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ACCOUNTS RECEIVABLE FINANCING OPTION
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
"Cash flow is the lifeblood of any business. Without it, even profitable companies can fail." — Richard Branson, Founder of Virgin Group
RECEIVABLES FINANCING: HOW CANADIAN BUSINESSES BOOST CASH FLOW FAST
The Hidden Cost of Waiting for Payment
Your customers take 60 days to pay while your suppliers demand payment in 15.
That gap doesn't just strain operations—it kills opportunities, damages vendor relationships, and forces you into expensive alternatives.
Receivables financing converts those outstanding invoices into immediate cash, eliminating the waiting game that's holding your business back.
2 Uncommon Takes On A/R Finance
Your rejection from the bank might be your best advantage: Traditional lenders assess your debt and credit history; receivables financing evaluates your customers' creditworthiness, meaning your past financial struggles become irrelevant if you're serving creditworthy clients.
The cost comparison everyone gets wrong: Businesses compare receivables financing fees to loan interest rates, but the real comparison should be against lost opportunities, rush shipping charges, supplier discounts you can't access, and the administrative cost of chasing payments yourself.
Receivables financing companies deliver essential cash flow solutions to Canadian businesses of all sizes. These firms help convert unpaid invoices into immediate working capital. That speed makes receivable funding a powerful tool for B2B companies that need liquidity to grow.
THERE IS NO SHUTDOWN IN CANADIAN RECEIVABLE FINANCING -
Despite headlines about business shutdowns, receivables financing in Canada continues to operate at full strength. Invoice factoring solutions remain accessible, reliable, and growth-focused. For many firms, these facilities offer faster approval than any traditional loan.
FACTORING HAS BEEN AROUND FOR CENTURIES
Factoring is often viewed as a modern innovation, but it has been used globally for hundreds of years. The core concept is simple: leverage your receivables as collateral to unlock immediate cash. When structured properly, the receivables financing process / asset based lending solution creates a predictable and ongoing source of liquidity.
WHY YOUR OPERATING CYCLE MATTERS
Receivables financing / Invoice discounting shortens the time it takes for a dollar to move through your business. Faster cash conversion for your company's accounts receivable means stronger liquidity and better financial flexibility. Improved operating cycles also reduce reliance on term loans or credit cards in areas such as supply chain finance.
THE COST OF RECEIVABLES FINANCING
The cost to secure financing via accounts receivable depends on the provider:
Banks: Charge annual interest rates on lines of credit secured by A/R.
Non-bank factors: Use a short-term “discount fee” for invoice financing charged on each invoice.
Both: Provide funding based on the quality of your customer base and speed of payment.
Factoring fees are often mistaken for interest charges, but they function differently. When you factor an invoice, you are selling it at a discount, not borrowing against it. The result is a stronger balance sheet, as receivables convert directly into cash.
HOW FACTORING COMPARES TO BANK LINES
Banks advance roughly 75% of receivables, while invoice factoring companies / a/r service providers often advance up to 90%. The remaining amount is released once the customer pays. Higher advance rates help companies improve cash flow without increasing long-term debt.
Key advantages include:
Immediate access to cash to retire accounts payable
Access early payment for Predictable working capital
No additional collateral required beyond receivables invoice value
Flexibility as sales volumes increase
ASSIGNMENT VS. SALE OF RECEIVABLES
Two structures dominate the Canadian market for the financing of extending credit :
Secured borrowing: Banks / financial institutions take an assignment of receivables.
Factoring: You sell your receivables outright to a third party factor.
Both rely on the strength of your customer base, payment terms, and A/R turnover.
WHY FACTORING IS POPULAR WITH BUSINESS OWNERS
Factoring eliminates the 30–90 day payment cycle. Companies receive working capital immediately after issuing an invoice. This liquidity supports day-to-day operations and reduces pressure on internal cash reserves.
HOW FACTORING AFFECTS THE BALANCE SHEET
Some of the world’s largest corporations sell their receivables through structured programs known as securitization. Small and mid-sized firms can access similar benefits through:
Recourse factoring (you absorb the credit risk)
Non-recourse factoring (the factor absorbs most credit risk)
Traditional factoring often involves the factor managing billing and collections.
At 7 Park Avenue Financial, we recommend Confidential Receivable Finance, which keeps your receivables management private and fully under your control while still delivering immediate funding.
Case Study: How Receivables Financing Helped ABC Manufacturing Win a Major Contract
From The 7 Park Avenue Financial Client Files
ABC Manufacturing, an industrial equipment producer, secured a $500,000 mining contract but lacked the $200,000 required for materials and labor. Their bank offered only a $75,000 credit increase, and the client’s net-60 terms created a cash flow gap that threatened the opportunity.
By partnering with a receivables financing company, ABC accessed a $400,000 facility tied to existing receivables and new contract milestones. They received 85% advances confidentially, giving them the working capital needed for production without alerting the customer.
The company completed the project profitably, generated $462,500 in total advances, and turned a $32,000 net profit after fees. The success led to an additional $1.2M in orders and helped ABC grow from $2M to $4.5M in annual revenue within 24 months—while gaining the confidence to pursue larger, capital-intensive contracts.
KEY TAKEAWAYS
Receivables financing converts invoices into fast working capital.
Factoring provides higher advance rates than bank credit lines.
Discount fees differ from traditional loan interest charges.
Confidential receivable financing protects customer relationships.
Shorter operating cycles lead to better cash flow and business stability.
Ideal for B2B companies with slow-paying customers.
Funding grows automatically as sales increase.
CONCLUSION
Receivables financing is one of the most effective cash flow tools available to Canadian small and mid-sized businesses.
If your firm needs faster access to working capital, call 7 Park Avenue Financial , a trusted and experienced business financing advisor who understands A/R funding solutions. The right strategy can strengthen liquidity and support long-term business growth.
FAQ / FREQUENTLY ASKED QUESTIONS: Receivables Financing
How does receivables financing improve cash flow predictability?
Receivables financing turns uncertain customer payment timelines into immediate, reliable funding. Instead of waiting 30–90 days, businesses receive cash within 24 hours of invoicing, creating steady, predictable working capital. This stability helps with budgeting, scheduling payments, and managing seasonal fluctuations.
Can receivables financing help my business grow faster?
Yes. Faster cash access allows companies to accept larger orders, fund inventory, and invest in marketing without waiting for customer payments. Many businesses experience 20–40% faster growth because they can take on more projects and negotiate better supplier terms.
Does receivables financing reduce the administrative burden of collections?
It can. Full-service factoring handles collections, credit checks, and follow-ups, reducing internal workload. Even confidential or partial-service programs streamline admin through online portals and automated reporting, cutting manual reconciliation and payment tracking time.
How does receivables financing affect supplier relationships?
Stronger cash flow enables on-time or early supplier payments, improving trust and increasing negotiating power. Businesses can secure early-payment discounts, volume pricing, and better terms—often shifting from COD to extended trade credit.
What flexibility does receivables financing provide compared to traditional loans?
Funding automatically increases with sales, requires no fixed repayment schedule, and does not add long-term debt to your balance sheet. You can choose which invoices to finance and use the facility only when needed, making it ideal for seasonal or fast-growing businesses.
Statistics on Receivables Financing
The global receivables financing market exceeded $3.2 trillion in 2024, with Canada representing approximately $85-95 billion of that total market.
Canadian businesses carry an average of 45-60 days in outstanding receivables, tying up approximately 15-20% of annual revenue in unpaid invoices at any given time.
Studies show that 82% of small business failures are attributed to cash flow problems, with delayed customer payments being a primary contributing factor.
Businesses using receivables financing report 25-35% faster growth rates compared to similar companies relying solely on traditional bank financing.
The average advance rate in Canadian receivables financing programs ranges from 80-90%, with fees typically between 1-5% monthly depending on invoice terms and customer creditworthiness.
Approximately 60% of staffing agencies in North America use some form of receivables financing to manage the gap between weekly payroll and 30-60 day client payment terms.
Canadian businesses that switched from bank lines of credit to receivables financing cited approval speed (average 5-7 days vs 45-60 days) as the primary decision factor in 68% of cases.
Citations
- Industry Canada. "Canadian Small Business Financing Data." Innovation, Science and Economic Development Canada, 2024. https://www.ic.gc.ca
- 7 Park Avenue Financial ." Accounts Receivable Financing and the Cost of Factoring" .https://www.7parkavenuefinancial.com/accounts-receivable-financing-cost-of-factoring.html
- Canadian Federation of Independent Business. "Cash Flow Management in Canadian SMEs: 2024 Survey Results." CFIB Research, 2024. https://www.cfib-fcei.ca
- Bank of Canada. "Credit Conditions Survey: Business Lending Trends." Bank of Canada Publications, 2024. https://www.bankofcanada.ca
- Medium/Stan Prokop."Cash Flow Based Financing Solutions: Key Benefits & Issues". https://medium.com/@stanprokop/cash-flow-based-financing-solutions-key-benefits-issues-bec25dab6fe1
- Statistics Canada. "Quarterly Financial Statistics for Enterprises." Statistics Canada, Table 33-10-0225-01, 2024. https://www.statcan.gc.ca
- BDC (Business Development Bank of Canada). "Working Capital Management: A Guide for Canadian Entrepreneurs." BDC Knowledge Centre, 2024. https://www.bdc.ca
- International Factoring Association. "Annual Factoring Industry Volume Report: Canadian Market Analysis." IFP Publications, 2024. https://www.factoring.org
- Export Development Canada. "Trade Finance Solutions for Canadian Exporters." EDC Resources, 2024. https://www.edc.ca
- Substack / Stan Prokop/7 Park Avenue Financial."Unlocking the Power Of Business Financing Cash Flow: Cutting-Edge Business Finance Solutions".https://stanprokop.substack.com/p/unlocking-the-power-of-business-financing?r=2ovmjk&utm_campaign=post&utm_medium=web&triedRedirect=true
