Business factor funding in Canada. When it comes to cash flow financing strategies we’re often quoted as proponents of new and alternative working capital strategies. But truth be told (similar to fashion!) there’s one AR Finance strategy that seems new, but apparently is about 4000 years old . Recycling is hotter than ever… so let’s dig in!

Although we were quite aware that business factoring – aka ‘ receivable finance ‘ is ONLY about 4000 years old, supposedly during the reign of King Hammurabi of Mesopotamia. From that it grew even faster in medieval times as it helps growing garment and textile industries in Europe and North America.

So that quick history tour brings us up to today, where thousands of Canadian business owners and financial managers find themselves in what we can only often describe as challenging times in business finance. So cash flowing your invoices via AR finance, previously deemed as ‘ alternative’ in nature is now simply one of the fastest growing business finance methods

We often find ourselves almost ‘ over explaining ‘ why and how factoring works. A simple explanation is to simply say that it’s not ‘ borrowing ‘… it’s ‘ selling’. The paper work around the accounts receivable financing solutions is the mechanism that allows you, at your will and choice, to generate immediate cash by invoking the AR finance mechanism ‘ factoring’.

So while many business owners/managers find themselves thinking of ‘ borrowing ‘ for business finance, they might just want to think more of ‘ Selling’. As they generate those sales they get immediate SAME DAY advance on the revenue they generate. By the way, the right A/R financing solutions allows to you sell invoices when you want, and certainly not all the time – only when you need the cash. Typically business owners tend to utilize the power of Factoring at key cash flow disbursement times approach – that might be payroll, term loan obligations, CRA payments, etc.

It’s important to understand the concept of advance rate within this financing mechanism. Typically, more often than not, that advance rate will be 90%. That is to say if you have a 100k sale, which has been in fact ‘ earned’ by shipping your product, or providing your service, you would receive that same invoice day, if you choose, 90k as immediate cash flow funding . The 10% is a holdback and that’s remitted to you as soon as your client pays. That holdback, in the case of our 100,000.00 invoice will typically have a 2k financing charge attached to it if your client honors typical 30 day terms.

If your firm has significant amounts of capital tied up in current asset accounts such as inventory and receivables you will clearly benefit from immediate same day cash flow received from your business factor funding solution. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in your working capital solutions.

P.S By the way, 4000 years ago CONFIDENTIAL RECEIVABLE FINANCING did not exist – today it does. That allows you to bill collect and finance your cash flow under total control of your own management. Check it out.