING FINANCING CANADIAN RECEIVABLES 

 

Invoice Factoring provides a simple way for small and medium-sized businesses to access the funds they need without waiting 2 weeks or more before payment. As an alternative form of financing, it's ideally suited for enterprises that don't have long and established credit histories with banks and who are growing with the need for additional working capital.

 

Let factoring financing get your company back to a healthy balance sheet - allowing you to grow sales while not tying up your capital accounts receivable for goods and services you have provided or shipped.

It’s an alternative form of financing ideally suited to small and medium-sized businesses, especially enterprises that do not have the leverage necessary from traditional lenders because they are considered high-risk due to their lack of collateral or credit history. Factoring provides access to cash flows needed now and future needs while freeing up funds tied up in working capital inventory and A/R.

 

Call 7 Park Avenue Financial, an experienced and credible advisor for small business in this niche area of Canadian business financing and assess your factoring options relative to the type of business loan facility that meets your growth needs. 

A factoring facility with rates, terms and structures that suit your business model and provide you with all the working capital and cash flow you need is a competitive advantage.

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

 

What is factoring?

 

 Invoice Factoring is a type of debtor finance in which businesses sell their invoices to third parties at reduced values. This transaction helps them meet immediate cash needs and can be used as an alternative to traditional bank loans or equity funding.

Receivable financing allows businesses to sell their accounts receivable (invoices) to a third party at a discount for immediate cash. This service benefits businesses by providing quick liquidity, reducing the wait for customer payments, and enhancing cash flow, which can be critical for operational management and growth.


 

How does invoice factoring differ from traditional loans?

Unlike traditional loans, which provide a lump sum that must be repaid with interest, invoice factoring and financing receivables involves selling your outstanding invoices at a discount to a financier. This method improves cash flow without incurring debt, making it a preferable option for businesses not wanting to increase their liabilities. A/R Financing is a subset of asset based lending.

Can receivable financing help my business if I have customers who pay slowly?

Absolutely. Accounts receivable finance is ideal for businesses with customers who take longer to pay. It converts your slow-paying invoices into immediate cash, enabling you to manage your operations smoothly without cash flow disruptions.

What are the typical terms and conditions of receivable financing agreements?

Terms vary by financier but generally include the percentage of the invoice advanced (typically 70-90%), fees (factoring fees based on a percentage of the invoice), and the handling of collections. Businesses should carefully review these terms to ensure they align with their financial strategies. Receivable financing rates vary based on various criteria around transaction size and credit quality.

Are there any risks involved with receivable financing?

While receivable financing can significantly aid cash-strapped businesses, risks include dependency on the financier for cash flow management and potential impacts on customer relationships due to third-party collections. Businesses should consider these factors to make informed decisions.

What are the initial steps to take when considering receivable financing?

Begin by assessing your company's financial needs and understanding your customers' payment behaviors. Research potential financiers, compare terms, and consider the financial impact, including costs and benefits, of factoring your receivables.

Is receivables financing suitable for all types of businesses?

Receivable financing is most beneficial for businesses that deal with B2B transactions as well as government accounts receivables, and have long invoice payment terms that can't deliver consistent cash flow. It is less suitable for companies that conduct primarily cash transactions or B2C sales with immediate payments.

Many industries are large users of factoring, such as staffing agencies and trucking companies. Accounts receivable financing works for any company selling on business credit terms to commercial and government accounts.

How quickly can I access funds through receivable financing?

Funds are typically available within 24 to 48 hours after the receivable financing company verifies the invoices submitted. This quick access to immediate cash flow  is one of the primary advantages of receivable financing.

What criteria do financiers consider when evaluating my application for factoring accounts receivable financing?

Financiers evaluate the creditworthiness of your customers (not your company), the total value of invoices, and your historical transaction records such as business bank statements  to determine eligibility and terms. Those issues also affect accounts receivable financing rates. Business bank statements should also be provided.

Can I choose which invoices to factor in a receivable financing arrangement?

Yes, most receivable financing companies allow you to select which invoices to factor in. Accounts receivable financing offers flexibility - Receivable financing services help manage the cost of financing and maintain control over your accounts receivable portfolio around unpaid invoices.

What role does a receivable financing company play in supply chain management?

By providing timely cash flow, accounts receivable financing companies allow businesses to manage their supply chain obligations effectively. Prompt payments to suppliers can secure better terms and reinforce supply chain reliability.

How does financing accounts receivable  integrate with my existing financial processes?

Receivable factoring should complement your existing financial processes, including invoicing, collections, and ledger management. Integration typically involves setting up processes with the financier to ensure seamless transaction flows.

What is the impact of receivable financing on my business's credit score?

Accounts receivable factoring and receivable loans do not directly affect your business's credit score as it is not a loan and does not incur debt. However, improved cash flow may enable more timely debt payments, potentially positively impacting your credit score.