Thousands of small and medium sized businesses in Canada have gravitated to invoice finance funding as a solid alternative to their needs for working capital credit and financing. But what if, just if you had access to a facility that was a notch above those thousands of firms who use traditional factoring?
Conceptually factoring credit and financing is immediately attractive to Canadian business owners and financial managers. It provides an immediate line of credit based solely on a percentage of your receivables. Solid facilities will usually advance 90% of the total of your receivable based… most business owners are aware that banks advance against a 75% under 90 day formula .
Reporting and qualifying for your draws on receivables couldn’t be much easier – it involves simply submitting an aged A/R listing which allows for your drawdown and credit financing availability.
Since the majority , ( about 99% ) of companies and firms providing invoice finance funding are not banks clients are always asking us how facilities work, if its not a bank arrangement . It’s actually quite simple. Your funds and draws against your receivables are deposited by your funding and factoring firm into your regular bank account. Payments received by your firm, from your clients, are put into a separate account in the name of your finance partner. These funds, when received from your clients, reduce the amount you have drawn/borrowed on a daily basis. The bottom line, it’s your revolving business line of credit.
Now, let’s get into C I D. That’s the term we use to demonstrate how you can be a winner in one of the key issues around factoring and receivables credit financing in Canada. This is the practice surrounding the key issue in standard (dare we say ‘ old school’) invoice finance funding that came to Canada with a wave of U.S. and U.K. firms that dominate the industry.
If your competitors or peers in your industry are using this traditional method here’s what happens… your end user cusotmer is notified that you have entered in a factoring arrangment – this allows the finance firm to somehow feel safer they will get paid we guess, which is understandable .
But our choice or recommended solution for firms such as yours considering this type of financing is C I D – confidential invoice discounting. Your clients aren’t notified of your financing arrangement and there is no extra charge for this method of financing.
There are of course other key issues around understanding this type of financing – the advance rate on your receivables ( i.e. how much you get .. 80-90% is standard) , actual discount fee of financing charge on your entire facility, and our desire to ensure you understand how any miscellaneous items are charged .
So whets our bottom line then? Simply that there are some true ‘ heavyweight’ alternatives that give you both advantage and comfort when you’re considering invoice finance funding and credit financing for your receivables . Speak to a trusted, credible and experienced Canadian business financing advisor in this niche area of working capital finance.