YOUR COMPANY IS LOOKING FOR ACCOUNTS RECEIVABLE FINANCING FACTORING
Invoice Factoring In Canada Via A Factoring Company
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Accounts receivable factoring loans offer a powerful financing tool for businesses seeking to transform unpaid invoices into immediate cash flow.
Unlock instant cash flow by converting your unpaid invoices into working capital today!
7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer Accounts Receivable Factoring Loans & solutions that solve the issue of cash flow and working capital – Save time and focus on profits and business opportunities
Canadian Business Financing with the intelligent use of experience
AR FACTORING - CANADA
Feel familiar with factoring account receivable advantages in the Canadian landscape? We think it's time for a ' cash flow ' roll call!
What Is Factoring? Great Question! It's all about access to cash!
Accounts receivable factoring companies help Canadian businesses secure consistent cash flow by converting unpaid invoices into immediate working capital. Understanding the mechanics and benefits of accounts receivable factoring/invoice financing can unlock new growth potential for your business.
Understanding Accounts Receivable Factoring Loans
One method by which Canadian business owners and financial managers can fix the proverbial short-term ‘cash flow is tight’ the problem is to agree to sell accounts receivable to a finance factoring company.
Accounts receivable factoring companies provide immediate funding by advancing a significant portion of your sales, typically around 90%, and holding back the remaining 10% until the invoice is paid, less financing costs.
This method is often compared to financing options like business lines of credit. Still, a third party factoring company can offer quicker access to funds and less stringent approval criteria.
It’s a more straightforward process than you think. You are advanced 90% of your sales as you generate them, and the 10%, a ‘holdback’ of sorts, is remitted to you promptly, less financing costs, once your clients have paid the invoice. Pretty simple, right?
New clients at 7 Park Avenue Financial will ask, ‘Is factoring receivables a good idea?’
The answer to that question is more straightforward than you think. If your firm can absorb a margin reduction/fee in the 1-2% range, your firm can achieve unlimited cash flow to run and grow your business.
The ability to finance sales and reduce your investment in accounts receivable provides immediate funds for day-to-day operations. Business liquidity is at the heart of long-term corporate success.
A/R FINANCING IS SAME DAY FUNDING OF SALES
Some advantages of this type of business financing seem more obvious than others, the most obvious being that you are no longer in ‘ wait ‘ mode; you’re in ‘ cash flow’ mode!
With technology and banking systems as sophisticated as they are today, you typically get your funds on the same day!
Accounts receivable factoring works by submitting invoices to a factoring company, receiving an advance on the invoice amount, and then getting the final payment once the customer pays. That helps power business growth, which the business owner likes!
ANY SIZE AND TYPE OF BUSINESS CAN UTILIZE ACCOUNTS RECEIVABLE FACTORING
Broadly speaking, factoring account receivable finance is available to every type of firm, from start-ups to Major Corporations. We certainly can’t make that statement about all other types of Canadian business financing - that is the uniqueness of a factoring company. Selecting a trustworthy financing partner - Accounts receivable factoring works for all commercial and government receivables is crucial.
ALL A/R CAN BE FINANCED - EVEN OUT-OF-COUNTRY CLIENTS
Another advantage of a small business using this financing method is the comfort it brings, knowing Canadian firms can utilize the financing for their Canadian and U.S. clients - currencies and geography are not an issue.
Suppose your firm has foreign receivables. In that case, it typically needs to have some credit insurance in place - but that’s also the case if you could secure commercial bank financing for those same sales to avoid cash flow problems. It's all about financing the balance sheet and not waiting what seems like 90 days to collect a/r these days.
ARE THERE ALTERNATIVES TO FACTORING?
Of course, there are other alternatives to factoring—they might include business credit cards, working capital term loans, and external collateral, but when you consider the ease and simplicity of the factoring process, the other solutions often pale in comparison. You are, in effect, able to turn your company into a cash flow machine, generating sales and cash simultaneously.
WHAT IS THE COST OF FACTORING ACCOUNTS RECEIVABLE?
It's not a perfect world, of course, so your firm has to have some decent gross margin to absorb the 1-2% finance charges, and you have to spend some time understanding the approval, process, and types of factoring available.
To calculate accounts receivable factoring costs, it's important to understand the factoring fee and the advance rate. Prompt collection of receivables reduces factoring fees.
THE BEST TYPE OF FACTORING? WE HAVE IT!
Do we have one favourite recommended solution for this form of financing? We do. It’s a type of factoring known as ' confidential invoice finance ', which allows you to bill and collect your own A/R while retaining total control of the client relationship.
KEY TAKEAWAYS
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Collateral Value: The core of ABL is understanding the value of assets used as collateral, including accounts receivable, inventory, and equipment.
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Borrowing Base: This represents the maximum amount a lender will advance, usually a percentage of the collateral’s value on outstanding invoices, inventory, and equipment if applicable.
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Lender Monitoring: The lender regularly assesses and monitors the collateral’s value to ensure loan security and compliance with the factor facility or line of credit
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Advance Rate: The percentage of the collateral's value that can be borrowed, typically lower than 100% to account for risk.
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Reporting Requirements: Regular reporting of the borrower's financial records and collateral to verify and maintain the borrowing base.
CONCLUSION
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing the factoring account receivable advantages you have been looking for to enhance your cash flow prospects.
FAQ
What are accounts receivable factoring loans?
Accounts receivable factoring loans involve selling your unpaid invoices to a factoring company in exchange for an immediate cash advance, improving your business's cash flow.
How does accounts receivable factoring benefit my business?
Factoring companies provide instant working capital, reduce the burden of debt collection, and allow you to focus on growing your business without worrying about cash flow issues.
Are accounts receivable factoring loans suitable for small businesses?
Yes, small businesses can benefit significantly from using an accounts receivable factoring company, as it offers quick access to funds without the need for traditional loan approvals or additional collateral.
How do I choose the right factoring company?
Look for a reputable factoring company with transparent fees, flexible terms, and experience in your industry to ensure the best service and support.
What is the difference between recourse and non-recourse factoring?
In recourse factoring, your business retains some liability for unpaid invoices on eligible accounts receivable. In contrast, non-recourse factoring shifts the factoring company that assumes risk - offering more protection on the invoice value, but usually at a higher cost. Many factoring companies offer both solutions, as well as credit insurance if required.
How can I improve my business credit score?
Maintain timely payments, reduce outstanding debts, and regularly review your credit report for accuracy to improve your business credit score.
What are the alternatives to factoring loans for improving cash flow?
Alternatives include business lines of credit, merchant cash advances, and short-term business loans, each offering different terms and benefits.
How does invoice discounting differ from factoring?
Invoice discounting involves borrowing against unpaid invoices without selling them, retaining customer management, and typically involving lower fees.
What is the impact of factoring on customer relationships?
Factoring companies often handle collections professionally, maintaining positive customer relationships and freeing you from the hassle of debt collection.
Can factoring loans affect my business’s financial statements?
Factoring can improve liquidity ratios and balance sheets by converting receivables into cash, potentially enhancing your business's financial health.
What assets are typically used in asset-based lending?
Assets commonly used include accounts receivable, inventory, machinery, equipment, and sometimes real estate, providing collateral for the loan.
How does the borrowing base work in asset-based lending?
The borrowing base is the total value of eligible collateral, determined by the lender, from which they calculate the maximum loan amount available to you.
