Eliminating The Hail Mary Pass on Canadian Receivable Financing Techniques

 

OVERVIEW – Information on factoring and receivable financing in Canada. Only when certain elements of AR Financing and cost are understood does this funding strategy make sense for your company. 

Receivable Finance generates somewhat of a ‘ fear of the unknown’ when we talk to clients who are business owners / financial mgrs looking at AR Financing, commonly known as ‘ factoring’.

The problem though is that with so much diversity out in the market the solutions they are offered are ‘ reheated’ / misunderstood. Not knowing the different nuances often have your company feeling like it needs a ‘ HAIL MARY PASS’ for their Canadian Receivable Financing needs. The solution? Understanding the offering and how it works and benefits your firm. Let’s dig in.

A ‘ Hail Mary Pass’? That’s the legendary term coined by NFL great Roger Staubach. He actually borrowed it from two 1930’s players at Notre Dame who coined the term when they needed a last chance ‘ low probability’ pass that needed divine intervention!

No divine intervention needed here, just common sense. Owners/finance mgrs just need to think of A/R financing as a business line of credit against receivables. Simple enough. But not so fast. Because the paperwork of ‘ factoring’ shows that you don’t have ‘ ownership ‘ of the A/R certain terms must clearly be understood. Let’s cover off key basics.

Your borrowing ability on your factoring line of credit will always be based on specific collateral, i.e. the amount of your outstanding invoices, typically less than 90 days old. (Older invoices are deemed uncollectible).

How much can we get? is a typical client question. The answer -more often than not your advances will be 90% of your outstanding A/R.

Cost? Financing costs are higher in factoring. However you can lower your costs by up to 50% or more if you focus on strong collections to clients. Simply speaking – the length of time your clients take to pay determines your financing costs.

Miscellaneous fees abound for many offerings which can increase your cost. These include closing fees, ‘ facility fees’, aka standby fees, termination costs, monitoring costs, and up front deposits. Our answer to all of the above – with the right lender pretty well none of the above should apply to your finance offering.

Receivable finance works best when your sales are constant or growing… We caution our clients who might be in high distress of have flagging sales that entering into the wrong financing arrangement at this time causes negative cash flow due the fact that borrowings will mostly go to reducing the credit line.

Have we forgotten anything? Just that our recommended facility for almost all our clients is CONFIDENTIAL RECEIVABLE FINANCING, allowing you to bill and collect your own invoices without the required notification to your clients that 99% of the industry requires. It’s much better than the ‘reheated’ versions of old school factoring offered by most Cdn firms.

Our bottom line? Work with a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
who can assist you in determining the total cost, as well as benefits of ‘ factoring’ , including comparing the facility to a bank line of credit. Common sense Canadian business financing – no Hail Mary Pass needed!


Stan Prokop – founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years – Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info & Contact Details :

http://www.7parkavenuefinancial.com/ar-financing-factoring-receivables-finance.html

7 Park Avenue Financial

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

Office = 905 829 2653

Fax = 905 829 2653

greg@7parkavenuefinancial.com

‘ Canadian Business Financing with the intelligent use of experience ‘

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop
7 Park Avenue Financial
Canadian Business Financing