Tweet

Is Business Receivable Invoice Finance Your Guaranteed Cash Flow Solution? What Factoring Costs

Guest post by: Stan Prokop

Article Overview: Information on business receivable financing and why invoice finance, commonly called ' factoring' is a guaranteed method of solving cash flow and working capital challenges . Let Factoring be your successful breakthrough in Business Financing !

Is Business Receivable Invoice Finance Your Guaranteed Cash Flow Solution? What Factoring Costs

The ups and downs of business often relate directly to those same ups and downs in business financing - let's examine why invoice finance, i.e. the financing of your business receivable is a guaranteed solution to solve some of those ups and downs.

We're the first to admit that any Canadian business owner or financial manager can be skeptical about the word guaranteed - so we'll offer up the basic facts and let you determine the validity of that ' guarantee '.

Business receivable finance, commonly called factoring is the immediate hard core alternative to monetize your business cycle. Your firm typically is finding cash flow and working capital finance harder to manage, and most probably you have discovered you can access the business financing you need.

To feel better about that ' guarantee ' we mentioned clients want to know what the cost of this type of financing is, and is it easy or cumbersome to use on a day to day basis.

The cost of invoice finance in Canada is widely mis understood. Let's look at a few facts around this issue, which tends to be often the most worrisome part of any clients decision to enter into this type of business receivable financing. First of all the cost of invoice financing is always viewed by customers as an interest rate - the actual lender, who is not financing your receivable (like the bank) is buying your receivable. It's purchased at a discount to yourself, and that discount in Canada can be anywhere from 1-3%. So in determining your interest in factor financing make sure you are singing from the same hymn book as the factoring firm,

Want an easy way to look at the cost of invoice finance? Think of it this way - if you were able to increase your prices by 1-3%, or take the cash you achieve from this type of financing and utilize it for supplier discounts from your vendors you have pretty well just broken even on your business financing. That's powerful! You have turned your company into an automatic cash flow machine with unlimited credit, without the banks help and all that comes with bank financing.

Let's turn again to our ' guarantee '. We can categorically say that if your business is new or a start up, or if you are experiencing high growth, or is unable to access bank financing because of financial challenges you've faced or are facing then business receivable factoring is the guaranteed solution to those challenges. We repeat, none of these 4 issues affects your ability to turn your company into the cash flow machine we describe - that's the guarantee.

So why aren't hundreds or thousands of Canadian businesses taking us up on our ' guaranteed financing ' concept? Guess what, they are - everyday hundreds of firms turn to or start exploring this valuable type of business financing.

In summary, determine if your firm fits into the challenged businesses we spoke of. Make sure you understand the real true cost of this financing, which can in many cases increase your access to credit by 100% or more. Speak to a trusted, credible and experienced Canadian business financing advisor and turn that ' guarantee ' we spoke of into successful business receivable financing.

Related Articles
  The Only Disadvantage Of Factoring Receivables And Why Confidential Accounts Receivable Finance Works!
  The Unknown Secret In Canadian Accounts Receivable Finance - C I D Business Factoring And Financing in Canada
  What’s the cost of confidential invoice finance and how does receivable factoring work?
  Factoring: an alternative way to finance your business
  Your Choice - Right Way / Wrong way ? Canadian Accounts Receivable Financing & Business Factoring
  Invoice Cash - Working Capital Now for your Receivables
  Nightmare On Receivable Financing Street ? Understanding How Canadian Business Factors Price A/R Factoring In Canada
  Canadian Receivable Financing - Answers To These 2 Questions Are Why You Need Invoice Factoring In Canada
  Supersize Your Canadian Business Accounts Receivable Finance Success via Confidential Invoice Discounting Factoring
  Canadian Accounts Receivable Finance ! Avoid The ‘ Fat Smoker ‘ Crisis Via Confidential Invoice Factoring
  Will my Canadian Company benefit from an Accounts Receivable Factoring Facility?
  At Last ! New Method To Finance A Business - Canadian Confidential Financing Factoring Receivables
  How To Get The Best Factoring Financing From Your Receivable Investment And How Factoring Firms Differ in Canada
  The Secret Of Commercial AR Factoring And An Accounts Receivable Financing Loan In Canada
  Invoice Cash – How to make money with Factoring!
  How The Cost of Factoring Finance Makes Sense In Accounts Receivable Financing
  Commercial Factoring And Receivable Financing Strategies in Canada
  Why a Confidential Factoring Receivable And Invoice Finance Program Will Work For Your Firm
  At Last ! Solid Info On Canadian Accounts Receivables Loans & Financing – A Business Credit Alternative
  What If .. Accounts Receivable Finance was the Perfect Answer to Your Cash Flow Financing ?

Article Tags: business receivable, cash flow solution, factoring, invoice finance



Related Forum Posts
Improving Cash Flow - How do I improving Cash Flow? What the best way to improve it to another 100% growth YOY? Has anyone does this or achieved this using online marketing? Thanks, Roberts
Re: Improving Cash Flow - Thanks for your information. guide on how to avoid the problems of over trading. <-- Where is this guide? Any URL? guide on debt factoring and invoice discounting: the basics. <-- Where is this guide? Any URL? I just want to learn more about this. I am also looking for a good article on: What exactly is Cash Flow? Ways to improve cash flow at individual level and organizational level? I think it is a problem of thinking and mind sets problem. If we can change the way of spending, we can have more Cash. Robert
Different Types of Funding - Finance for business can be obtained through a number of different sources. Let's review some of those channels to help you decide what's right for your business needs: Grants There are over 930 different EU and UK grants and loans available from over 100 issuing bodies. This is the cheapest form of finance and an important part of the funding package that companies and individuals need. We can help you find your way through this maze. Technology Micro Projects: 50% of eligible costs up to £20,000 Research project: For a technical and feasibility study of an innovative idea for new technology 60% of costs up to a grant of £75,000. Development project: For development up to pre production 35% of costs up to a grant of £200,000 Developing an innovative idea: valuable for small companies and individuals at the start of a technical project: 75% of costs of hiring a mentor and consultants. Export To start exporting or moving into new markets grants of 50% of costs up to £20,000 each. Training and Education Knowledge Transfer Partnerships, Achieving Best Practice in Your Business, Investors in People Modern Apprenticeships New Deal for various grants. Environment BOC Foundation for the Environment: 25% to 50% of Project cost, typically £20,000 to £100,000 Clean up Fund: Emission reducing equipment up to 75% of cost Community Chest Fund: Up to £25,000 for projects near active SITA sites High Impact Fund: £150,000+ for larger projects near SITA sites Assisted Areas Regional assistance grants of between 10 and 35% for capital expenditure in less favoured areas of the UK. Loans Loans are an excellent source of finance if you have suitable security to borrow against or a reliable earnings stream. This needs to be planned and presented well to obtain funds. Credit cards Provides up to 56 days free credit if you play the game! Overdraft Banks are surprisingly supportive when presented with a well thought through plan and competent management. Bank Loans Lenders tend to look for a good business plan and security. Typically the loan is approved by a centralised back office function rather than the person you meet. Terms and rates depend upon the risk. Repayments can be very flexible to meet your specific needs. Mortgages These can include flexible repayment terms to meet your business needs. This can even be incorporated into your overdraft finance so that you have one flexible account for both personal/ business mortgages and overdraft Small Firms Loan Guarantee Scheme Up to two years trading: Up to £100,000 Over two years trading: Up to £250,000 However these are difficult to obtain and are a loan of last resort. Export Guarantee Scheme This is government backed insurance against appropriate export documentation. Mezzanine This is a halfway house between loan and equity. It can be an innovative way of raising funds for the more established business. Mostly for expansion capital. Equity This is not as easy as the papers would have you know. Only 1% of business plans received by Venture Capital Funds are successful. However, a good business proposition consisting of a strong demand for the product or service, management track record and a sound financial plan will enhance the chance of success. Business Angels These are high net worth individuals who are successful businessmen looking for investment opportunities. They can provide both time expertise and money. Typical investment size is £25,000 to £250,000 but can go as high as £2m for the right opportunity. Exit within 3-5 years. Venture Capital These are investment funds seeking high rates of return. However typically investments are over a million pounds. Some funds are targeted at lower amounts depending upon the sector and region. These funds are looking for exponential capital growth over 3-5 years. Asset backed finance This can cover machinery, sales invoices even sales orders. It can be a very flexible source of finance to the growing business Leasing This will cover your capital expenditure and spread the cost over a three to five year period. It is particularly useful if you do not have taxable profits to maximise your capital allowances. Sale and leaseback of a property you own is another good source of funds. Factoring Factoring offers a sales ledger administration and debt collection service. Up to 95% of an approved sales invoice is paid within 48 hours, quicker if required. Credit protection is also available to protect against a bad debt. The Factor will own and place a first charge over the book debts and they might also take other charges, depending upon the strength of the financial information. Invoice discounting Invoice Discounting can be Confidential or Disclosed; it depends upon the strength of the financial information. The service is the same as Factoring, except that the sales ledger administration and the debt collection is the responsibility of the client and not the Factor. Pre payment of the approved sales invoice is still up to 95% and the factor will still have a first charge on the book debt and therefore own the debt. This service can also have credit protection cover. All sales invoices need to be for a business to business debt, and some proof of delivery is generally required. Trade Finance This is funding provided against stock purchases, signed contracts and orders whereby the funder will prepay a certain percentage of the value Pension fund It may be possible to use your pension funds for a loan back to the business What do u think about it?
Re: Google's April 2012 Update - As far as I understand, Google's main search mission is to deliver The Best Solution Possible, when you type in a query. This means that they kind of _cant_ teach people how to "game the system" and rank themselves. The way I see it, by the time Google's done evolving their algorithm, the only way to get to the top is going to be "Be A Fantastic Solution Provider... across the board... for your niche/keyword."
In-depth understanding of Cash-flow - Accounts Payable and Receivable can get a lot of businesses in trouble. You really do need to be careful to ensure you don't come unstuck. Having a credit card or overdraft facility can help in these circumstances though.


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

Presenting Yourself With Impact at Work

Five keys to business success

9 tips to increase ROI in PPC Campaigns

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.