YOUR COMPANY IS LOOKING FOR BUSINESS CASH FLOW SOLUTIONS!
THE PROS AND CONS OF ACCOUNTS RECEIVABLE FINANCING SOLUTIONS
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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
AR cash flow can be achieved in several manners. Receivable loans (they are not actually loans, by the way!) for many business owners and financial managers immediately conjure up bank financing. But that's not always the case, as we'll see. And you might find the 'design genius ' of some of these offerings quite interesting, and more importantly... achievable. Let's dig in.
WHAT IS ACCOUNTS RECEIVABLE FINANCING?
Accounts receivable financing is a financing service solution that allows a company to get paid on outstanding invoices. The factoring company charges a fee, typically in the 1-2% range, for funding a company's outstanding receivables.
Accounts receivable financing allows companies to receive early payment on their outstanding invoices. A company using accounts receivable financing commits some, or all, of its outstanding invoices to a funder for early payment in return for a fee.
SHORT TERM FUNDING FOR BUSINESS CASH FLOW NEEDS
The concept of financing accounts receivable revolves around the need for short term day-to-day operations. That challenge is accentuated when it comes to ' growing ' your revenues and profits. Businesses requiring SME COMMERCIAL FINANCE needs should not feel alone in this area - some of Canada's largest companies constantly have to address cash flow needs as they focus on how to get paid by clients and grow the company at the same time/
WHAT IS CONFIDENTIAL A/R FINANCING, AKA ' NON-NOTIFICATION ' FACTORING
So what then is ' Confidential ' accounts receivable-based finance? At its simplest, it's securing financing via money owed by your client receivable base on a typically ongoing basis. When you're dealing with a bank, your accounts are ' pledged,’ but a commercial finance firm utilizes paperwork to reflect an ongoing 'sale ' of your accounts as they turnover. That's the essential difference.
THE COST OF BANK FINANCING VERSUS ALTERNATIVE FINANCING
It's no secret that bank rates for any business financing are typically the lowest cost of borrowing. While Confidential ' non-notification loans are more expensive, their benefits mirror a traditional bank facility. This is achieved via your ability to bill and collect your own invoices while still reaping the cash flow benefits of same-day financing for all your sales. When you are considering how accounts receivable financing works, it is important to understand how the cost is determined.
USE A/R FINANCING AS A BRIDGE BACK TO TRADITIONAL LENDING
Many firms that utilize commercial A/R cash flow loans are in a transitory phase. They are either leaving the bank (having been asked to!) or seeking commercial financing for their sales as they repair any financial issues in their business, allowing them to migrate back to... you guessed it... the bank!
2 KEY REQUIREMENTS FOR ACCOUNTS RECEIVABLE FINANCING
No business does not have the ability to finance their accounts receivable: the only requirement - Sales and commercial A/R. You've not got a solid way to finance outstanding invoices on the balance sheet.
While we have painted a picture of many businesses having no access to bank funding, numerous firms have access to some bank credit, but not all that meets their needs. That is where the factoring company solution comes in and acts as a type of line of credit for ongoing financing needs
A PROFILE OF A COMPANY USING EXTERNAL FINANCING
From an approval perspective, Confidential A/R funding takes a holistic look at your whole business - that encompasses your current financial position, its challenges, your industry, as well as your overall client portfolio. Issues that can slow down but not hinder your AR financing might be CRA issues or having some clients or a client represent a large part of your whole business - i.e. the concept of ' concentration.' This type of financing allows you to take on larger orders and contracts.
2 KEY DRIVERS IN A/R FINANCE SOLUTIONS
What then are some key ' drivers' that you would consider in receivable loans? They include:
Positive: the ability to achieve continual financing day to day, facilities revolve, growth becomes virtually unlimited, greater flexibility in negotiating terms with key / new /large clients
Less than Positive - higher cost, occasional higher reporting needs
CONCLUSION
Receivable loans go a long way to improving your business liquidity. Business experiences gaps in their ability to fund their business as expenses are being paid while your firm waits for 30 days to 60 days or longer !! To get paid on outstanding invoices requires your business to make higher investments in current asst accounts such as receivables and inventory while at the same time maintaining payrolls or making investments in capital equipment.
The ability to access a receivables lown gives your business the capital needed to fund and operate your company. It is important to understand the costs of receivables finance and, as importantly, understand how factoring works on a day to day basis,
The benefits of funding your a/r are clear -
Accelerating Collections
Allows for focusing on the overall creditworthiness of your client base
Allow your business to take on larger orders and contracts that otherwise might not be financeable - Another complementary solution in this is P O Financing - To learn more about PURCHASE ORDER FINANCE, click HERE.
Factoring / AR finance solutions typically have no define credit limit - your facility grows automatically as your sales grow - Many high growth companies can't access financing because they are hindered by ' high growth ' - ( Considered a good thing by most entrepreneurs!)
Looking to understand better the effects of accounts receivable financing on cash flow? Financing accounts receivable for the small business owner doesn't have to be a major challenge in your search for capital and business credit. If you're interested in the 'design genius ' of accounts receivables cash flow financing that mirrors a bank solution, seek out and speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in your finance needs.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2021/Rights Reserved
