YOUR COMPANY IS LOOKING FOR TRADE RECEIVABLE FINANCING!
ACCOUNTS RECEIVABLE FINANCING AT IT'S BEST
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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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Trade Receivables Financing is sought after more and more as a method of cash flowing accounts receivable in Canada. Is there a mathematical secret to understanding and getting... shall we say... below the surface of this method of business financing? Let's dig in.
ACHIEVING BUSINESS CREDIT SUCCESS IN CANADA VIA FINANCING OF CURRENT ASSETS
Getting business credit in Canada (and being successful at it!) is the ongoing struggle of the business owner / financial manager, particularly in the SME sector. Term loans are not the answer. While there are good reasons to secure long-term working capital for your business it’s a fundamental financial principle that the current assets of your business should be financed through short-term financing.
BANK FINANCING VERSUS NON-BANK ALTERNATIVE FINANCING - WHAT IS TRADE RECEIVABLES FINANCE?
If that 'short term financing' doesn't come from a bank, where does it come from then? The answer is commercial finance companies that focus on receivables finance. These firms put paperwork in place that allows you to finance (in fact the proper term is 'sell') your A/R, as you generate sales, to finance your business. That whole process is known as factoring, where a company sells receivables instead of assigning them to a bank (pledge of accounts receivable ) under a traditional bank facility.
3 KEY ISSUES AFFECTING THE FUNDING ADVANCE IN A/R FINANCING
That's simple right? In fact, the math is very simple if you understand how accounts receivable financing companies calculate and advance that financing on accounts receivables. Key factors in the whole process include:
The overall ' risk profile ' of your client base
The ongoing amount of your Receivables on a typical monthly basis
The payment history of your clients
THE COST OF RECEIVABLE FACTORING VERSUS THE BENEFITS
Although receivable financing is more expensive than Canadian chartered bank credit in Canada one specific advantage is that your ' advance rate' or ' margining' is generally in the 90% area. That means more liquidity. Note also this is ' same day' financing - as you generate sales those sales are immediately monetized into cash flow - funds being wired into your operating account the same day.
WHAT RECEIVABLES CAN BE FINANCED / WHAT IS PLEDGING ACCOUNTS RECEIVABLE
In general, you can finance any receivable that is less than 90 days old - in some cases, a special exception will be made on that timeframe- but most business owners/managers quickly realize that receivables become less collectible when they are older and impact the company's balance sheet in a negative way. When a company sells its accounts it generates immediate funding .
QUICK AND EFFICIENT FUNDING
Businesses that can't obtain the full amount of financing they need gravitate to receivables financing from a factoring company for different reasons. That might be to leverage .monetize current assets such as A/R to free up working capital. Many clients tell us they prefer trade A/R financing through a non-bank entity simply because it’s a more quick and efficient process when it comes to securing approval.
WHAT IS THE BEST TYPE OF A/R FACTORING FINANCING YOUR TRADE RECEIVABLES?
7 Park Avenue Financial accounts receivable financing solution is CONFIDENTIAL RECEIVABLE FINANCING we do meet some clients who simply prefer ' old school’ receivable finance which has your finance firm inserting themselves into the collection process with your outstanding invoices. It's short term funding that allows companies to fund sales growth and investment in A/R.
WHAT OTHER SOLUTIONS ARE AVAILABLE UNDER ASSET BASED LENDING
Are there times when trade receivables financing doesn't work? If your company is in a death revenue spiral no amount of financing will often fix the problem. Growing revenues can hide a lot of problems! Also, there are other complementary solutions to financing current assets - they include tax credit financing, PO/Contract financing, and full-scale non-bank asset-based lines of credit. Bottom line - explore your options!
CONCLUSION
A/R financing is a multi billion dollar business in Canada. Explore the options by seeking out and speaking to a trusted, credible and experienced Canadian business financing advisor who will take you below the surface of this financial offering.
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Stan Prokop
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