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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
Email = sprokop@7parkavenuefinancial.com
"Cash is king in business. Without it, opportunities pass you by, and eventually, the business suffers or fails." — Marcus Lemonis, CEO of Camping World and host of "The Profit"
Breaking Free from the Cash Flow Waiting Game
You've earned the revenue, but the money sits locked in unpaid invoices.
Every day you wait, opportunities slip away while bills pile up.
Let the 7 Park Avenue Financial team show you how Receivable financing factoring unlocks that trapped cash immediately, turning your invoices into working capital within 24 hours so you can run your business without the constant financial stress.
Accounts Receivable Financing: 7 Key Considerations for Canadian Businesses
Accounts receivable (AR) credit solutions are offered by both established and emerging factoring finance companies in Canada. Businesses can choose from several financing models, but success depends on selecting the right option for cash flow needs. Evaluating these solutions ensures a stronger financial foundation.
AR financing provides working capital to cover daily operating expenses. Instead of paying bank loan interest, firms pay a fee based on invoice value. For example, selling a $10,000 invoice on 30-day terms may cost between $150 and $200.
Factoring typically costs more than bank borrowing, yet it offers higher borrowing power—often up to 90% of invoice value. Most importantly, it converts sales into immediate cash. This flexibility is vital for businesses managing growth and customer credit terms.
Pricing varies widely among Canadian factoring companies. Rates depend on monthly sales volume, client credit quality, invoice age, and additional services. Some lenders even require financing of all receivables, which is often an inflexible option for smaller firms.
It’s important to note that receivables financing is not a loan or equity investment. Instead, it’s cash flow financing directly tied to sales. Like retailers accepting credit cards, businesses receive immediate payment while the finance company assumes collection responsibility.
7 Key Considerations in Choosing Factoring Finance Companies
1. Responsibility for Bad Debts
Determine whether your firm remains liable for unpaid accounts. This factor directly affects overall pricing and risk.
2. Client Profiles
Consider your customers’ industry, size, and location. Lenders evaluate these details to set terms and conditions.
3. Invoice Volume and Days Sales Outstanding (DSO)
High invoice counts increase administration costs. Proving strong collections performance can reduce financing fees.
4. Annual Financing Volume
Some providers prefer clients with several million in annual revenue. A common monthly minimum is around $250,000 in receivables.
5. Specialized Knowledge
Certain factoring firms focus on industries like staffing, manufacturing, or technology. Sector expertise can improve flexibility and approvals.
6. Systems and Technology
Efficient back-office systems ensure faster funding. Verify that your provider uses reliable software and offers responsive service.
7. Collections Approach
Traditional factoring requires customer notification, which may concern business owners. Confidential receivables finance lets you manage billing and collections directly—without client disclosure.
CASE STUDY
Company: Mid-sized freight transportation company in Alberta
Challenge: Company secured several major contracts with large retail distributors, representing a 45% increase in business volume. However, these contracts included 60-day payment terms, while fuel costs, driver wages, and equipment maintenance required immediate payment. The company's bank line of credit was maxed out and couldn't accommodate the growth. Without additional working capital, company would need to turn down the contracts or risk running out of cash within 90 days.
Solution: 7 Park Avenue Financial originated a specialized transportation factoring company. The factor approved a facility within 5 days based on the strong credit quality of the firm's customers. Company began factoring invoices immediately, receiving 90% of invoice value within 24 hours of each delivery. The factoring company also took over credit checking and collections, reducing administrative burden.
Results:
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Immediate Impact: Northern accepted all new contracts without cash flow concerns
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90-Day Results: Revenue increased 47% while maintaining positive cash flow throughout the growth period
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One-Year Results: Northern added 12 new trucks and 18 drivers, expanded into two new provinces, and increased annual revenue by $2.3 million
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Ongoing Benefits: The company maintained the factoring relationship even after qualifying for increased bank lending, valuing the administrative efficiency and funding speed for continued growth
Owner stated: "Factoring saved our company. We had the opportunity of a lifetime but couldn't afford to take it. Within a week, we had the cash flow to say yes to growth instead of watching it go to a competitor."
Key Takeaways
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Accounts receivable financing provides immediate cash from outstanding invoices.
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Factoring costs more than bank loans but offers higher borrowing power.
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Canadian factoring companies vary in pricing, minimums, and requirements.
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Responsibility for bad debts is a critical factor in cost and risk.
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Confidential receivable finance avoids customer notification.
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Specialized industry expertise can improve funding flexibility.
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Strong collections performance lowers overall fees.
Conclusion
Accounts receivable financing in Canada offers powerful solutions for businesses needing cash flow stability. By evaluating these seven considerations, firms can align with the right factoring partner.
Call 7 Park Avenue Financial to ensure you implement the best receivables finance facility for long-term growth.
FAQ
Q: What types of businesses benefit most from receivable financing factoring?
A: It works best for B2B companies selling on credit terms—such as staffing firms, manufacturers, transport/logistics, wholesalers, and service businesses with seasonal cash flow gaps.
Q: How does receivable financing factoring work for a Canadian business?
A: You deliver goods or services, submit invoices to a factor, receive 80–95% in 24–48 hours, and get the balance (minus fees) once your customer pays.
Q: When should a business owner consider factoring?
A: When cash flow gaps prevent filling orders, meeting payroll, buying inventory, or when bank financing is unavailable or insufficient.
Q: Where can Canadian businesses find reputable factoring companies?
A: Through firms like 7 Park Avenue Financial, factoring specialists, industry associations, banks, and referrals from accountants or advisors.
Q: Why do factoring companies focus on customer creditworthiness instead of mine?
A: Because payment comes from your customers. Their reliability matters more than your credit, making factoring accessible to startups and firms with limited credit history.
Q: How much does factoring cost compared to other financing?
A: Typically 1–5% of invoice value, depending on risk, terms, and volume. While higher than bank loans, factoring also covers collections and credit management.
Q: What industries commonly use factoring in Canada?
A: Staffing, trucking, manufacturing, wholesale, oilfield services, construction trades, textiles, and food distribution—all with B2B sales and delayed payments.
Q: How quickly can a business access funds?
A: After setup (3–7 days), first funding arrives in 24–48 hours. Ongoing invoices fund within 1 day, making cash flow predictable.
Q: What’s the difference between recourse and non-recourse factoring?
A: Recourse means you cover unpaid invoices (lower cost). Non-recourse shifts insolvency risk to the factor (higher cost, more protection).
Q: Can factoring be used with other financing?
A: Yes. It complements lines of credit, equipment loans, and term financing, provided agreements don’t conflict with security interests.
How does factoring improve cash flow predictability?
A: It converts 30–90 day waits into near-immediate cash, stabilizing working capital and enabling accurate planning.
Q: What advantages does factoring offer over bank loans?
A: Faster approval, no fixed repayments, funding tied to sales growth, no extra collateral, and built-in credit/collection services.
Q: How can factoring support growth opportunities?
A: It funds larger orders, inventory purchases, staffing, marketing, and market expansion without straining reserves.
Q: Why is factoring valuable for B2B firms with long payment terms?
A: It eliminates the cash gap between paying suppliers and waiting 30–90 days for customer payments, keeping operations running smoothly.
Q: How does factoring reduce administrative burden?
A: The factor handles collections, credit checks, and payment tracking, reducing accounting workload and improving customer relationships.
STATISTICS ON RECEIVABLE FINANCING FACTORING
- Global factoring volume reached $3.5 trillion in 2023, with invoice factoring representing one of the fastest-growing alternative financing methods worldwide. (International Factors Group)
- 82% of small businesses fail due to cash flow problems, with late customer payments being a primary contributing factor. (U.S. Bank Study)
- The average B2B invoice payment time in Canada is 47 days, creating significant working capital pressure for suppliers and service providers. (Atradius Payment Practices Barometer)
- Businesses using factoring grow 30% faster on average compared to similar businesses relying solely on traditional financing methods. (Commercial Finance Association)
- Canadian factoring volume exceeds $60 billion annually, with transportation, staffing, and manufacturing representing the largest user segments. (Industry Canada Reports)
- 73% of businesses using factoring cite improved cash flow predictability as the primary benefit, surpassing even the speed of funding access. (CFA Annual Survey)
CITATIONS
- Commercial Finance Association. The State of the Commercial Finance Industry: Annual Report 2023. New York: Commercial Finance Association, 2023. https://www.cfa.com
- Klapper, Leora. "The Role of Factoring for Financing Small and Medium Enterprises." Journal of Banking & Finance 30, no. 11 (2006): 3111-3130. https://www.worldbank.org
- Soufani, Khaled. "The Decision to Finance Account Receivables: The Factoring Option." Managerial and Decision Economics 23, no. 1 (2002): 21-32. https://onlinelibrary.wiley.com
- Industry Canada. Key Small Business Statistics. Ottawa: Innovation, Science and Economic Development Canada, 2024. https://www.ic.gc.ca
- Atradius. Atradius Payment Practices Barometer: Canada. Amsterdam: Atradius N.V., 2024. https://www.atradius.com
- International Factors Group. Annual Factoring Statistical Review. Brussels: International Factors Group, 2023. https://www.ifgroup.com
- Federal Reserve Bank of Cleveland. "Accounts Receivable Financing: A Primer." Economic Commentary, no. 2016-03 (March 2016): 1-5. https://www.clevelandfed.org
- BDC (Business Development Bank of Canada). Alternative Financing Options for Canadian Businesses. Montreal: BDC, 2024. https://www.bdc.ca
- 7 Park Avenue Financial ."Confidential A/R Finance Factoring - A Business Game Changer" https://www.7parkavenuefinancial.com/factoring-confidential-ar-finance.html
- Medium/7 Park Avenue Financial ."Business Receivable Factoring: Gateway to Predictable Cash Flow"https://medium.com/@stanprokop/business-receivable-factoring-gateway-to-predictable-cash-flow-22bf58ab10a5
