Receivables Finance! said the client. Give me one good reason why …. ‘ We hear that one a lot , so we’ll do one better and provide him, or her with 8 solid business reasons to consider an account receivable service for your cash flow financing needs .
Reason # 1 is simply growth… one of the ultimate ironies we have found in business financing is that many clients are punished for growing. Generally of course that’s growing too fast and traditional banking in Canada somewhat dislikes high growth.
But tell that to the entrepreneur who has been building his or her company, or working forever on that major contract or sale. We have said it before and we’ll say it again, a surefire method to generate positive cash flow immediately is to slow down sales and accelerate collections. You’ll be flush with cash, but guess what, you wont be growing and thats the dream of most entrepreneurs and business owners.
A/R finance likes, no, scratch that, loves! growth. In fact under most facilities you will enter into for this method of Canadian business financing you are automatically approved for whatever level of financing you need, as long as you have the sales and resultant receivables to back up your request.
Reason # 2- the ability to purchase smarter and harder. With the cash on hand from your instant a/r collections via receivables finance you are in a position to negotiate better pricing with key suppliers, giving them at the same time the assurance you will pay .
Reason # 3 – This is a powerful but often overlooked one. It’s simply your new found ability to take prompt payment discounting, typically 2%, off major purchases. That reduces the cost of an accounts receivable service significantly.
Reason # 4- Timing and speed. A solid A/R facility financing can usually be put in place within a week or two. Compare that to the time it takes to set up a bank facility with all the requirements imposed by Chartered banks in Canada, which by the way also include profitability, personal guarantees, potential outside collateral, etc .
Reason # 5 – This one is a bit tricky. Under traditional A/R finance in Canada utilizing the popular U.S. model the finance firm takes over all your collections, after all they have purchased the receivable. That reduces collections costs and focus by the Canadian business owner.
Thats all good, but we’ll point out that our favorite and in fact recommended facility is a confidential invoice financing, wherein you bill and collect your own receivables and sales. So in this case opting for our recommended solution would in fact not save you the burden of collections and customer interfacing.
Reason # 6 – You’re in control. In Canadian A/R finance you are under no obligation to finance all your A/R, so you only pay for financing you use, when you need it. Thats flexibility. Many bank facilities have standby and usages fees that kick in when the facility is not used. Thats not the case with Canadian accounts receivable service finance.
Reason # 7 – Customers who have liabilities with Canada Revenue for source deductions, H.S.T. etc and in fact use their a/r advances to clear up these federal and onerous obligations . That’s a good thing, as the tax man should be on your side, not at the door!
Finally, reason # 8. It’s basically the concept of the bridge. View receivables finance as your temporary bridge to a more traditional financing. A properly constructed facility should have little or no contractual obligations, allowing you to move on to another method of financing that might come with a lower cost.
There are numerous other reasons to consider A/R finance as a business financing strategy for Canadian business owners and financial managers… We have touched on some of the key ones, but further investigation by you will no doubt lead to other potential benefits.
Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in implementing a facility that makes sense for your firm.