Receivable financing companies just might be the ‘ new and improved ‘ solution to your business cash flow challenge. Factoring companies are providing solutions that in many cases Canadian chartered banks are unable to provide based on their more severe credit requirements for borrowers.
Why then should a business owner of financial manager be looking at a receivable financing facility? That’s a typical question posed by business owners who sit down with our firm to discuss their finance challenges.
The simple reason is pretty basic – accelerated business cash flow. From the day you generate an invoice and make a sale your company is eligible for immediate cash. And the good news is that you can finance all your sales and invoices, or only partially draw on a basis that suits your needs. Most companies have their own cash flow cycle, including the seasonality of the industry they are in.
We have mentioned that in spite of accounts receivable financing rates ( they are higher than bank financing ) this type of corporate finance solution has become the de facto alternative to traditional business credit lines. More so for the small and medium sized business in Canada, also know as the ‘ SME ‘ sector. But don’t be surprised when we tell you than many larger firms use a flavor of this method of finance also.
Why is being ‘ cash flow positive ‘ so important in today’s biz world? Simply because competition is tougher than ever and your ability to enhance your reputation with suppliers and customers is critical. It gives your firm ‘professional visibility ‘.
There are in fact other forms of short term cash flow financing including sale leasebacks, financing sr&ed tax credits, short term working capital loans based on solely your sales volume, etc. A/R factor financing collateralizes your receivables, but not other assets.
Business clients will always ask if there is an ‘ upper limit ‘ to the amount that factoring companies will provide against their sales. The answer is there is no upper funding limit! Your sales revenue becomes almost an automatic ATM machine!
If there is one solution that we recommend against all others for a receivable financing facility it’s a ‘ Confidential ‘ facility. It allows you to bill and collect your own receivables and achieve all the benefits of this type of solution.
If you’re focusing on almost daily ‘ cash flow survival ‘ it might be time to recognize the finance solution is right in front of you – A/R finance!
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of success in business finance.