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Factoring Financing Canada – What is the best program?

Guest post by: Stan Prokop

Article Overview: Information on factoring financing in Canada – what program best suits Canadian firms and how is factoring priced and how does it work from a business model perspective .

Factoring Financing Canada – What is the best program?

Factoring Financing – Canada continues to embrace this new and growing in popularity form of financing. Canadian business owners only have one problem – what is this financing, how does it work, and how do they eliminate the confusion around what type of factoring financing works best. Well that is three problems of questions actually..!

Let us share some valuable information in order to assist you to both understand, profit, and feel with certainty you have the best Canadian factoring ( also known as invoice discounting ) solution .

You probably are happy to know that a factoring type of facility works for every size of business and almost every industry in the Canadian business landscape. Start ups benefit from factoring, as do some of the larger corporations in Canada. (Larger corporations benefit from a more sophisticated type of factoring and better pricing, but at the end of the day it is the same facility and the same method of cash flow and working capital financing.

Clients, (unfortunately) often only focus on price when they are looking at a factoring facility. Anything we buy as consumers or business of course has to be competitively priced, but in factoring it is a lot more important to know who you are dealing with and how your facility works.

Let’s also cover off one of our basic questions as posed by clients – that is namely what is factoring?! Simply speaking it’s the selling of your receivables to a specialized finance firm. What is so special about that – simply that you receive the cash, less a financing discount, the same day you issue your invoice. You have just become cash flow positive! And are generating positive working capital on a regular basis. All at the expense of only some of your gross margin, as the finance fee should generally be viewed by yourself as a cost of doing business, as opposed to an ‘interest rate ‘financing charge.

One of the many reasons you should speak first to a credible trusted financing advisor is that there are a number of small nuances you need to understand about factoring. Each firm handles these ‘nuances ‘a bit differently. Each invoice you factor also has a holdback attached to it, in the industry the holdback is generally 10-15%. You receive that holdback immediately after your customer pays the invoice. It’s just a buffer for the finance factor firm that covers off late payment by your customer, or a possible credit note you might issue on the invoice, etc.

What is the absolute most important thing you need to know about factoring in Canada? Some may disagree, but in our opinion it is simply whether you understand that your facility is a notification facility or a non notification facility.

We recommend to all clients that they fully understand the benefits of a ‘non notification ‘factoring facility. With that type of facility you are able to bill and collect your own invoices, with no additional intrusion or notification by the factoring company with respect to your clients. We feel that piece of advice alone is immeasurable in benefit to Canadian firms.

In summary, factoring is a form of working capital and cash flow generation. It does not entail borrowing money, you are in fact just doing the opposite, liquidating assets (your receivables!) to generate positive cash flow. You are in effect no longer in the collection business – that’s a good thing. Choose a non notification facility if you can negotiate one , and speak to a credible business financing advisor that will worth with you to maximize the benefits of this type of business financing in Canada .

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Article Tags: best factoring program, Factoring financing Canada



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