A Peek Inside Accounts Receivable Financing In Canada: Receivables Lending Deconstructedaccounts receivable finance

OVERVIEW – Information on accounts receivable finance . Here are the issues to understanding receivables lending solutions in Canada.

Accounts receivable finance solutions in Canada require some level of ‘ deconstruction’ to understand both the benefits, and pitfalls receivables lending offerings. Let’s dig in.

A/R financing in the Canadian marketplace is a ‘ non bank’ solution, allowing businesses to finance their receivables for cash flow and working capital needs. They key difference from bank financing is simply that the cost of this financing is expressed as a ‘ fee ‘ as opposed to an ‘ interest rate’ solution via traditional Canadian chartered bank offerings.

The ability to get ‘ same day ‘ cash for sales you generate is appealing to Canadian business owners/financial mgrs. One of the appeals of this type of financing is that the amount received on the receivables is almost always more than a bank would advance. (Typically 90% – that remaining 10% is simply a holdback reserve that you receive when your client pays your invoice)

At its simplest accounts receivable finance works almost always as long as you have commercial ‘ business to business’ invoice sales that reflect product and or services your firm has delivered on.

Receivables lending solutions should never be viewed as ‘debt ‘ or ‘ equity’ financing. All you are doing is monetizing existing assets – your A/R.

Cost is always a factor when owners / mgrs consider financial solutions. Recall we indicated invoice financing is billed as a ‘ fee ‘ and that fee is typically 1.5-2% of your sales. (The fee will always be a function of how long your receivables are outstanding – prudent owners/mgrs can therefore reduce financing costs by effective A/R mgmt)

The benefits of a receivables lending solution are many – they include the ability to grow your business at almost any level of growth: additionally you can improve supplier relations and take payment discounts from your own vendors, thereby enhancing key vendor relationships. In many cases if your firm has good margins and can absorb growth financing costs you’re in a position to take on larger contracts or even sell to the government as well as large corporations who tend ( intentionally ?) to pay SME firms much more slowly . ( Hint – it’s their version of cash mgmt!)
Have we forgotten anything? Oh yes, those potential ‘ dangers ‘ in acquiring the right solution. They include understanding the following basics:

Ensuring you understand whether you or your commercial finance firm is responsible for bad debts – your ability to extend credit properly and manage collections reduces financing costs

Being able to articulate your customer base to enjoy better pricing – size and invoice age are factors that will help determine your pricing

Working with the right company – many of the offerings in the Canadian marketplace are focused on specific industries – example: Trucking; working with a firm that understands your industry… you guessed it.. helps.

Finally, the majority of receivable finance solutions that are non bank in nature in Canada require that your clients be notified of the finance process. Our recommendation? Consider a Confidential Receivable Finance solution that allows you to bill and collect your own accounts.

If you’re interested in a solid ‘ peek ‘ into A/R financing solutions in Canada , with a focus on best solution that suits your firm while eliminating pitfalls seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success that can assist you with your cash flow needs.

7 Park Avenue Financial :

http://www.7parkavenuefinancial.com Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 100 Million $ of financing for Canadian corporations . Info /Contact :


7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

= 905 829 2653


‘ Canadian Business Financing With The Intelligent Use Of Experience ‘

7 Park Avenue Financial

Canadian Business Financing