Accounts Receivable Financing Cash Solutions | 7 Park Avenue Financial

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FINANCING FOR BUSINESS GROWTH

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        Financing & Cash flow are the biggest issues facing businesses today

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"Cash flow is not just the lifeblood of your business – it's the oxygen. Accounts receivable financing ensures you never have to hold your breath waiting for payment." - Alan Miltz, Co-Founder of Cash Flow Story

RECEIVABLES FINANCING IN CANADA 

Want to feel initiated?  Privileged?

That's kind of what a secret is about, and we're sharing a great one today: a strategy known as Confidential Invoice Factoring / Accounts Receivable Finance. It's our version of the best factoring financing in Canadian business today for small businesses and, for that matter, businesses of all sizes when it comes to money owed to your business!

What is accounts receivable financing?

Accounts receivable financing is a popular way for companies to receive payment on outstanding invoices on their balance sheets. By selling receivables, the company makes an agreement with a commercial finance firm known as a factoring company.

The financing company provides capital relative to accounts receivable balances. Small and medium-sized businesses are the most common users of this method of financing.

The cost of receivable factoring/financing is typically higher than that of traditional lender solutions. In some cases, firms with poor credit or companies that are growing quickly are good candidates for this method of cash flow financing. 

Utilizing accounts receivable factoring companies that provide a cash advance for sales generated is a valid financial strategy that provides fast access to cash and solves short-term funding needs. Accounts receivable provide the primary collateral.

Account receivable financing stands as a key part of the asset-based lending solution in Canada.

From Invoice Paralysis to Cash Flow Freedom

Your business is thriving with new orders, but your bank account tells a different story. Unpaid customer invoices have created a cash flow gap that threatens your ability to meet payroll, purchase inventory, or pursue growth opportunities.

Are you ..??

Looking for business financing without adding debt?

Solving the cash flow gap for growth and to cover operational expenses before collecting payments

Are you looking for solutions to manage your cash flow for clients needing extended payment terms?

Looking for an immediate solution for converting receivables into cash?

Are you wondering how to accept large orders/contracts til the customer pays?

Needing non-bank financing?
 

Let the  7 Park Avenue Financial team show you how Accounts receivable financing transforms those outstanding invoices into immediate working capital, eliminating the wait and putting you back in control of your business finances.

Three Uncommon Takes on Accounts Receivable Financing

1. Beyond emergency funding, accounts receivable financing can serve as a strategic growth accelerator, allowing businesses to accept larger contracts without cash flow concerns.
2. Unlike traditional financing that focuses on your company's credit score, accounts receivable financing evaluates your customers' creditworthiness, opening doors for businesses with limited credit history.
3. A company's accounts receivable needs  can be structured as a selective tool, allowing this financing method to finance specific invoices based on cash flow needs rather than committing your entire receivables portfolio to cover operational expenses

SOLVING CASH FLOW ISSUES  

Let's backstep a bit first, though.

Why are you considering receivables finance and invoice factoring?

Why are thousands of other firms, your competitors included(!), already in that business when it comes to achieving early payment on sales generated for your goods or services—i.e., receiving cash immediately, given that clients ignore many payment terms?

NON-BANK AR FINANCING  

There are only two answers to that question... maybe three.

First of all, this type of working capital and cash flow financing is relatively easy to work with, and secondly, the more you analyze it, the more it seems to make sense.

Our third reason - in many cases clients we meet are almost forced to consider this type of business financing because factoring financing becomes their only method of ensuring their business has the working capital and cash flow to succeed when a  bank credit line may not be available.

 FINANCING THE BALANCE SHEET 

When talking to clients, we always try to dispel the perception—and trust us, it’s just that—that this is the 'poor man's (or woman’s!) solution to business financing.

Hardly some of the most prominent, most well-known names in Canadian business, even public companies, by the way, utilize account receivable finance. It’s just disguised a bit more cleverly by those finance folks as securitization, etc.

HOW DOES CONFIDENTIAL FACTORING WORK?  

Anyway, back to our key point today: Is there a way to reap all the benefits and financial leverage of accounts receivable finance and cash flow generation while allowing you to control your own destiny?

99% of factoring financing in Canada is done in a very... let's call it 'pure' manner.

You sell your invoices, the buyer, the 'factor,' notifies your clients that they have purchased the receivable, and you get your cash flow the same day. In effect, you've just turned your company into an automatic ATM, with yourself having the key to the back of the unit!

But wait... perhaps, like hundreds of other businesses that we meet, you don't want to let the world know how you are financing your business, including your competitors, by the way! Is there a solution for that collection process

THE BEST A/R FINANCING SOLUTION?  

There is. It’s what we've termed 'CONFIDENTIAL RECEIVABLE FINANCING ’; our terminology for confidential invoice discounting or factoring financing.

It allows you to bill and collect your own a/r while enjoying all the benefits of same-day cash flow.

Unless we're missing something, it’s the ultimate win-win. if your company is unable to achieve traditional bank financing! 

Now, you have opened up a window of financing that has created for your company all the benefits of this type of Canadian business financing—without taking on business debt.

Business accounts receivable financing is simply monetizing or cash-flowing your unpaid invoices—typically the second most liquid current asset—your a/r—and turning that into your first most liquid asset—cash flow!

Case Study: Benefits of Accounts Receivable Financing

A growing Toronto-based IT infrastructure company faced a critical challenge. With contracts from several major corporations, their business was booming, but with 60-90-day payment terms, cash flow couldn't keep pace with growth opportunities.

After implementing accounts receivable financing, the company immediately accessed 85% of invoice values within 24 hours of billing. This transformed their operations in several ways:

• Payroll stability improved, reducing staff turnover and recruiting costs
• Vendor relationships strengthened through consistent on-time payments
• The company accepted a major contract previously beyond their working capital capacity
• Equipment purchases were made without traditional debt financing
• Their focus shifted from cash flow management to business development

Within 12 months, the company increased revenue by 47% while maintaining healthy margins and strong client relationships. The financing cost represented less than 2% of gross revenue—a minor expense compared to the growth opportunity cost they would have incurred without adequate cash flow.

KEY  TAKEAWAYS

• Accounts receivable financing converts unpaid invoices into immediate cash, typically providing 80-90% upfront with the remainder (minus fees) paid when your customer settles.
• Factor rates generally range from 1-5% of invoice value, varying based on invoice size, customer creditworthiness, and industry risk factors.
• Your customers' credit quality matters more than your own business credit score, making this financing accessible to younger businesses with strong clients.
• Financing companies perform due diligence on both your business operations and customer payment history before establishing your facility.
• Most providers offer either recourse factoring (you retain default risk) or non-recourse factoring (the factor assumes non-payment risk for an additional fee).
• Selective factoring allows businesses to choose which invoices to finance, providing flexibility compared to traditional bank financing.
• Payment notification requirements vary between providers, with some mandating customer notification while others operate invisibly.
• Integration with accounting software streamlines the financing process, reducing administrative burden while improving cash flow predictability.
• Seasonal businesses particularly benefit from accounts receivable financing's ability to scale up during peak periods without permanent overhead.
• Manufacturing, trucking, staffing, and professional services companies typically see the greatest advantages due to their invoice-heavy business models

CONCLUSION - ACCOUNTS RECEIVABLE LOANS / ACCOUNTS RECEIVABLE FINANCING

Are you intrigued? Interested? Hopefully, you're not confused. Accounts receivable financing/invoice financing stands out as a solid financial tool!

Call  7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor / financial intermediary, on the benefits of factoring funding in Canada. Include the best accounts receivable loan solution for your firm with factoring fees that make sense and are competitive.

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

What percentage of my invoice value can I receive through accounts receivable financing companies?

Most financing companies advance 80-90% of invoice value upfront, with the remainder (minus fees) paid when your customer settles the invoice.

How quickly can I access funds through accounts receivable financing?

Funding typically occurs within 24-48 hours after invoice verification, providing rapid access to working capital when you need it most.

Will my customers know I'm using accounts receivable financing?

This depends on whether you choose notification or non-notification factoring. With notification factoring, customers are informed, while non-notification arrangements maintain complete confidentiality.

Does accounts receivable financing work for service-based businesses in Canada?

Yes, service companies with verifiable completed work and creditworthy customers can effectively utilize accounts receivable financing to improve cash flow.

How does accounts receivable financing compare to a business line of credit for manufacturing companies?

Unlike lines of credit that depend on your business credit profile and may have strict covenants, accounts receivable financing scales with your sales and evaluates your customers' credit, making it ideal for manufacturing businesses with large orders and extended payment terms.

How does accounts receivable financing improve business growth opportunities?

• Provides immediate access to capital locked in unpaid invoices
• Enables acceptance of larger orders without cash flow concerns
• Allows for inventory purchases to fulfill new opportunities
• Provides predictable cash flow for strategic planning
• Eliminates growth limitations imposed by delayed customer payments

What makes accounts receivable financing different from traditional bank loans?

• Based on your customers' creditworthiness rather than your business credit
• Scales automatically with your sales volume  for best financial planning around cash needs
• Doesn't add debt to your balance sheet
• Provides working capital without fixed monthly payments
• Often accessible to younger businesses with limited credit history

How quickly can a business implement an accounts receivable financing program?

• Initial setup  typically takes 5-10 business days
• Once established, funding occurs within 24-48 hours
• Documentation requirements are often simpler than traditional loans
• Digital platforms have streamlined the application process
• No need for lengthy business plan or financial projections

What industries in Canada benefit most from receivables financing?

• Manufacturing with extended production cycles
• Transportation and logistics with net-30/60 payment terms
• Staffing and professional services firms
• Construction and contractors with milestone payments
• Seasonal businesses with fluctuating cash flow needs

How does accounts receivable financing affect customer relationships?

• Professional factors represent your brand appropriately
• Many programs offer non-notification options for confidentiality
• Improved cash flow means better service delivery to customers
• Ability to extend competitive payment terms without financial strain
• Enhanced financial stability improves overall customer experience

Do I lose control of my customer relationships with factoring?

You maintain control of customer relationships while gaining professional accounts receivable management support, with many programs offering non-notification options that keep financing arrangements completely confidential.

What happens if my customer doesn't pay the invoice?

With recourse factoring, you're responsible for repaying the advance if customers don't pay, while non-recourse arrangements transfer payment risk to the financing company for certain approved customers, offering additional protection for a slightly higher fee.

What's the difference between recourse and non-recourse accounts receivable financing?

• Recourse financing from accounts receivable financing companies requires you to buy back or replace unpaid invoices
• Non-recourse financing transfers payment default risk to the financing company
• Non-recourse typically costs more due to the risk transfer
• Recourse is more common and offers lower fees
• Some providers offer modified recourse options with limited risk-sharing

How do financing companies determine which invoices they'll fund?

• Customer credit history / credit reports and financial stability
• Industry sector and typical payment patterns
• Historical relationship between your company and the customer
• Invoice size and verification of delivery/service completion
• Geographic location and jurisdictional considerations for collections

Citations / More Information

1. Business Development Bank of Canada. (2023). "Cash Flow Challenges for Canadian SMEs." BDC Industry Research Report, 45-47.
2. Canadian Factoring Association. (2022). "State of the Factoring Industry in Canada." Annual Industry Report, 12-18.
3. Deloitte Canada. (2023). "Alternative Financing Trends in Canadian Mid-Market." Financial Advisory Services Research, 78-82.
4. Statistics Canada. (2024). "Business Financing Survey: SME Access to Capital." Government of Canada Publication, 23-28.
5. Ernst & Young. (2023). "Working Capital Management Strategies for Growth-Stage Companies." EY Finance Advisory Research Report, 34-39.

1. Business Development Bank of Canada: https://www.bdc.ca
2. Canadian Factoring Association: https://www.factoringassociation.ca
3. Deloitte Canada: https://www.deloitte.ca
4. Statistics Canada: https://www.statcan.gc.ca
5. Ernst & Young: https://www.ey.com/ca