OVERVIEW – Information on working capital financing in Canada. Whether it’s a factoring cash flow loan or other finance solution numerous options exist for the business owner/mgr
Factoring / Canada – these two words , relatively speaking , are new to each other. What is behind the sudden increase in popularity and usage of this age old financing concept which has been in place for hundreds of years around the world? Let’s get laser focused
First of all, it’s simply a new choice for Canadian business owners and financial managers – they either have been financing their receivables with their bank, or in many cases, have been unable, for a variety of reasons, to negotiate such a facility. The challenge for business financing in Canada is even more difficult based on a company’s smaller size coupled with the current challenging business environment of 2010.
Factoring in Canada, if you have the proper facility put in place, allows you to provide your firm with virtually unlimited cash flow based on your ability to generate valid receivables as you grow your business . For small and medium sized businesses this is absolutely critical – they didn’t coin the term ‘cash is king’ for nothing!
While the concept and general practice of factoring in Canada seems simple once the business owner learns about it we feel the greater challenge is simply to determine what the best factoring solution is for your firm. That is where an experienced, trusted, and credible financial advisor might be of great assistance. Factoring, if entered into in an improper fashion, can be very paper intensive, and also have significant ramifications on how you run your business, and how your business is perceived by others – by others we mean bankers, suppliers, and yes, even internal staff.
As you contemplate a Canada factoring solution it is necessary for you to ensure you have , at a minimum, covered off the basics – A good starter is simply ‘ Does my firm qualify for such a financing facility?’
Your firm clearly should be labour or product focused – very capital intensive industries sometimes are not the best candidate for a factoring facility in Canada.
While no one wants to finance a firm that is in somewhat of a ‘death spiral ‘the exact opposite of that often makes the firm a very solid factoring prospect – that is to say you are growing too quickly, with annual growth perhaps much more than the traditional 10% or so that we see in stable commodity oriented industries in Canada. High growth and factoring make the perfect marriage. Why is that? Simply because growing sales, if managed well, mean growing profits, and traditional financing strategies such as bank lines or working capital term loans are not a good fit for explosive growth firms. With explosive growth you get all the cash flow you need from factoring.
Many industries that are cash flow and labour intensive, a solid example would be freight companies or staffing / placement agencies require cash flow frequently through the month. A properly set up factor facility will allow your firm to generate cash flow from your receivables whenever you need it.
In a lot of firms there as seasonal issues, big contracts, and generally what’s known as ‘bulges ‘in normal requirements. Factoring solutions fit these sorts of bulge needs perfectly.
We meet with business owners that come to us that are start ups or relatively new – they are not aware they are often great candidates for factor financing (also sometimes called invoice discounting) but they clearly have discovered they are not candidates for traditional bank type financing that requires solid balance sheets, historical cash flow, and good operating ratios that typically the institutions such as the Canadian banks look for.
You also are a perfect candidate for Factoring in Canada if you have receivables from large slow paying customers. These larger firms might be good profitable customers for your business based on just the issue of sales volume, but they clearly tie up your working capital when your firm is not paid in 60, or sometimes even 90 days.
Factoring is relatively new in popularity in Canada, it is gaining traction quickly. Careful analysis should be spent of whether your firm qualifies for such a facility – it has to work for you and the lender. If in doubt, and many are , because anything new can be perceived as complicated , enlist the services of a trusted, credible and experienced Canadian business Financing Advisor with a track record of success in this area of Canadian cash flow financing !
P.S. Numerous other cash flow financing solutions may also work for your firm – These include :
Asset based credit lines
SR&ED bridge loans
Unsecured cash flow loans
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
Office = 905 829 2653
‘ 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.
7 Park Avenue Financial
Canadian Business Financing