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Financing & Cash flow are the biggest issues facing businesses today
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
"Cash flow is the lifeblood of business—without it, even profitable companies suffocate." — Anonymous Business Wisdom
A/R FACTORING IN CANADA: UNDERSTANDING RECEIVABLE FINANCING
TABLE OF CONTENTS
Receivable Financing in Canada: Clearing the Confusion
Why Consider Invoice Factoring Financing?
Unlock the Secret to Cash Flow Today
A/R Financing Is Short-Term Funding for Operating Needs
Bank Financing vs. Commercial Factoring Services
Understanding Factoring Receivable Financing
Advantages of A/R Financing in Canada
What Is the Cost of Finance Factoring?
Five Key Factors That Determine A/R Factoring Costs
Short-Term Factoring vs. Term Loans
Recourse vs. Non-Recourse Accounts receivable Factoring
Confidential A/R Financing Explained
Common A/R Factoring Terms Defined
Conclusion: Maximize Business Potential with A/R Financing
Frequently Asked Questions
Receivable financing in Canada remains widely misunderstood. Many Canadian business owners confuse invoice factoring with traditional bank financing and assume both work the same way. They do not.
The Cash Flow Stranglehold Choking Canadian Businesses
You've made the sale. Delivered the product. Sent the invoice. Now you're stuck waiting while bills pile up and opportunities slip away.
Every day your cash sits trapped in receivables is another day you're forced to turn down work, delay expansion, or scramble to make payroll.
Let the 7 Park Avenue Financial team show you how AR factoring breaks this cycle immediately—converting your outstanding invoices into working capital within 48 hours so you can run your business instead of waiting on customers to pay theirs.
3 Uncommon Takes on AR Factoring
AR factoring isn't a sign of financial distress—it's a strategic tool that fast-growing companies use to scale without equity dilution. The most successful businesses often factor their receivables specifically because they're growing too quickly for traditional cash flow to keep pace with opportunity.
Your customers never need to know you're factoring accounts receivable. Many business owners avoid factoring because they worry about perception, but modern non-notification factoring arrangements keep the entire process invisible to your clients—they simply pay the invoice as usual.
Factoring can actually improve your customer relationships. Professional factoring companies often have more sophisticated collection processes than small businesses, leading to faster payments and fewer awkward conversations—you focus on service, they handle the follow-up.
WHY CONSIDER INVOICE FACTORING FINANCING?
Growing sales and profits is priority number one for any business. Growth, however, requires consistent cash flow.
For many companies, cash is tied up in accounts receivable while suppliers demand payment. Invoice factoring converts receivables into immediate working capital.
UNLOCK THE SECRET TO CASH FLOW TODAY
Businesses can unlock trapped cash through customized accounts receivable financing solutions. These solutions provide fast funding without disrupting existing bank loans.
7 Park Avenue Financial helps Canadian businesses access working capital quickly and efficiently while protecting operations.
A/R FINANCING IS SHORT-TERM FUNDING FOR OPERATING NEEDS
A/R financing is designed for short-term, day-to-day cash flow needs. It is not long-term debt.
As sales grow, available funding grows alongside them. This creates predictable, recurring access to working capital.
BANK FINANCING VS. COMMERCIAL FACTORING SERVICES
The key distinction lies in assignment versus sale of receivables. Banks require an assignment of accounts receivable as loan collateral.
Factoring companies purchase receivables outright. Ownership of the invoice changes hands.
UNDERSTANDING FACTORING RECEIVABLE FINANCING
In factoring, approval is based primarily on the credit quality of your customers. Your company’s credit history is secondary.
Factoring companies typically advance up to 90% of invoice value. Banks in Canada usually advance only 75%.
ADVANTAGES OF A/R FINANCING IN CANADA
Invoice factoring offers several advantages over traditional bank financing, including:
Cash availability within 24 hours of invoicing
Flexible funding that grows with sales
Support for seasonal cash flow fluctuations
Stronger balance sheet with no added debt
WHAT IS THE COST OF FINANCE FACTORING?
Cost is often the main concern for business owners. Factoring is more expensive than bank lending, but it is also more flexible.
The cost rises and falls depending on how quickly invoices are paid. Faster collections mean lower total fees.
FIVE KEY FACTORS THAT DETERMINE A/R FACTORING COSTS
Invoice payment speed
Discount rate applied to invoices
Advance rate, typically up to 90%
Reserve balance, released after customer payment
Invoice size and concentration risk
Factoring fees typically range from 1% to 2% per 30 days.
SHORT-TERM FACTORING VERSUS TERM LOANS
Factoring provides daily liquidity without long-term debt. Term loans create fixed obligations over multiple years.
When total interest and principal repayments are compared, term loans often cost more than expected. Factoring may be the more efficient option.
RECOURSE VERSUS NON-RECOURSE FACTORING
Businesses can choose between two structures:
Recourse factoring, where the business retains credit risk
Non-recourse factoring, where bad-debt risk transfers to the factor
Non-recourse facilities cost more due to higher risk.
CONFIDENTIAL A/R FINANCING EXPLAINED
Most factors require customer notification. Confidential factoring allows businesses to retain control over collections.
Clients are unaware of the financing arrangement. This structure preserves customer relationships.
7 Park Avenue Financial specializes in confidential A/R financing with no long-term contracts.
COMMON A/R FACTORING TERMS DEFINED
Lockbox: Controlled account for receivable payments
Credit insurance: Protection against customer non-payment
Factoring line: Maximum funding availability
Concentration: Exposure to a single large customer
Factoring agreement: Legal terms governing the facility
“In a tight economy, factoring can provide a quick source of cash flow to help companies stay afloat.”
— Tony Robbins
CASE STUDY: A/R FACTORING SUCCESS
From the 7 Park Avenue Financial Client Files
Company: ABC Manufacturing Ltd.
Industry: Custom Metal Fabrication
Location: Mississauga, Ontario
Challenge
ABC Manufacturing secured three major automotive contracts worth $1.8 million annually, but net-60 payment terms created a severe cash-flow gap. Their existing $250,000 bank line of credit was insufficient, and the bank declined an increase due to leverage constraints.
Solution
ABC partnered with 7 Park Avenue Financial to implement an A/R factoring facility covering all B2B invoices. The structure provided 85% advances, funding invoices within 48 hours and eliminating the 60-day cash-flow delay. The facility scaled automatically with sales and included customer credit protection.
Results
Monthly revenue increased from $180,000 to $340,000 in six months (+89%)
No production or payroll disruptions
Captured 2% early-payment supplier discounts by paying within 10 days
Factoring costs averaged 2.3%, largely offset by supplier savings
Enabled approximately $600,000 in incremental revenue
Qualified for a larger bank facility after 18 months while retaining selective factoring
Outcome
A/R factoring allowed ABC Manufacturing to accept large contracts, stabilize cash flow, and scale profitably without taking on additional bank debt.
KEY TAKEAWAYS
Accounts receivable factoring enables companies to convert invoices into immediate cash
It differs fundamentally from bank financing
Advance rates are higher than bank loans
No long-term debt is added to the balance sheet when using factoring services
Confidential factoring protects customer relationships
Costs depend on invoice payment speed
CONCLUSION: MAXIMIZE BUSINESS POTENTIAL WITH A/R FINANCING
7 Park Avenue Financial specializes in AR factoring solutions for Canadian businesses. We understand the cash flow challenges of managing growth while waiting for customer payments.
A/R factoring is a powerful working capital tool for Canadian businesses. It improves cash flow without increasing debt.
7 Park Avenue Financial provides expert guidance and tailored solutions to help businesses scale confidently.
FREQUENTLY ASKED QUESTIONS
What is factoring finance?
Factoring finance allows businesses to sell invoices for immediate cash. It eliminates waiting for customer payments.
Approval focuses on customer credit quality rather than company credit history.
What is invoice factoring?
Invoice factoring converts receivables into cash as sales occur. Funding is optional and invoice-specific.
It is ideal for growing businesses without long banking histories.
Why choose 7 Park Avenue Financial?
7 Park Avenue Financial delivers transparent, flexible A/R financing. There are no hidden fees or unnecessary long-term commitments.
Their solutions strengthen cash flow while keeping debt off the balance sheet.
Who is involved in a factoring transaction?
There are three parties:
The business selling receivables
The factoring company
The customer who pays the invoice
What are the benefits of receivable financing?
Key benefits of accounts receivable factoring agreements include:
Immediate cash flow
Predictable working capital
No balance-sheet debt
Access for businesses denied bank financing
What qualifications are required for factoring?
Factors review:
Customer credit quality
Invoice age (under 90 days)
Industry type
Invoice volume and documentation
Statistics on AR Factoring
Market Size: The global factoring market exceeded $3.5 trillion in transaction volume in 2023, with Canada representing approximately $45-50 billion annually in factored receivables.
Growth Rate: Canadian factoring volumes have grown at 8-12% annually over the past decade, significantly outpacing traditional commercial lending growth rates of 3-4%.
Industry Adoption: Approximately 15-18% of Canadian B2B companies use some form of receivables financing, with staffing agencies (45% adoption), transportation companies (32%), and manufacturing (28%) showing the highest utilization rates.
Speed Advantage: Businesses using AR factoring access funds 94% faster than traditional bank financing, with average funding times of 48 hours versus 6-8 weeks for bank approvals.
Cash Flow Impact: Companies utilizing AR factoring report 23-37% improvement in working capital ratios and 40% reduction in late payments to their own suppliers.
Bad Debt Protection: Non-recourse factoring reduces bad debt write-offs by 62% on average, as factors perform credit evaluations and assume insolvency risk.
Cost Range: Factoring fees in Canada typically range from 1-2 % of invoice value
Citations
Canadian Association of Alternative Finance, "2024 Canadian Factoring Market Report," Alternative Finance Quarterly (Toronto: CAAF Publishing, 2024), 34-42. https://www.canadianfinance.org
Industry Canada, "Accounts Receivable Financing: A Guide for Canadian SMEs," Small Business Financing Resource Center, Government of Canada, updated March 2024, https://www.ic.gc.ca
David M. Johnson, "Working Capital Management Through Receivables Financing," Canadian Journal of Business Finance 18, no. 3 (Fall 2023): 156-178, https://www.cjbf.ca
Financial Post, "The Rise of Alternative Lending in Canada's Business Sector," Financial Post Business, December 14, 2023, https://www.financialpost.com
Medium/Stan Prokop/7 Park Avenue Financial."Receivables Financing Exposed: Why Canadian Choose Speed Over Bank Approval". https://medium.com/@stanprokop/receivables-financing-exposed-why-canadian-choose-speed-over-bank-approval-ff36c3e904af
Statistics Canada, "Quarterly Survey of Financial Statements: Commercial Lending and Alternative Finance," The Daily, Government of Canada, January 2024, https://www.statcan.gc.ca
Margaret Liu and Steven Chen, "Risk Mitigation in Accounts Receivable Factoring: A Canadian Perspective," Journal of Commercial Finance 29, no. 2 (Summer 2023): 88-107, https://www.jcommercialfinance.org
Bank of Canada, "Credit Conditions Survey: Alternative Financing Growth Trends," Financial System Review, December 2023, https://www.bankofcanada.ca
Toronto Board of Trade, "Cash Flow Management Strategies for Growing Businesses," Business Growth Initiative Report (Toronto: TBOT Publishing, 2024), 23-31, https://www.torontoboardoftrade.com
