Securing business financing in Canada has historically presented challenges for small business owners. However, the landscape is evolving as specialized financing companies enter the market, offering alternatives to traditional bank loans and lines of credit, which often have stringent qualification criteria.
For businesses that sell goods or services to other companies or government entities, invoice factoring and purchase order (PO) financing are two accessible options worth exploring.
**Invoice Factoring: Bridging the Payment Gap**
While securing contracts with mid-sized and large corporations can provide a steady stream of business, their extended payment terms (often up to 60 days) can strain cash flow. Invoice factoring provides a solution by eliminating this wait. Factoring allows you to receive immediate payment for your invoices, typically within two days. In this process, you sell your invoices to a factoring company, which advances you the invoice amount, minus a small fee. The factoring company then collects the full payment from your client, allowing you to maintain consistent cash flow.
**Purchase Order Financing: Funding Your Supply Chain**
If your business model involves reselling or wholesaling products, funding your suppliers is crucial. Purchase order financing provides the capital needed to cover supplier costs, enabling you to fulfill customer orders. This type of financing uses the customer’s purchase order as collateral. Once the customer pays their invoice, the financing is settled.
In conclusion, both invoice factoring and purchase order financing offer accessible and rapid solutions for businesses seeking to improve cash flow and fund operations. These options are generally easier to obtain than traditional loans and can be implemented quickly, provided your business is profitable and serves reputable clients.