June 17th, 2010
Invoice Factoring Companies | List of Invoice Factoring Businesses
Factoring in Canada – its growing, it's popular, it's misunderstood! Let's clarify some facts and discredit some misconceptions around the financing of one of your Canadian firm's largest and most liquid asset – accounts receivable.
Factoring in Canada is how many firms are able to in effect leverage their accounts receivable without adding additional debt to the firm. Many customers actually utilize portions of their factoring and working capital facilities to address other issues in their balance sheet such as accounts payable or government super priority payments.
Is factoring in Canada the only way to generate working capital. Most certainly not. Your business has the added options of borrowing under a loan, or term loan scenario. A working capital cash flow loan injects a permanent working capital into your business with fixed payments over time – usually 3-5 years. That of course also adds debt to your balance sheet, and most owners we speak to are looking for cash and working capital solutions, not debt on their balance sheet.
Your firm's receivables (and inventory of course) generate sales revenue and profits for your firm. So clearly you want to ensure you are maximizing those assets while at the same time keeping your balance sheet stable. Balance sheets become unstable when there is too much debt.
You can of course choose to limit your growth prospects and remain self financing, or to negotiate an amount of credit with your bank that leaves the bank comfortable but not necessarily you as a business owner. You can also ignore address those growth aspects as we have said by borrowing to service that growth.
There is a third choice, which is financing your accounts receivable as you generate them – that strategy seems much better to many business owners – you're growing, meeting your business goals, increases profits, and the over all worth or value of your business .
If you sit down and carefully address the issue of what factoring or invoice discounting costs you will find that if you lay out three scenarios one might be much more appealing than the other – lets recap those scenarios :
- Continue to self finance and limit your growth and competitiveness – including the obvious working capital and daily cash flow challenges
- Borrow on a term debt or subordinated debt basis
- Sell your receivables as you generate them – increase sales and profits and capture all the opportunity costs of additional working capital
Somehow our third option remains more appealing!
So why are we not hearing more about Canadian business owners who have discovered a holy grail of financing? When we talk to customers we know the answer – they have entered into the wrong type of factor facilities. The fragmented and U.S. influence on factoring in Canada has many firms entering into the wrong type of facilities. We advocate non notification factoring, no locked in contracts, and fair competitive pricing.
Check out the benefit of factoring in Canada, and speak to an experienced advisor in the area – you just might be one of the few who have found the holy grail of the best financing solution for your firm at this time
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June 13th, 2010
Factoring receivables refers for the practice in which smaller companies sell invoices to become able to obtain funds these days. In this case they don't have to wait for a credit period of 30, 60, or 90 days. Thus by selling invoices smaller firms tend not to generate debt. This exercise of invoice factoring is basically employed as a finance management tool.
This practice of invoice factoring is usually adopted to avoid any loans or giving any collateral against availing any loan. The fee for invoice factoring is paid in terms of discount. This discount can ranger anywhere between 2.5% to 7%. Like a result of invoice factoring the smaller companies prevent exhibiting any loans on their balance sheets plus they also do not need to spend any interest for the cash taken. This results in better profit figures but slightly various with purchase order funding.
Several companies also assist tiny companies in accounts receivable factoring. These businesses set up the firm with the perfect factor for any distinct factoring circumstance. If a person has an invoice or any receivable to become factored then these firms come out to support within the same.
These businesses assist the manufacturers, distributors, importers, exporters, wholesalers, contractors, suppliers etc equivocally. They also assistance truckers in construction invoice factoring. These organizations help to locate ideal aspect for any specific predicament within the area or can also aid to choose from nationwide factoring organizations to avail the finest rates. They usually customized solution as per the clients need. To avail the services of such firms firstly a form needs to become filled out stating the kind of receivables and other details needed for invoice factoring. Then these companies approach the probable paying parties that avail invoice factoring. Some of these organizations assume the risk inside the deal for non-recourse factoring wherever the client is not required to spend back.
You'll discover various sorts of organizations with distinct forms of rates for factoring. Any invoices or receivables towards amount of $100,000 might be factored instantly. The average rate payable for discount in such cases is 2-5%.
Some businesses specialize for a specific category of invoice factoring. For instance, some companies indulge only in invoice factoring for medical business. Some firms, which cater to little and medium companies for invoice factoring, build invoices on the net and acquire immediate funding. They generally give a 24 hours turnaround. Other types of businesses also give funds to small firms for their day to day operations against collateral of their invoice or buy order. These types of organizations also purchase mortgage notes, structured settlement annuity or medical receivables.
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June 7th, 2010
From Entrepreneur:
Say you're a young startup–growing fast, but with little-to-zero positive cash flow–and you're straining to reach the next level or just to get through the end of the month. The bank-financing drought is showing no sign of letting up, and of course credit lines are reeled in tight.
What's the answer? For a growing number of startups, it is factoring. The practice involves a financing company, or “factor,” advancing you money based on its buying your receivables at a discount; your customers pay the factor the full value later, when the bill is due. Factoring gets you cash in hand immediately–but at a steep price. Factoring fees are much higher than interest rates charged by a commercial bank. Fees are quoted by the month, so a typical 3 percent fee is actually the equivalent of a 36 percent annual interest rate.
Dealing with a factor can also be much more difficult than with a commercial bank. Banks are highly regulated, offer competitive rates and commoditized lending services, so entrepreneurs can, with few exceptions, easily anticipate the cost and terms of their loan. But factoring is very fragmented. Most factor financing is provided by smaller, unconventional lenders. It is much less regulated and the quality, reliability and integrity of factors vary widely.
The reason more startups are turning to this more expensive, risky alternative is simple: It is often the only way to get cash. And if it is the route you decide to pursue, due diligence is the single most important step. Investigate how long the factor has been in business, where its offices and headquarters are and the background of its management team. Ask for referrals from current clients, and research complaints or lawsuits using web searches, the Better Business Bureau and the state's Attorney General's Office. Also, trust your gut: If you feel you can't build trust with the factor, don't pursue the loan.
If you go forward, review your contract with a magnifying glass, particularly these points:
- What is the duration of the contract? The shorter the better–ideally, month to month. You want to switch to less expensive financing as soon as possible.
- Will the factor negotiate? Some factors allow contract negotiations while others offer only take-it-or-leave-it documents.
- Must you provide a personal guarantee? This allows the factor to go after you and your assets to be repaid. Some factors will lend without a personal guarantee or on a “non-recourse” basis.
- Will the factor take possession of your receivables if they are uncollected? Probably not, which means you'll need to collect on your own. Be prepared: If receivables are uncollected, you'll need to repay the factor's advance or you may lose financing altogether.
- How will the factor notify your customers? Ideally, the factor will create a lockbox to accept payments in care of your company. You maintain day-to-day contact with your clients so that everything appears seamless and they are not aware of your financial situation.
- Will you be required to factor 100 percent of your receivables? Cash flow and collections patterns fluctuate, and some weeks you may not need financing. If your factor requires you to finance all receivables, you will pay dearly for financing even when you don't need it. Single-invoice or spot factoring allows you to opt out.
- Is there a minimum or maximum sales requirement? Some factors require a certain sales volume. If you are not within the limits, you may lose your financing–so the fewer restrictions, the better.
Finally, always keep the end in sight. The real goal with factoring is to improve your cash flow, increase liquidity and rebuild net worth to qualify for commercial bank financing. Commercial bankers can help you figure out the financial targets that can help you re-qualify, but it is up to you to create the plan.
As a commercial lender, I have seen businesses resort to factor financing for one or two years at the most. If the company still didn't qualify for bank financing at that point, chances are, it was already out of business.
From Entrepreneur:
Say you're a young startup–growing fast, but with little-to-zero positive cash flow–and you're straining to reach the next level or just to get through the end of the month. The bank-financing drought is showing no sign of letting up, and of course credit lines are reeled in tight.
What's the answer? For a growing number of startups, it is factoring. The practice involves a financing company, or “factor,” advancing you money based on its buying your receivables at a discount; your customers pay the factor the full value later, when the bill is due. Factoring gets you cash in hand immediately–but at a steep price. Factoring fees are much higher than interest rates charged by a commercial bank. Fees are quoted by the month, so a typical 3 percent fee is actually the equivalent of a 36 percent annual interest rate.
Dealing with a factor can also be much more difficult than with a commercial bank. Banks are highly regulated, offer competitive rates and commoditized lending services, so entrepreneurs can, with few exceptions, easily anticipate the cost and terms of their loan. But factoring is very fragmented. Most factor financing is provided by smaller, unconventional lenders. It is much less regulated and the quality, reliability and integrity of factors vary widely.
The reason more startups are turning to this more expensive, risky alternative is simple: It is often the only way to get cash. And if it is the route you decide to pursue, due diligence is the single most important step. Investigate how long the factor has been in business, where its offices and headquarters are and the background of its management team. Ask for referrals from current clients, and research complaints or lawsuits using web searches, the Better Business Bureau and the state's Attorney General's Office. Also, trust your gut: If you feel you can't build trust with the factor, don't pursue the loan.
If you go forward, review your contract with a magnifying glass, particularly these points:
- What is the duration of the contract? The shorter the better–ideally, month to month. You want to switch to less expensive financing as soon as possible.
- Will the factor negotiate? Some factors allow contract negotiations while others offer only take-it-or-leave-it documents.
- Must you provide a personal guarantee? This allows the factor to go after you and your assets to be repaid. Some factors will lend without a personal guarantee or on a “non-recourse” basis.
- Will the factor take possession of your receivables if they are uncollected? Probably not, which means you'll need to collect on your own. Be prepared: If receivables are uncollected, you'll need to repay the factor's advance or you may lose financing altogether.
- How will the factor notify your customers? Ideally, the factor will create a lockbox to accept payments in care of your company. You maintain day-to-day contact with your clients so that everything appears seamless and they are not aware of your financial situation.
- Will you be required to factor 100 percent of your receivables? Cash flow and collections patterns fluctuate, and some weeks you may not need financing. If your factor requires you to finance all receivables, you will pay dearly for financing even when you don't need it. Single-invoice or spot factoring allows you to opt out.
- Is there a minimum or maximum sales requirement? Some factors require a certain sales volume. If you are not within the limits, you may lose your financing–so the fewer restrictions, the better.
Finally, always keep the end in sight. The real goal with factoring is to improve your cash flow, increase liquidity and rebuild net worth to qualify for commercial bank financing. Commercial bankers can help you figure out the financial targets that can help you re-qualify, but it is up to you to create the plan.
As a commercial lender, I have seen businesses resort to factor financing for one or two years at the most. If the company still didn't qualify for bank financing at that point, chances are, it was already out of business.
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June 1st, 2010
Invoice cash – can a factoring or working capital facility actually reduce your finance expenses and allow your business to grow at any rate profitably. We think we can show you how!
Canadian business owners and financial managers keep hearing about firms that ' factor ' their accounts receivables, their ' invoices '. This is a growing trend in Canada that has caught on to a financing strategy that has been successful in the U.S. for a number of years.
Is there a ' perfect ' financing solution for your firm that provides you with unlimited working capital and is actually cheaper than bank financing when you realize that you are carrying receivables 30, 60, and 90 days on your balance sheet ? While we might agree there is no ' perfect ' financing solution for all Canadian firms everywhere we strongly feel that we can very EASILY demonstrate who invoice cash, know as factoring, or receivable discounting will take your firm to the next level of sales and profits.
Let's get back to our statement of how you can reduce your finance expenses, and grow your sales at any growth rate. We will even add that you can ' profit ' from this financing strategy.
We have to get a little technical here, but bear with us! –
OUR EXAMPLE:
Let's say your firm has sales of 1 Million dollars, you have 40% gross margins, and you have operating costs of 38%, leaving you a 2% net income on your sales. Included in those costs are your bank financing costs from, for example, a Canadian chartered bank. We would point out that your bank credit line has a limit, and at a certain point, because your customers are paying you in 30, 60, and 90 days you are full utilizing your line of credit. Are you able to take new orders and contracts without new external financing – we don't think so!
So whats the solution?! We have one for Canadian business owners or their financial managers. Let us set up a working capital factoring facility for you. The kind that we prefer is 100% non intrusive – that is to say you will continue to bill and collect your own accounts receivable. We call it non-notification. Ask any other firm if they like how their factoring facility works – if they don't have a non notification facility they will tell you they don't necessarily like it for a number of reasons , mainly customer intrusion , etc .
So we have our facility set up. You take on new orders and contracts and double your sales to 2 Million dollars.
Your competitors start talking about you!
Using the factoring, or invoice cash facility you get paid the same day you invoice. At the end of the year your sales are 2 million, they have doubled! Your net profit would be 130k, not 20k; you would have paid 70k in factoring and financing costs and still have made a lot more profit – in our example 110k more profit.
Again , we realize we're getting a little technical and accounting oriented in our example and explanation – so what is the laypersons button line explanation of what just happened – It is as follows -
You doubled your sales, you had no concerns about external financing or taking on new debt, and your profits went up, a lot!
Technically what happened is what KPMG calls on their website the ' Cash conversion cycle ' – you have turned over assets much more quicker, therefore you have greatly improved return on asset, return on equity, and net profit .
In summary. Invoice cash, factoring, receivable discounting, whatever you want to call it (at our firm we call it a working capital facility) works. It can work for you.
Sit down with a trusted, credible and expert business financing
factoring invoice discounting
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June 1st, 2010
Factoring financing in Canada is a proven, and growing in popularity method of generating cash flow and working capital for your Canadian firm. It often works best in conditions when your firm is experiencing higher than historical growth, or in many cases you are a start up or early revenue company who requires additional cash flow that you might not be able to attain from Canadian chartered banks.
In speaking to many clients factoring is clearly mis – understood. Last week we got a call from a customer who inquired whether we purchase bad, uncollectible accounts receivable. We indicated to that customer that what she in fact wanted was a commercial collection agency! Factoring in fact is the opposite of that, it's the purchase of your accounts receivable ( and we mean the collectible accounts ! ) for immediate cash flow .
Factoring in Canada is somewhat of a fragmented industry, so we encourage you to seek and speak to respected and credible business financing and factoring advisor. The type of firm you end up dealing with in factoring will often affect how successful you viewed this type of financing strategy. There are a number of different types of factoring in Canada. Technically speaking we can refer to the types of factoring in the following manner -
Full notification invoice factoring (This is the U.S. and British model)
Non notification factoring
Spot factoring
Factoring in the context of a true working capital or asset based line of credit facility
We are always concerned that customers, armed only with a little bit of information or their first contact with a firm who only offers one type of factoring, will get themselves into the wrong type of facility, thereby tainting any future positive thoughts they might have on this type of financing. The bottom line again – you can speak to an unbiased expert on how this financing can help your firm, or you can choose a hit and miss approach and enter into the wrong type of financing facility. We will take option # 1 any day!
Let's talk a bit about factoring in general as opposed to focusing on which type of factoring best suits your firm. This type of financing is essentially the purchase of one or all of your receivables, on a one of, of on going basis, to facilitate immediate cash flow.
Remember also that you are not incurring any debt when you are factoring – in fact your balance sheet improves because you are turning over receivables / working capital in a more efficient manner.
Because there is a cost associated with factoring you should generally be comfortable that you have the proper gross margins for the factoring of your accounts receivable. Very low margin businesses, even though they have good turnover are not always best suited for this type of financing.
In summary, factoring is growing in popularity. At the same time the myriad of types of firms that offer this financing, as well as the way in which they offer factoring can ultimately affect whether your firm is a successful user of this financing strategy. Investigate the benefits of this type of financing, ensure you understand who is offering it to you and which 'factoring model 'they use, allowing you to better determine if financing in this manner suits your cash flow and working capital needs . That 's proper business decision making!
factoring association
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May 26th, 2010
The cost of credit is the cost of not taking credit terms extended for business financing. When Canadian business owners extend, or receive business credit the credit terms are expressed as the amount of discount that is given for prompt payment, when the prompt payment discount expires, and when the invoice is due.
Let's look at an example. We might say that we are being offered 2% ten, net 30. What does that mean? It means that if we pay the invoice in 10 days we can subtract 2% of the invoice amount for our payment. We can assure you that your supplier, if it is your firm being offered the discount truly means ten days! Not take 2% and pay in 30 days as some try to do. (Those discounts are charged back)
Lets work thru and example. Supposed you are being offered 9000.00 of credit on 2% ten net 30 days. You can either pay 9000.00 x 98% = 8820$ in ten days, or of course, as we have noted, pay the full 9000.00 in 30 days. If your company is in a position to take the discount you can save a significant amount on your purchase price from that supplier.
If you wait the full 30 days you effectively borrow 8820 for 20 days, paying 9000- 8820 , or 180$ of interest .
So what is the 'credit cost 'in borrowing this money? The calculation is done as follows:
Credit cost = % discount / 100-%discount x 360days/ credit period – discount period.
If you work through the numbers in our example the credit cost = 36.7%.
As our example shows, the annual percentage cost of being offered a 2 % 10 day/ net 30 days scenario is almost 37%. Remember also that this discount is continually offered, so it was offered 18 times a year the effective annual credit cost is 43%!!
Selling on credit is an accepted an important part of business. From the customer perspective it's a source of financing, because you receive goods or services that you don't have to pay for until a specific future point in time, usually 30 days more often than not. As business grows between a supplier and customer the amount of financing being extended or taken grows.
So what is the final point of interest in our article? Its is as follows. More and more Canadian firms are looking at factoring and working capital financing facilities outside of bank financing. If our business could pay cash for goods and services we would take the discounts and arrange with our bank to allow us to pay for everything in Cash! Unfortunately our balance sheets and income statements don't allow us to generate those sorts of bank facilities.
Factoring is the immediate sale of our accounts receivable for cash. It also can cost anywhere from 1 – 3% per month in 'discount fees that are taken by the factor firm.
Is that expensive. Yes. And maybe not! Because as we have seen if we can sell our receivables immediately for cash and then take supplier discounts we can offset a large portion , ( maybe all ) of the financing costs .
That allows us to be in the best of stead with our suppliers – We have cash to pay our bills and we receive immediate cash for our invoices. In a high growth scenario that's worth its weight in gold so to speak!
Factoring can serve the dual purposes of generating significant cash flow and receiving significant price or payment discounts from our preferred major suppliers.
That is a winning cash flow combination!
Accounts receivable factoring
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May 22nd, 2010
Accounts Receivable Factoring is really a technique of improve the amount of cash for the business. The businesses that is going to be able to do this are the ones that are business to company. Should you do not do this, then you will not be able to have your invoices factored. Factoring is really a way of discounting your invoices and selling them to investors or factoring companies. Some variables will figure out the factoring fee that you will need to pay for invoice factoring, but usually the fees is going to be low.
From Yahoo:
“The Royal Bank of Scotland Group plc has agreed the sale of RBS Factor SA to GE Capital,” the bank said in a statement. Factoring is the process whereby cash is advanced to companies, as a proportion of revenue from invoices issued. The debt is reassigned towards the factoring company, which enables them to collect it. RBS, which had sold already its German factoring division to GE Capital in March, did not disclose how much will be paid. Both deals are subject to regulatory approval and expected to complete by the third quarter of 2010. RBS added: “As part with the group's strategic plan, announced in February 2009, this company was placed in the non-core division although the group sought a new owner having a long term commitment to the factoring sector in France.”
The Factoring Buiness is certainly large. If there are enough margins to account for the factoring fees, then this can take your business towards the next level. Increasing the bottom line and giving your company the growth that it's asking for is one with the greatest things that you can do for your company. Certainly look into getting your invoices factored so which you usually appear at your choices.
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May 19th, 2010
There are a number of business to business firms out there which could make use of enhancements on cashflow. Often times, several firms may have invoices dated from 30 to 90 days. During this time, the corporation has sold the service or product, and it's waiting to get paid.
In order to get money right away as opposed to waiting for the customer to pay, you can get your company accounts receivables factored. Some people call it invoice financing, whilst others may say that it's invoice discounting. In either case, it is the identical final result. You will be selling your invoices to a business for a discount. This discount will often be anywhere between 1 to 6 pct. As opposed to looking at the credit rating of your business, the factoring or financing company are going to be looking at the credit of the customer. They will also check out various other info just before cutting you a check. The total amount that they can offer you up front will fluctuate. A great example, some might provide you with 80% of the value of the invoice.
When the customer pays, they will pay you the remainder of the cash, minus their fees. This can help plenty of organizations out there. It is possible to help improve your working cash as well as help increase the growth of the business. Naturally, if your company doesn't have enough margins to handle the fees of getting your invoices financed, then this business financing model certainly won't work out. The great thing is the fact that this strategy can help out plenty of businesses. consumer receivable financing and RBS Finance are good information sources.
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May 19th, 2010
Based on the company definition, invoice factoring may be the purchasing of invoices at some discounted price planning to profit from collecting the accounts receivable. If you are associated with a company of growing and selling services/products to great credit worthy clients, the possible solution for you is to think about factoring your invoices. Accounts receivable factoring enables you to convert your slow paying receivables into cash. This is carried out by selling your invoices or receivable accounts to an investor or organization. Accounts receivable factoring enables the company owner to improve cashflow and give the company room to grow. Accounts receivable factoring is really a powerful way of funding growth, and is even a lot more valuable when bank loans or other finance sources aren't readily available. With this you do not need to wait for your customers to pay. Your business is able to obtain money now for the current invoices. It is done by merely promoting out your outstanding receivables or invoices at a discount to a finance organization or to some factoring company. These organizations will assume risk on the receivables and will provide you with the immediate cash for the company. Accounts receivable factoring basically represents the sale which has not been collected as cash yet. The customer has to spend at some point of time in the future. Payment of accounts receivable may be the only prominent source of cash inflow when your company extends credit to your clients. It is one of the most efficient ways of increasing the money flow inside your company so that you can very easily face the competitive company world. In fact most with the organizations use these providers just to obtain the working money. Accounts receivable factoring is a very easy and simple financial transaction on behalf of the company. They will pay to all sorts of companies like who lack credits, where marginal revenues do not regulate monthly payments of a traditional loan or who lack working capital to complete a new started project. These days any-size business can appreciate the advantages of accounts receivable factoring. It's a really flexible method of injecting the capital when required. It's a really efficient way of raising functioning capital for businesses which do not stick to typical lending standards. So meet your challenge of cash flow with accounts receivable factoring.
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