subject: Factoring In Canada Receivables Financing [print this page] Canadian business owners and financial managers keep hearing about factoring their accounts receivable as a viable working capital solution to generate cash flow for their firm.
How does factoring work in Canada, and how your firm benefit does from this type of financing. Also what are the costs of factoring? Let's discuss those issues.
Canadian firms are challenged in the current environment to deliver the financial performance they need to operate and survive. The global financial woes of 2008-2009, out of which we are now emerging didn't to anything to help those challenges in a positive manner!
While most business owners rely on banks to get their financing, many firms either are new, don't qualify, or qualified previously but had financial challenge and are unable to get the financing they need for their working capital accounts, which are of course mainly receivables and inventory.
Canadian business owners want alternatives, and factoring provides one of many alternatives as a working capital source. If anything relying on just one source of financing, such as a bank or other outside lender has proven to be dangerous for many smaller to medium sized firms.
Factoring is the monetization, or in simply layman's terms, the immediate cash flowing of your accounts receivable. The factoring process allows you to immediately overcome the biggest working capital challenge most businesses have, namely providing payment terms to customers, and seeing those customers even taking longer to pay than your terms!
Factoring puts you back in control of this timeless business challenge. Many of our clients use this type of financing as a bridge to get back to traditional financing, because your bank sees the cash flow coming into your firm on a regular basis.
Also, by providing extended payment terms that you are comfortable with to new or existing customers allows you to maintain a competitive advantage with your customs.
Factoring is the sale of your accounts receivable to a finance factor firm. We encourage all clients to understand the different types of this financing which are:
-recourse factoring
-non recourse factoring
-insured receivables factoring
-non notification factoring
We strongly recommend non notification factoring to clients who qualify because it allows you to bill and collect your own receivables with no notification to your customer based.
Factoring is perceived as expensive, but a true analysis will show you that in many cases you can make money by using factoring. The financing costs associated with this type of cash flow financing can be offset by collecting your receivables faster and allowing you to buy smarter and take supplier discounts. Not to mention improving relations with your supplies.
In summary, factoring is a new great alternative financing vehicle. It works because you receive immediate cash for accounts receivable, allowing you to kick start your business cycle all over again. There are a number of different types of this financing offered in Canada speak to a trusted, credible, and experienced advisor in this area to maximize the advantages of this cash flow financing .
