One Way To Escape The Working Capital Trap

OVERVIEW – Information on accounts receivable financing in Canada. Why factoring facilities might make the difference in your firms working capital and cash flow success

Recent Studies in the U.S. , ( and we believe the Canadian business landscape is very similar ) suggest that one of the most viable ways for businesses to grow and continue growing in the current economic and somewhat difficult credit environment is to consider a factoring working capital facility for their business . This type of financing facility is also known as an accounts receivable financing facility.

When business credit and access to business credit gets difficult Canadian business owners should of course investigate every ‘tactic ‘to get their company financing properly.

If your company is doing reasonable well, and the general economic and business and credit environment is quite positive naturally more traditional financing is considered – as a Canadian business owner you know the drill – prepare an executive summary or business plan, produce several years of financial statements, and meet with your Canadian chartered bank to discuss receivable or term financing . The reality of today’s economic environment is that many businesses aren’t in a position to pursue this traditional financing and therefore must consider what the alternatives are.

One of the appeals of factoring / accounts receivable financing is that your business is generating positive cash flow right out of the gate.

One of the other main benefits of such a facility is that business owners and financial managers can focus on running their business, and not spending all their time on cash flow problems and working capital challenges. We would point out that the time save on collections of course refers to the factor that the finance or factor firm is the one collecting your accounts receivable. Many business owners do not like this direct contact with the customer, and that is one of the reasons that the Canadian business environment has, relatively speaking, been ‘ slow ‘ to catch on to factoring .

This necessitates a brief discussion around the concept of notification and how factoring has traditionally been done in the U.S. and elsewhere in the world. Factoring started hundreds, some say thousands of years ago in Europe and Asian. Traditionally it involved the total ‘sale ‘of your receivables, your firm got the cash but you didn’t own or collect the receivable at that point. In recent years , due to the creativity of the North American financing markets there are numerous other product offerings related to factoring , one of which is ‘ non – notification ‘.

We believe non-notification factoring is the absolute best solution for Canadian business owners who are considering alternative financing. Under CONFIDENTIAL RECEIVABLE FINANCE facilities you bill and collect your own receivables, while at the same time receiving cash for them as soon as you generate your invoices. This provides a double whammy, so to speak!
1. You bill and collect your own receivables and get cash ASAP
2. You maintain the relationship with your customer, which is key to most Canadian business owners

As we have noted in the past factoring is more expensive than traditional financing, but that premium that is paid provides you with literally all the cash you need to grow your business. Savvy Canadian business owners are able to use that cash to improve supplier relationships, take prompt payment discounts, and purchase more inventories for sale to their customers. In certain cases, all, yes we repeat, ALL! Of the costs of a factoring facility can be offset by good gross margins and strong operating efficiencies.

Is it any wonder by factoring, accounts receivable financing and non traditional working capital facilities are becoming more popular in Canada? We don’t think so! Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your cash flow needs .

Author: Stan Prokop – founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:

CONTACT:

Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171
greg@7parkavenuefinancial.com

 

7 Park Avenue Financial
Canadian Business Financing