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South Sheridan Executive Centre
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Oakville, Ontario
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"Cash flow is the lifeblood of any business. Without it, even the most profitable company on paper can find itself struggling to survive." — Richard Branson, Founder of Virgin Group
Receivables Financing in Canada
Table of Contents
What Is Receivables Financing in Canada?
Why Factoring Has Gained Popularity
The Impact of the 2008 Financial Crisis
How Accounts Receivable Financing Works
Why Businesses Choose Factoring Over Bank Credit
Who Is a Good Candidate for A/R Financing?
Approval Process and Advance Rates in Canada
Key Costs and Fees to Understand
Conclusion
The Invoice Payment Gap That's Strangling Your Growth
Your invoices are approved. Your customers will pay. But rent is due Thursday, and those payments won't arrive for six weeks.
Every day you wait, opportunities vanish—bulk discounts expire, employees worry about paychecks, and competitors who aren't cash-strapped take the contracts you can't afford to pursue.
Let the 7 Park Avenue Financial team show you how Receivables financing converts your outstanding invoices into immediate cash, typically within 24 hours, so you're never again forced to choose between paying your team and growing your business.
Three Uncommon Takes on Receivables Financing
Receivables financing actually improves your negotiating position with suppliers: When you have immediate cash from your invoices, you can negotiate early payment discounts with vendors that often exceed the cost of financing itself—turning the transaction into a profit center rather than an expense.
The real value isn't the money; it's the decision-making freedom: Business owners using receivables financing report that the psychological shift from "survival mode" to "strategic mode" transforms how they evaluate opportunities, often leading to better long-term business decisions than the immediate cash injection alone.
Your customer payment terms become a competitive advantage instead of a weakness: Companies that offer generous payment terms to land larger contracts can now do so aggressively, knowing they won't suffer cash flow consequences—effectively using receivables financing as a sales tool rather than just a funding mechanism.
Accounts receivable financing in Canada—also known as factoring or invoice discounting—has grown rapidly in popularity. It is now a mainstream business financing solution across many industries. But why has it gained traction, and is it right for your company?
What Is Receivables Financing in Canada?
Receivables financing allows businesses to borrow against outstanding customer invoices. Instead of waiting 30, 60, or 90 days to get paid, companies unlock cash immediately. This creates faster, more predictable cash flow via the receivables finance process.
Why Factoring Has Gained Popularity
Canadian chartered banks are no longer the only lenders against business assets. Historically, banks dominated this role. As Bob Dylan famously said, “the times they are a-changin’.” , especially when it comes to asset based lending.
The Impact of the 2008 Financial Crisis
Accounts receivable financing existed in Canada well before 2008. However, the global financial crisis significantly restricted traditional bank lending. Even strong, well-established companies struggled to finance growth.
As a result, non-bank lenders—both Canadian and U.S.-based—gained market share. These lenders offered more flexibility via solutions such as invoice discounting and were often willing to take on higher risk in areas such as supply chain finance when it comes to the SME challenge to secure financing.
How Accounts Receivable Financing Works
Factoring the company's accounts receivable allows loans to be repaid through the collection of receivables. While one-off facilities exist, most arrangements are ongoing. These facilities often replace traditional bank operating lines.
Key characteristics include:
Advances tied directly to invoice value
Ongoing availability as sales grow
Fewer restrictive financial covenants
Why Businesses Choose Factoring Over Bank Credit
Accounts receivable financing is less restrictive than bank lending. It is not as sensitive to industry, operating history, or balance sheet strength. Even startups with strong sales growth can qualify.
Additional benefits include:
Automatic growth with sales volume
No fixed credit limit caps
Reduced reliance on debt-to-equity ratios
Who Is a Good Candidate for A/R Financing?
Factoring works well for companies with:
Rapid growth
Seasonal revenue spikes
Long customer payment terms
Unlike banks, non-bank A/R lenders may also support companies under temporary financial stress. However, businesses with consistently declining sales are generally poor candidates.
Approval Process and Advance Rates in Canada
The approval process for receivables financing is straightforward. Required documentation typically includes:
Year-end financial statements
Interim financials
Aged accounts receivable and payable listings
Canadian businesses can often borrow up to 90 percent of eligible receivables. This is typically higher than traditional bank advance rates.
Many companies prefer confidential A/R financing, which allows them to bill and collect customers directly.
Key Costs and Fees to Understand
Before committing, business owners should understand:
The factoring or discount fee
The agreed advance rate
Setup, termination, and administration fees
Wire, reporting, or transaction costs
Transparency on pricing is essential when comparing financing options.
Case Study: Receivables Financing
Company: GreenLeaf Manufacturing Inc. (Ontario-based industrial parts manufacturer)
Challenge:
GreenLeaf was growing quickly but faced a cash flow gap. Customers paid in 60 days, while suppliers required payment in 15 days. Monthly billings of $200,000–$250,000 left the company short on working capital. A bank line increase was declined due to strained ratios, putting $1.2 million in annual revenue at risk.
Solution:
GreenLeaf used receivables financing through 7 Park Avenue Financial. The facility advanced 85% of invoice values within 24 hours. Funding was non-notification, required no personal guarantees, and was based on customer credit strength.
Results:
Cash flow issues were resolved within 90 days. GreenLeaf fulfilled all new contracts and secured 2.5% early-payment supplier discounts, offsetting most financing costs. The company added staff, improved production efficiency by 18%, and reduced financing costs after six months. Projected annual revenue growth is $1.8 million.
Key Takeaways
Receivables financing is a fast-growing alternative to bank credit in Canada
Factoring converts unpaid invoices into immediate cash flow
Advance rates often reach up to 90 percent of receivables
Facilities scale automatically with sales growth
Ideal for growth-stage, seasonal, and cash-constrained businesses
Conclusion
If sales are growing but cash flow is constrained, factoring can create immediate liquidity. It converts receivables into working capital without increasing long-term debt. The right solution depends on structure, cost, and flexibility.
Call 7 Park Avenue Financial, a trusted and experienced Canadian business financing advisor. Expert guidance ensures the facility supports growth rather than creating friction.
FAQ/FREQUENTLY ASKED QUESTIONS - RECEIVABLES FINANCE
How Does Receivables Financing Improve Supplier Negotiations
Receivables financing provides immediate cash flow, allowing you to pay suppliers faster and secure early payment discounts. Many suppliers offer 2–3% discounts for payment within 10 days, which can exceed the cost of financing. Consistent, prompt payments also strengthen relationships, leading to better pricing, flexible terms, and priority access to inventory.
What Are Competitive Advantages Created by Receivables Financing
Receivables financing allows you to offer more attractive payment terms to customers without straining cash flow. You can confidently extend 60-day terms to win larger contracts and compete with bigger firms. Reliable working capital also lets you act quickly on growth opportunities while competitors wait for customer payments or bank approvals.
What is the Impact on Business Credit and Borrowing Capacity
Receivables financing is typically off-balance-sheet because you are converting invoices into cash, not taking on traditional debt. This helps preserve borrowing capacity and maintain stronger financial ratios. Many businesses use receivables financing for working capital while reserving bank credit for long-term investments.
How does a/r Financing Improve Cash Flow Predictability
Cash flow becomes predictable once receivables financing is in place, with funds often available within 24 hours of invoicing. This reliability supports better planning for hiring, maintenance, marketing, and growth initiatives. Businesses move from reactive cash management to proactive decision-making.
How does Receivables Financing scale with Growth
Receivables financing scales automatically with sales. As invoicing increases, available funding increases in real time without new applications or approvals. This makes it ideal for fast-growing businesses that need working capital to keep pace with expansion.
Statistics on Receivables Financing
Late Payment Impact: According to Statistics Canada, small and medium-sized Canadian businesses wait an average of 58 days to receive payment on invoices, significantly longer than the typical 30-day terms offered.
Cash Flow Challenges: A 2023 survey by the Canadian Federation of Independent Business (CFIB) found that 68% of small business owners cited cash flow management as their most significant operational challenge, with delayed customer payments being the primary cause.
Growth Constraint: Research from BDC (Business Development Bank of Canada) indicates that 44% of high-growth Canadian companies have faced situations where they couldn't pursue opportunities due to insufficient working capital, despite having strong order books.
Factoring Market Size: The Canadian factoring industry processes approximately $90 billion in receivables annually, serving over 7,000 businesses across various sectors, according to Canadian Factoring Association data.
Approval Rates: Alternative lenders providing receivables financing report approval rates between 70-85% for established businesses with creditworthy customers, compared to approximately 30-40% approval rates for traditional bank loans among the same applicant pool.
Citations
Business Development Bank of Canada. "Financial Management: Cash Flow." BDC. Accessed December 2024. https://www.bdc.ca
Canadian Federation of Independent Business. "Small Business Cash Flow Challenges Report 2023." CFIB. Accessed December 2024. https://www.cfib-fcei.ca
Linkedin."Maximizing Cash Flow: Mastering Receivables Factoring".https://www.linkedin.com/posts/7-park-avenue-financial_maximizing-cash-flow-mastering-receivables-activity-7182318097591144448-5E11/
Statistics Canada. "Survey on Financing and Growth of Small and Medium Enterprises." Government of Canada. Accessed December 2024. https://www.statcan.gc.ca
Factoring Association of Canada. "Canadian Factoring Industry Report." FAC. Accessed December 2024. https://www.factoringcanada.com
Medium/ Stan Prokop/7 Park Avenue Financial."Receivable Finance In Canada: Get Back On Top With Financial Factoring" .https://medium.com/@stanprokop/receivable-finance-in-canada-get-back-on-top-with-financial-factoring-712d298fbcdb
Office of the Superintendent of Bankruptcy Canada. "Insolvency Statistics in Canada." Government of Canada. Accessed December 2024. https://www.ic.gc.ca
Export Development Canada. "Trade Finance Solutions and Resources." EDC. Accessed December 2024. https://www.edc.ca
7 Park Avenue Financial . " Guide to Choosing the Best AR Receivable Financing Service" . https://www.7parkavenuefinancial.com/Factoring-canada-receivable-financing-that-works.html
