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Factoring – how does a somewhat alternative (but becoming more mainstream every day) financing strategy allow Canadian businesses to become more competitive and at the same time get all the working capital the firm needs to grow. Also, Canadian business owners and financial managers continue to opt for financing solutions that don't take on more debt or damage the balance sheet re rations, returns on investment, etc. Your firm either has access to all the working capital and cash flow you need thru operations or existing banking facilities, or, in most cases you are looking for a financing strategy that gives you access to capital when other more traditional sources may not be available. Although factoring works for almost every company, no matter what their financial circumstances, doesn't it make sense to search out and investigate financing strategies when your firms are not faced by financial problems and challenges? We certain think so. Options! That is what working capital financing is all about. Your firm has the ability to source new debt via business loans, or perhaps a factoring facility. We like to call this facility a 'working capital facility ', and we quickly point out it has the ability, if needed, to also margin your inventory and owned equipment also. So does factoring have an impact on your bottom line? Absolutely, in a number of ways, mostly positive by the way. Our biggest problem with clients asking for factoring assistance is that they are always focusing on the discount rate or fee taken by their factor for providing instant cash on their receivables. We point out to clients that the cost of factoring can many times be offset 50-100% by your firms new ability ( you didn't have it before ) to maintain positive cash balances, take supplier discounts, and negotiate better pricing and relationships with suppliers . At the same time factoring brings no debt to the balance sheet, you are simply liquidating current assets and monetizing them into cash. Factoring reduces your working capital challenges to a totally manageable level in that you now have the potential to increase you receivable and inventory turns dramatically, those turns will increase profits and of course your tangible net worth . If factoring is used positively your company actual is valued higher given that you have no debt associated with financing, and profits are generated through inventory turns. What has the factoring really cost then? It will have cost you 1-2% in gross margin every month. Most business owners know or have heard about the basics of factoring – you simply don't wait for 1-3 months to collect those accounts receivable - you receive a same day cash transfer for 90% of your receivables. You have just shortened your working capital cycle by anywhere from 1- 90 days! And in many cases removed the financial stress that comes from strong growth or other financial challenges. Yes, strong growth is a financial challenge because ire requires you to build up and finance receivables and inventory to handle that growth. If you absolutely forced us to say one negative thing about factoring in Canada we would say it's the potential customer intrusiveness that comes with this type of facility. Factor firms that are using the U.S. and European model of factoring want the ability to contact your customers and collect the funds advanced to you under your facility. That is why we are a proponent of a factor facility that is non notification in nature – your firm continues to do all the billing and collecting. So is this your only working capital solution for Canadian working capital financing. No it isn't, but it's a very viable one for many firms, maybe yours? Work with a trusted and credible business financing expert and determine if it's right for you! Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com Originating financing for Canadian companies,specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see: http://www.7parkavenuefinancial.com/factoring_in_Canada_a_Great_Solution.html
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Factoring in Canada, accounts receivable financing,
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