Invoice factoring moves from routine to strategic
Montreal, Quebec—March 22, 2022— Accounts receivable factoring, or invoice factoring, is a routine practice in many industries, but choosing a factoring finance company today is anything but routine. Accounts receivable factoring, or invoice factoring, is the process of selling unpaid invoices for a cash advance. Simply put, it allows a company to access funds it is going to receive faster that it would otherwise. The practice increases working capital, adds no debt and helps companies better manage cyclical ups and downs.
“As government programs have ended and businesses adapt to co-existing with COVID, many standard best practices must adapt, too,” says Philippe Frenette, Vice President of Factoring & Asset-based Lending at Mitsubishi HC Capital Canada. “Almost every company has encountered atypical changes and challenges over the past few years that affect how, when and why they employ factoring.” Here, Frenette explains five considerations to help choose a factoring partner.
1. More than just factoring: A factoring provider can offer much more than accounts receivable financing. Going forward in a new and uncertain business environment, leveraging additional capabilities can result in greater efficiencies. A sharp provider can look critically at a business’ financials and suggest alternative ways of financing, says Frenette. “It could be a line of credit supported by accounts receivable, for instance, to help fund the ramp-up of inventory or equipment acquisition,” he explains. “Utilizing the right factoring providesd as by a trusted business advisor can be a smart, strategic move.”
2. Help in an uncertain future: Concerns about variants, inflation and worldwide economic stability abound. A bank may offer a million-dollar line of credit today, but what about a year from now? Would they be comfortable doubling that? “Look for a factoring partner that is willing to develop a long-term relationship with your business as it grows, and that has a history of operating that way,” says Frenette.
3. Consultative approach: Some companies that offer factoring will work to learn about clients’ businesses and business models. They use that knowledge to develop ways to meet present needs in line with what makes the best sense for the longer term. Factoring companies that are not volume-based, without transaction quotas to meet, will be most apt to offer this type of counsel.
4. Broad, deep experience and connections: A good factoring partner will be able to provide solid referrals to providers of other types of financing a business may need, such as purchase order financing or mezzanine debt. They may be able to refer other resources, too, from needed advisory board members to an interim CFO.
5. Entrepreneurial mindset: Small and mid-sized businesses, in particular, can benefit from a factoring partner whose specialists have similar background and expertise. Working with someone who has had their own business, or who has worked extensively with smaller, growing businesses, provides important insight to develop smart non-commodity financing solutions.
“As companies work to grow their businesses in this ‘new-normal’ economy, finding a long-term partner to fulfill their cashflow requirements is critical,” says Frenette. “By looking past immediate needs, companies can strategically plan for both ongoing and future opportunities with flexible financing tools such as factoring.
About Mitsubishi HC Capital Canada
Mitsubishi HC Capital Canada is a specialty finance company that brings a consultative approach and expertise to customers of all sizes to help their businesses grow every day. Serving as a collaborative partner, we provide customized financing solutions for a wide range of industries, including manufacturing, construction, work trucks/transportation, IT, staffing, healthcare and clean technology/mobility. We are committed to the United Nations Sustainable Development Goals to improve the communities where we operate. Visit https://www.mhccna.com/en-ca/
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