One of the biggest challenges for Canadian company owners is obtaining
business financing. As a first instinct, owners usually try to go to the bank hoping for a
business loan or line of credit. They soon find that qualifying for bank financing is hard, as the bank will demand collateral and three years worth of financial statements. Although large companies can qualify for bank funding, most small and midsized companies can’t. However, small companies are not out of options. There are two alternatives.
If the business sells goods or services to other businesses and your main challenge is that they need money to pay suppliers or employees, the solution could lie in using two little known financing products –
invoice factoring and
purchase order financing.
Most small and midsized businesses have cash flow problems because clients take 30 to 60 days to pay their invoices. Although waiting to get paid is a standard business practice in
Canada, it can wreak havoc on the company’s finances. Because, while waiting to get paid, business owners still have to pay employees and suppliers, who coincidentally, don’t like waiting to get paid.
Factoring financing can provide an advance on your invoices, supplying the cash flow the business needs to pay employees and suppliers.
Another common cash flow problem happens with a reseller gets a large order that he can’t afford to deliver. Usually, this happens because they don’t have money to pay their suppliers for the goods they need. In this case, purchase order funding may be the solution.
Purchase order funding provides pre-delivery financing, allowing you to pay your suppliers and to deliver your orders. The transaction is settled once the end customer pays.
Both
factoring and purchase order financing have several advantages over business loans and conventional bank financing. For starters, they are easy to obtain. Most small business owners that do business with reputable clients will qualify. Also, they can be implemented very quickly. Most companies can obtain funding within 5 to 10 business days.
However,
factoring and purchase order financing are not for everyone. It will only work well if three things are true. First, you must sell to commercial customers. Consumer sales cannot be financed. Second, your profit margins must be at least 15%. And lastly, it will only help you if you have slow paying customers or if you need financing to fulfill a large order.
About Commercial Capital LLC
Looking for a
factoring company in Canada? We provide
factoring and
purchase order financing in Canada and all provinces. For more information call (877) 300 3258.
