Tweet

Factoring – Canadian Receivables Financing

Guest post by: Stan Prokop

Article Overview: Information on factoring and financing Canadian receivables . How does factoring work and how the type of facility you choose will ultimately ensure your satisfaction and success with this type of business cash flow financing

Factoring – Canadian Receivables Financing

Factoring in Canada provides Canadian business owners and financial managers with an alternative method of financing working capital and cash flow needs. A classic situations in which your firm would utilize this method of financing is when you are experiencing strong growth, or unable to finance daily working capital needs when you have significantly larger orders or contracts with either a new or existing customer . Factoring in Canada is the financing of good accounts receivable. The business model is simple to understand, but requires extra diligence on your behalf in choosing which technical method of factoring would work best for your firm.

We recommend non notification factoring to our clients, although that is only one of several methods available to your firm. Under the non notification method of factoring you are in total control of your receivables and working capital. You bill and collect your receivables in the normal manner that you always have, but at the same time, due to the way in which factoring benefits business, you receive instant cash flow and working capital as soon as you are able to generate a valid invoice to your customer.

The higher cost of this type of financing can in many cases easily be offset by smarter buying on your firms part, or taking advantage of discounts not previously available to yourself when you carried large receivable and inventory positions based on traditional customer payment habits of 30, 60, and yes even 90 days sometimes . If you have a customer that is paying in 60-90 days you can generate all the cash due from those sales 2-3 times via factoring, as opposed to getting paid once in the customers 60-90 day payment time to yourself .

Factoring is simply all about working capital turnover. Is factoring the panacea of total goodness for your firm. We tell clients that no one type of financing is always going to be the best long term solution for your firm , but quite frankly factoring is an excellent ' bridge ' to your next level of growth . That bridge is there because your firm is new, has financial challenges, or, as we noted, is growing too quickly to allow you to negotiate traditional bank financing.

So how do we 'cross the bridge 'our clients ask? The answer is to simply understand the following facts:

• - Factoring is a solid immediate cash flow and working capital solution for Canadian business
• - Factoring has a higher cost than traditional financing
• - More often than not it should be viewed as an interim financing facility
• - There are different types of factoring in Canada offered by different firms - Don't choose the wrong facility!

Factoring and receivable financing, (also known as invoice discounting) differs from traditional bank lines of credit. Depending on which type of factoring facility you use you in effect can have unlimited access to working capita. That is simply because this type of financing focuses on your assets themselves, not your balance sheet and income statement. In negotiating a bank line of credit the total focus is on yourself as owner, your balance sheet, your income statement, your industry, and your years in business.

Factoring places a much smaller reliance (in some cases none!) on those guidelines, and focuses solely on the following:

You have assets (receivables)

They are financeable today for immediate cash flow!

It's as simple as that.

So, in summary is it that easy? Yes. And no. We say no because the challenging in setting up a proper factoring facility in Canada is simply understanding the differences in the types of facilities that are set up on your behalf, how they work, how they are priced, determining if you wish to lock in to a contract or leave it open ended, and your overall comfort level with the day to day business model of factoring receivables as you generate sales. Speak to a credible, trusted and experienced business advisor in this area and ensure you understand how the benefits of this type of financing can be crafted into a facility that works for your Canadian firm.

Related Articles
  The Only Disadvantage Of Factoring Receivables And Why Confidential Accounts Receivable Finance Works!
  How The Right Factoring Firms in Canada Can Provide Financing Factor Facilities Confidentially
  Working Capital Financing - 10 Reasons Not to Factor Receivables in Canada
  What’s the cost of confidential invoice finance and how does receivable factoring work?
  Factoring and Receivable Financing in Canada
  Factoring Finance – Don’t Make This Mistake when Considering a Factoring Program in Canada
  At Last ! New Method To Finance A Business - Canadian Confidential Financing Factoring Receivables
  Factoring in Canada – Working Capital Now
  Working Capital Factoring – A business ‘ Dear John’ letter to my customer!
  Factoring in Canada – Receivables Financing
  Your Choice - Right Way / Wrong way ? Canadian Accounts Receivable Financing & Business Factoring
  Factoring and Accounts Receivable Financing In Canada
  Real World Advice on Cost of factoring of receivables in Toronto – Board the Receivable factoring Bus!
  Working Capital Factoring – Invoice Factoring Canada
  What Does Accounts Receivable Financing Mean? How does it work in Canada?
  Is there an Alternative Solution to Factoring for Canadian firms with working capital Challenges ?
  What is the Best type of Factoring and Receivable Financing Facility for Canadian Firms?
  Receivable Factoring – Three Things You Didn’t Know About Factoring Services
  Accounts Receivable Financing and Factoring Facilities Help Canadian Businesses Grow!
  We’re Sharing the biggest Secret in business funding today and why factoring of accounts receivables isn’t what you thought!

Article Tags: factoring in Canada, receivables financing Canada



Related Forum Posts
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
Canadian Entrepreneurs...let's chat.... - I thought it would be nice to gather up all the Canadian entrepreneurs on one topic to discuss how everyone is getting along. I just realized Evan is Canadian as well! Hope he's able to join the conversation. Look forward to the chat. By the way, I'm in BC. Phil
Re: Meltdown in the Financial Markets - [quote="Kevin":3lnvm7h2]If the US is simply creating fake/"funny" money with their bailout, then I wonder why the Canadian dollar has dropped so badly? One Canadian dollar is suddenly worth only about $0.84 US now. It doesn't make sense to me.[/quote:3lnvm7h2] The Canadian dollar has dropped to about $0.80 USD... what kind of holiday shopping season will it be this year if this trend continues?
Canadian Entrepreneurs - Hi Evan, I think you should profile Anita from the Body Shop. Is she Canadian? It would be nice to get a Canadian perspective for all of us who are starting businesses in Canada. Do you find th stories of the entrepreneurs vary depending on country? Thanks for all these great stories - it helps inspire us! Jessica
Re: Meltdown in the Financial Markets - If the US is simply creating fake/"funny" money with their bailout, then I wonder why the Canadian dollar has dropped so badly? One Canadian dollar is suddenly worth only about $0.84 US now. It doesn't make sense to me.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

B2B PR – Planning for Success

Leadership-A Daily Gift

Work Place Counselling

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.