OVERVIEW – Information on receivables funding solutions in Canada. The Receivable Credit solution comes in various forms – which one works for your firm
Receivables funding in Canada, thankfully, comes with choices. Is a receivable credit solution your firm’s ‘ golden chance ‘ at working capital success. It just might be, and here’s why. Let’s dig in.
It clearly is a good thing that the business owner has choices in A/R financing. One of those reasons is that bank financing, for some, or all of the cash flow financing you need simply might be unattainable by Canadian chartered bank standards.
So enter A/R finance. It comes in various ‘ sizes’ and ‘ flavors’. It can be a stand alone solution, or in some cases it can be a sub set of an asset based line of credit, that type of facility monetizes both receivables and inventory and equipment into one revolving line of credit.
And, throwing more choice into the mix, the Canadian business owner and financial manager has the choices of utilizing ‘ traditional ‘A/R factoring, or it can opt for our preferred and recommended solution: CONFIDENTIAL RECEIVABLE FINANCING.
The key difference in understanding non bank receivable financing simply boils down tot two things:
UNDERSTANDING HOW IT WORKS
While it only makes sense that an alternative non bank solution will be more costly thousands of firms gravitate to this method of business financing simply because it gives them all the cash flow and working capital they need based on their sales level – with virtually no upper limit to financing available.
If you opt for traditional financing, most typically called ‘ FACTORING’ you’re involved in a tri part deal between yourself, your lender, and your client. Your client pays the lender, the one key advantage to your firm is that you receive the cash, at your option, the day you make and invoice the sale. That’s clearly cash flow power. The cost of that transaction, typically 200$ on a $10,000.00 invoice ( assuming 30 day terms/payment) can often be very justified when you consider your new found ability to buy inventory, reduce payables, take discounts with your own suppliers, or negotiate better pricing.
Two other key factors come into play when considering non bank receivables funding. First of all, you aren’t taking on debt; the accounting treatment of A/R financing is simply not ‘ borrowing’ when recorded by your accountants. And finally, you can of course bring in new equity into your firm, or consider a working capital term loan – but those two solutions simply dilute ownership and bring debt to the balance sheet.
The Confidential A/R financing we mentioned simply allows you to receive all the benefits we mentioned, but it’s not longer a ‘ 3 way ‘ – because you bill and collect your own receivable with no notice to any client or vendor.
Is a receivable credit solution in the works for your firm? It just might be the ‘ golden chance ‘ for cash flow peace of mind. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can guide you through the myriad of lingo and options for this very popular method of financing growth.
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:
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Off. 905 829 2653
Cell 905 302 4171
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