AR Financing in Canada allows business owners and financial managers to remove some of the ‘ panic ‘ that sets in when a cash flow crisis seems to be threatening and just around the corner. Numerous solutions exist for fixing a working capital shortage – one of them; confidential invoice finance seems tailor made for… the fix. Let’s dig in.
A/R Finance is really a subset of the broad business solution called ‘ asset based lending. Many people refer to is simply as ‘ factoring ‘ – although that is a generic term that covers numerous types of receivable finance. They include ‘ invoice discounting , ‘notification factoring’, ‘ forfaiting ‘, ‘ spot factoring ‘, non recourse factoring ‘ etc. .. Etc..! Large well known corporations, some of the largest in the world in fact call it ‘ Securitization’ – they move receivables off the balance sheet constantly in bulk by selling them.
It goes without saying that some of that terminology can be a bit confusing so we’ll be zeroing in on just the key basics , including our recommended solution for this method of Canadian business financing , Confidential A/R Finance .
It’s interesting to note also that for those clients we talk to that have never even heard of the term that in facts it’s been around, and in practice since pre Roman Empire times. And the word ‘ factor ‘ comes from Latin meaning ‘ he who does things ‘. That ‘ doing things ‘ revolves around monetizing the sale between via the monetization of accounts receivable between a ‘ sellers … that’s you, and your customer.
The majority of clients who use A/R finance solutions are in a couple basic categories – they can’t get all the financing they need from a bank ( or cant qualify for any finance at all ) , or they are in special situations re turnaround, growth, etc. In the majority of cases solutions such as Confidential Invoice Financing is an interim solution, possibly for a year or two, allowing customers to migrate back to more traditional financing facilities?
In traditional ‘ factoring ‘ solutions they concept of notification is key ‘. Here the lender, usually a commercial finance firm requires that your clients be notified about the process of financing your AR. That’s because the paperwork surrounding this type of facility is unlike the bank – banks ‘ collateralize’ your receivables , commercial factor firms have paperwork that specifies that sales invoices you finance are in fact ‘ sold ‘ to them .
The way to beat any notification , i.e. being ‘ Confidential ‘ about this whole process is to enter into a invoice financing facility that allows you to bill and collect your own invoices, without anyone knowing how you are financing your business. Rates and paperwork are essentially the same.
In some cases this financing can be part of an asset based lending facility, allowing you to also finance inventory and equipment as a part of your non bank business line of credit .
So, consider letting ‘ he who does things ‘ work for your firms cash flow needs. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with AR financing that works best , and removes the ‘ panic ‘ around cash flow needs.