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Why Confidential Factoring Discounting Is Your Secret Cash Flow For Business Weapon!

Guest post by: Stan Prokop

Article Overview: Information for Canadian business on confidential factoring discounting and why this tool is a solid cash flow for business strategy and a viable alternative finance options that becomes more popular everyday .

Why Confidential Factoring Discounting Is Your Secret Cash Flow For Business Weapon!

In terms of a secret weapon in business one assumes if you had this one you would have a competitive advantage? And that’s what we think confidential factoring discounting will deliver once you understand why it might just be a solid alternative for cash flow for business in Canada.



We're talking about regular and special here. Regular factoring or invoice discounting or receivable financing (all these terms are interchangeable) is the financing of your receivables for instant cash flow and working capital,



This type of financing is becoming more commonplace everyday. When we talk to clients about what they perceive the financing to deliver on the two most common issues they bring up are that they don’t really like how it works on a day to day basis, and secondly, the cost factor seems to always come up.



We think we can dispel both of those issues when it comes to providing a better alternative to address both concerns and misconceptions that our clients have.



We need to step back a bit though and first understand what this type of factoring discounting is, and why the current ' vanilla ' offering in Canada doesn’t work for clients.



At its core the facility is simply ' monetizing ' (a fancy word for ' turning into cash’) your receivables for immediate cash. Your ability to collect your receivables faster creates cash flow and eliminates a lot of business stress! If you have the ability to obtain conventional bank financing naturally you probably would be financing your receivables through the bank - yet in the current economic environment bank credit is more difficult to achieve, and, to make matters worse in many circumstances we see the amount of credit you can get from a commercial bank in Canada is simply not enough for your needs. That’s where the working capital challenge sets in.



So, ' regular ' factoring for cash flow for business works as follows - you generate an invoice, you sell the invoice and receive cash, usually the same day. Sounds great so far right. However, now what happens is that your customer is contacted by the factor firm and they verify the invoice and receipt of goods and services. They also are in collection mode directly with your clients, according to whatever your terms are. The cost of this type of financing in Canada ranges anywhere from 7-8% per annum to 1-3% per month. Factors determining prices are your firm’s general financial profile, the size of the facility you need, and the types of customers and industries you sell into.



So that’s ' regular ' and we can here our clients now saying this sounds kind of ok , but the customer intrusion level is highly undesirable .



That’s where confidential factoring discounting comes in. Here's the kicker. You bill and collect your own invoices! You have now regained total control of your factoring facility, are achieving all the benefits, and it is you who decides what amount you wish to finance on a daily, weekly or monthly basis. And whats more ' special' is simply the fact that the costs of confidential factoring discounting are essentially the same. We also spend a lot of time with clients showing them how they can offset a huge part of the cost of this type of financing via some time worn cash management strategies .



One or two caveats are that the facility should generally involve a receivables portfolio size of at lease 250k, and you have to be able to demonstrate solid operations regarding maintaining updated financials, billing cleanly and properly, and posting payments to the ledger properly.



Not everyone in Canada knows or is aware of this type of financing. Speak to a trusted, credible and experienced business financing advisor as to how this type of financing gives you a major competitive edge over firms using the ' regular' version!

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Article Tags: cash flow for business, factoring, factoring discounting



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