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Factoring - Factor Canada – The right choice for Canadian Companies?

Guest post by: Stan Prokop

Article Overview: The article focuses on the current economic environment as it relates to small and medium businesses having difficulty in obtaining working capital , with a focus on factoring or invoice discounting as a potential viable solution.

Factoring - Factor Canada – The right choice for Canadian Companies?

Is your Canadian company hearing about factoring, aka ' invoice discounting ' , or are you simply hearing more about this relatively new but growing financing concept in Canada ?

There is a not a day when we don't pick up the paper or hear on the radio that the Canadian economy seems to be starting , finally, to fire on all cylinders again . That's the good news, but we are equally hearing about the difficulties that Canadian business has in acquiring the working capital and cash flow financing it needs. While larger corporations have the financial strength to commandeer a number of different options the small and medium sized business in Canada does not have those same options. Cash flow and working capital continues to be 'job one' 'challenge one'!

Most business owners realize that with the fast pace of technology and business, the explosion of the internet, and the world wide financial liquidity issues that we are not in a ' normal ' environment . Bank lending continues to fall, and even the banks and other larger financial institutions are challenged with their own liquidity, stock market, and capitalization issues.

It is therefore somewhat easy to see why alternative financing forms are becoming more and more in vogue. They may be temporary, they may be permanent, but they are clearly being investigated!

Factoring and invoice discounting facilities for Canadian companies appear more and more to be providing growth engines for small and medium sized businesses in Canada.

One of the main factors forcing companies to look at factoring and invoice discounting is the very reality that the financial statements of many small to medium sized Canadian firms have either some balance sheet deficiencies, operating losses, or some aspect of their business that puts their company currently out of favor with many lenders, such as tier one institutions such as banks, etc.

So the vise tightens somewhat at both ends, your firm is not doing as well financially due to market conditions, and traditional lenders either aren't lending or in some cases can't lend if they wanted to .

To source the proper amount of business capital for your firm you either have to be an expert at that, or you should engage an Factoring expert / working capital expert.

So is factoring, also known as invoice discount, and in some cases 'asset based lending 'the right solution. There is never any sure fire answer , but if your Canadian firm has the right amount of , lets call it ' liquid collateral ' - i.e. receivables, and inventory , there are a number of viable factoring solutions that fit what you need . These type of facilities can live with the other debt and issues your firm might currently be facing, , and they wont measure your current and on going performance against those textbook ratios you have encountered - i.e. debt to equity, cash flow coverage, etc. With the right type of facility you can even get additional top up financing for purchase orders, equipment, and any collateral you might have in real estate.

In summary, if you are not a working capital expert, engage one! Find out what the market is offering your firm in the general area of asset based lending, specifically accounts receivable / invoice financing. Yes, you will be paying a higher cost of funds for that need working capital, but if you can generate additional profits, survive and grow your business that option seems very tenable for Canadian firms.

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Article Tags: factoring Canada, Factoring Specialist, Invoice factoring



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