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Financing & Cash flow are the biggest issues facing business today
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Direct Line = 416 319 5769
Office = 905 829 2653
Email = firstname.lastname@example.org
A lot of receivable finance in Canada happens via financial factoring. For those business owners and financial managers that aren't fully familiar with this method of Canadian business financing there is that potential element of fear of the unknown. We think some basics, as well as some recommendations are in order, allowing you to get back on top of business financing challenges. Let's dig in.
A world wide revolution is in fact in place on alternative financing methods such as A/R finance - a subset of asset based lending. The real surprise is that companies of all size, from start up to major corporation in fact utilize this method of cash flow/working capital financing.
Factoring is a very ' formulaic ' and is a financial solution linked to the total value of your accounts receivable. Factors such as income statement, debt to equity, and personal collateral have very little to do with approval for this method of finance, which is of course one of the reasons for its popularity. In effect your A/R always covers your ' loan ' amount, although loan is a misnomer as it’s actually a ' cash flow monetization' of your 2nd most liquid asset - Receivables. (Cash is still king at # 1!).
The broad appeal of financial factoring solutions revolves around the fact that cash is immediate on making a sale, if you choose that to be the case. Typical advances are 90%range, and that adds another layer of attractiveness given banks (if you qualify) tend to margin receivables at 75%. Bottom line - more liquidity.
Firms that might be deemed ' higher risk ' by Canadian chartered banks can still almost always secure separate non bank receivable finance solutions.
From the Canadian banks point of view the overall credit worthiness of a customer is what drives lending solutions. These are lower cost almost always, as financial factoring is a more expensive form of financing, but accessible! The bank in fact views receivables and others as ' secondary ' sources of collateral - A/R finance views it as the only source of collateral, therein the difference.
Many Canadian firms are uncomfortable with the traditional form of factoring, which almost always involves notifying your clients of the process and payment. Therefore our recommended solution is CONFIDENTIAL RECEIVABLE FINANCING - here the business bills and collects its own receivables - it’s only your firm that knows how you are financing yourself. A classic MIND YOUR OWN BUSINESS.
Businesses that want to source more capital can consider a non bank asset based lending solution, allowing them to combine inventory and equipment, plus A/R into one total business line of credit.
If you want to overcome the fear of assessing new cash flow financing solutions for your company seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing needs.