Account Receivables Financing: Transform Your Business Cash Flow | 7 Park Avenue Financial

 

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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

 

 

 

 

7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer account receivables financing  and working capital solutions  – Save time, and focus on profits and business opportunities

 

7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”

 

 

 

 

Account Receivables Financing

What is Accounts Receivable Financing?

 

Accounts receivable financing is a financial solution that allows businesses to leverage their outstanding invoices to access immediate cash flow.

 

Unlike traditional loans, this type of financing provides an advance on the value of the invoices, which means it doesn’t add conventional debt to the business’s balance sheet.

 

Businesses can convert their unpaid invoices into working capital, helping them meet financial obligations and manage cash flow more effectively.

 

This method is particularly beneficial for businesses that need quick access to funds without the lengthy approval processes associated with traditional loans.

 

 

 

Cash Flow Crunch? Transform Your Invoices Into Instant Capital

 

Your growing business is drowning in unpaid invoices while expenses keep mounting. The frustration of waiting 30, 60, or even 90 days for payment stifles your growth and limits opportunities.

 

Let the  7 Park Avenue Financial team show you how Account Receivables Financing offers immediate access to working capital by converting your outstanding invoices into same-day cash.

 

 

Two Uncommon Takes on Financing A/R:

 

1. Account Receivables Financing can improve customer relationships by allowing longer payment terms without straining your cash flow.

 

2. Companies can use receivables financing strategically to take advantage of early payment discounts with their suppliers

 

 

Strengthening Your Business with Cash Flow Finance Solutions

 

Cash flow finance solutions allow your business to strengthen your firm’s decision-making ability and financial future.

 

Accounts receivable financing companies help businesses leverage their outstanding invoices to access immediate capital and improve cash flow. One method thousands of business owners and financial managers employ is account receivable funding.

 

In particular, we’re talking about Confidential Receivable Finance, allowing you to bill and collect your receivables. And no ‘secret phone call’ is required! Let’s dig in.

 

 

The Importance of Planning Your Cash Flow

 

Planning your cash flow with the right external financing solution allows your business to identify growth opportunities better and avoid the proverbial ‘cash flow crunch’ that comes with the ebb and flow of sales.

 

Receivables finance can provide the necessary capital for business growth by alleviating cash flow challenges and enabling businesses to seize development opportunities.

 

And the right solutions will always help you ensure profits without the risk of lacking working capital. While businesses have numerous traditional and alternative capital-raising mechanisms, those needs must be properly communicated to lenders.

 

Is Your Business a Candidate for Accounts Receivable Financing?

 

If your firm has sales, it’s always a candidate for A/R financing. AR financing allows businesses to utilize accounts receivable as collateral to secure funds quickly and improve cash flow.

 

Thousands of firms that can’t attract a bank finance solution have the comfort of knowing their sales can be financed via receivables funding.

 

 

The Benefits of Receivables Financing

 

This is short-term financing at its best, allowing you to pledge/sell your customer accounts to fund obligations such as payroll, inventory/materials, and growth in those sales!

 

 

Asset-based lending differs from traditional loans because it leverages accounts receivable as collateral, offering more flexible funding options without creating debt.

 

It’s critical to understand that this solution is not a loan—there are no fixed payments. Instead, it’s a continuous revolving credit facility.

 

 

How Accounts Receivable Financing Works

 

The accounts receivable financing process typically involves a few straightforward steps:

 

 

1. Invoice Submission: The business submits its outstanding invoices to the financing company. This can often be done digitally, making the process quick and efficient.

2. Funding: The financing company advances a percentage of the invoice value within 24 to 48 hours. This immediate cash injection helps the business cover payroll, inventory, and operational costs.

3. Repayment: When the customers pay their invoices, the business repays the financier. Depending on the arrangement, this can be done through a dedicated account or by remitting the funds directly to the financing company.

 

 

This process allows businesses to maintain a steady cash flow without waiting for customers to pay their invoices, ensuring they can continue to operate smoothly and pursue growth opportunities.

 

 

Bank Versus Non-Bank A/R Financing

 

The difference between bank A/R financing and non-bank financing is the way the collateral (i.e., your A/R) is documented.

 

In the bank’s case, it is ‘pledged,’ while Confidential Receivable Finance via a third-party commercial finance firm stipulates the sale of receivables,i.e. being  ‘sold’ instead of pledged. It's as simple as that.

 

 

Invoice financing allows businesses to borrow against their accounts receivable, providing immediate cash flow without adding traditional debt to their balance sheets.

 

While a non-bank solution will always be more expensive than the bank, it’s a solid, effective way to finance your business. More often than not, it’s a ‘bridge’ to getting back to a formal chartered bank relationship. In the case of financing, receivables are, in essence, ‘Unsecured Financing.’

 

 

Accounts Receivable Financing Versus Factoring

 

 

While accounts receivable financing and factoring are methods to improve cash flow, they operate differently.

 

With accounts receivable financing, a business retains ownership of its outstanding invoices and uses them as collateral to secure an advance. This means the company is still responsible for collecting payments from its customers.

 

 

In contrast, factoring involves selling the outstanding invoices to a third-party factoring company at a discount.

 

The factoring company then takes over the responsibility of collecting customer payments. Depending on the agreement, factoring can be done on a recourse or non-recourse basis, which determines who bears the risk if a customer fails to pay.

 

 

Accounts receivable financing offers more flexibility, allowing businesses to retain control over their invoices and customer relationships while accessing necessary funds. This makes it an attractive option for companies looking to manage their cash flow without relinquishing control over their receivables.

 

 

Why Businesses Choose Third-Party Receivables Finance

 

There’s a whole range of reasons thousands of Canadian businesses gravitate towards third-party commercial receivables finance.

 

Has your business ever been in any of the following categories?

 

 

Third-party receivables finance provides a cash advance by leveraging outstanding invoices, enabling businesses to improve their cash flow and meet urgent financial needs.

 

  

Common Challenges Faced by Businesses  

 

 

• Banks refused to grant you the amount of business credit you need.

• You have a bank line, but it’s not enough! In such cases, businesses can either sell their invoices to a third party, transfer the responsibility of collecting payment to the finance company, or retain ownership and collect payments from clients while seeking short-term funding.

• Your firm is relatively new.

• One or a few customers represent a large portion of your sales (known as ‘concentration’).

 

 

How Confidential Receivable Finance Works

 

 

At the core is that, unlike traditional ‘Factoring’ offered by 99% of commercial A/R financiers, your customers do not need to be notified.

 

Businesses can leverage their accounts receivables for immediate cash flow without notifying customers. So, financing is clearly on the ‘honour system,’ given that you’ve received funding for your accounts and are obligated to pay back when your clients pay.

 

 

Maintaining Client Relationships

 

 

Business owners quickly see the positive impact of maintaining 100% of their client relationships, from sales to final invoicing and collection.

 

CASE STUDY:

 

A Canadian manufacturer faced a critical challenge when a major contract required significant upfront costs.

 

Through Account Receivables Financing, they accessed $500,000 in working capital within 48 hours, enabling them to fulfill the contract and grow revenue by 40%. The flexible funding grew with their needs, and they've since doubled their business without taking on traditional debt.

 

Key Takeaways

• Understanding advance rates determines your immediate cash availability from invoices.

• Credit insurance protection safeguards against customer payment defaults

• Digital platforms streamline the entire funding process from submission to payment

• Proper invoice documentation ensures rapid funding and compliance

• Professional customer communication maintains strong business relationships

 

 

Conclusion

Can your firm benefit from a winning recipe for A/R funding?

 

Call  7 Park Avenue Financial, a trusted, credible, and experienced Canadian business finance advisor who can assist you with your cash flow finance needs.

 

 

FAQ

How quickly can I access funds through Account Receivables Financing?

• Typically, within 24-48 hours of invoice submission

• Some providers offer same-day funding

• Digital platforms enable rapid processing

 

 

• What percentage of my invoice value can I receive upfront?

• Generally, 80-90% of invoice value is available immediately

• The remaining amount minus fees received when the customer pays

• Rates vary based on industry and credit quality

 

 

• Do my customers know their invoices are being financed?

• Options for both disclosed and non-disclosed financing

• Professional notification processes available

• Maintains existing customer relationships

 

 

How does Account Receivables Financing improve business cash flow?

• Immediate access to working capital

• No waiting for customer payments

• Predictable cash flow planning

• Reduced collection efforts

• Unlike invoice factoring, which transfers the responsibility of collecting payments to the factoring company, accounts receivable financing allows businesses to maintain control over their collections.

 

 

What makes Account Receivables Financing different from traditional loans?

• Based on invoice quality, not company credit

• No fixed monthly payments

• Grows with your business

• No additional debt on the balance sheet

 

 

Can small businesses qualify for Account Receivables Financing?

• Qualification based on customer creditworthiness

• Minimal time in business required

• Flexible funding options

• Quick approval process

 

 

What industries benefit most from this financing solution?

• Manufacturing and distribution

• Professional services

• Transportation and logistics

• Construction and contracting

• Technology companies

 

 

How quickly can businesses access funds?

• Same-day funding available

• Digital application process

• Minimal documentation required

• Ongoing funding relationship

 

 

Is there a minimum invoice amount required?

• Typically $5,000 minimum invoice size

• Monthly minimum volume requirements vary

• Flexible terms for growing businesses

 

 

What documentation is needed to get started?

• Business registration documents

• Recent accounts receivable aging report

• Sample invoices

• Bank statements

 

 

Does accounts receivable factoring affect my relationship with customers?

• Professional notification process

• Enhanced customer service options

• Maintains business relationships

• Transparent communication

 

 

What happens if my customer doesn’t pay?

• Credit insurance protection is available

• Collection support provided

• Risk mitigation strategies

• Professional dispute resolution

 

 

Will this help my business grow?

• Increased purchasing power

• Ability to take larger orders

• Improved supplier relationships

• Strategic growth opportunities

 

 

How does the Account Receivables Financing process work?

• Submit invoices digitally

• Receive immediate funding

• Automated payment tracking

• Professional collection services

 

 

What are the typical costs involved?

• Factoring fees based on volume

• No hidden charges

• Transparent fee structure

• Volume discounts available

 

 

What makes a good Account Receivables Financing candidate?

• B2B invoice-based businesses  who can't access traditional bank loans or a bank credit line

• Creditworthy customers

• Growing revenue

• Clean invoicing practices

 

 

What is Working Capital Management?

Working capital management is the strategic process of monitoring and controlling a company's current assets (like cash, inventory, and accounts receivable) and current liabilities (such as accounts payable) to ensure optimal operational efficiency and maximize return on assets. It involves maintaining sufficient liquidity for day-to-day operations while avoiding excessive idle capital.

 

What is Cash Flow Optimization?

Cash flow optimization is the systematic approach to improving how money moves through a business. It involves streamlining accounts receivable collection, managing payment terms with suppliers, optimizing inventory levels, and implementing efficient payment processing systems to ensure the business maintains healthy liquidity while reducing working capital costs.

 

What is Supply Chain Finance?

Supply chain finance is a set of technology-based business and financing solutions that link buyers, sellers, and financing institutions to lower financing costs and improve business efficiency. It enables businesses to lengthen their payment terms to suppliers while providing the option for suppliers to receive early payments through a third-party financier, optimizing working capital for both parties.

 

What is Trade Credit Insurance?

Trade credit insurance, also known as accounts receivable insurance, is a risk management tool that protects businesses against customer payment defaults, insolvency, and bankruptcy. It provides coverage for outstanding invoices and enables companies to safely extend credit to customers, expand into new markets, and secure better financing terms through enhanced receivables protection.