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Real World Advice on Cost of factoring of receivables in Toronto – Board the Receivable factoring Bus!

Guest post by: Stan Prokop

Article Overview: Information on why the factoring of receivables and in Toronto and the rest of Canada is becoming a major and accepting business financing tool . How receivable factoring works, what are the benefits.

Real World Advice on Cost of factoring of receivables in Toronto – Board the Receivable factoring Bus!

Whether they are hearing about it from their business peers, reading about it, or being ' pitched' on the factoring of receivables, whether in Toronto or the rest of Canada is a hot topic in the world of Canadian business financing. We think we can simplify the issue into some valuable basic pieces of information around what receivable factoring is, what it costs, and more importantly, how it works re benefits and solutions! At its most basic it is simply the ' sale ' of your receivables as you generate the . Think of it - receiving cash flow and working capital the day you generate a valid sale and invoice. The cost of that service is a fee, generally between 1-3% which you as a business owner have to rationalize against the benefits of receiving that cash immediately and making use of it. That really is where the crux of our advice comes in, that the cost of the instant cash flow actually can be offset significantly, in some cases totally, by the effective use of those funds. That is achieve in the following manners - more sales and profits, taking on orders and contracts you couldn’t even consider before, and finally, the less tangible but very real benefit of using that cash flow to purchase in larger and smarter quantities, as well as taking payment discounts which might e offered through suppliers . If those benefits don’t ring clear then we confess we will have to give up now to demonstrate the clear benefits of factoring of receivables. Whether its Toronto factoring, or anywhere else in Canada the challenge for the business owner is really to get the best advice on what type of receivable factoring to get, who to get it with, and where to get it. In all businesses we rely on experts, and the financing of your business in Canada surely demands an expert - there is not a lot of room for error when it comes to how your business is financed. So seek the services of a trusted, credible, experienced Canadian business financing advisor who can set you on the right track. It’s frankly all about the nuances, and as we speak to clients and determine they don’t really often understand how receivable factoring works it’s at that time they need advice. It's really about the day to day. We rarely get into debates with clients about ‘do they qualify ' because frankly if you have a business and are generating commercial receivables then, guessing what, you qualify. So free up the cash flow, maximize on the working capital benefits of factoring of receivables, and whether it’s Toronto factoring or anywhere else in Canada feel free to board the receivable factoring bus! Just do it right though.

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Article Tags: business financing, factoring of receivables, receivable factoring, Toronto factoring



Related Forum Posts
Re: Using factoring companies - [quote="BigJim22":3e4n6n63]I haven't used it myself but can see how it would be valuable for some entrepreneurs. It's hard when you get an order but don't get paid until 30, 60, or 90 days later. But it's also hard to give up $ to the factoring companies![/quote:3e4n6n63] ..."But it's also hard to give up $ to the factoring companies!" Great comment, Jim! However, it's not as hard as it may appear from the outside. Unfortunately, there is no free meal ticket with any financing option (other than gov. grants). The real question regarding the financial viability of factoring is this: I have 2 checks for you; one is for $100 and you can have that one in a month; the other one pays you $80 now plus another $15 in a month. Yes, you net 5 cents less on the dollar with option 2, but if you can take the first $80 now and turn them into $90 or $100 (e.g. more sales!) in a month, then you've not only off-set the loss but actually grown your top and bottom line. Factoring is really much more like running a price promotion. Just look at all the sales events that are happening daily. Companies discount their goods by 10% - 75% only to sell more volume. What are the costs of these programs? Another good example are credit cards! If you as a merchant accept credit card payments from your customer, you're already paying 2% - 5% of each sale to the credit card company. That's the same principle as factoring! Or how many businesses offer a 2% net 10 days discount to their customers, only for them to pay within 10 days? By the way, I can beat those 2% net 10 hands down with our factoring rate! And then there are traditional loans.... you always have to pay back the principal AND interest periodically, no mattter how the business is doing. With our factoring programs there is no principal or interest to be paid back, and the "cost of factoring" is tied to sales and cash flow (i.e., when an invoice actually gets paid and after you have already received the money). The objective truth is that factoring is not the right solution for everybody. Used wrongly or irresponsibly, it can do a lot of damage to a company. But used for the right reason and under the right circumstances, a good factor and factoring program will do miracles for a company's growth (or survival). And in these situations, the $ that go to the factoring company become totally moot. It will truly be the famous win-win. Best, Ralf
Using factoring companies - I haven't used it myself but can see how it would be valuable for some entrepreneurs. It's hard when you get an order but don't get paid until 30, 60, or 90 days later. But it's also hard to give up $ to the factoring companies!
Re: Improving Cash Flow - Hi aquinm78, Thank you for providing a great list. Your 10 tips are most important for regulating cash flow for any business. I particularly agree about number 3 because there are many hard working people with successful business’s who have gone to the wall simply because they couldn’t get paid on time by their customers. This is where factoring companies can be useful as they take care of all you’re invoicing for a small fee and will guarantee an income every week, regards, Mal.
Getting a startup business loan - The banks are increasingly offering startup business loan packages but for the most part they are not supportive of new businesses - they like to see at least 2 years of business history before lending out any serious money. It's important to look at what you can get at the banks but you may have to take an alternate route to financing (angels, venture capital, suppliers, customers, factoring, credit cards, etc.)
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


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