YOUR COMPANY IS LOOKING FOR CASH FLOW FINANCING VIA A/R FINANCE!
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Financing & Cash flow are the biggest issues facing business today
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AR Finance, i.e. cash flow financing has the ability to save your company when it fact your firm is faced with survival challenges. Let's examine when a receivables strategy works, and what you need to do to facilitate a financing that makes sense. In essence, 'how it works' and 'why'.
Canadian business owners and finance managers that face challenges of raising cash for their firm can utilize an A/R finance strategy, which is in effect the sale and monetization of your receivables to generate working capital. Our comments are focused on your firm being potentially in 'survival' mode, but of course, they apply to daily operations and growth, or even 'hyper-growth' which is a double edge sword.
If you do in fact require an A/R cash flow strategy are you in fact eligible? Let's examine some key requirements around getting a proper facility in place. We say 'proper' because in our opinion there are certain receivables structures that certainly aren't optimal for your company.
Getting back to those qualifications! As a general rule only commercial, i.e. 'Business to Business' a/r is eligible for financing. (While there are financing mechanisms for consumer A/R in Canada - securitization/merchant advance etc. Invoice financing in Canada general pertains to commercial business receivables)
And by the way, your clients can be in Canada, in the U.S. or foreign - cash flow A/R financing has the ability to capture and fund all of these!
Naturally, your firm also has to be selling on credit, as a cash sale environment just does not work!
Size more or less counts when it comes to your ability to set up a proper receivables facility. Although very small facilities can be set up a good rule of thumb is that monthly A/R in the 100k+ range is a recommended size. And by the way, there is NO upper limit on the size of your facility in Canada, as facilities exist for tens of millions of dollars if that is in fact required.
The issue of ‘concentration’ comes up. As a rule of thumb, it’s preferable to have your A/R base spread over a number of clients, with no one client becoming a huge part of your overall sales. That issue is certainly able to be resolved if, in fact, that's the case with your firm, but widespread A/R clients is in fact the preferred business model.
While in almost all cases Canadian business financing vehicles work best with established companies we do point out to clients that a start-up firm can in fact set up a proper facility and benefit in the same manner.
While very small invoice transactions can be financed typically larger invoice amounts lend themselves best to this method of finance.
So those are some of the points that define your eligibility for a cash flow financing facility. To originate a facility you must be able to produce aged receivable reports, financial statements, and basic info around your business model.
Our recommended facility is confidential AR FINANCE, which allows you to bill and collect your own receivables. Generally, this type of facility has a higher level of due diligence involved, but your firm reaps all the benefits of cash flow financing and remains in full control of all aspects of the day to day routine.
Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in setting a proper facility that puts you in full survival, and hopefully growth mode for future sales and profits.
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