Cash Flow Freedom: The AR Financing Advantage
Stan Prokop
Canadian Business Financing | Cash Flow Financing | Asset Based Lending | Equipment Finance | Lender Financing | Purchase Order Financing | Acquisition Financing | SAAS Financing | Acquisition Financing
Stop Waiting for Payment: AR Finance Solutions
YOUR COMPANY IS LOOKING FOR A/R FINANCE SOLUTIONS!
?ACCOUNTS RECEIVABLE AR FUNDING
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the? biggest issues facing business today
ARE YOU UNAWARE OR?? DISSATISFIED WITH YOUR CURRENT? BUSINESS ?FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - [email protected]
7 Park Avenue Financial South Sheridan Executive Centre 2910 South Sheridan Way Oakville, Ontario L6J 7J8
Direct Line = 416 319 5769
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Stop Waiting, Start Growing: AR Finance Solutions
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7 Park Avenue Financial originates business financing solutions for Canadian Businesses – We offer A/R Finance? and working capital solutions ?– Save time, and focus on profits and business opportunities
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7 Park Avenue Financial: “Canadian Business Financing with the intelligent use of experience”
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What is AR Financing: Understanding Accounts Receivable Financing
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A/R Finance in Canada seems straightforward to most Canadian business owners and financial managers.
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However, if you are not dealing with the right receivable financing company under conditions that reflect how you do business… well, let’s just say… Confusion can set in.
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Accounts receivable refers to the money owed to a business by its customers for goods or services provided on credit.
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INSTANT CASH FLOW FROM UNPAID INVOICES!
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Those unpaid invoices and expenses keep piling up? -with slow collections straining supplier relationships and challenging growth.
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Let the 7 Park Avenue Financial team show you how to gain immediate access to cash flow -?? eliminating that waiting and allowing you to grow sales and profits.
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Understanding Accounts Receivable
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Accounts receivable (AR) is crucial to a company’s financial well-being. It represents the amount of money owed to the business by its customers for goods or services provided on credit.
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Understanding accounts receivable is essential, as it directly impacts a company’s cash flow, liquidity, and overall financial health.
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Accounts receivable are recorded as assets on a company’s balance sheet. They indicate the amount of money expected to be received from customers within a short period, typically within a year.
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The accounts receivable balance is a key indicator of a company’s financial health, as it reflects the efficiency of its collections process and the creditworthiness of its customers.
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Efficient accounts receivable management ensures that a business maintains a steady cash flow, which is vital for meeting operational expenses and investing in growth opportunities.
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Two Uncommon Takes on Receivable Finance
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You Wanted to Know!
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How quickly can I get funding through Accounts Receivables Finance?
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Funding typically arrives 24-48 hours after approval, with same-day funding available in urgent situations.
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What percentage of my invoice value can I access?
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Most factoring providers advance 80-90% of the invoice value upfront, with the remainder (minus fees) paid when your customer settles the invoice.
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Do I need to finance all my invoices?
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No. You can select specific invoices or customers for financing, maintaining flexibility in your cash flow management.
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How Accounts Receivable Financing Works
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Accounts receivable financing is a financial solution that allows businesses to access immediate capital by leveraging their outstanding invoices.
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This type of financing is beneficial for companies that experience cash flow gaps due to slow-paying customers or seasonal fluctuations in sales.
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The accounts receivable financing process typically involves the following steps:
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Accounts receivable financing can be structured in various ways, including factoring, invoice discounting, and accounts receivable loans.
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Each option has benefits and drawbacks, and businesses should consider them before choosing a financing solution. By converting unpaid invoices into immediate cash flow, companies can bridge the gap between sales and payment, ensuring smoother operations and the ability to seize new opportunities.
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YOUR CASH FLOW FINANCING SOLUTION
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So, let’s share some pearls of wisdom around the cash flow financing mechanism ( known as factoring ) that works great… when you understand what’s happening via solutions from ‘ factoring companies’ for your outstanding invoices.
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Accounts receivable financing companies provide cash flow solutions by offering competitive rates, quick funding, and efficient invoice processing.
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A/R FINANCING DELIVERS NO DEBT TO THE BALANCE SHEET
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Rather than taking on debt to finance your firm's ongoing working capital needs, many small businesses choose instead to monetize their 2nd most liquid asset - A/R.
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A/R financing delivers no debt to the company's balance sheet, as accounts receivable is classified as an asset. (Cash on hand is of course your most liquid asset - it’s just not as plentiful as you want it to be!)
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RECEIVABLE FINANCING BECOMES YOUR BUSINESS CREDIT LINE
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If your firm meets bank criteria for cash flow/working capital needs, you’re, in effect, using that A/R as collateral for what most call a business line of credit.
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Financing accounts receivable is a pivotal strategy for managing working capital, allowing businesses to unlock capital tied up in their accounts receivable.
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That’s not really how Account Receivable financing works—under the ‘paperwork’ involved, you are constantly selling your accounts for a discounted amount at your discretion.
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HOW MUCH FINANCING CAN YOU OBTAIN
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The amount you receive, typically 80-90%, becomes immediate cash on the balance sheet—pretty much the same day you generate a sales invoice.
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In effect, you’re simply shortening your business's total operating cycle..... and you can trust us that the costs associated with carrying your accounts receivable, risking lousy debt, and missing out on opportunities to move your business forward because of a lack of cash are very nicely offset by your costs in the invoice-to-cash conversion via a Receivable financing company.
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The amount of financing is often based on the accounts receivable balances, which play a crucial role in determining the value and terms of financing agreements.
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FINANCING APPROVAL
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Underwriting is a critical component of the accounts receivable financing process.
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Finance companies and lenders carefully evaluate a business's and its customers' creditworthiness before approving a financing agreement.
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The underwriting process typically involves reviewing the business’s financial statements, credit history, and accounts receivable aging report to determine the level of risk involved.
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This thorough evaluation ensures that the financing solution is tailored to the business’s needs and financial situation.
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THERE ARE 2 CHOICES IN RECEIVABLE FINANCE
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Canadian business owners have two choices when it comes to financing sales cash flow under the financing mechanism we’ve been talking about:
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领英推荐
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When we talk to clients who have used or are thinking of using such an invoice discounting process, we stress that it’s all about the quality of the financing companies you are dealing with.
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Ultimately, you want a firm that understands your business model, prices competitively, and has the capital to grow with your business.
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Managing both accounts receivable and accounts payable is essential for maintaining liquidity and avoiding financial pitfalls.
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By the way, some of the largest and most successful corporations in Canada figured out this same type of financing a long time ago.
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They call what we’ve been describing ‘ SECURITIZATION ‘. As your firm should be doing, they focus on keeping inventory low and turning accounts receivables into cash on hand as quickly as possible.
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Factoring vs Invoice Discounting
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Factoring and invoice discounting are two popular forms of accounts receivable financing.
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Factoring involves selling outstanding invoices to a finance company, which then collects customer payments.
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This method provides immediate cash flow but may involve higher fees and a loss of control over the collections process.
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On the other hand, invoice discounting allows businesses to access a higher percentage of the invoice value, often around 90%, while retaining the responsibility of collecting payments from customers. This option offers more control but may require a stronger internal collections process.
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Both factoring and invoice discounting have advantages, and the choice between them depends on the business's specific needs and circumstances. By understanding these options, businesses can select the most suitable receivable financing method to enhance their cash flow and support their growth strategies.
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Accounts Receivable Loans
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Accounts receivable loans are funding where a business borrows against its accounts receivable.
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The lender provides cash in advance based on the value of the outstanding invoices, and the business repays the advance plus fees when the invoices are paid.
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Businesses often use Accounts receivable loans that require a more flexible financing solution. They allow for ongoing access to capital based on receivable balances.
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Underwriting is a critical component of the accounts receivable financing process. Finance companies and lenders carefully evaluate a business's and its customers' creditworthiness before approving a financing agreement.
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The underwriting process typically involves reviewing the business’s financial statements, credit history, and accounts receivable aging report to determine the level of risk involved. This thorough evaluation ensures that the financing solution is tailored to the business’s specific needs and financial situation.
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By understanding the concept of accounts receivable and the various financing options available, businesses can make informed decisions about managing their cash flow and improving their financial health.
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WHY ACCOUNTS RECEIVABLE FINANCING MAKES SENSE
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The? ' PERFECT STORM ' in AR finance happens when your firm is:
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1.GROWING
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2. HAS GOOD GROSS MARGINS ALLOWING YOU TO ABSORB THE FINANCING COST
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3. FOCUSING ON GOOD ASSET TURNOVER AND MEASURING THAT TURNOVER
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4. UTILIZING A RECEIVABLE FINANCING COMPANY TO FACILITATE GROWTH, NOT HIDE MISMANAGEMENT OF ASSETS
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DID YOU KNOW?
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?KEY TAKEAWAYS
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CONCLUSION
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Will this method of business financing work for your firm?
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Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can provide your company with the ' words of wisdom' it needs to maximize the challenges of business financing and growth.
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Short-term invoice factoring is a bridge back to traditional Canadian business financing and business lines of credit, solving your current liquidity challenges and business needs.
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FAQ
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What immediate impact does AR Funding have on business operations?
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How does Financing a/r improve business planning?
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What advantages does A/R Finance offer over traditional loans?
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How does A/R Finance affect customer relationships?
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What cost benefits come with? Financing a/r ?
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What criteria must businesses meet to qualify for AR Finance?
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How is A/R Finance different from traditional bank financing?
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What documentation is needed for AR Finance approval?
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How does the AR Finance process work in practice?
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What industries benefit most from AR Finance?
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What are the typical costs associated with AR Finance?
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' Canadian Business Financing With The Intelligent Use Of Experience '
?STAN PROKOP 7 Park Avenue Financial/Copyright/2024
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Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil