5 Things You ( Probably ) Didn’t Know About Canadian Business Receivable Finance . Cash Flow Financing Via Factoring Clarified !

Receivable Financing In Canada


Information on Business receivable finance in Canada . Cash flow financing via factoring and a/r financing – explained and clarified!



Clarity and quality of information surely count when Canadian business owners and financial mangers consider business finance alternatives. We've said in the past, and still feel it's true that no other form of finance in Canada is as misunderstood or potentially confusing as business receivable finance. So does this method of cash flow financing have to be confusing? We don't think so, so let’s recap 5 often asked client questions with a goal of clarity for you, the Canadian business owner.

Question 1 revolves around the amount of funds you can expect to obtain in Canada. Typical advance rates for most facilities revolve around the 90% mark if you are dealing with the right party. The balance, i.e. the remaining 10% of your receivables is a holdback that is remitted to you immediately after your client pays. Another key question is facility size, and the good news here is that your facility grows as your sales grow. In general there are no credit limits per se, unlike bank facilities, which clearly have a cap .

Question 2 revolves around the process, i.e. the length of time it takes to set up a facility. We generally advise that it takes approx 2 weeks to set up a proper facility - that is a general guideline. You will know, by the way, very early on in the process if you are approved. After that it's simply a question of documentation.

Question 3 is the proverbial hot point. Fees and costs. Various factors come into play here, the credit quality of your firm in general (it does not have to be as solid as you think), the size of your facility, the nature of your industry, etc. On balance a solid business receivable finance fee in Canada is 2-3% if you're billing and collecting on a 30 day term.

Question # 4 revolves around types of receivables that can be financed, The key point here is that only ' business’, i.e. B2B a/r can be financed in Canada, so those companies with a consumer a/r base cannot take advantage of cash flow financing .

Question # 5 revolves around the age of receivables that can be financed. As a pretty general rule only A/R that is under 90 days in age can be financed via this method of Canadian business financing. One can safely assume of course that if you haven’t collected your accounts by that time there is an element of uncollectibility or bad debt in your A/R portfolio.

There you have it. Confusion gone away? We hope so. When considering working capital finance via business receivable financing ensure you've got the right information at hand to make an informed decision. Speak to a trusted, credible and experienced Canadian business financing advisor for your ability to get on track with cash flow finance.



Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/business_receivable_finance_cash_flow_financing.html

Working Capital Management Is A Numbers Game When Cash Flow Financing Needs Are Now

Empower Your Company With Working Capital And Cash Flow Solutions. Financing The Gap!


Information on working capital management techniques when you need cash flow financing . Plan now for financing needs tomorrow .






Your company’s working capital is the amount of funds which is working to solve your short term operating needs. A good way to look at this is to think of all your current assets as your gross cash flow, and if you subtract your current payables and loan payments due, etc you then have a net working capital amount.


How your firm manages those current assets, and the amounts you have invested in that part of the balance sheet will ultimately determine what cash flow financing options are available to your firm, traditional or otherwise. Your ability to turn over those current assets, i.e. A/R, inventory, etc is what impresses a lender, as they view that turnover as ultimately repaying working capital loans, operating facilities, asset based loans, etc.

Most business owners don’t see it this way, but your cheapest form of borrowing is actually your short term liabilities such as payables. The challenge though, is that those payables have short timelines with respect to being due, and your firm needs the working capital management solutions to address that need.

The irony that we have always found in working capital discussions is that the often used ‘current ratio’ is somewhat meaningless. It doesn’t do a lot to reflect what is happening now or in the future. Very simply speaking, most accountants or analysts look for a current ratio of 2:1, or more. So is a 4:1 ratio fabulous then?? Not really if your inventory is in work in process and your receivables are slow or uncollectible!


Accounts receivable and inventory are the two main asset classes in your working capital. No surprise there. Your ability to monetize (borrow against) them is ultimately your cash flow financing savior.
So, as we are constantly preaching, it’s all about the timing of your working capital and cash flow needs. It’s that constant pattern of inventory turning to receivables turning to cash that dictates your success or failure in working capital management. A few very basic calculations that every business owner should know are your days sales outstanding in a/r, as well as your inventory turnover. They are simply arithmetic calculations.


Because of those two great assets, A/R and inventory you not only want, but are often forced to consider borrowing against these assets. In Canada this is accomplished in a variety of manners. They include bank lines of credit, non bank asset based lending facilities, receivable financing on its own, and occasionally inventory finance on its own merit. Even your SRED tax credits or purchase orders can be financed if applicable . You make a smart decision when you utilize one of the above solutions with a focus on borrowing what you need and using and managing daily to that need.


The problem we run into all the time is when clients approach us when they need funds urgently, typically when the overall risk is greater because of their current solvency situation. The bottom line is to determine the minimum amount of cash you need, include a buffer or bulge type scenario, and plan your working capital management and cash flow financing in a proactive manner. Some early warning signs of cash flow issues include declining cash balances ( obviously ) , extreme bulges in new orders , supplier payment issues , over 90 day receivables, etc.

In summary, don’t over borrow, and don’t under finance at the wrong time. Speak to a trusted, credible and experienced Canadian business financing advisor on solutions available today in cash flow finance for your company’s needs.




Stan Prokop - founder of 7 Park Avenue Financial –


http://www.7parkavenuefinancial.com


Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :



http://www.7parkavenuefinancial.com/working_capital_management_cash_flow_financing_now.html

You’ve Got Working Capital and Cash Flow Problems – We’ve got Canadian Business Financing Loan Solutions !

Working Capital Management Finance Strategies





Information on working capital and cash flow financing solutions in Canada via a business loan or asset monetization strategy .How Canadian small and medium sized firms finance themselves today.



It becomes evident at numerous times in the life of a business that some form of outside financing is needed. Let's look at some of the situations that your firm finds , or might find itself in and what types of Canadian oriented working capital and cash flow financing business loan solutions are available.





Some times the best problem is the worst problem - by that we mean that you are growing and growing quickly. Alternatively many clients we meet are experiencing some sort of challenge - it might be a financial loss in the current or previous year. And most commonly it’s a case of financing those current assets, i.e. A/R and inventory to bring in liquidity to the company for normal ongoing operations.



Three solutions are available to the Canadian business owner of financial manager. They include taking on more debt (not optimal or often desired), bringing in a partner for additional permanent equity and working capital, or, our favorite ' Monetization ' (Back to that one later)



If your company is not leveraged, or should we say over leveraged and can handle additional debt that is not necessarily a bad thing. For the majority of firms and industries in Canada a debt to equity ratio of 2 or 3: 1 is generally viewed as acceptable by the people that count. (Banks and other lenders!)



Raising private equity for a small to medium sized business is generally difficult and challenging in the Canadian business climate. We've seen numerous clients take the public financing route via a reverse takeover or utilizing a capital pool... our simple observation on that ?... In general things never seem to work out! Let's leave it at that.



When studies look at how small and medium size borrowers really do borrow in Canada it probably isn’t shocking to our clients that a huge majority of debt comes from credit cards, the BIL Government loan, personal savings of the owner, loans from friends and family, , etc . Generally only 35% or so of business in Canada in the SME sector gets the financing they needs from traditional bank financing, due mainly to the requirements that Canadian commercial banks impose on company borrowers and their owners personally. (By the way, we love Canadian banks... its just that sometimes there is a better way)



We mentioned that working capital solutions for cash flow financing can come not from borrowing, but from monetization of current and fixed assets. That’s why be spend a lot of time with clients explaining the different benefits and costs associated with : bank lines of credit, non-bank lines of credit , a/r and inventory working capital facilities , true ABL ( asset based lines of credit) facilities , confidential receivable discounting .



In additional many previously viewed ' alternative solutions ' are becoming more mainstream everyday. They include purchase order and contract financing, tax credit financing, securitization, etc.



So, do you have a working capital or cash flow financing business loan challenge? Invest some time in real world Canadian solutions. Seek and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in addressing current and perhaps future financing challenges.







Stan Prokop - founder of 7 Park Avenue Financial -



http://www.7parkavenuefinancial.com





Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :





http://www.7parkavenuefinancial.com/working_capital_cash_flow_financing_business_loan.html

Cash Flow Financing - Why Canadian Factor Companies Just Became Your Best Bet For Factoring & A/R Sales Finance

Why Canadian Business Has Chose Non Bank Receivable Financing !





Information on factor companies in Canada –how does factoring pricing work and why have Canadian business owners and financial managers chosen this method of cash flow financing to grow their business.





One alternative to borrowing funds or raising additional ownership equity in your firm for cash flow financing is the solution provided by factor companies in Canada via accounts receivable financing / factoring.



This solution is becoming more and more popular and much of the mis information around this type of Canadian business financing is being cleared up and clarified properly as thousands ( yes thousands) of companies just like yours look for new business financing methods when the old ones either don’t work or aren’t available .



Let's focus on a couple of the main points that clients want to better understand when they consider cash flow financing via factor companies. Those two key points, if we had to sum them up, are: What is the real cost of factoring, and how does it work on a day t day basis?



In Canada it is somewhat safe to say that pricing on receivable financing is somewhat ' all over the place '. Rates range from 1-3% per month. So what drives that pricing then? The key areas that factor into factoring pricing are the size of your facility, the general overall quality of your Canadian and U.S. receivables, and the relative financial health of your firm as ' borrower'. We hasten to add that when you finance your firm in this manner you aren’t actually borrowing or taking on more debt... you are just ' monetizing'... or we could say ' cash flowing' your largerst current asset, which is typically receivables .



You can win with factor companies when you become in effect a ' educated buyer’... what we mean by that is it’s important to understand the Canadian landscape when it comes to who you are dealing with. There is an incredibly fragmented industry here, and it’s yours to take advantage of if you know how.



So who are the players in the industry, because it certainly would be a challenge if you had to investigate them all! as there are hundreds of firms. These firms are Canadian, U.S., and U.K. owned, some are major corporations, some could simply be called 'mom and pop' finance firms, and finally some are medium sized in nature and capitalization and are solid candidates to handle all your business financing.



With respect to how this type of financing works... our recommended preference is confidential invoice discounting... a term we give to factoring which allows you to bill and collect your own receivables , with no notice being required to apprise your clients of how you are financing your firm .



Typically, if not always the U.S. and U.K. firms doing business in Canada do not offer this type of financing. Your best bet is to seek someone knowledgeable in the factoring market and ensure you partner up with the right firm. That’s where working with an expert always pays off. Naturally if you have all the time in world to speak to and investigate hundreds of firms who might be a poor choice for this type of financing need then by all means... go ahead! And for the record we're jealous of that time you have on your hands in running a business!



Getting back to pricing on this cash flow financing method. Remember that you aren’t borrowing funds, you're selling receivables. So by utilizing this financing you're generating immediate cash flow every time you make a sale. You are not constantly ' re-applying ' for a new line of credit, similar to a bank scenario.



Canadian firms make best use of this financing when they have growing sales and fairly decent gross margins that allow them to absorb the financing cost. Your strong sales growth brings immediate cash; the fixed costs in your business generally remain the same... so the higher business volumes bring incremental profits to your firm



Our bottom line? As usual we encourage you to work with an ' expert’... so consider seeking a trusted, credible and experienced Canadian business financing advisor who can assist you in your cash flow financing needs.





Stan Prokop - founder of 7 Park Avenue Financial -



http://www.7parkavenuefinancial.com



Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :





http://www.7parkavenuefinancial.com/factoring_factor_companies_cash_flow_financing.html

What will cash flow financing cost your firm and what working capital cash facilities make sense?

Cash flow financing is typically what makes or breaks your company as your firm grows or struggles to overcome temporary challenges. Working capital cash finance is a top priority for small and medium sized business in Canada.
We hate taking the easy way out for an answer to those concerns, so we'll attempt to provide some real world immediate solutions for that working capital challenge that is always top of mind.

We haven’t found anyone who does not disagree that working capital management tends to be the single most important measurement for your firm on a daily and ongoing basis - its always comes back to that ' cash flow is king' fellow!

If your liquidity is limited you need to recognize that. Your accountant, with all due respect will easily and quickly calculate your working capital and potentially advise you that you're in a great position. He or she does that by going to your balance sheet and subtracting current liabilities from current assets. Let’s say he or she came back and gave you the great news - that you have 4 dollars of current assets for every one dollar of payables. Sounds great so far, right?

Wrong, because you might find that your actual cash on hand is only .30 cents for every dollar of payables due, and all your money is tied up in - you guessed it, receivables and inventory that are slow paying and slow turning, respectively.
So the reality is you have great working capital only if you feel very comfortable that you can pay bills, loans, leases, employees, etc!! .. as they come due . We don’t meet a lot of business owners in the small and medium size business category that have that level of comfort.

So, why do you have a cash flow financing need, and what is the cost of a working capital cash facility that makes sense.
Sitting down with clients and talking about their cash flow needs often revolves around the same key issues they are going through : temporary financial losses, lack of long term financing ( i.e. buying or leasing non current assets without good long term debt solutions ) , and , you guessed it , your biggest problem - growth ! Dramatic increases in sales, as great as they sound, lead to cash flow financing needs.

An internal solution that will not cost you a lot and solve your working capital cash challenge is simply better turnover of receivables and inventory. That’s easy for us to say and difficult for you to achieve, right? So, how does Canadian business address that - it’s by monetizing receivables and inventory and in effect your future sales, via a cash flow financing facility.
If you firm is in a great industry, has clean balance sheets, and makes money your bank facility for a revolving line of credit will typically be in the 5-10% per annum range for cost of financing.

If your firm doesn’t qualify for bank financing should you abandon ship? Definitely not. Working capital financing via receivables financing and asset based lending can solve all your problems and in effect turn your firm into a cash flow machine.

That new found cash flow comes at a price, as rates can be in the 1% or 2% per month range, but you are actually paying that now by carrying A/R and inventory and losing out on the opportunity cost of turning capital into new sales and profits.
Speak to a trusted, credible and experience Canadian business financing advisor for your cash flow financing solution that makes optimal sense for your company.

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Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/cash_flow_financing_working_capital_cash.html

Staying Afloat via cash flow financing – Cash Flow for Business Solutions

So we're all in agreement, right ? - staying afloat is better than sinking... and talking to clients seeking cash flow for business seems to be mostly what we are doing these days. Cash flow financing for your business, whether you like it or not is at the top of the ‘ worry pile’ for Canadian business owners these days.

We'll discuss the problem, how you measure the problem, and, most importantly, some great solutions both traditional and alternative. And by the way, alternative is fast becoming traditional, but more about that later!

In talking to clients about business financing and business cash flow we always get the distinct impression they feel their business is unique - and that may be so but the truth of the matter is that the cash flow financing challenges you face are being faced by everyone else in and out of your industry.

As a business owner you can be forgiven for thinking your business cash flow financing challenges are unique, probably because of the mix. What do we mean by the mix? Simply that each h company and industry has difference levels of inventory, receivables, payables, all of which factor uniquely into the working capital challenge.

In fact, whether you like it or not, about 80%, yes 80% of all you assets are in receivables, inventory, and to some extent prepaid.

Your ability to ' turnover' these assets is what makes your business successful, or not.

Each industry has different gross margins, and if you have great gross margins then you can withstand a bit less turnover that is required in inventory and receivables. If you are in a low gross margin business turnover is absolutely critical. And you measure that turnover by three key metrics, inventory turns, days sales outstanding or collection turnover, and finally days payable outstanding.

Turnover drives working capital and many business owners kind of know that, but more often than not aren’t focusing on improving that turnover.

So , lets get back to staying afloat , which is what its all about !There are a number of cash flow financing solutions that allow you to address cash flow financing for your business . If it was a perfect world you would have all the liquidity you need from you bank, but bank financing is always a challenge for business, and in many cases inventory is not part of the financing mix that is available.

There are at least 5 great cash flow for business solutions available to help you succeed in Canadian business financing. These include the selling of your receivables, which can be done confidentially, and thereby generating instant cash flow for your company. For firms with 250k+ in assets and receivables you are in a position to be a candidate for a fully margined A/R and inventory working capital facility, available through a non bank solution. Larger firms with significant investments in working capital (receivables and inventory) are eligible for asset based lending which is in our opinion the ultimate Canadian working capital solution.

Most business owners don’t know they can access cash flow financing via the financing of Purchase Orders (p o’ s) and contracts. They allow you to consider orders significantly higher than you could have ever handled in the past. And, finally firms with relatively good financial standing can access unsecured cash flow working capital term loans via non bank lenders.

So whats it all about. We think we have been fairly clear, and hope you agree. It’s about understanding your cash flow financing challenges, measuring them via the turnover of working capital accounts, and finally, accessing any one of the five, yes 5! solutions we have provided .

Speak to a trusted, credible and experienced Canadian business financing advisor as to what makes sense for your firm.

-

Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com


Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/cash_flow_for_business_cash_flow_financing.html

Avoiding Blunders in working capital financing and Cash flow Financing

Mistakes. As Business owners we all make them. Let's talking about wrong choices in working capital financing and how the right types of cash flow financing can turn adversity into opportunity for growth and profits.

All Canadian businesses need working capital, permanently, and in many cases, on a ' bulge' basis from time to time. In essence you are financing your operating cycle, and most business owners intuitively know their industry has a unique cycle - that being simply the time it takes for a dollar to flow through inventory, A/R, and back to cash.

Larger or established? You probably have a better chance of seeking what people refer to as ' traditional' forms of financing. Quite frankly we're not sure anymore what traditional means, as the lines are getting blurred between what some consider as non traditional working capital financing.

Maybe we're different, but we seem to meet more and more clients that are unable to access capital for growth and development. They seek to enhance working capital in a variety of methods. Those include receivable financing, aka ' factoring', asset based lines of credit, financing for purchase orders ( yes , you can finance a purchase order !) , and even monetizing hard assets into revolving facilities such as a short term bridge loan on equipment, with proceeds used for working capital and cash flow .

The bottom line is your need to focus on liquidity, so if you have positive working capital as calculated by the text books ( current assets - current liabilities ) you must therefore monetize those assets into the ' cash is king ' model .

The harsh reality is that as you textbook calculation of working capital goes up your actual cash flow is negative , given that your investments are simply tied up in inventory and receivables which seem to be collected more slowly every year in our opinion and those of our clients .

Naturally if you are able to be paid in cash at time of sale, of if inventories turn very quickly, and billed customers pay promptly ,, well suffice to say the cash flow financing pressures are eased quite a bit - but reality of business usually does not give us that luxury .

We are often amazed at how many clients we meet who are looking for proverbial ' working capital ' but are in a position of not being able to define the type of financing they think they need

The ultimate cash flow support tool is the Chartered bank operating line of credit. But many business owners who do not qualify for these facilities are moving to either a receivable financing facility or an asset based line of credit. These come at a higher cost, but provide liquidity often 100% greater than might have been achieved previously, had they been bankable.

So whats our take away tip here - simply that you must look beyond the rate and focus on what collateral you are providing to get the liquidity you need.

Ultimately you need to understand your particular need and choose a financing solution that provides you with the cash flow financing to meet your business needs, as well as grow your business. You have options, which many Canadian business owners and financial managers don’t realize. Be they traditional or alternative, one or several of them will work for your firm. Speak to a trusted, credible and experienced Canadian business financing advisor who will put you on a clear path to the solution for working capital financing.
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Stan Prokop is founder 7 Park Avenue Financial ; Originating financing for Canadian companies,specializing: working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies . For info / free consultation on Canadian business financing / contact details see:

http://www.7parkavenuefinancial.com/cash_flow_financing_working_capital_financing.html