Misconceptions in Factor Finance In Canada . You Just might be wrong when it Comes to A/R Financing In Canada : Here’s Why

OVERVIEW – Information on misconceptions around factor financing in Canada. When it comes to A/R financing and the types of factoring available dos the Canadian business owner/manager recognize the best solutions?

A/R Financing in Canada comes with a lot of misconceptions. We’re not quite sure who starts some of these ‘ untruths’ but we are though quite confident that when it comes to factor finance and the types of factoring in Canada that we can clear up the ‘ mess ‘ in helping the Canadian business owner and financial manager understand this method of financing.

Our goal – making sure you can handle the truth – let’s dig in.

One popular method of financing receivables is of course obtaining Canadian chartered bank facilities – i.e. the ‘ revolving business line of credit ‘. Where misunderstanding occurs is when the owner/ manager assumes this is the same way that Invoice financing supplies your cash flow and working capital. That’s incorrect.

Banks take a collateral security agreement on all your assets, including AR, and allow you to borrow 75% of all your accounts under 90 days on an ongoing basis. Factoring, aka ‘ invoice discounting’ utilizes paperwork that allows you to in effect ‘ sell ‘ your accounts as you generate sales. If you have the right facility in place you borrow 90% against your accounts, not the 75% the bank allows.

A/R finance
is expensive isn’t it? That’s one of the most common statements or questions we get from clients in initial discussion with them on how to finance cash flow. We’ll let you decide that one – Consider this.

Banks have a low cost of capital and financing and borrowing costs are incredibly low – typically in the 4-6 % range per annum on your borrowing needs. The banks offset that low return and rate by taking minimum risk and only granting business credit to firms that have historical and consistent profits, owner equity and positive cash flows. That of course limits both the number of borrowers and the amounts you can borrow under bank lines.

Factor finance costs in Canada are handled in a totally different manner. You pay a ‘ commission’ on all accounts you choose to finance, typically in the 2% range. So on a 10k invoice you would pay 200$ for the right to access cash the same day you invoice. We can already see our clients furiously pounding those calculators to come up with a ‘ financing cost ‘. But consider this:

1. First of all you have access to capital you might not be able to borrow on from a bank

2. You are already being ‘ the bank’ for your customers already, as you carry receivables, at your expense, for 30, 60… and dare we say it, 90 days.

3. Furthermore the cash flow you gain from the right types of factoring allows you to take discounts with your own suppliers, which decreases your total cost of borrowing significantly. And that new found same day cash you achieve with financing A/R allows you to quickly generate more sales and more profits.

Don’t forget also that while many firms consider this newer method of financing your firm as ‘ intrusive ‘ to some degree, that by utilizing our recommended solution: CONFIDENTIAL RECEIVABLE FINANCING , you can run your own business and bill and collect your own receivables, borrowing what you need when you need it

So there you have it – Total (we hope) clarity on a number of issues surrounding factor finance in Canada. Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your account receivable cash flow finance needs.

Author: Stan Prokop – founder of 7 Park Avenue Financial


Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:


Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171


7 Park Avenue Financial
Canadian Business Financing