Looking for small business financing? Consider accounts receivable financing strategies

Can the financing receivable be able to help your company? The emergence of dramatically from small business financing in accounts receivable (by the way, the largest Canadian company also uses this tool!) Only a company factor as you want to utilize working capital and cash flow, apply, locked in accounts receivable

No need for rocket science for every financial owner of the Financial Manager to find out that if the company has investment in accounts receivable and inventory, the asset is usually called ‘Current Assets’ requires financing in several forms. Of course you can ‘self financial’ – meaning just waiting for your inventory to turn into receivables, and then wait maybe even longer for A / R to turn into cash. However, doing it forces you to give up on sales opportunities and challenge the core of your financial health, given that we all agree cash flow is king.

If you are lucky enough to finance through the Canadian rental bank, you are certainly used to ‘guarantees’ – our banks do a good job to explain it to you! Why don’t you use your own collateral company, its assets, especially accounts receivable, and monetize the assets into cash.

Clients are often quite clear about the benefits of accounts receivable, which are also called invoice discounts or factoring. What doesn’t seem to have is how it works.

One you have such facilities with frankly is one of the easiest and fastest ways to open cash flows and working capital every day, weekly, or monthly. The power to choose your time frame remains with yourself. And by the way, you only pay for the financing you are using. Let’s go back, how does it work.

In Canada there are two types of factoring, we will focus on the most common, which, by the way, not our favorites (some are better) but let’s stay simple for now.

After your company generates invoices, you send it to your company partner factor. It can be an invoice, some, or a lot or all. Funds for invoices are wired, or sent to you, on the same day to your account. Didn’t you just feel your cash flow really isn’t locked and flowed?! About 10% are held back as a buffer, but as soon as your client pays you get the funds back, less what is known as a discount fee, usually between 1 and 3% – 2% quite good norms.

Back To Top