Canadian Businesses Struggle to Access Financing Amid Covid-19 Response

The COVID-19 response continues to strain small and medium-sized businesses in Canada. The uncertainty makes buying supplies, paying for new safety features, and even paying staff a struggle for many. While the Ontario government stepped in to offer financial support to businesses, many are still waiting.

Delays in Government Funding

According to the CBC, as of this April, Magdi Bazara, owner of the 3 Cents² Coffee Shop and Eats to Go, was promised funding that never arrived. Both businesses were granted $10,000, but the money didn’t come through. In March, Bazara then learned that his application for the Coffee Shop was deemed ineligible after the fact, without any explanation as to why. Being out $10,000 that you had counted on is a struggle for any business.

The CBC has several examples of businesses that are still waiting for the bureaucratic machine to fulfill its promises. For example, Steve Quay, owner of Quay Communications, has been waiting for a government grant he was approved for since January. As many business owners are no doubt doing, Jones is pouring his personal money into his business to try to keep it afloat in the meantime.

The government admits that while 108,000 businesses received their first payment, 35,000 have not yet received their second. An informal survey conducted by NDP MPP Jessica Bell found that 85% of the business owners she spoke to have not received their funding yet.

Gaps in Government Grants

Government funding isn’t just slow--it also has strict eligibility criteria that leaves many struggling businesses in the lurch. For example, Ontario’s Main Street Relief Grant for Personal Protective Equipment (PPE) is only for very small businesses with 2 to 19 employees. Sole proprietors with no employees and small businesses with 20 or more employees don’t qualify for this support.

Other grants have minimum revenue loss as their metric for eligibility. For example, the now-closed Small Business Support Grant required businesses to demonstrate a 20% revenue drop in April 2021 specifically. However, this was in response to a lock-down measure starting in December. The government did not really offer support to businesses that struggled over Christmas, unless the effect was so severe it lasted into April.

An Alternative: Invoice Factoring

If you find yourself ineligible or still waiting for government financing for your business, we have the financial solutions you need. Invoice factoring is a strong alternative to government loans. When you send out an invoice to J D Factors, we make sure that you have access to the cash from that invoice in 24 hours. That response time means that you can be more flexible, make better decisions, and be certain that as long as you can invoice, the cash will keep coming in.

Our services are particularly valuable as these economically uncertain conditions continue. J D Factors offers non-recourse factoring, which means we handle collection efforts from your clients and don’t ask you to return your money to cover bad debt due to a client's bankruptcy. Reach out today to discuss how invoice factoring can help you manage risk and keep your business open.

What You Need to Know about the Emerging B2B Ecommerce Market

Some B2B companies already had ecommerce sites set up to serve their customers. However, with Covid-19 preventing most traditional in-person sales, even more B2B companies are adopting an ecommerce model that allows customers to order much in the same way as B2C consumers purchase items on sites like Amazon. According to Forbes, B2B ecommerce has become one of the fastest growing segments for both new and established companies. Forrester Research projects that B2B ecommerce will make up 17% of all B2B sales in the United States by 2023.

If you’re considering creating an ecommerce site for your company, there are a few things to consider. Making the move from a personal, face-to-face sales process to an online one can boost convenience, and works especially well for companies that need to connect with younger buyers, but it has its pitfalls too. Here is what you need to know about B2B ecommerce.

General benefits of moving to ecommerce

Larger customer base: Moving online allows you to access a much wider base of customers. So long as you can ship your product or offer your service in their area, you can reach them online. Ecommerce is a key tool to expand your business.

• Convenience for customers: Customers find ecommerce to be highly convenient. They can access the store at any time, see their past purchases to buy again more confidently, look through product specifications at their leisure, and use new payment options.
• Avoid credit card fees: The world of ecommerce provides access to other payment options that may charge you less in terms of fees than traditional credit card providers. Some of your customers may prefer to avoid using credit cards as well.
• Customer loyalty programs: It can be easier to implement a customer loyalty program through an ecommerce site. These programs provide their own benefits to you, like providing a wealth of customer data and intelligence.
• Competition: As ecommerce has not been adopted widely across all industries, it may be a great opportunity for you to get a leg up on the competition.

Potential issues when adopting ecommerce

Starting up an ecommerce site for your business can be rewarding but is expensive and also brings risk, like any business change. You can protect your business from these issues ahead of time if you consider them first.

One issue is meeting customer expectations. Delivery expectations for clients are higher when they are buying online. They compare the experience to consumer-facing ecommerce and expect quick shipping, fast updates on shipping progress and more.

Web development has its pitfalls as well. You’ll need a highly intuitive and functional website right from the start, or you could deter customers who have bad experiences using your website's new functionality. You’ll also need a platform that is secure to protect your customer’s information.

Creating a website that can meet these needs can be expensive. Invoice factoring can help you build up the cash reserves to afford a quality website right from the start, by giving you access to your revenue the moment you send out an invoice. Many businesses work with companies like J D Factors to fund their growth and development, too. With invoice factoring, the factoring company pays you what you invoice your customer, minus a fee, and collects from the customer on your behalf. In the meantime, you can use that cash to fund initiatives like developing an ecommerce website.

J D Factors offers factoring services that can help you grow your business with ecommerce solutions, or in other ways. Contact us today to learn more.

Tax Advice for Businesses that Have Survived the Pandemic

First, if you’re here, congratulations for surviving a very tough year! About one in six businesses considered closing for good this year. We’re not quite out of the woods yet though and are heading into a tough tax season for businesses that have survived the pandemic. Thankfully, you still have options and strategies that can help. Here’s our pandemic tax tips for 2021.

The Canadian Emergency Wage Subsidy (CEWS)

Many businesses took advantage of the CEWS in order to pay their employees and keep their doors open. If you claimed CEWS, then the money that you claimed is considered business income and must be included with your taxes. You also must withhold CPP, income tax and employment insurance premiums from the CEWS that you give to employees.

The CRA is doing mini audits of the CEWS and requesting that some businesses give them information about how they used the relief benefits within 10 days. It’s wise to work with your accountant to have this information available quickly.

The Temporary Wage Subsidy (TWS)

If you were eligible for this tax break the CRA already calculated it and told you. This is not taxable income, instead it is a straight tax break that you will not need to pay taxes on, although you will need to report it.

For Your Employees: Working from Home Tax Deduction

Keeping your employees employed this year was likely tough. While you probably can’t offer them the kind of benefits or bonuses you’d like to, you can at least make them aware of the tax benefits that the government is offering. If your employees are newly working from home, or did for a period of time in 2020, then they may be able to claim a maximum of $400 for their expenses, without having to track them. In most cases you do not need to provide anything for employees to claim this.

Moving Matters

Do all of your employees still live in Ontario? When people began working from home they also moved away from the office. Some may have moved out of province. There can be tax implications to hiring or having an employee who is out of province. This is an important subject to bring up with your accountant.

If your employees moved out of the country, or you chose to hire people who are not residents of Canada to fill gaps or lower your employment costs, then there are even more tax implications that you should discuss with your accountant.

Factoring and Taxes

Do you find that you don’t have the cash on hand to handle your tax obligations? It has been a challenging year, and many businesses are in the same position. Factoring can help you have a healthier cash flow, maintain your savings for your corporate taxes, and save for and pay your employee’s salary more effectively.

Invoice factoring gives you access to your accounts receivables immediately. At J D Factors, we pay you when you send out an invoice and then we handle the payment from your customer. This means that you’ll have a stronger cash flow all year, which is especially helpful come tax time.

Last Minute Tax Tips

It’s tax season again, which means it’s time to get your affairs in order. This can be a busy and stressful time for everyone, but particularly for small and medium sized businesses. Add the unique stressors of the pandemic, and your taxes may seem even more daunting this year. But have no fear, there are a handful of simple, last minute tax tips that will help alleviate the stress.

1) Start Early

Don’t procrastinate. This can be hard when things are stressful, but you will be better off if you just buckle down and get things done. So, call your accountant to make an appointment to start early to ensure that you are ahead of the game and avoid any surprises.

2)     Pay on Time

Missed payments, late filing and other delays can lead to unnecessary fees or interest payments, ultimately making your tax season more expensive than it needs to be. Worried you won't have the cash on hand to pay your taxes? The team at J D Factors can help. We can work with a pre arranged payment plan with the CRA and can even put aside a portion of funds from funding to go towards your tax bill.

3)     Ask for Help

The Canadian government offers several credits and deductions for small-to-medium sized businesses to assist with pandemic recovery. These programs are designed to help you save money to support the growth of your business and the Canadian economy. Make yourself aware of these assistance programs and their tax implications. Doing so could help save you money and accrue additional support for your business.

4)     Be Thorough

The last thing you want is to be finished with your taxes and then get a letter from the government saying your business must undergo a costly and time-draining audit. While sometimes being audited is random and unavoidable, you can take steps to prevent the likelihood. Your accountant and bookkeeper will help ensure that you:

• Are thorough with your deductions.
•  Understand the limits to deductions such as travel expenses and dining out and don’t overestimate them.
• Keep consistent and detailed records of what you claimed on your taxes (this is important to keep for your own purposes in case an audit is in your future).

 5)     Seek Help from a Professional

At J D Factors, we provide factoring advice to small and medium sized businesses looking to improve cash flow (and following these tax tips will help you do just that). Contact us to get your cash flow under control so you can pay your taxes on time.

Remember, there's still time to seek help from a professional accountant, and we'd be happy to connect you with some of the best – reach out if you need a referral. Working with an expert will ensure that your taxes are done properly, thoroughly and on time.

Payment Terms are Changing - Here’s What You Need to Know

Do your clients want to change payment terms because of COVID-19? Some are trying to delay payment because of their own pandemic-related financial difficulties, and it’s causing a problem for businesses across the country. 

Before the pandemic, 31% of small businesses in Canada dealt with bad debt. According to the Toronto Star, business debt and bankruptcies increased even further during the pandemic, and have affected businesses of all sizes. Global News also reported that as of January 2021, roughly 181,000 Canadian small businesses were considering closing their doors.

While you may be sympathetic to your client’s ongoing struggles, this freeze to your account receivables can seriously impact your own cash flow and undermine your business. When you can’t buy supplies, you can’t take on new orders. When you can’t pay your staff, you risk permanently losing your best people. The effects of delayed payments from COVID-19 are not just temporary, especially as we head into year two of the pandemic. Last year, 58,000 small businesses in Canada closed. If you’ve made it this far, you need a plan to keep going.

So, when clients just can’t pay because they are facing their own challenges, what do you do? You need to handle the late payment, without souring the relationship with your client. Here’s how:

1. Change Payment Terms, On Your Terms

Changing your payment terms can help encourage your clients to prioritize paying you. Shorten your payment terms from 60 and 90 days down to 30, or even have invoices due upon receipt. Add an interest charge to all late payments, so that you’re not essentially giving your clients interest-free loans while they wait to pay. It will also incentivize clients to pay, to avoid having to pay the late fees.

2. Treat Clients as Individuals

BrooksCity recommends identifying clients who are chronic late payers. Require these clients to pay early, potentially before you have even fulfilled their order or completed their work. This can force the client to prioritize paying you over the other bills that they need to pay.

3. Payment Plans

You can also offer clients who are struggling to pay a payment plan. Immediately getting even a quarter or a half of the payment that you’re owed can help your business move forward, even if you have to wait for the rest of it. You can still claim interest on the money that the client cannot pay up front.

4. Consider Invoice Factoring

Invoice factoring is a great solution because you receive an agreed upon percentage upfront, up to 97%, whether your client can pay right now or not. The invoice factoring company pays your invoices when you issue them, and then they handle collection from your clients. This allows you to immediately invest in your business and cover your costs, even if your client is very delayed in paying.

Non-recourse factoring is an even better idea during the current crisis. In this arrangement, the factoring company handles your bad debt, so that your business isn’t impacted. Reach out to J D Factors to learn more about how to protect your business while getting control over your accounts receivable, even in today's tough economic climate.

Use Factoring to Get Control of Your Cash Flow in 2021

Looking to get your company's cash flow under control in 2021? You're not alone. Over the last year, you may have found that many of your customers are slow to pay as they deal with the fallout from COVID-19. These delays have ramifications for your business, reducing your ability to buy supplies, pay staff, and keep your business running.

Invoice factoring is a simple solution to cash flow problems. When you send out an invoice, you receive it’s value in cash from the factoring company, minus a fee. Instead of waiting for 30 or even 90 days for payment, you get paid right away. When your customer eventually pays, they pay the invoice factoring company. In the meantime, you regain control of your cash flow and keep your business operating smoothly.

Factoring companies handle billions in invoices every year, and many specialize in a specific industry and tailor their services to serve those clients best. Here are five ways that invoice factoring can help you regain control of your cash flow:

Helping New Businesses That Can't Secure a Bank Loan

Factoring has now been accepted as a viable alternative to a bank loan in many industries across Canada – from trucking to food manufacturing and distribution. Many companies that don't qualify for a loan because they are too new to have established credit, or because they have poor credit are eligible for invoice factoring. That's why invoice factoring is a powerful tool for start-ups and businesses looking to get back on their feet but need an investment in people, inventory, equipment, technology or supplies to do so.

Full Access to Your Account Receivables

Businesses that are just starting out or that have struggled with loan payments can use factoring when they can’t access a loan, but the benefits of invoice factoring are more far-reaching than that. Many businesses that do qualify for loans still use factoring because it gives full access to all of the money in their account receivables now. Access the money you need without worrying about managing loan payments or applying for additional loans down the road.

An Alternative to Bringing in an Investor

Invoice factoring is a great alternative for businesses that are looking for investors. Outside investors may want a portion of your business in return for an infusion of cash. If you need to improve your cash flow, consider invoice factor as an alternative to giving up a stake of your business to an investor. What’s great is that, unlike many investors, invoice factoring will keep up with your sales, no matter how large they get. It’s a wise solution for businesses that are expecting a big ramp-up, or that are worried about managing cash during periods of hyper-growth.

Invest in Your Business

In addition, factoring works well for established companies that issue large invoices that clients take a lot of time to pay. In the 30 to 90 days you are waiting for your customer to pay, you could instead have that cash to reinvest in your business. Self-investment allows you to make better long-term decisions, like buying more materials in bulk, offering the stability to keep your best staff, having the cash to take on more work, and much more.

Reduce Operating Costs

Every business that uses invoice factoring can cut out some of their operating costs. You won’t have to follow-up with invoices, saving you significant time and labour. If you choose non-recourse factoring, (where the factoring company handles clients that don’t pay), then you also will save time and money on collections. Non-recourse factoring has the additional benefit of protecting you from clients who go bankrupt and will never be able to pay the invoice.

Invoice factoring is a powerful tool to help businesses of all kinds get control of their cash flow. Reach out to J D Factors to learn more about how to integrate invoice factoring into your business this year.

 

How to Prepare Your Business for the Second Lockdown

 

As Ontario faces another lockdown on Boxing Day, businesses have a short period of time to prepare for the financial health of their operations and for the wellbeing of employees. While the lockdown is certainly going to be financially taxing on many SME's, the silver lining is that this is not the first time businesses have been through the challenges of either closing completely or operating with restrictions in place. 

If you haven't already, now is the time to lean on your experience over the last year to ensure that you are as prepared as possible for the second lockdown. Here are five tips to help you do just that:

1. Look back at your response to the first lockdown

A successful business is introspective. It's important to look at what went well, and what didn't during the first lockdown and make changes accordingly this time around. Keep in mind that what went well from your perspective may differ from others. Take the time to talk to your employees, partners, suppliers, vendors, and customers to talk about what worked and what you should do differently.

2. Expect and anticipate shipping delays

There have been more shipping delays than usual this time of year because of increased online holiday orders as consumers bunker down and stay home. That may mean that essential business goods or shipments out to customers are taking longer to arrive.

Be patient and remember that essential workers in the shipping and trucking industries are working harder and putting in extra shifts and long days. Despite their efforts many companies are still struggling to keep up with demand and make deliveries on time.

From delivering essential food items to the COVID-19 vaccine, those in the trucking and freight industries are giving up time with their own families and putting themselves at risk. This essential and thankless job is keeping Canadians fed, comfortable and secure and allowing business in Canada to continue. The best way to deal with these delays is to know the reality of the situation and place orders well in advance of when you need them.

3. Identify bottlenecks

Procuring and delivering goods may be one bottleneck to deal with during lockdown, but are there others? Common bottlenecks that can put your business at risk include staffing and cash flow.

Are you ready to cover shifts of employees who may be unable to come to work because they've got symptoms or are waiting for a COVID test result? Have a plan in place and trained staff on standby just in case.

4. Get Your Finances in Order

Many businesses across the country have been relying on government subsidies and programs to continue to operate. That may help you get through the lockdown, but it's not a long-term strategy. For businesses with reduced hours (or those who will be closed), take advantage of the time afforded you and get your finances in order. In an article for the Chartered Professional Accountants of Canada, business consultant Eitan Dehtiar suggests that businesses "look at an overall cost reduction plan, trying to transition as many fixed costs as you can to variable costs so that you have the ability to turn off the tap and adjust."

In addition to reducing costs, advice from EY (formally Ernst & Young) includes evaluating short-term liquidity and closely monitoring cash flow to stay on top of potential shortfalls.

5. Remember, Cash is Always King

Cash flow is always critical to the health of a business, but even when business is good, if customers don't pay what's owed, things can go sideways. Even businesses that have never missed a payment with their bank, like Carl Gatt, owner of BLB Transport Group, may be denied credit when it's needed.

Earlier this month, FreightWaves interviewed Gatt, who shut his trucking business down after a financing dispute with his lender, RBC Bank. Gatt, who is planning on retiring, ended up paying his drivers from his own personal savings after his business accounts were shut down as the dispute went to court.

Luckily for Gatt's drivers, RBC Bank and the courts agreed that he could sell his business to Ready Go, who agreed to buy the company's assets and hire most of Gatt's employees. "When I met Carl, I saw how much he cared about his employees," Ready Go owner and General Manager Ajay Virk told FreightWaves, adding that "we didn't want to see these guys losing their jobs."

While Gatt's story ended on a somewhat happy note, this isn't always the case. Now, more than ever, it's important to get a hold of your cash flow, ensure your accounts receivable are up-to-date, and have a plan should any government programs or subsidies you're using disappear.

Relying on your bank for credit is risky. Instead, consider invoice factoring as a safer way to ensure your expenses are covered. With invoice factoring you'll get paid instantly for your invoices so you can pay your employees and cover expenses. Give the team at J D Factors a call to learn more. Our contactless process means we're able to help your company get control of your cash flow, even during the lockdown.