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RECEIVABLE FINANCE SOLUTION! ACCOUNTS RECEIVABLE FINANCING WORKS!
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Financing & Cash flow are the biggest issues facing business today.
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Receivable financing in Canada has made some interesting gains in recent times. First of all, there is nothing like winning a 'popularity contest,' and thousands of firms have continued to embrace this method of financing cash flow. And even better than that, some interesting 'changes' to how this finance from a factoring company works have offered even more appeal to the Canadian business owner/financial manager. Let's dig in.
WHO USES BUSINESS FACTORING SERVICES?
The SME (small to medium enterprise) sector in Canada can be forgiven for feeling underserved when accessing capital that other larger and public companies find easier to achieve. So a subset of asset-based lending, 'factoring services' have stepped in nicely when they find themselves less ' creditworthy' and unable to access all of the working capital they need.
WHAT IS THE BEST TYPE OF FACTORING SOLUTION?
If we step back a bit, it's not hard to discover why receivable financing services have such appeal. Utilizing this method of financing, including our favourite and recommended " CONFIDENTIAL RECEIVABLE FINANCING ' your company can finance all North American accounts receivable ( international accounts often require some form of credit insurance ), and depending on the type of financing you need risk of bad debt can even be transferred to your financing partner.
HERE IS WHAT'S WRONG WITH TRADITIONAL ' OLD SCHOOL' FACTORING FINANCING
While the traditional form of this financing can be termed somewhat ' invasive ' as the collection department of your firm is taken over by the finance firm, it still works for thousands of firms who wish to access capital and aren't really concerned about notifying clients about how they finance their business.
WHAT IS THE APPEAL OF CONFIDENTIAL A/R FINANCE?
Enter Confidential A/R finance. The appeal here is significant. While the main benefit continues to be the fact that you have daily access ( if you need it ) to working capital this type of ' confidential ' credit line facility allows you to bill, and collect, all your accounts receivable without any intervention whatsoever with a third party. In our own experience with clients that seems to be the desired route business owners/ financial managers wish to take, perhaps it’s our inherent Canadian conservatism!
HOW DOES FACTORING WORK
So how does this method of financing cash flow work? It's pretty basic stuff. Standard finance documents that you would sign with any financing are put in place at the outset of the arrangement with factoring companies. It's all about financing your balance sheet and cash flowing those outstanding invoices.
All sales you generate can be financed the same day that invoices are generated. 90% margining of accounts is typically available, which even beats the 75% offered by our Canadian chartered banks. Your clients are totally unaware of your financing mechanism. You're running a ' business as usual ' company, with one exception; you have all the cash flow and financing you needed based on your sales growth via financing accounts receivable. It's the alternative to bank financing for short term day to day funding, in effect a kind of business credit line facility; and is not a term business loan that brings debt to the balance sheet.
Businesses can choose between non recourse factoring or regular recourse funding where you still keep your bad debt risk. The factoring fee that is charged is not an interest rate, which is an often confusing part of a/r financing when we talk to new clients here at 7 Park Avenue Financial.
CONCLUSION - RECEIVABLES FACTORING
Looking for the best accounts receivable factoring for your small business? If your firm has good financial records and a track record of growth, as well as future growth potential, seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with the best factoring services for business owners in Canada.
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Stan Prokop
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