Non bank finance companies in Canada provide various business financing solutions to the Canadian business owner/manger. One of those is the financing of accounts receivable turnover. However, negotiating the landscape of A/R financing in Canada tends to be confusing – this is due to a proliferation of players, somewhat confusing terminology, and solutions that do different things in different ways.

Our preference for our clients is to allow them to have a financing solution in place that allows them to multitask – and that multitask is simply all about doing a few things at once that are very important to your business – grow sales, turnover assets, and generate profits. Now that’s multi-tasking! Let’s dig in.

Part of the challenge in ensuring you have the right working capital and cash flow financing in place is to differentiate this method of financing your assets from other methods of financing your company. A/R financing is not related to the concept of a term loan – it’s simply a method of financing your sales as you wait for clients to pay you. And these days those clients seem to take forever, as everyone seems to be in the same boat… slowing down payables.

Generally speaking A/R financing suits every business that sells on commercial credit terms. And by the way, your a/r can consist of services if your company does not sell a product per se. Simply speaking, as soon as you have earned and provided those services and have properly billed them they can be financed.

The concept of A/R financing in Canada revolves around ‘ selling’ your sales to your finance partner, as opposed to providing them for collateral to a Canadian chartered bank. So while the net effect is the same (cash flow!) each type of financing is ‘ papered’ differently when it comes to the legalese and documentation surrounding this method of business finance.

While a bank charges you ‘ interest ‘on borrowing against your a/r line commercial finance companies purchase the asset (the receivable) at a discount to its 100% value. Generally speaking in Canada the cost is 2% per month. The nuances around how your transaction is priced relate to the general health of your business, the size of your monthly sales, and the overall general credit quality of your customer base.

Typically any sale in North America can be financed, and if your firm has foreign receivables they can be financed also, it’s just that they will require some credit insurance to be in place.

So is this all something new in the Canadian business financing landscape. Not really… as companies in North American, and starting in Europe have done this for hundreds, yes hundreds of years .

What then are the key benefits in this method of cash flow finance? They include same day immediate access to cash as you generate sales, the ability to attract larger clients and contracts because you now have ‘ financing ‘ in place, as well as having the general comfort level that you can meet operational requirements such as payroll and term loan and lease obligations.

What the Canadian business owner /manager often misses in assessing this method of financing is the overall opportunity cost of funding their business. Some people maintain that it’s a method of financing your business by simply lowering your prices, as that cost is in essence the cost of your financing. Don’t forget also though that if you don’t have A/R financing in place, from either a bank or finance companies that you are in effect being the bank for your clients. And if you review your business plan carefully and your overall goals and objectives we’re quite sure you did not intend to be the bank for your clients!

Don’t forget also that the new found cash flow in A/R finance solutions allows you to take discounts with suppliers, negotiate better pricing from vendors, and avoid late charges on your payments to key vendors and suppliers.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in accounts receivable turnover financing.

P.S. Don’t forget to ask about CONFIDENTIAL RECEIVABLE FINANCING… allowing you to finance, bill and collect your own receivables without any third party interference.