What’s All The Commotion About A/R Finance In Canada ?

Information on factoring and receivable financing in Canada. A/R Finance and debt factoring play key roles in the cash flow of thousands of Canadian businesses just like yours – Here’s why

Canadian business owners and financials managers continually are hearing about factoring in Canada. It is difficult to separate the information Canadian firms need to know from the ‘noise ‘and misconceptions about Canadian factoring and receivable financing .

At no time in recent history have Canadian businesses been challenged with obtaining the acceptable amount of capital they need to run and grow their businesses. The cash flow shortage can often be the death knell of a company, as it has the ability at that point to go into a long term death spiral, ultimately ending in potential business failure.

All business owners can recognize they have limitations in generating capital and cash flow for their firm. The usual cast of characters includes, of course:

Bank Financing of current assets

Canadian Government working capital term loans

Owner equity

Asset sale and leaseback strategies

So, as we have noted, with all the commotion and market noise about ‘ factoring ‘ how does the business owner in Canada understand how this financing works , what is the upside and downside, and most importantly, is it right for your business .

In Canada factoring, also known as ‘invoice factoring ‘mirrors the U.S. method of doing business. Your company in effect ‘sells ‘its accounts receivable at point of invoicing, with your company and your factor partner determining who will bear the ultimate risk of non collection of the receivable. If you bear the risk its called ‘recourse ‘– if the finance firm bears the risk it is called non-recourse. Many factor firms insert a third scenario into the above mix; they require the receivables to be insured, which adds an additional layer of expense for your firm, generally in the 1-2% range. However there is of course solid comfort in knowing that the receivable is in fact insured and that no bad debt expense will come back to your firm!

Business owners need to understand that the receivables you are in effect ‘selling ‘for immediate cash are current, valid, and earned receivables. Your firm has to have delivered the product or service, your customer should have accepted that same product or service, and the invoice must be ‘due ‘per your payment terms. Generally you are in no position to sell a receivable and expect to receive cash for that sale if the invoice is greater than 90 days old, as there is some doubt as to the ultimate collection of that account.

So let’s also get back to the ‘noise and commotion’ in the Canadian business financing marketplace about this alternative method of financing. What’s the good and bad from your perspective as the Canadian business owner.

First of all you are, to some degree, out of the collection business. The factor firm now does that. We can almost hear you breathing a sigh of relief – but remember that one of your most valuable assets, your customer relationship, is now partially in the hands of a third party finance company. To eliminate such issues we are a huge proponent of CONFIDENTIAL RECEIVABLE FINANCING .

So what’s the bottom line – it’s of course to ‘pick your partner ‘carefully. We recommend that you use a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
in this alternative financing method, allowing you to reap maximum benefits from this relatively new form of Canadian business financing.

Stan Prokop
– founder of 7 Park Avenue Financial
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 :

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


Office = 905 829 2653

‘ Canadian Business Financing with the intelligent use of experience ‘