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UPDATED 09/29/2025
Financing & Cash flow are the biggest issues facing business today
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
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"Cash flow is the lifeblood of any business. Without it, even the most profitable company can fail." — Richard Branson
Breaking Free from the Cash Flow Waiting Game
Your customers take 30, 60, or even 90 days to pay invoices while your bills arrive daily.
This payment gap strangles growth and forces impossible choices between paying suppliers or meeting payroll.
Let the 7 Park Avenue Financial team show you how Receivables factoring eliminates this waiting period, turning your invoices into immediate cash so you can run your business without constant financial stress.
Canadian payment terms data: Average DSO (Days Sales Outstanding) is 52 days in Canada (Atradius/Equifax reports).
Accounts Receivable Financing Solutions for Canadian Businesses
Accounts receivable credit solutions give Canadian businesses the ability to extend credit sales without straining cash flow. Whether through bank financing or receivables factoring, these options help reduce funding challenges. The right strategy prevents cash flow from becoming a barrier to growth.
Understanding the Cash Flow Gap
Entrepreneurs and finance managers know the challenge well. The gap between delivering a product or service and receiving payment is often 30–60 days. For many firms, traditional bank credit lines are limited or inaccessible.
Factoring Receivables: An Alternative to Bank Loans
Factoring receivables provides an alternative funding source. Multiple options exist, which can confuse business owners and financial managers. Choosing the right program depends on your sales cycle, margins, and customer base.
How Factoring Works
Factoring involves selling receivables instead of pledging them as collateral. The finance provider advances cash based on outstanding invoices. Like bank loans, businesses remain responsible for any bad debt.
Key Benefits of Receivables Factoring
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Speed – Same-day or next-day funding is common.
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Capital Access – Facilities grow with sales volume, unlike capped bank lines.
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Flexibility – Funding adapts to seasonal or growth-driven sales spikes.
Cost Considerations
Factoring is more expensive than bank credit, with typical fees of 1.5%–2% per invoice. On a $10,000 sale, the cost is $150–$200. However, businesses often offset costs by negotiating supplier discounts, reinvesting in growth, or reducing the hidden expense of carrying receivables.
Bank Credit Lines vs. Accounts Receivable Factoring — Key Differences
| Feature / Criteria |
Bank Credit Lines |
Accounts Receivable Factoring |
| Speed of Funding |
Approval can take days to weeks depending on underwriting and documentation. |
Funding is often available same day or next day after invoice approval. |
| Accessible Capital |
Usually capped by lender; increases require re-approval and time. |
Scales directly with invoice volume — facility can grow as sales increase. |
| Typical Cost |
Lower interest rates; fees depend on credit and collateral. Often the cheapest option if eligible. |
Higher transaction fees (commonly 1.5%–2% per invoice) plus service fees in some cases. |
| Collateral / Structure |
Receivables are usually pledged as collateral; the lender holds a security interest. |
Receivables are sold or assigned; the factor advances funds against invoice value. |
| Responsibility for Bad Debt |
Borrower usually retains loss risk unless a non-recourse product is used. |
Most factoring is with recourse; non-recourse factoring is available at higher cost. |
| Customer Notification |
No change — collections remain with the borrower unless otherwise agreed. |
Can be disclosed or confidential. "Confidential factoring" preserves the customer billing relationship. |
| Eligibility |
Requires credit history, financial statements, and sometimes personal guarantees. |
Approval focuses on invoice quality and debtor creditworthiness rather than borrower credit alone. |
| Best Use Cases |
Established companies that qualify for lower-cost capital and want long-term financing stability. |
Companies with strong invoice volumes, rapid growth, or seasonal cash needs that need fast liquidity. |
| Administration & Documentation |
Typically heavier legal underwriting, covenants, and ongoing reporting requirements. |
Requires invoice verification, onboarding and ongoing invoice submission; documentation can be simpler. |
| Impact on Customer Relations |
Minimal if managed in-house; customers continue to pay the business directly. |
Potentially visible if disclosed; confidential factoring avoids notifying customers. |
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Note: Costs, terms, and availability vary by provider and borrower profile. Use this table as a high-level guide. Consult a qualified Canadian business financing advisor such as 7 Park Avenue Financial to determine the right structure for your company.
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Market size: The Canadian factoring industry provides billions in annual funding.
Confidential Factoring Options
Some businesses worry about how factoring affects customer perception. Confidential receivables factoring solves this by allowing companies to manage billing and collections internally. Clients and suppliers remain unaware of third-party financing involvement.
CASE STUDY
Company: Mid-sized transportation company in Ontario
Challenge: Company was experiencing rapid growth, winning contracts with major retailers requiring 60-day payment terms. Despite increasing revenue, the company struggled with cash flow gaps between fuel costs, driver payroll (weekly), equipment maintenance, and delayed customer payments. Traditional bank financing was denied due to the company's heavy existing equipment debt, and they were at risk of declining profitable contracts due to cash constraints.
Solution: Partnered with 7 Park Avenue Financial to implement a receivables factoring program. They began factoring invoices from their creditworthy retail clients, receiving 85% advances within 24 hours of invoice submission. The factoring company also provided credit screening for new potential clients, helping the company avoid risky customers.
Results: Within six months the company increased revenue by 45% by accepting contracts they previously would have declined. Cash flow stabilized completely, eliminating payroll stress and late supplier payments. The company captured early payment discounts from fuel suppliers, saving 2% on fuel costs that partially offset factoring fees. After 18 months, company had built sufficient cash reserves to reduce factoring to selective invoices only, graduating to a hybrid approach that maintained flexibility while minimizing costs.
Key Takeaways
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Accounts receivable financing improves cash flow by advancing payment on invoices.
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Traditional bank credit is often limited, making factoring an attractive alternative.
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Factoring provides speed, scalability, and flexibility but comes at a higher cost.
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Confidential factoring allows businesses to maintain client relationships.
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Professional advice helps secure the best structure and terms.
Client profile: Typical users are SMEs with $500K–$20M annual revenue.
CONCLUSION - EXPERT GUIDANCE MATTERS!
Understanding the mechanics and risks of A/R financing is essential. Not all facilities offer the same terms or benefits.
Call 7 Park Avenue Financial, a trusted Canadian business financing advisor ensures you choose the right solution for sustainable growth.
FAQ
GENERAL Q&A
What is receivables factoring and how does it work for my business?
Receivables factoring lets you sell invoices to a factoring company for immediate cash. You get 70–90% upfront and the balance (minus fees) when your customer pays.
Who qualifies for receivables factoring in Canada?
Qualification depends on your customers’ credit, not yours. B2B firms invoicing creditworthy commercial or government clients—such as manufacturers, distributors, and staffing firms—often qualify.
When should my company consider using receivables factoring?
Factoring is useful during growth, seasonal cash gaps, long customer payment terms, or when bank financing isn’t available.
Where can Canadian businesses access receivables factoring services?
Options include factoring companies, alternative lenders like 7 Park Avenue Financial, certain banks, and sector-specific providers.
Why do profitable businesses use receivables factoring?
Because profits don’t equal cash. Factoring unlocks working capital tied up in invoices without adding debt or giving up equity.
How much does receivables factoring cost compared to other financing?
Factoring usually costs 1–2% of invoice value. Though higher than loans, it includes fast cash, credit checks, and collections support.
How quickly can I access funds through receivables factoring?
Funds are typically available within 24–48 hours, and once set up, often same-day.
What types of businesses benefit most from receivables factoring?
Staffing, manufacturing, transportation, contractors, and B2B service firms with slow-paying customers benefit most.
How does receivables factoring differ from a bank loan or line of credit?
Factoring isn’t debt—you’re selling invoices. Approval is based on customer credit, funding grows with sales, and repayments happen when customers pay.
Can I use receivables factoring if my business has credit challenges?
Yes. Even with poor credit or limited history, you can qualify if your customers are reliable payers.
5 BENEFITS-FOCUSED Q&A
How does receivables factoring improve my cash flow predictability?
It converts uncertain payment timing into consistent cash within 24–48 hours, making budgeting and payroll predictable.
What operational advantages does factoring provide beyond just cash?
It includes credit checks, professional collections, reporting, and freeing staff from chasing payments.
How does factoring support business growth and expansion?
Funding grows with sales, letting you accept bigger orders, extend terms, and invest without loan limits.
Can receivables factoring help me negotiate better terms with suppliers?
Yes. Cash from factoring lets you pay early, earn discounts, and build stronger supplier relationships.
How does factoring protect my business from customer non-payment?
Non-recourse factoring covers losses from customer bankruptcy, while credit monitoring reduces bad-debt risk.
5 Q&A FOR FIRST-TIME READERS
Is receivables factoring considered a loan that adds to my business debt?
No. It’s a sale of receivables, not debt, so your balance sheet isn’t burdened with liabilities.
What happens to my customer relationships when I factor invoices?
Professional factors maintain positive customer interactions, with options for confidential arrangements.
Do I have to factor all my invoices or can I select which ones?
You can choose. Spot and selective factoring give flexibility, while whole-ledger offers better rates.
What industries or invoice types are not suitable for factoring?
Not suited for B2C sales, disputed invoices, unfinished work, or contracts with very long terms.
How do I transition away from factoring if my cash flow improves?
You can reduce or stop factoring with notice, since it’s not long-term debt. Many still use it selectively.
3 DEEPER UNDERSTANDING Q&A
What is the difference between recourse and non-recourse factoring?
Recourse means you cover unpaid invoices; non-recourse shifts risk to the factor, usually at higher cost.
How do factoring companies determine advance rates and fees?
They assess customer credit, invoice volume, payment terms, and industry risk. Advances are 70–90% with 1–5% fees.
Can receivables factoring work alongside other types of business financing?
Yes, with proper structuring. It pairs well with equipment loans or grants, but not with financing that already claims receivables as collateral.
STATISTICS ON RECEIVABLES FACTORING
- The global invoice factoring market was valued at approximately $3.8 trillion in 2023 and continues growing as businesses seek working capital alternatives
- Canadian small and medium-sized businesses report that 70% experience cash flow problems, with slow-paying customers being the primary cause
- The average payment period for B2B invoices in Canada is 49 days, creating significant cash flow gaps for operating businesses
- Businesses using receivables factoring report 30-50% faster growth rates compared to similar companies relying solely on traditional financing
- Approximately 80% of factoring clients continue using the service after their first year, indicating high satisfaction with the solution
- Invoice factoring has grown by 12-15% annually in North America over the past decade as businesses recognize its advantages
- Companies using factoring services report reducing their days sales outstanding (DSO) by an average of 20-30 days
CITATIONS
- Banerjee, Ranjan. "Working Capital Management and Corporate Performance: Evidence from Small and Medium Enterprises." Journal of Small Business Management 52, no. 3 (2014): 567-582. https://www.tandfonline.com/journals/ujbm20
- Industry Canada. "Key Small Business Statistics." Government of Canada, 2023. https://www.ic.gc.ca
- Soufani, Khaled. "The Role of Factoring in Financing UK Small and Medium-Sized Enterprises." Journal of Small Business and Enterprise Development 9, no. 1 (2002): 37-46. https://www.emerald.com/insight/publication/issn/1462-6004
- Canadian Federation of Independent Business. "Small Business Cash Flow Survey Results." CFIB Research, 2024. https://www.cfib-fcei.ca
- Klapper, Leora. "The Role of Factoring for Financing Small and Medium Enterprises." World Bank Policy Research Working Paper Series (2006). https://www.worldbank.org
- International Factoring Association. "Annual Industry Statistics and Trends." IFA Publications, 2023. https://www.factoring.org
- Paul, Soumendra, and Rajib Basu. "Invoice Financing and Its Impact on SME Growth." International Journal of Business Finance Research 14, no. 2 (2020): 89-103. https://www.theibfr.com
- 7 Park Avenue Financial ."Financing Receivables: Complete Guide for Canadian Business Cash Flow Solutions"https://www.7parkavenuefinancial.com/accounts-receivable-factoring-canada.html
- Medium/ 7 Park Avenue Financial "Why Successful Businesses Factor Their Receivables"https://medium.com/@stanprokop/why-successful-businesses-factor-their-receivables-009ba566d5c3
- Linkedin. "Maximizing Cash Flow: Mastering Receivables Factoring" https://www.linkedin.com/posts/7-park-avenue-financial_maximizing-cash-flow-mastering-receivables-activity-7182318097591144448-5E11/
