Forget Higher Cost Equity Capital : Why Receivable lending Makes Sense

OVERVIEW – Information on accounts receivable lending in Canada provides a strong alternative to long term debt and equity solutions that come at a much higher cost / risk


Accounts receivable lending in Canada
as a viable alternative to debt and equity options? You bet, that’s why thousands of firms in Canada have turned to an invoice factoring and financing service as a strong alternative to
taking on long term debt or diluting equity ownership if in fact an equity raise is a viable alternative. Let’s dig in.

We have made the assumption that many companies in the SME Commercial sector (small to medium enterprise) could in fact access debt capital or raise equity financing. The reality is that only the smallest percentage of companies in SME could realistically be successful.

When it comes to cash flowing your receivables to grow a business it basically comes down to a traditional or an alternative financing strategy and solution. The traditional ‘ go to ‘ is our Canadian chartered banks. However requirements are stiff in the view of many business owners. From the banks perspective they feel a strong financial track record and balance sheets and income statements that reflect profit and success are an absolute pre-requisite.

So let us assume your firm is in fact eligible for debt or equity financing as a growth alternative. (We can dream, can’t we?) Equity investors such as venture capital folks, Accounts Receivable Lendingprivate equity groups, or even much lower down the scale, angel investors and friends and family can rightfully demand a significant piece of ownership and board direction.

Debt solutions such as term loans, mezzanine financing, mortgages, etc come with fixed repayment obligations and can dramatically change the structure of your balance sheet.

So is there an alternative? As we have noted financing via accounts receivable lending allows you to generate cash flow from sales while avoiding taking on debt. All you are doing is monetizing assets you already have.

An invoice factoring service (Our recommended solution is CONFIDENTIAL RECEIVABLE FINANCING) involves generating cash flow as you create revenue and generate client receivables. While the cost of this financing is higher than bank financing its VERY MUCH lower than diluting equity, and involves no new debt on the balance sheet.
A simple example – Let’s say your firm has a 100k invoice you have just generated from a sale or delivery of a service. You would typically receive 90% of this balance the same day you generate a client invoice. The balance is remitted to you directly after you client pays, less a finance charge in the 1.5 -2%. In essence you have generated cash of 98,500$. That immediate cash allows you to operate your business and grow more revenue.

Where businesses go wrong is aligning themselves with an invoice factoring firm that does not meet their needs. The ability to work with a credible firm with clean documentation and a strong record of client satisfaction is key.

Oh and those ‘ higher costs ‘. They can almost always be easily offset, sometimes 100% by simply altering your pricing strategy and using new found immediate cash flow to take supplier discounts and negotiate better terms and pricing with vendors.

While an invoice factoring services had in years gone by a certain stigma attached to it the reality is that some of the largest corporations in Canada use this type of financing. And the use of our recommended CONFIDENTIAL A/R FINANCING allows you to bill, collect, and cash flow your busines with no knowledge of any other party such as a supplier or client.

If you want to determine if this type of financing is a strong alternative to growth for your company seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with an accounts receivable lending strategy that matches your company and industry needs.

Author: Stan Prokop
7 Park Avenue Financial :
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 90 Million $ of financing for Canadian corporations . Info /Contact :


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