OVERVIEW – Information on solutions from a Receivables Company In Canada : Receivable Financing Services Might Be The Right Solution for Working Capital Needs
Receivable Financing Services are one of the most popular working capital and cash flow alternatives today for Canadian business. Receivables company solutions are a solid alternative to the Canadian chartered bank offering – the ‘business line of credit ‘. Let’s dig in.
It’s not hard to see why business owners/financial managers are mesmerized by the lure of bank facilities – they are low cost, have some solid flexibility. The problem? Getting approved! Essentially it’s all about the credit standards set by our banks.
Receivable financing services are alternatively served by a true ‘ Receivables Company ‘. They just might be the ‘ buried treasure ‘ owners/managers are looking for. These commercial firms fill the ‘ need gap ‘, albeit at a higher cost. It should be no secret then that the key collateral is simply the business assets of the company, specifically A/R.
Receivable Finance, aka ‘ factor financing ‘ – its not ‘ equity ‘ or ‘debt’ financing, its simply monetizing your sales for the business life blood – cash flow.
Financing costs for A/R financing vary widely , and are typically in the 1.25 – 2% per month range These costs though can be truly be significantly offset in a number of ways –
– Your business can negotiate better pricing on product and services because of new found cash availability
– The business can now afford to take valuable supplier discounts for prompt payment, which themselves are often 2%!
– Less sophisticated owners do not always take into account the actual cost they incur to ‘ carry a/r’
– Larger commercial or govt contracts can be taken on with the knowledge sales can be financed
In our own experience meeting and talking to clients the actual ‘needs’ of the business become blurred – as the business owner / manager often co-mingles other needs such as equipment , property, inventory .
The best way to view A/R solutions is along the lines of short term operating needs.
There are some distinct advantages to a commercial A/R financing facility. One of them is simply borrowing power, as typical advances are 90% of outstanding A/R, significantly better than the bank 75% ratio. The best use of a facility is when you have an ongoing facility based on the ebb and flow of sales and A/R collections
There are some other solutions out there that might be worth investigating – they include Revenue based finance, which simply allocates a portion of all sales as your borrowing base. In the smaller end of the market, i.e. small businesses and retailers/restaurants ‘ Merchant Advance ‘ solutions are popular. They simply monetize future sales – today.
Top experts will tell you that the best use of non bank commercial financing is for business growth – in the majority of cases they are the ‘ bridge ‘ back to traditional financing and common timeframes for utilizing this type of service is a year or two.
One of the best A/R factoring solutions is ‘ CONFIDENTIAL RECEIVABLE FINANCE ‘, allowing you to bill and collect your own invoices without any notification to others – least of all your competitors .
If you’re looking to explore the potential ‘ power ‘ of a Receivables company 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 working capital 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 :
7 PARK AVENUE FINANCIAL = CANADIAN A/R FINANCING EXPERTISE
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