Commercial Finance Factoring: Get Cash Now

Q: What do factoring companies do?

A factoring company specializes in invoice factoring, or purchasing outstanding invoices from businesses that have slow-paying customers and are looking to boost cash flow. This allows a business to access cash immediately after issuing an invoice, instead of waiting 30-90 days for the customer to pay. Visit: https://www.7parkavenuefinancial.com

Q: Is a factoring company worth it?

Invoice factoring and financing work for business owners who require cash and who can demonstrate they have reliable customers who have a history of paying invoices on time. A company should be able to demonstrate good gross margins to afford the 1-2% factoring fees that come with selling invoices to a third party. Visit: https://www.7parkavenuefinancial.com

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When we meet with Canadian business owners and financial managers to discuss their working capital and cash flow problems and their current financial obligations, customers are either self-financing or requiring cash flow assistance, or their current financing needs do not provide them with the working capital and cash flow they require.

Although invoice factoring has a long history and is the way many businesses acquire short-term capital, a ' factoring loan ' does not bring debt to your balance sheet. Here's what you need to know about most factoring companies in Canada.

The Cash Flow Solution Banks Don't Want You to Know

You've delivered the work, sent the invoice, but payment won't arrive for months. Meanwhile, bills pile up, opportunities slip away, and stress mounts.

Uncommon Takes on Commercial Finance Factoring

1. The Hidden Competitive Advantage: Most businesses view the invoice factoring industry as emergency funding, but savvy companies use it strategically to negotiate better supplier terms by paying cash upfront, often securing 2-5% early payment discounts that offset factoring fees.

2. The Scaling Accelerator: Unlike traditional loans that require collateral and lengthy approvals, factoring grows with your sales automatically - the more you invoice, the more funding becomes available, making it ideal for businesses experiencing rapid growth.

THE CHALLENGE OF ACCESSING BANK FINANCING IN CANADA

Canadian banks as a financial institution, are among the strongest and most successful in the world - part of that reason is their somewhat conservative stance to Canadian business financing -

That conservative stance serves shareholders very well, but certainly doesn’t help small and medium-sized business owners achieve their financing needs.

So, where does your business get the cash flow it needs? Asset based lending solutions provide answers!

Long-term borrowing, i.e. what the finance people call 'term debt' is not the solution for day-to-day operating and working capital needs. Companies generate cash from the 'current assets' portion of their balance sheet. That involves the following asset categories:

And yes, there is a cost and a process, but those costs and that way of doing business can be properly justified with the help of a trusted and credible advisor in this area of Canadian working capital finance.

When we meet with business owners to discuss their working capital needs they must understand their working capital situation and requirements.

You don't need to be a full-fledged chartered accountant to measure your working capital situation and needs.

HOW TO ASSESS YOUR WORKING CAPITAL AND CASH FLOW NEEDS

By taking a few numbers from their financial statements, customers can monitor the level of working capital to fund the business, and make payments on any debt the company has, i.e. loans, leases, etc.

Those calculations are very simple but not always properly understood or monitored by our customers.

For example, determine your current working capital by taking your current assets and subtracting current liabilities - it’s as simple as that. Then monitor this number against the following items:

By -( at least on a monthly basis) - analyzing these very basic numbers will show your trends in your working capital needs and any deterioration that might be setting in.

IS INVOICE FACTORING THE SOLUTION TO YOUR BUSINESS CAPITAL NEEDS?

Well, to this point, we have discussed the problem - Is ' invoice / discount factoring ' the solution?

It can be as long as the business owner understands what it costs and how it works. Would the business owner prefer to access cash immediately on making a sale, or wait 30 days to .. yes.. 90 days to collect a receivable?

The fast application process and fast funding are why thousands of businesses, including your competitors, use third-party a/r finance via invoice factoring companies.

FACTORING COST? HOW MUCH DO FACTORING COMPANIES CHARGE

Factoring works as follows if you have properly structured a facility for your own particular business model and way of doing business. You simply sell, or ‘factor’ accounts receivable invoices as you generate them.

You receive 80-90% of the money immediately, and the balance on paid by your customer.

There is of course, no 'free lunch' in Canada, so a financing fee, or 'discount fee,' is deducted from the funds due you.

In Canada, this can be in the range of 1 to 2 % on average- that is known as the factoring discount.

Your ability to negotiate the best fee and the type of facility that suits your daily paperwork is probably going to come from working with a trusted and credible advisor in this area of Canadian Finance.

RECOURSE VERSUS NON RECOURSE FACTORING

Canadian businesses can choose to maintain their current bad debt and credit risk policy via a standard recourse factoring agreement, or they can choose to access a non-recourse facility, which allows the company to transfer the risk to the factoring company at a higher facility cost.

How Factoring Can Make Your Company More Successful

Understanding the basics of factoring in Canada revolves around understanding why a Higher turnover of receivables, i.e. via factoring, is a great indicator of a successful company.

Your company is in a better position to invest funds, pay creditors in a timely fashion, and grow and profit your business.

If your firm could sell more because it had the working capital to finance receivables and inventory, and purchase more goods, you are turning over assets constantly and generating more profit.

Therefore, the 1-2% cost of the factoring is hardly what the Canadian business owner should focus on.

THE COMPETITIVE ADVANTAGE IS BEING SUCCESSFUL VIA FACTORING SOLUTIONS

You can also extend credit terms to major customers or new potential customers, which becomes a major competitive advantage - like your firm, your customer also views 'cash as king' and will probably reward you with new business.

Offering larger amounts of credit to good customers, with great payment terms, is a great way to increase your competitive presence via the factor companies' solution.

Case Study

The Manufacturing Success Story

An Ontario manufacturer was growing rapidly but struggling with 75-day payment cycles from major automotive clients. Monthly revenue hit $180,000, but cash flow gaps prevented them from purchasing raw materials for new orders.

After partnering with a commercial factoring company, the company began receiving 85% of invoice value within 24 hours of delivery.

The result: The business increased annual revenue by 65% while maintaining healthy profit margins, proving that commercial finance factoring can be a growth accelerator rather than just emergency funding.

CONCLUSION

Want to take your business further with the experts in small business lending in Canada? It's important to know what to look for in a factoring company in Canada!

At 7 Park Avenue Financial, we offer the best factoring company solution to clients - Confidential Receivable Financing - it allows your firm to bill and collect your receivables on a full or selective basis. Talk to our team for more info.

Factoring might not be the solution for every firm in Canada; most certainly, it is not.

BUT - if you can't get the financing you need, it's a solid working capital Canadian alternative.

Call 7 Park Avenue Financial, a trusted business financing advisor, to get the facility that suits your business and needs. Learn the main reasons why factoring is a good choice for your company's growth finance needs.

FAQ: FREQUENTLY ASKED QUESTIONS

A factoring company specializes in invoice factoring, or purchasing outstanding invoices from businesses that have slow-paying customers and are looking to boost cash flow. This allows a business to access cash immediately after issuing an invoice, instead of waiting 30-90 days for the customer to pay

Invoice factoring and financing work for business owners who require cash and who can demonstrate they have reliable customers who have a history of paying invoices on time. A company should be able to demonstrate good gross margins to afford the 1-2% factoring fees that come with selling invoices to a third party.

Commercial finance factoring works best for B2B companies with creditworthy customers, including manufacturers, distributors, staffing agencies, transportation companies, and service providers with invoice amounts typically over $1,000 per transaction.

Factoring speed depends on your setup process, but most established clients receive funds within 24-48 hours of submitting invoices, with initial approvals often completed within one business day.

A Factoring cash advance typically ranges from 70-90% of invoice value immediately, with the remaining balance (minus fees) paid once your customer settles the invoice, varying based on your industry and customer credit quality.

Customer notification varies by factoring type - recourse factoring may require notification, while non-notification factoring keeps the arrangement confidential, though most factors eventually interact directly with customers for payment collection.

Factoring costs typically range from 1-5% of invoice value, influenced by factors like your industry, customer creditworthiness, invoice size, and whether you choose recourse or non-recourse factoring arrangements.

Commercial finance factoring benefits B2B companies with 30-90 day payment terms, seasonal businesses needing consistent cash flow, growing companies requiring working capital, and businesses wanting to outsource credit management functions.

Factoring applications typically require recent financial statements, accounts receivable aging reports, customer lists, sample invoices, and business registration documents to evaluate your company and customer creditworthiness.

Factoring becomes cost-effective when the benefits of immediate cash flow outweigh the fees, particularly during growth phases, seasonal fluctuations, or when early payment discounts from suppliers exceed factoring costs.

Canadian businesses can find factoring through industry associations, bank referrals, online directories, and specialized financial brokers like 7 Park Avenue Financial, who understand the Canadian commercial lending landscape.

Factoring approval focuses on your customers' creditworthiness rather than your business credit, provides faster access to funds, requires no collateral, and grows automatically with your sales volume.

Daily factoring/sales ledger financing of invoices involves submitting approved invoices to your factor, receiving immediate advance payments, notifying customers of the assignment, and receiving remaining balances once customers pay the factoring company.

Manufacturing, transportation, staffing, wholesale distribution, and professional services benefit significantly from factoring due to longer payment cycles and the need for consistent working capital to operate effectively.

Businesses should avoid factoring when customer credit quality is poor, invoice amounts are too small to justify fees, payment terms are already very short, or when traditional financing options are more cost-effective.

Factoring provides maximum benefit during the accounts receivable period, transforming the 30-90 day wait into immediate working capital that can be reinvested in operations, inventory, or growth opportunities.

Successful companies use factoring long-term because it provides consistent cash flow predictability, professional collections management, credit protection through non-recourse options, and scalable funding that grows with business expansion.

Commercial finance factoring creates predictable cash flow by converting uncertain payment timing into scheduled funding, allowing you to plan operations, meet payroll consistently, and take advantage of growth opportunities without cash flow constraints.

What competitive advantages does factoring provide over waiting for payments?

Factoring enables early payment discounts with suppliers, faster inventory turnover, improved vendor relationships through prompt payments, and the ability to accept larger orders without cash flow concerns that competitors might decline.

Receivable Factoring smooths seasonal cash flow variations by providing consistent funding regardless of collection timing, with this financial transaction enabling businesses to maintain operations during slow periods and capitalize on peak season opportunities without traditional lending constraints. Supply chain financing challenges can often be addressed with this type of Canadian business financing, as can freight factoring challenges or the need for purchase order financing.

Non-recourse factoring transfers bad debt risk to the factoring company when your company sells an invoice, protecting your business from customer insolvency or payment default while still providing immediate cash flow from creditworthy receivables.

Factoring supports growth by providing scalable funding that increases with sales volume, enabling businesses to accept larger contracts, expand operations, hire additional staff, and pursue opportunities without traditional lending delays or restrictions.

Commercial finance factoring differs from loans because you're selling your invoices rather than borrowing money, with approval based on customer creditworthiness instead of your business credit, and no debt appearing on your balance sheet.

Government invoice factoring is possible and often preferred by factors due to the reliable payment history of government entities, though processing times may be longer, and specific compliance requirements may apply.

Invoice disputes in factoring require resolution between you and your customer first, with the factoring company typically holding funds until disputes are resolved, emphasizing the importance of clear invoicing and delivery documentation.

Factoring flexibility varies by provider, with some requiring all invoices from approved customers while others allow selective factoring, giving you control over which receivables to convert to immediate cash.

Factoring agreements from an invoice factoring providers typically range from month-to-month to multi-year contracts, with cancellation terms varying by provider, though most reputable factors offer reasonable exit provisions without excessive penalties.

Commercial finance factoring recourse from an invoice financing company simply means you're responsible if customers don't pay, while non-recourse transfers that risk to the factoring company for approved invoices, with non-recourse typically costing more but providing credit protection.

Factoring evaluation focuses on your customers' payment history, credit ratings, financial stability, and industry reputation rather than your business credit, with factors often maintaining databases of business payment behaviours and creditworthiness.

What's the total cost comparison between factoring and other financing options?

Factoring costs from invoice factoring providers include discount rates (1-2% of invoice value) plus any additional fees in the factoring contract, which, when annualized, may exceed traditional loan rates but provide immediate access, no collateral requirements, and built-in credit management services to assist with the company's cash flow.

Citations

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR: Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

Commercial Finance Factoring: Cash Flow Solutions for Canadian Business Owners | 7 Park Avenue Financial

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