YOUR COMPANY IS LOOKING FOR THE RIGHT RECEIVABLES FINANCE SOLUTION!
SOLUTIONS FOR ACCOUNTS RECEIVABLE FINANCING & ACCOUNTS RECEIVABLE FACTORING IN CANADA
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Financing & Cash flow are the most significant issues facing business today.
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Receivables finance in Canada, we think, suggests the analogy of ' made to measure ' versus ' off the rack' when it comes to the short to intermediate-term solutions offered by business factoring companies. And the type of solution you choose will be directly related to the benefits. Let's dig in.
THE IMPORTANCE OF ACCESSING CASH AS YOU NEED IT
Business owners and financial managers very early on realize the importance of access to short term financing for day to day operations and the ability to grow a business. Business cycles in their industry or specifically in their company often force the owner/manager to address cash shortages. Therefore, a solution is required - if it’s not a Canadian chartered bank offering, then business factoring companies step in to take up that slack.
WHAT ARE THE DIFFERENT TYPES OF A/R FINANCE?
But what are the types, costs and advantages of this method of Canadian business financing? The type of financing you ultimately source needs to deliver on liquidity. The right offering will also allow you to grow your business without always having to consider more ' equity ' or ' long term debt, ‘which dilute ownership can bring balance sheet risk, respectively.
Accounts receivable financing as a cash flow and working capital solution is sometimes neglected by Canadian businesses, if only because owners don't know it existed or how it works.
A LITTLE HISTORY ON FACTORING
Almost all of the accounts receivable financing currently taking place in Canada originated, style-wise, in the U.S. and even back to Europe; it was a natural way to fill the gap between delivering products and services and waiting to get paid.
WHAT DOES FACTORING COST?
When you weigh a business factoring accounts receivable solution via a factoring company it’s a classic case of cost versus benefits. While A/R finance is almost always more expensive, it delivers significant benefits, not the least of which provides a method for unlimited growth related to the ' market power ' of your company.
FACTORING IS A SUBSET OF ASSET BASED LENDING AND IS VERY POPULAR
Big corporations get more prominent because of their ability to demand more time to pay clients. Businesses in the SME sector might be your clients who desperately need trade credit from your company to address their own financial issues. Looking back not too long ago, Top experts tell us that A/R receivable financing volumes actually shrunk just after the 2008-2009 worldwide credit crunch simply because many businesses stopped growing - i.e. A/R declined. And let's not even talk about pandemics!
BANK CRITERIA FOR A RECEIVABLES LOAN / LINE OF CREDIT
Canadian banks offer revolving credit facilities based on their terms. The same cash flow and access to working capital we're talking about comes with the demand of bank credit criteria - those solid balance sheets, profit generation, and collateral and ratio requirements.
Business factoring companies step in with various solutions. Traditionally the only offering available had business factors assuming management and control of your sales invoices, including direct contact with clients.
DIFFERENT TYPES OF CREDIT RISK MANAGEMENT CAN BE ACHIEVED
Financing accounts receivable can also be done on a non-recourse factoring basis - that means that your invoice factoring facility transfers all the credit risk to the factoring firm. Normal recourse factoring has your company still controlling credit risk.
WHAT IS THE BEST TYPE OF FACTORING
Our recommended alternative to business owners/managers is CONFIDENTIAL RECEIVABLE FINANCING, allowing a company to reap all the benefits of A/R finance and total control of sales, invoices and collections. Larger corporations can take advantage of securitization, offering the same benefits.
HOW CAN A COMPANY REDUCE THE COST OF FACTORING
Businesses in Canada can reduce the costs of A/R financing by always coming back to the fundamentals: good credit management, timely invoicing, good follow up, and drawing down on bank lines of credit or business factoring facilities only when they need to.
QUALIFICATIONS FOR A FACTORING FACILITY
Any small or large business can achieve a factoring solution. It a short-term third-party finance solution, and the invoice amount can vary and is not critical to being approved. Small businesses achieve immediate cash, allowing your firm to fund day-to-day operations and consider growth opportunities. It allows companies to generate cash show for business needs without waiting 30, 60, or, dare we say it, 90 days to collect your A/R.
CONCLUSION
If you're looking for a ' made to measure ' solution in Accounts Receivable cash flow finance and want to find out what you might be missing in a business cash flow solution, seek out and speak to a trusted, credible and experienced Canadian business financing advisor.
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Stan Prokop
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