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Receivable financing factoring is a fairly simple process. The process? It's as follows - As you generate sales and invoice your clients for goods and services you have delivered ( Yes , service companies can also be financed in this manner!) your finance factor company buys those from you based on an agreement being in place to do so . You typically receive 90% of your funds the same day, the balance is remitted to you as soon as your client pays, less finance costs. In Canada these costs average 1.5 - 2% per month . (Various criteria affect your rate, more about that later). In Canada the majority (99.9% is pretty well a majority don't you think) require that payments by your clients go directly to the factor company. We're not big fans of that scenario, so that's why our recommended and preferred solution to clients is a CONFIDENTIAL RECEIVABLE FINANCING facility, allowing your firm to bill and collect your own A/R. That in our opinion is the optimal solution. Back to those receivable financing rates, which tend to be a point of major discussion when we're facilitating this type of solution? Your overall rates are generally based on the following criteria - the size of your receivables is one. However make sure you understand that if you're dealing with the right firm you are not required to finance your entire A/R portfolio all the time. You choose when you want funding and in what amount. And that of course means you only pay for what you use. That's a good solution, right? Other factors that affect pricing include the general quality of your customer base, the number of clients you have, average invoice sizes over time, and the overall quality of both your own firm's finances as well as your client's general reputation. That's a lot of qualifiers but in almost all cases unless your company is in a death spiral you will get the financing you need. That's why A/R finance is a clear alternative when traditional bank financing is not available. The thing about receivable finance is being educated on who to deal with, its one form of business finance where a ' word to the wise ' is a valuable gift! Many Canadian business owners and financial managers are intrigued by f factoring; they simply don't have enough quality information to digest why it might work for them. When we sit down with clients we talk about a number of key issues in the whole A/R financing process. That includes: Benefits of A/R finance
The value of an advisor or consultant
Cost of finance
Due diligence required to set up a facility
Tips and tricks to enhance maximum cash flow
Your firms new found ability to take on larger business
Why negative perceptions of this type of finance abound
Accounting/banking issues that come with this type of facility
If you're looking for the straight goods on dealing with a factor company seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your cash flow 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 10 years - has completed in excess of 85 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: http://www.7parkavenuefinancial.com/receivable-financing-factoring-factor-company.html
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