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INVOICE CASH AND INVOICE FACTORING - CANADA

Guest post by: Stan Prokop

Article Overview: The article highlights Factoring in Canada as an alternative financingthat used by Canadian firms to increase cash flow during times of high growth or if cash flow needs are in excess of traditional sources .

INVOICE CASH AND INVOICE FACTORING - CANADA

Invoice , Cash - those words are synonymous with good news to Canadian business owners and financial mangers that continually run into cash flow challenges in the current economy.

Business owners want cash soon, rather than later so they can run their businesses according to their unique cash flow needs. When we meet with owners and financial personnel in Canadian companies we often hear they are struggling wish cash flow problems and challenges. More often than not they can't get the financing they need from traditional sources in Canada such as chartered banks and business oriented credit unions.

With a properly set up factoring and invoice discounting facility you receive your cash within 24 - 48 hours of your invoicing. Imagine not having to wait 60 and sometimes 90 days for your funds.

To receive full funding for your receivables from a Canadian charted bank there is of course an extensive loan and business application, with a lot of emphasis spent on historical cash flow analysis, balance sheet analysis, income statement and operating ratios, etc! Factoring eliminates 90-95% of that type of waiting and negotiation.

As a business owner you do have a number of options in funding your company - there are traditional sources such as term loans, sale leaseback financing of assets, new equity from yourself or new partners, etc. There is of course never a perfect solution, because a lot of business is a balance act.

Factoring, or invoice cash, is one of those options. Utilizing a well set up factor facility your funds flow to your firm immediately on invoicing, that eliminates a huge part of what is known as the working capital cycle - i.e. the time that it takes a dollar to flow through your company from the time you manufacture a product or deliver a service, to the time it takes to get paid. Most payment terms are 30 days in business. We only wish!!

When you finance through an invoice cashing - also called invoice discounting facility, you are not borrowing funds on a long term basis. Your balance sheet does not accumulate debt; you are simply liquidating current assets in a more efficient manner.

The perfect Canadian factoring facility, and the one that we continually recommend and work with our customers on is a 'non - notification' facility. Unlike traditional factoring that is practiced in the U.S. and abroad non notification factoring allows you to bill and collect your own receivables - you finance as much of you're A/R portfolio as you choose. And, with respect to financing costs, you are only paying for what you use. That's good business.

If you already have facilities set up with a bank invoice cashing and factoring can be very complimentary with that financing, as long as all parties co operate and document the transaction.

So let's recap: Your business requires additional cash flow. You either have facilities in place and they aren't working, or you are self financing and need cash flow to pay suppliers, employees, etc. Canadian business owners have options - term loans, bank financing, credit union financing, new equity or partners, a public offering, etc.

Invoice cash, or Factoring, is one of those solutions. It will cover short term needs, works well if you are new or newer in business, or if your firm has other financial challenges relative to capitalization. If you are growing quickly that's even better!

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Article Tags: cash flow, factoring canada, invoice cash, invoice factoring



Related Forum Posts
Re: USA vs Canada Hockey time . . . - CONGRATULATIONS CANADA!!!
Re: Should bad tippers be exposed on Social Media? - Should bad tippers be exposed on Social Media? No they shouldn't. I guess the customer must have used a credit card, or possibly a cheque (do people still write cheques nowadays? I haven't written a cheque since 2001 - after 7/11 my UK bank refused to send me a chequebook because they were tightwads hiding behind "the threat of terrorism" but I have done just fine without one) or maybe even an IOU. This is an excellent argument in favour of paying in cash... and I had almost been persuaded by the 4-Hour Work-Week argument that you should pay for everything with a credit card that earned you air miles... In a world of angry cry-babies, CASH is still KING!!


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