Some Big Bang Evidence On A/R Financing In Canada

OVERVIEW – Information on business receivable finance in Canada. How to approach account factoring from a cash flow , cost and day to day operational manner

Business receivable finance in Canada requires a special sort of ‘ vision’ when it comes to looking at the benefits, and mechanics of receivables account factoring. The ability of the business owner/financial manager to be informed properly is key to success in this area of Canadian business finance. Let’s dig in.

Most business owners seeking A/R financing that we talk to are typically aware of the basics. If you’re not let’s do a quick mini recap! Unlike bank financing of working capital as it relates to receivables A/R financing via a specialty lender is about selling, not collateralizing your receivables. Paperwork is put in place at the start of your transaction which allows you, on an ongoing daily, weekly, or monthly basis ( it’s your choice ) to receive ongoing advances against all sales you make .

Those advances are typically 90%, the remaining balance being held as a ‘ reserve’ of sorts that is paid to you as soon as your clients pay. The financing charge in this type of financing is calculated on a daily basis based on the time it takes for your clients to pay.

In Canada the overall financing cost almost always significantly more expensive than bank financing, which costs in the 4-5% range per annum. The other side of the story is that companies that are not eligible for bank financing are almost always eligible for receivable account factoring, for unlimited amounts commensurate with their sales patterns and growth.

So, if we maintain that many business owners/ financial mangers are looking at it all wrong, how then should they be viewing this type of financing?

First of all they must understand, and benefit from the fact that AR financing is not debt, the only balance sheet optics that take place with business receivable finance is that you have less A/R and more cash in the bank!

You should also understand that all North American receivables can be financing, which includes of course any U.S. business your firm does. Note that foreign overseas accounts will require some additional credit insurance in place, but this by the way is also required by our banks.

The majority of business owners we talk to focus on the key issue that traditional account factoring in Canada involves notification to their clients that this type of financing is taking place. That’s ‘ old school’. We strong recommend ‘ New School ‘, which is ,
Confidential Receivable Financing allowing you the business owner to bill and collect your own receivables under the concept of ‘ it’s nobody’s business but yours’ as to how you are financing your company.

The fact that this type of financing has been around for hundreds of years must be a validation of some sort that this method of financing works. In fact the cash flow you generate from account factoring can be used to take supplier discounts as well as allowing you to negotiate better pricing with your vendors based on higher credit limits and enhanced relations with your vendors. Both of these can significant reduce the costs of your financing by 1/3 in many cases!

Don’t forget also that you’re are no longer constrained in taking on new business of larger size , because you know that working capital financing is in place to facilitate current asset growth in receivables and inventory . Just being able to sell more, collect quickly, and turnover assets more efficiently is a solid way of looking at this method of financing.

Have you been looking at A/R financing in the right manner. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor for some of that ability to look financing working capital quickly and efficiently.

Author: Stan Prokop – founder of 7 Park Avenue Financial

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:


Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171



7 Park Avenue Financial
Canadian Business Financing