YOU ARE LOOKING FOR ACCOUNTS RECEIVABLE LOANS!
RECEIVABLES FINANCING SOLUTIONS IN CANADA / ACCOUNTS RECEIVABLE FACTORING
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Financing & Cash flow are the biggest issues facing business today
Unaware / Dissatisfied with your financing options?
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Email - sprokop@7parkavenuefinancial.com
Nothing is more important to a Canadian business owner or financial manager than being well informed - in business living in the past generally leads to failure in today’s competitive environment.
WHAT IS ACCOUNTS RECEIVABLE FINANCING?
AR / Accounts receivable financing is a financial transaction where companies selling on business credit terms receive funding for a portion of their accounts receivable as they generate sales. Receivable financing agreements can be managed in many ways, including factoring or selling your receivables or assigning A/R as collateral for a loan or line of credit.
UNDERSTANDING ADVANTAGES AND COSTS OF A RECEIVABLES LOAN
So when it comes to business financing and credit, knowing the advantages and costs of accounts receivable loans and factor financing options become valuable for accounts receivable financing of the balance sheet.
CAN YOUR COMPANY ACCESS THE FINANCING AND BUSINESS CREDIT YOU NEED?
Many Canadian businesses still feel they are somewhat of a captive prisoner in the difficult business credit environment. While interests are low in Canada and the stock markets, they seem to be doing fairly ok. It's clear that access to business credit in general and credit lines specifically is still complicated.
It’s kind of like a slow thawing out, with the freezer, of course, being Canadian chartered banks. Many surveys suggest that a good percentage of Canadian businesses that apply for working capital and cash flow facilities for receivables finance do not get all of the financing they need if, in fact, they are approved at all. That's when the benefit of an alternative accounts receivable loan agreement is beneficial to consider.
This forces you, the business owner or manager, to take a second look at what is available out there to keep your operating capital adequate. We're definitely not blaming the banks (we love Canadian banks), but could there be a better way for small and medium-sized businesses to access credit...well, we think so.
Isn’t the saying that 'necessity is the mother of invention'? In our case, independent finance firms, both U.S.-owned and Canadian, have stepped up to the bar, providing accounts receivable loans for your financing needs. We hasten to point out that the word 'loan' is a misnomer here... our clients use the term also, but we caution them that the good news is that these facilities aren't loans. They are just the monetization of your largest current asset - your a/r.
DON'T LET THE RECEIVABLE FINANCE TERMINOLOGY GET CONFUSING - TALK TO THE 7 PARK AVENUE FINANCIAL TEAM
Accounts receivables loans from a factoring company in Canada go by many different terms. Some you have heard of when it comes to factoring accounts receivable, some you may not have.
They include :
Invoice discounting
Factoring
Receivable financing
Accounts receivable loans provided by finance companies provide firms with immediate same-day/next-day funding for your invoices for your firm's products or services.
Confidential invoice discounting or factoring - At 7 Park Avenue Financial, we recommend these solutions as the best factoring company solution you can access - allowing you to bill and collect your own receivables while achieving all the benefits of A/R financing.
In effect, you are maximizing your cash flow from operations by monetizing your assets, i.e. the receivables.
Accounts receivable loans are your answer to being stuck in the middle - at one end of the spectrum is your investment in accounts receivables and providing terms to your own clients. In contrast, at the other end, it’s a question of not being able to access traditional business credit to finance that same investment.
So, do you know a good solution when you see one? Receivable financing would appear to be that solution. Turning your company into a cash flow machine via receivable finance from accounts receivable financing companies is a solid strategy adopted by thousands of Canadian firms.
HOW DO ACCOUNTS RECEIVABLE LOANS WORK?
The process is simple, as you generate sales, invoices are immediately sold, i.e. converted into cash, at a discount. In Canada, the business factoring rates range widely - anywhere from 1-2% per month. The factoring fee is expressed as a fee by the industry and not a rate per see - that's a major point of confusion that we at 7 Park Avenue Financial are forever explaining!
HOW DOES ACCOUNTS RECEIVABLE FINANCING WORK?
Your factoring fees are reflected on your income statement as a financing cost. Your company receives advance payment either the same day or the next day - money is deposited into your bank account, while your clients enjoy the payment terms you have provided.
Your firm's financial strength and issues such as the credit score and credit rating are significantly de-emphasized in receivables finance - the focus is on the general creditworthiness of your A/R and the ongoing cash flows generated by your collections.
HOW DOES THE BUSINESS OWNER ASSESS COSTS WHEN CONSIDERING HOW ACCOUNTS RECEIVABLE FINANCING WORKS
When it comes to accounts receivable factoring pros and cons, it is often about the cost. Business owners accept this pricing when they realize they have decent gross margins to absorb this cost while at the same time using the newfound cash to take discounts with suppliers and sell more, and generate more profits. In some cases, 50-100%of the financing cost can be offset by using your newfound cash flow. Your ability to decreases finance costs depends on your days' sales outstanding turnover ratio.
At 7 Park Avenue Financial, we take time to ensure that clients understand the higher costs of financing than traditional bank loans. It often becomes a question of access to capital versus cost of capital. Your focus on asset turnover will decrease the fee amount involved in factoring - As well, we ensure clients won't enter into lengthy contracts that won't work for their business model.
Here is an online factoring calculator you might find useful!
WHY IS DSO IMPORTANT?
Your company's DSO / DAYS OUTSTANDING is important because it measures the impact of receivable investment needs and the length of time it takes for you to turnover a/r and get paid on your sales. It is a key measurement metric of successful companies.
SOME BACKGROUND ON A/R FINANCING
Canadian business owners would prefer that their clients and suppliers didn’t know they were financing their A/R via accounts receivable loans. That’s why they investigate 'C I D,' confidential invoice discounting, allowing them to bill and collect their own receivables as they wish. (Traditional factoring via the U.S. and U.K. model requires your clients to be notified as part of your factoring financing agreement. In banking funding, a/r revolves around a pledge of accounts receivable, while invoice factoring is a sale agreement.
In summary, thousands of firms in Canada are moving to this type of accounts receivable financing. It allows firms to meet debt obligations for short-term and long-term borrowing while generating immediate cash flow on sales. Companies can also choose accounts receivable factoring with recourse or non recourse, depending on their choice to keep or transfer bad debt collection risk. Larger corporations can choose between accounts receivable factoring vs securitization.
CONCLUSION - ACCOUNTS RECEIVABLE FINANCING VS FACTORING
Speak to 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can review costs, procedures and benefits around accounts receivable financing Canada, allowing you to win the cash flow and working capital battle! Receivable loans for businesses are a solid way to run and grow your business, allowing you to sell more of your products or services. Let us show you how a receivable financing solution can free up your working capital for business growth goals.
Click here for the business finance track record of 7 Park Avenue Financial
