Business Financing Method That’s Not The Harsh Reality You Thought It Was?

OVERVIEW – Information on accounts receivable financing in Canada . Understanding why and how it works is critical to cash flow success.

Accounts receivable financing in Canada. Rarely does paying proper attention to business details not pay off. And, despite what you have heard, there’s no real harsh reality here. Let’s dig in.

A/R financing in Canada is really a ‘ sub set ‘ of what we call asset based financing in the Canadian business financing marketplace. So why should the Canadian business owner or financial manager pay attention to this financing solution. Only one reason; that it advances cash flow to your company as you create sales – so if you believe cash flow and working capital are critical to your business ( that’s a mantra we NEVER give up on ) then you’re pretty well on board already.

This method – accounts receivable financing is, 99.9% of the time, offered by non bank lenders. They are commercial finance companies that specialize in providing your firm with a business based receivable line of credit.

While this type of facility works in the same manner as the traditional bank line of credit (you supply regular A/R and sales aging – funds are advanced). One immediate positive difference is that these funds are generally advanced at 90% of your outstanding a/r under 90 days – banks , surprising taking a more conservative approach, (!) advance at only 75%.

If we had to clearly identify to our clients one major concern most companies have it’s the level of involvement of the A/R financier in your business when you borrow under this method. While banks simply register a security against your receivable and allow you to borrow funds against a specified limit at your will the A/R financing solution can be described as ‘ more involved ‘.

Why is that? One basic reason is that many firms that borrow from banks have a financially stronger financial profile. Firms utilizing AR finance often cannot meet bank criteria for any or all of the borrowing they need.

So is there actually a way to retain all the benefits of a business line of credit in A/R financing and control full ownership and control of your billing and sales function?

There is… and it’s called CONFIDENTIAL ACCOUNTS RECEIVABLE FINANCING. Under this method your firm retains total command of your cash flow cycle. Bottom line, you’re receiving all the benefits of A/R financing while being the master of your own domain – i.e. billing and collecting within our current customer relationships.

Another key factor, often also becoming a harsh reality, is the fact that Receivable financing from a commercial finance firm is more expensive than bank financing, which of course these days is in the low single digits when it comes to interest rates on business credit facilities.

The size of your Accounts Receivable financing facility is often a key determinant in pricing. While a small majority of firms in Canada can in fact achieve bank type pricing on this type of credit facilities the reality is that the overall cost of cash flow financing of receivables from a non bank finance firm is typically in the 2% per month range. But when you benchmark that against having all the cash you want, and having the ability to take on as much business as you want it’s not the worst tradeoff in the world.

Oh, and by the way, most companies can offset a huge amount of their financing costs by achieving faster asset turnover as well as being in a position to take discounts with suppliers now, often equaling the total cost of their borrowing!

So, if you haven’t paid attention to this method of financing for your firm, now just might be the time!  Employ the services of a trusted, credible and experienced Canadian business financing advisor just might eliminate those harsh realities that were top of mind when it comes to financing your business.

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
Phone = 905 302 4171
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7 Park Avenue Financial
Canadian Business Financing