Unlocking Growth Through Receivables Factoring in Canada
Maintaining liquidity is a top priority for Canadian businesses—especially those in industries like trucking, manufacturing, and staffing where payment cycles often stretch 30, 60, or even 90 days. In such cases, factoring receivables becomes a strategic solution to access working capital quickly, without taking on new debt.
Factoring allows a business to sell its unpaid invoices to a third party (called a factoring company) in exchange for immediate cash—typically within 24 to 48 hours. This not only stabilizes cash flow but enables companies to meet payroll, invest in growth, and cover operational costs without waiting for slow-paying customers.
Understanding How Receivables Factoring Works
Receivables factoring—also known as invoice factoring—is a financial transaction where a business sells its accounts receivable to a factoring company at a discount. The process is simple:
The business submits outstanding invoices to the factoring company.
The factor advances a percentage of the invoice value (typically 80–95%) within 1–2 business days.
Once the customer pays the invoice, the remaining balance (minus fees) is released to the business.
Unlike a loan, factoring is not debt. It’s a sale of an asset (the invoice), making it ideal for companies that need liquidity without affecting their balance sheet.
Why Businesses Turn to Receivable Factoring
Businesses using receivable factoring gain several operational and financial advantages:
Immediate access to cash
No additional debt
Scalable financing tied to sales
Optional credit protection (non-recourse)
When Factoring Loans Receivable Makes Sense
A company might consider factoring loans receivable when:
Experiencing cash flow issues due to extended payment terms
Facing seasonal demand spikes or supply chain delays
Needing capital for payroll, inventory, or expansion
Being ineligible for traditional financing due to limited credit history
For growing firms and startups, factoring provides speed, flexibility, and risk management—without the rigid conditions of bank loans.
Industries That Use the Factoring of Receivables
The demand for the factoring of receivables is strongest in industries with large invoice volumes and slow-paying customers. These include:
Trucking and logistics
Temporary staffing
Manufacturing and distribution
Healthcare services
Construction and contracting
Each of these sectors often faces net-30 to net-90 payment terms, making access to fast capital crucial.
What to Look for in an Accounts Receivable Factoring Company
When selecting an accounts receivable factoring company, consider:
Industry experience
Advance rates and fees
Contract flexibility
Customer service reputation
A reputable factor will tailor terms to your business model, communicate transparently, and offer funding without hidden fees or long lock-in periods.
Key Features to Look For in a Factor
Fast funding (24–48 hours)
Competitive rates (1%–5% typical)
Non-recourse options
Online reporting and account management
Canadian market expertise
How to Start With a Receivable Factoring Company
Submit an application and provide recent invoices.
Get a quote with advance rate and fees.
Sign an agreement and begin funding.
Receive advances and ongoing support.
FAQs
1: Is factoring only for businesses with bad credit?
No. Factoring is based on your customer’s credit, not yours. It’s used by businesses of all credit profiles.
2: How much does factoring typically cost in Canada?
Fees range from 1% to 5% of invoice value, depending on industry, volume, and risk.
3: Will my customers know I’m using factoring?
Yes, as the factoring company manages collections. However, reputable firms maintain professionalism and transparency.
4: Can I factor only some of my invoices?
Yes. Many providers offer selective factoring, allowing you to choose which invoices to submit.
5: Is factoring better than a bank loan?
Factoring is faster and doesn’t add debt. It’s ideal when you need cash flow but don’t qualify—or want to avoid—traditional loans.
6: What’s the difference between invoice factoring and accounts receivable financing?
Factoring involves selling invoices; accounts receivable financing uses invoices as collateral for a loan.
Final Paragraph
Factoring is a fast, debt-free way to turn unpaid invoices into working capital. Whether you’re a small business owner or a financial decision-maker in a growing firm, accounts receivable factoring gives you the agility to stay ahead of cash flow challenges. For more information: factoring receivables
