Factoring Your Receivables : Ultimate Cash Flow Solution | 7 Park Avenue Financial

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YOUR COMPANY IS LOOKING FOR INFO ON INVOICE FACTORING AND THE COST OF ACCOUNTS  RECEIVABLES FINANCING! 

THE FACTORING COMPANY SOLUTION

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?

CONTACT US

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 originates business financing solutions for Canadian Businesses – We offer Receivable factoring  and other working capital solutions  – Save time, and focus on profits and business opportunities

7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”

Are you :  

Looking to improve cash flow and eliminate the customer waiting to pay

Looking for funding for larger orders or contracts

Focused on financing growth without debt

Interested in fixing season cash gaps

Invoice factoring, other versions of receivable finance/asset-based financing in Canada, and the cash flow challenges with running a business remind us of the classic movie BEING THERE, starring Peter Sellers.

Playing a ‘savant’ gardener in the movie, Sellers says, "And then we get spring and summer again!”

Most small business owners and medium-sized companies  ( as well as large corporations !) know too well that clients prefer to take the most extended credit terms they can get away with -

Essentially, they are leveraging the line of credit you have offered your customer. However, few firms can pay the invoice on time, let alone take an early payment discount.

In the movie, he has a 'routine' in life—things are always the same. How can Canadian business owners and financial managers break out of the constant cash flow challenge cycle? Receivable finance is one clear solution to that problem.

As an owner/manager, you know the drill—your working capital is tied up in your A/R and inventory. Can invoice financing from factoring companies help untie that capital?

Cash Flow Crunch: The Silent Business Killer

Problem: Many Canadian businesses face critical cash shortages while waiting weeks or months for invoice payments, creating operational paralysis.

This payment gap forces difficult choices between paying suppliers, meeting payroll, or pursuing growth opportunities.

Solution:  Let the 7 Park Avenue Financial team show you how Factoring your receivables bridges this gap by converting unpaid invoices into immediate cash, restoring financial control without adding debt.

INVOICE FINANCE FIRMS PROVIDE IMMEDIATE PAYMENT  TO YOUR BUSINESS IN EXCHANGE FOR A DISCOUNT ON THE INVOICE IN THE 1- 1.5% RANGE

Let's address that issue around the following key points: 

What is factoring? What are the benefits for your firm? What does it cost, and how does it work? That's a mouthful, but understanding these key issues could be the first step in better understanding one of Canada's most popular business financing methods today.

WHAT IS THE REAL COST OF INVOICE FACTORING 

Factoring is the process of' selling' your receivables as soon as you issue them. Selling anything gets you 'cash,' and that's the core premise of invoice factoring.

The largest, most successful corporation in Canada also offloads its receivables. They do that under a fancier method—securitization—but at the end, it’s the same thing—selling you A/R constantly as you make sales to generate instant cash.

Do you have to sell your receivables? Of course not. You can wait 30, 60, or 90 days for your customers to pay you, but you've been there already, and that's not working!

So, what is the main benefit of factoring solutions? Essentially, it's unlimited working capital in cash flow as you grow your sales. How can we say unlimited cash flow? Well, simply because if you have receivables, you will always have immediate cash for them! The cash flow problem is solved!

KEY POINT - FACTORING RECEIVABLES IS NOT CALCULATED AS AN INTEREST RATE COST -

Part of the problem in our clients' understanding of the cost of factoring is that they view it always as an 'interest rate', while in fact, it is an invoice factoring rate expressed as a fee /discount.

A/R commercial finance firms don't call it that - it is a discount rate. They purchase your receivables (either one, some or all of your invoices) at a discount -

That discount in Canada ranges from 1-2%. The norm tends to be closer to 1.5 - 2%. So, a best-case scenario involves giving up $150.00 on a $10,000.00 receivable.

Understanding the factoring advance rate is essential for understanding the effective cost of factoring.

A GOOD QUESTION TO ASK YOURSELF - WHAT IS THE COST OF NOT FACTORING / FINANCING RECEIVABLES?  

So, who 'qualifies' for this type of financing? If you have receivables, you qualify! This type of financing covers pretty much every industry in Canada.

Several industries seem to always use factoring - i.e., trucking/transportation, staffing, security guards, etc. - but don't be confused by that point - if you have a receivable, Canadian, U.S. or otherwise, it can be financed - or, in our lingo, 'sold' and 'cash flowed'. Even international receivables can be funded with a few modifications to the program.

ALTERNATIVES TO FACTORING

So are there alternatives to factoring? Of course, you can arrange more traditional financing via a bank, Canadian credit union, etc. However, that type of financing comes with stringent requirements, including solid financial performance, personal guarantees, other collateral, etc.

A/R finance facilities can be efficiently implemented. The process involves a basic application and the documentation to register the facility like any bank, i.e., a security agreement on your receivables, etc.

One other key benefit is facility size—at a bank-type revolving line of credit, you have a limit, and you can't exceed that limit. That concept goes out the window with your receivable financing facility because your limit grows in lockstep with your sales and receivable investment. That's true: unlimited financing!

It always comes down to cost, and your facility's overall pricing will depend on several factors, including the size of your receivable portfolio, its credit quality, and how your customers have paid traditionally.

We recently met with a customer who advised us that their total all-in rate with a Canadian bank, including the rate and fees for all services, etc., was close to 11-12% when you factor everything in.

Let's say your factoring rate was 2% per month. You would now have unlimited cash to pay suppliers promptly, take prompt payment discounts, and negotiate better pricing.

When you weigh in all the comparables, there isn't that much more difference in factor pricing and bank pricing in most cases. Business owners should also check out Confidential Receivable Finance—click here for more info!

Case Study: Benefits of Factoring Your Receivables

When a Canadian manufacturer landed their largest contract ever with a major retailer, excitement quickly turned to concern. The $1.2 million order required substantial upfront material purchases and additional staffing, but payment terms were Net 60. With just $300,000 in available working capital, fulfilling the order seemed impossible.

After exploring traditional financing options that would take weeks for approval, the company turned to receivables factoring. Within 48 hours, they received approval and established a factoring relationship with an invoice financing company.

The results were transformative:

• Immediate access to 85% of invoice values upon shipment
• Ability to accept the contract and two additional large orders
• 37% revenue growth in just one quarter
• Elimination of supplier late payment penalties
• Improved supplier relationships through early payment discounts
• No need to take on long-term debt

"Factoring our receivables was the turning point," said the CEO . "Instead of turning down growth opportunities, we're now actively pursuing them. The cost of factoring is easily offset by early payment discounts from suppliers and our ability to take on more business."

10 Specific Use Cases for Factoring Your Receivables

1. Growth Opportunity Funding: A manufacturing company receives a large order that exceeds their current production capacity and needs immediate capital for materials and additional staff.
2. Seasonal Cash Flow Management: Ontario's landscaping business must bridge the winter revenue gap while maintaining staff and equipment readiness for spring.
3. New Market Expansion: A successful Toronto-based business wants to expand into western Canada but lacks the upfront capital for new facilities and inventory.
4. Government Contract Fulfillment: A security services company wins a provincial government contract with payment terms of Net 60 but needs immediate funds for hiring and equipment.
5. Supply Chain Disruption Recovery: A retail business rebuilding after supply chain issues needs working capital to secure inventory while still paying overhead during recovery.
6. Technology Upgrade Implementation: A manufacturing company needs to invest in automation technology to remain competitive, but it cannot divert operating capital without compromising day-to-day operations.
7. Acquisition Opportunity Financing: A business owner identifies a competitor available for acquisition at a favorable price but needs to move quickly before the opportunity disappears.
8. Customer Payment Term Accommodation: A supplier must offer 45-day payment terms to win a major customer contract but cannot manage cash flow impact without assistance.
9. Emergency Equipment Replacement: A transportation company faces unexpected equipment failure requiring immediate replacement to fulfill delivery contracts.
10. Staff Retention During Downturn: A professional services firm experiencing a temporary revenue decrease needs to maintain key staff without layoffs during the slowdown.

KEY  TAKEAWAYS

• Advance Rate Knowledge forms the foundation of factoring, representing the percentage (typically 70-90%) of invoice value immediately advanced to your business.
• Factoring fees incorporate two main components: the discount rate (usually 1-3% per month) and potentially a processing fee, with understanding these costs being crucial for evaluating profitability.
• Recourse versus non-recourse agreements determine financial responsibility if customers default, creating significantly different risk profiles for your business.
• Verification procedures vary widely among factors, making this understanding essential as some require extensive customer contact while others operate almost invisibly to your clients.
• Contract terms create vital flexibility or constraints, particularly regarding notice periods, minimum volumes, and exclusivity requirements that could impact your long-term financing options.
• Most factoring relationships operate as continuous funding mechanisms rather than one-time transactions, functioning essentially as an outsourced accounts receivable department.
• Factors' credit analysis capabilities deliver valuable intelligence about customer financial health that can inform broader business strategy beyond financing decisions.

CONCLUSION

Call  7 Park Avenue Financial, a trusted, credible and experienced business financing advisor who can assist you in determining the best A/R  pricing for your firm,

That allows you to focus on benefits via an invoice factoring company that you can reap from this growth in the popularity of business financing in Canada while understanding the actual cost of factoring receivables.

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

What is the real receivable factoring cost  of invoice factoring? How much does it cost for accounts receivable factoring?

What are the two types of accounts receivable factoring?  

The two key types of a/r factoring for outstanding invoices are non-recourse factoring solutions and recourse factoring. Non-recourse financing transfers the risk of collection and bad debt to the finance company. Standard recourse financing involves the company carrying and managing its credit collection risk and bad debt exposure.

What is the typical timeframe for receiving funds when factoring receivables?

• Funding typically occurs within 24-48 hours after invoice verification
• Some specialized factoring companies offer same-day funding options
• The initial setup process generally takes 3-5 business days
• Subsequent fundings happen much faster once onboarded

How does factoring differ from traditional bank loans for manufacturing businesses?

• No debt is created on your balance sheet
• Approval depends on your customers' creditworthiness, not yours
• Funding grows with your sales volume automatically to help the company's cash flow
• No restrictions on how you use the funds
• No monthly repayment schedules to manage

What types of industries benefit most from factoring receivables via invoice factoring companies in Canada?

• Manufacturing companies with large order fulfillment costs
• Transportation and logistics firms with significant upfront expenses
• Staffing agencies managing weekly payroll before client payments
• Seasonal businesses managing cash flow fluctuations
• Government contractors facing lengthy payment cycles

What documentation is required for factoring receivables applications?

Info needed by Most factoring companies includes:

• Accounts receivable aging reports
• Sample invoices and contracts
• Business formation documents
• Recent bank statements
• Customer contact information for verification

Will my customers know I'm factoring their invoices?

• Notification requirements from an accounts receivable factoring company  vary by factoring agreement type
• Non-notification factoring keeps the arrangement confidential
• Notification factoring requires customer awareness
• Many factors now offer discreet payment processing options
• Professional communication preserves business relationships

How does factoring improve business growth opportunities?

• Provides immediate capital to pursue new contracts
• Enables inventory purchases to fulfill larger orders
• Supports hiring additional staff during expansion
• Funds marketing initiatives to capture market share
• Eliminates the constraint of waiting for customer payments

What are the advantages of factoring compared to traditional bank loans?

• Approval based on customer creditworthiness, not your business credit
• No debt appears on your balance sheet
• Funding increases automatically as your sales grow
• No fixed monthly repayment obligations
• Faster approval and funding process
• Includes valuable accounts receivable management services

How quickly can a business access funds through receivables factoring?

• Initial funding typically within 3-5 business days of application
• Subsequent invoice funding within 24-48 hours
• Some factors offer same-day funding options
• Electronic transfers speed up the process
• No lengthy credit committee reviews

What types of invoices qualify for factoring in Canada?

• Business-to-business (B2B) invoices
• Business-to-government (B2G) invoices
• Recently issued invoices (typically under 90 days)
• Invoices free of liens or encumbrances
• Invoices from creditworthy customers
• Service or product delivery must be complete

Is factoring suitable for businesses in financial difficulty?

• Provides immediate relief from cash flow problems
• Helps businesses recover from temporary setbacks
• Offers financing when banks are likely to decline
• Supports turnaround strategies with immediate working capital
• Enables continued operations during challenging periods
• May cost more than traditional financing but delivers critical timing advantages

How do factors evaluate which invoices to purchase?

• Customer creditworthiness is the primary consideration
• Invoice age and documentation quality matter significantly
• Previous payment history with the customer is reviewed
• Industry-specific risks are evaluated
• The strength of your customer relationships is assessed
• Clear evidence that goods or services were delivered and accepted

Citations / More Information

1. Canadian Lenders Association. (2023). "Alternative Financing Growth Report: 2023 Edition." Retrieved from Canadian Lenders Association Research Publications.
2. Deloitte Canada. (2022). "Cash Flow Management Trends Among Canadian SMEs." Deloitte Financial Advisory Services.
3. Statistics Canada. (2023). "Survey of Financing and Growth of Small and Medium Enterprises." Government of Canada.
4. Ernst & Young. (2022). "Working Capital Management: Best Practices for Canadian Businesses." EY Canada Business Advisory Services.
5. FCI (Factors Chain International). (2023). "Annual Review of the Factoring Industry." Global Factoring Statistics.
6. Bank of Canada. (2023). "Business Outlook Survey: Access to Financing." Monetary Policy Report Supplement.

1. Canadian Lenders Association: https://www.canadianlenders.org
2. Deloitte Canada: https://www.deloitte.ca
3. Statistics Canada: https://www.statcan.gc.ca
4. Ernst & Young Canada: https://www.ey.com/en_ca
5. Factors Chain International: https://fci.nl
6. Bank of Canada: https://www.bankofcanada.ca