Account Receivable Financing: Convert Unpaid Invoices to Working Capital | 7 Park Avenue Financial

 

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YOUR COMPANY IS LOOKING FOR  RECEIVABLE FINANCE AND

WORKING CAPITAL SOLUTIONS!

LOOKING FOR THE BEST TYPES OF ACCOUNTS RECEIVABLE FINANCING?

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Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

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CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

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." – Anonymous Business Proverb

 

  

 

CAN YOU HANDLE THE TRUTH ON FACTORING RECEIVABLES?  

 

 

  

The Hidden Cost of Waiting for Payment  

 

 

 

Your invoices represent money you've already earned, but waiting 60 to 90 days for payment creates a dangerous cash flow gap.

 

Equipment needs replacing, payroll comes due, and opportunities pass by while you wait.

 

 

Let the 7 Park Avenue Financial team show you how  Account receivable financing eliminates this gap, converting your outstanding invoices into immediate capital so you can operate without the constant stress of timing your cash flow to customer payment schedules.

 

 

 

A/R financing in Canada comes with many misconceptions. We are not sure who starts these untruths, but we are confident that we can clear up the confusion.

 

 

Factoring—also known as factor finance or invoice financing—deserves a proper explanation for Canadian business owners and financial managers.

 

 

Our goal is simple: make sure you can handle the truth. Let’s dig in.

 

  

 

 

3 UNCOMMON TAKES ON ACCOUNT RECEIVABLE FINANCING  

 

 

 

1. Your customers' creditworthiness matters more than yours – Unlike traditional loans that scrutinize your business credit, account receivable financing decisions center on whether your customers will pay their invoices, opening doors for growing businesses with limited credit history.

2. It's a financing option that grows automatically with your success – Your funding capacity expands as your sales increase because more invoices mean more available capital, creating a financing solution that scales naturally without reapplication hassles.

3. You maintain complete control over customer relationships – In non-notification structures, your clients never know you're using financing, allowing you to access capital while preserving the direct customer connections that built your business.

 

  

 

 

ACCESSING TRADITIONAL BANK FINANCING CAN BE A CHALLENGE  

 

 

 

 

One common method of financing receivables is securing a Canadian chartered bank facility, often called a revolving business line of credit. Misunderstanding occurs when owners assume this works the same way as invoice financing. It does not.

 

 

 

  

QUALIFYING FOR BANK A/R FINANCING — AKA BUSINESS LINES OF CREDIT  

 

 

Banks take collateral over all business assets, including receivables, and typically lend 75% against accounts under 90 days. Factoring, also known as invoice discounting, allows you to sell receivables as you generate sales. With the right facility, you can access up to 90% of your accounts instead of the bank’s lower advance rate.

 

 

What is accounts receivable factoring?
It is the sale of your receivables for immediate cash flow.

 

  

 

 

IS FACTORING EXPENSIVE? YOU DECIDE  

 

 

 

 

Clients often ask whether A/R finance is expensive. The answer depends on perspective. When you sell an invoice, you receive cash the same day—often a more valuable outcome than waiting 30 to 90 days.

 

 

  

 

 

BANK INTEREST RATES  

 

 

 

 

Banks enjoy a low cost of capital, so business borrowing rates often range from 4% to 6% annually. They protect those low returns by lending only to firms with strong profits, owner equity, and predictable cash flow. This limits who qualifies and how much you can borrow.

  

 

 

 

THE TRUTH ABOUT FACTORING COSTS — SPOILER ALERT: IT’S NOT AN INTEREST RATE  

 

 

 

 

 

Factoring fees work differently from bank interest. You pay a commission on the invoices you choose to finance, typically 1.5–2%. On a $10,000 invoice, the fee is roughly $200 for same-day cash access.

 

Before judging the cost, consider the following.

 

 

  

 

3 KEY ISSUES IN FACTORING COMPANY A/R SOLUTIONS  

 

 

 

 

 

• Access to capital: You may obtain funding that banks will not provide.

• You are already the bank: Carrying receivables for 30, 60, or 90 days ties up your cash at your own expense.

• Cash flow leverage: Faster access to working capital allows you to take supplier discounts, reduce overall borrowing costs, and generate more sales.

 

 

 

  

 

WHAT IS THE BEST TYPE OF ACCOUNTS RECEIVABLE FACTORING?  

 

 

 

 

 

 

Some firms view factoring as intrusive.

 

 

However, with confidential receivable financing—the solution recommended by 7 Park Avenue Financial—you continue to bill and collect your own receivables while borrowing only what you need. This structure eliminates customer notification and preserves normal business operations.

 

 

 

 

Business owners can choose between two factoring types:

 

 

• Recourse factoring: You retain credit risk on the receivables.

• Non-recourse factoring: The factor assumes approved credit risk, offering added protection.

 

  

 

 

CASE STUDY — SUMMARY

From The 7 Park Avenue Financial Client Files  

 

 

 

 

Company: ABC Company (Industrial Equipment Parts Manufacturer)

 

 

Challenge:

ABC secured major Fortune 500 contracts that would boost revenue by 45%, but the customers required 90-day terms while suppliers needed payment in 30 days. The bank credit line couldn’t cover the working-capital gap, and traditional financing was too slow and required extra collateral. Without fast capital, ABC risked losing its largest growth opportunity in years.

Solution:

7 Park Avenue Financial provided an accounts receivable financing program advancing 85% of invoice values within 48 hours. Funding focused on the strong credit of the Fortune 500 buyers—not ABC’s balance sheet—and approval was completed in one week. ABC financed only the new contracts and kept full control of operations and customer relationships.

Results:

ABC delivered all contracts on time and secured ongoing orders. Cash flow improved, production delays were eliminated, and revenue from new customers exceeded forecasts by 12% within six months. Stronger liquidity helped them negotiate better supplier terms. After 18 months, ABC qualified for expanded bank financing but continued selective receivable financing to support seasonal and high-growth periods.

 

  

 

 

 

KEY TAKEAWAYS   

 

 

 

 

 

 

• Factoring is not the same as a bank line of credit and offers higher advance rates.

• Banks lend 75% on receivables, while factoring can provide up to 90%.

• Factoring fees are commissions, not interest rates.

• Businesses already fund customers by carrying receivables 30–90 days.

• Faster cash flow enables supplier discounts and additional sales.

• Confidential receivable financing avoids customer notification.

• Companies can choose recourse or non-recourse factoring based on risk preference.

• Factoring helps firms that do not qualify for traditional bank financing.

 

 

  

 

CONCLUSION  

 

 

These insights should provide clarity on factoring finance in Canada.

 

Call 7 Park Avenue Financial,  a trusted and experienced Canadian business financing advisor who understands A/R financing and cash flow needs.

 

 

Invoice factoring is a short-term working capital tool that supports growth and strengthens your balance sheet, and 7 Park Avenue Financial can tailor the right solution for your business.

 

  

 

 

FAQ SUMMARY — ACCOUNTS RECEIVABLE FINANCING  

 

 

1. What financial metrics should businesses review before choosing accounts receivable financing?

Evaluate your average payment cycle, invoice size, customer concentration, and margin spread versus financing costs. Determine how much capital you need immediately and whether the financing cost is justified by working capital gains. Review customer payment reliability and compare all-in fees against alternatives to ensure the solution fits your business model.

2. How do Canadian regulations affect accounts receivable financing?

Receivable financing follows provincial secured-transaction rules, with PPSA registrations creating the lender’s claim on receivables. Quebec uses the Civil Code and a separate registration system. These rules determine creditor priority, affect other borrowing arrangements, and set out what happens to financed receivables in distress or restructuring.

3. What technology does a business need to manage accounts receivable financing efficiently?

Automated invoicing, clear documentation, and reliable submission tools—often lender portals—are essential. Integrated accounting software helps track financed invoices, advances, and customer payments. Businesses using manual systems may need upgrades to avoid administrative delays and maintain accuracy.

4. What growth benefits does accounts receivable financing provide?

Financing grows with your sales, letting you accept larger orders without waiting for customer payment. This prevents cash-flow-based growth limits and removes the need for repeated credit reviews. The model creates a cycle where increased sales generate more funding capacity.

5. How does accounts receivable financing improve cash-flow predictability?

It converts receivables into immediate cash, reducing reliance on variable customer payment timing. This predictability supports planning for payroll, inventory, and operations while reducing the stress of juggling payables around uncertain inflows.

6. Why is accounts receivable financing better than using credit cards for short-term capital?

Credit cards have low limits, high interest, and hurt credit scores when maxed out. Receivable financing offers larger, scalable capital at lower relative cost because it converts an asset—not unsecured debt—into funding. It supports ongoing operational needs rather than small, short-term fixes.

7. What operational flexibility does accounts receivable financing offer?

You can finance only the invoices you choose, paying fees only on needed capital. There are no draw minimums or unused-capacity fees, and you can scale usage up or down with seasonal or operational demands without renegotiation.

8. How does accounts receivable financing help businesses banks consider risky?

Financing decisions focus on customer credit quality, not your company’s financial history. Startups, fast-growing companies, or firms recovering from past issues can still access capital if their customers are strong payers. Funding expands automatically with sales even when banks won’t lend.

 

 

 

 

STATISTICS ON ACCOUNT RECEIVABLE FINANCING

 

 

 

• Canadian small businesses wait an average of 49 days to receive payment on invoices, creating significant cash flow challenges (Statistics Canada, 2023)

• Approximately 82% of small business failures result from poor cash flow management or misunderstanding cash flow dynamics (U.S. Bank study)

• The global factoring market reached $3.7 trillion in 2023, with account receivable financing representing one of the fastest-growing alternative financing segments

• Canadian businesses using account receivable financing report 35% faster growth rates compared to similar businesses relying solely on traditional financing

• Nearly 65% of invoice-based businesses experience payment delays beyond agreed terms, with 23% waiting more than 90 days for payment

• Account receivable financing advances typically range from 70% to 90% of invoice value, with funds available within 24 to 48 hours of invoice submission

 

 

 

CITATIONS

 

 

 

 

1. Canadian Federation of Independent Business. "Payment Practices and Late Payments: Impact on Small Business." CFIB Research, 2023. https://www.cfib-fcei.ca

2. Statistics Canada. "Survey on Financing and Growth of Small and Medium Enterprises." Government of Canada, 2023. https://www.statcan.gc.ca

3. Industry Canada. "Key Small Business Statistics." Innovation, Science and Economic Development Canada, 2024. https://www.ic.gc.ca

4. Bank of Canada. "Credit Conditions Survey Results." Financial System Research, 2024. https://www.bankofcanada.ca

5. Financial Consumer Agency of Canada. "Business Banking and Financing Options." Government of Canada, 2024. https://www.canada.ca/en/financial-consumer-agency

6. Business Development Bank of Canada. "Alternative Financing: A Guide for Canadian Entrepreneurs." BDC Resources, 2024. https://www.bdc.ca

7. CPA Canada. "Financial Management for Growing Businesses." Chartered Professional Accountants of Canada, 2023. https://www.cpacanada.ca

8. International Factoring Association. "Global Factoring Statistics and Market Analysis." IFA Research Department, 2023. https://www.factoring.org

9. Medium/Stan Prokop."The Hidden Financing Solution: Account Receivable Finance for Growing Businesses" . https://medium.com/@stanprokop/the-hidden-financing-solution-account-receivable-finance-for-growing-businesses-79bc87955525

10. Export Development Canada. "Trade Finance Solutions for Canadian Exporters." EDC Financial Products, 2024. https://www.edc.ca

11. Toronto-Dominion Bank. "Small Business Banking Report: Financing Challenges and Solutions." TD Economics, 2023. https://www.td.com

12. 7 Park Avenue Financial ." Finance Factoring Receivable Financing Canada" . https://www.7parkavenuefinancial.com/finance-factoring-receivable-financing-canada.html