It’s a simple fact, if your business is growing a business to business company such as yours needs a ‘ business to business ‘ lending solution. That’s even more of a pronounced need when your growth is outpacing your financial means. That’s when Canadian business owners and financial managers look for an efficient , yet flexible means of financing their growth the solution of cash accounts receivable financing often comes up .
Let’s explore why this solution might in fact be the ‘ optimal’ one when it comes to business finance.
Of course it’s safe to say we can’t save the patient if we don’t know that the cure is. So let’s examine exactly what this solution does. In cash flow financing, aka ‘ factoring’, aka’ receivables financing’ its all about generating working capital and cash flow. It’s on paper a very simple procedure… we dont make it complicated… many do! You simple agree to sell your receivables, as you generate them for an immediate cash advance.
If you utilize the U.S. method of this type of financing you also have the ability to remove all or at least a part of your bookkeeping, collection and risk from your company’s daily procedures. While that is a good thing in fact our recommended and favorite solution for this method of business financing is a confidential receivable finance facility that in fact allows you to bill and collect your own receivables without any notification to your suppliers, clients, etc. More about that later though!
We also mentioned that this business to business lending solution allows you to sell, and generate cash flow for your sales as you make them. One technical point we should clarify is simply that it’s your choice, you certainly don’t have to finance all your A/R, and you can finance it 15 or 30 days from your billing if you choose, if you need cash flow.
So, cash flow. How much exactly do you receive when you sell an invoice or your ongoing A/R in a regular manner? We can typically say that in Canada you will receive 97 -98% of your receivable. That’s based on a 30 day terms of sale. You receive approximately 90% when you make the sale, and the balance is paid to you when your client remits, lets that 2-3% discount fee which effectively becomes the finance charge.
So, why in the heck would you do this? For the following reasons: Many firms simply don’t have the balance sheet or personal resources to finance growth. When you grow so does your inventory and receivables. They become an investment, and cash accounts receivable financing turns that investment into cash flow on your balance sheet. M
Additionally many firms in Canada use ‘ trade credit’ as offered to their customers to maintain strategic relationships, i.e. keep their clients. You are now in a position to offer, should you choose, extended terms to your client – because, as we said, you get paid as soon as you generate sales under our business to business lending solution.
In many cases we talk to clients that have one of large opportunities. It could be a large contract, new major sale to a new client, etc. This solution gets you to the goal line.
So, the bottom line? It’s simply that a true business to business lending solution such as receivable finance gives you very predictable working capital – bottom line your company is now liquid, and that’s a good thing.
Speak to a trusted, credible and experienced Canadian business financing advisor as to how you can implement a confidential cash A/R financing solution that makes sense, and works!