Did you know you can sell your invoices receivable to access the money your customers owe you without waiting for them to pay? Now you do. Let us guide you on how.
Generally, your customers (Licensed Producers or the provincial boards) will pay you in 15-60 days or 10-30 days after they have been paid; factoring enables your company to get paid today by selling your invoices at a discount based on the amount of advances and duration.
What Are the Benefits of Cannabis Invoice Factoring for Business Owners?
As earlier mentioned, Cannabis Factoring offers an excellent opportunity for cannabis business owners looking to manage cash flow. This type of financing provides quick access to working capital as a cash advance, with funds usually received within two business days. A quick turnaround for funding means that you’ll be able to meet your operational and maintenance costs, order new inventory, and grow your business. Invoice financing delivers consistent cash flow, helping business owners focus on what’s important – growth – rather than stressing about daily balances. When managing payment timelines for cash flow goals is taken out of the equation, numerous cannabis business owners also find that they can extend more flexible payment terms to their customers, helping to enhance business relationships and maybe save money. Invoice financing is also adjustable, so you’ll only accrue interest when you’re using the funds, helping to save money.
What Do I Need to Apply for Cannabis Factoring
While the application procedure differs depending on the lender, here are some basic tips. Before you apply for any type of financing to grow your cannabis business, including invoice financing, get your financial “house” in order by collecting your credit report (and the credit reports of your business associates), three to six months’ worth of bank statements, balance sheets, income statements with your annual revenue, and your capital needs. You and your business associates also need to be aware of your creditworthiness, have a history of making your payments on time, and have no defaults on your record. Many lenders will also need a clean criminal history for all business associates and management personnel due to the risks involved in the cannabis industry. Some lenders may also want to check a list of your key management personnel and a list of all active cannabis licenses held. Each factoring company Canada sets its eligibility conditions and application procedures. Keep in mind any service charges or processing fees that apply, interest rates, and any potential hidden costs when considering a factoring company.