Factoring Companies in Canada: 8 Best Options for Business Funding
Most business owners would agree that securing swift and adaptable financial stability can often hinge on tools like invoice factoring. By focusing on this cash flow solution, companies can overcome the challenges caused by slow-paying customers, converting outstanding work into accessible liquid capital. Especially for those in niche sectors like the freight industry or the construction industry, where cash flow can be irregular, factoring emerges as a valuable bridge to maintain operational smoothness, without the hurdles typical of mainstream financial institutions.
In Canada, there’s a considerable number of factoring providers each with their own specializations and amazing customer service. But before we deep-dive into exploring these invoice factoring providers in Canada, it’s important to grasp the foundational aspects of invoice factoring and the key attributes to prioritize when evaluating the right service provider for your needs.
What Is Factoring?
Invoice factoring is a form of cash advance where a business owner sells unpaid invoices to a factoring provider for an immediate source of funds. The business owner gets liquid capital for the invoice amount, usually after deducting any factor fee, ahead of the payment terms. The business owner’s commercial client, who has the responsibility of settling the invoice, then pays the factoring company directly according to the original payment terms.
Invoice factoring is also known by the terms accounts receivable factoring or receivable financing. (It’s vital to highlight that this differs from invoice financing, where a service provider or factoring company still offers a business owner cash for their invoice, but the business owner repays the invoice amount themselves, plus a fee.)
How does factoring work?
While the world of financing options is vast, factoring stands out as an efficient financing device. Every factoring company has its own unique aspects, but most factoring companies operate in a similar fashion. This is more or less what you can expect when you factor an invoice.
- Business owner submits outstanding invoices for funding. Traditional invoice factoring companies often bind businesses with annual contracts where they must factor all invoices. With many newer companies, you can choose which invoices you want to fund. (Full disclosure: FundThrough lets you pick which invoices to fund with no minimum, no maximum amounts, and no long-term contracts.)
- Factoring company does due diligence. Oftentimes this will include checking bank statements to ensure that a business is legally established, is up-to-date on taxes, and doesn’t have liens on their accounts receivable and/or the specific invoice. Several invoice factoring providers, notably those catering to niche sectors like the freight industry or construction industry, attempt to work alongside businesses despite these challenges. In this stage, the factoring company also assesses the credit strength and validity of the invoice to ensure its authenticity.
- The business’ customer is asked to sign an NOA. Having the customer owing the invoice sign a Notice of Assignment means they understand that the factoring company now owns the invoice so they can redirect payment. While a lot of business owners get concerned about their customers being involved, many large companies are used to this process.
- The business owner gets funded. The business owner receives cash in their bank account, less a fee (or, the invoice factoring cost). They can now have peace of mind that they have cash available to grow their business or cover any other cash flow gap. (This is our favorite part!)
- The customer pays the factoring company according to the invoice terms. When the invoice is due, the customer pays the factoring company, and the funding process is complete.
Types of factoring
There are a couple of different ways factoring is classified. The first is based on how you use factoring as a financing tool:
1. Whole turnover: You sell your invoices to a third-party that advances you a percentage (typically 70-80%) and pays you the rest, minus their service charge, when they collect from your client.
2. Selective: You have an ongoing relationship with the third-party factoring company that allows you to choose which invoices to fund and when.
3. Spot factoring: Occasionally, you might need to tap into liquid capital via an invoice factoring provider promptly to address a cash flow predicament.
The second way invoice factoring is classified refers to the structure of your agreement with the factoring company:
1. Factoring with recourse: With this form of factoring, you shoulder the credit risk. If the invoice isn’t settled by your client, you’re accountable for repaying the advanced amount to the factoring company.
2. Factoring without recourse:With non-recourse factoring, the liability of an unpaid invoice transfers to the factoring company. This means you are not responsible for unpaid invoices.
Pros of factoring
There are a wide variety of advantages of factoring, including:
- Debt-free funding (invoice factoring is not a loan!)
- Non-dilutive capital.
- Unlimited access to capital.
- Much faster turnaround time than bank financing.
- Save time without having to chase accounts receivable.
Cons of factoring
Like any financing method, factoring isn’t perfect. Here are the main perceived disadvantages of factoring invoices:
- Invoices need to be verified, so customer contact is sometimes required. (See how we work to maintain your relationships with customers if this worries you.)
- Can be complicated to account for in bookkeeping. (Here’s how to record factoring transactions, step by step.)
- Some factoring companies charge hidden fees, such as a service fee or minimum volume fee. At FundThrough, we don’t charge any hidden fees. See our pricing page for more on what you can expect to pay for invoice funding.
Get more info on invoice factoring advantages and disadvantages.
What does factoring cost?
Every invoice financing company uses their own factoring accounts receivable formula, and it’s important to recognize how dollar amounts can affect your decision. We can only speak for FundThrough. With us, funding rates range between 2.5% per 30 days or 6% over 12 weeks, depending on which option you choose.
Unlike other factoring service providers or financial institutions, with FundThrough, what you see is what you get. There are no hidden fees like account set up fees, ACH fees, or processing fees. Furthermore, you won’t find any termination fees that can come as an unpleasant surprise with some providers. There’s also no minimum (or maximum) monthly volumes for access to funds, and no long-term commitments after the invoice is settled.
This is why it’s crucial to do your research when checking out freight factoring companies or other industry-specific factoring options. You should understand the annual revenue implications, overall total costs, and be vigilant of any extra charges beyond the factor fee or any rate that impacts your income statement.
At FundThrough, our AI-driven technology allows us to offer highly competitive invoice factoring rates.
What Businesses Qualify for Factoring?
Businesses of various credit strengths and sizes can qualify for factoring, making it an essential credit service for those looking for alternative funding solutions. Whether a company has a perfect credit score or is still building its financial reputation, factoring is accessible. Small businesses use invoice factoring, as well as larger corporations. Factoring is a common practice in the freight industry, staffing industry, oil and gas industry, and other industries
What Is a Factoring Company?
An invoice factoring company – also sometimes called a factor – is a company that provides invoice factoring services. They’ll advance the invoice amount (minus any fees) and wait to collect on the original invoice terms from the original customer.
What to Look for in a Factoring Company
The best factoring company in the gives you access to quick funding when you need it, often within a business day, that suit your needs. Each company will require certain steps and documents in order to qualify, but most of them have a similar factoring process. There are a number of factoring companies in Canada, so it’s important to compare your options to ensure you’re getting the right fit for your unique situation.
Factoring Companies in Canada
When it comes to evaluating factoring providers (and more specifically, freight factoring companies) in Canada, it’s essential to look into a company’s reputation, factor fee structure, credit risk policies, and speed of accessing the source of funds. Equally crucial is their management of slow-paying customers, accounting software integration compatibility, monthly volumes in terms of funding minimums and maximums, as well as their repayment terms. Here are 8 invoice factoring providers in Canada to consider. (Also see our page on invoice factoring Ontario for more specific info.)
FundThrough is an AI-powered invoice funding platform that gives Canadian business owners flexible access to working capital on their terms. As a factoring company in Canada, FundThrough provides unlimited working capital based on the size of your outstanding customer accounts – so your funding grows as you grow. FundThrough offers amazing customer service – with the highest customer satisfaction rate in the industry, and works with businesses across North America. (If you’re looking for factoring elsewhere, see our pages on Texas invoice factoring, Houston factoring companies.)
Our Invoice Factoring solution provides an unlimited funding amount.
- Unlimited funding based on the size of your invoices
- 100% advance rates, minus a single fee. One up front price with competitive terms
- Receive funding for outstanding invoices within days
- Leverage artificial intelligence to make fast funding decisions
- Highly reviewed support team, and a partner in your success
- Flexible access to cash. Fund any invoice to any customer you want
- Technology requirements
Riviera Financing offers invoice financing and factoring to businesses across a variety of industries, including transportation, staffing, energy, oil & gas companies, telecommunications, utilities, and more. Riviera Finance offers financing services to most B2B businesses, regardless of how long they’ve been in business or their monthly revenue.
Factoring agreements are tailored to each business, and are managed by local offices. However, even businesses that aren’t close to a physical office are still eligible for Riviera Finance.
Riviera Financing has a credit facility size of $5K – $2M, and provides an advance rate of up to 95%. Their discount rate typically starts at 2%, and there is an early termination fee.
- Ideal for startups and small businesses with little credit history
- No credit score requirements
- Flexible financing options
- No monthly minimums, competitive fees
- Bankruptcy protection via non-recourse invoice factoring
- Ease of application process
- Unsuited for B2C businesses
- Not inexpensive
- Advance amounts listed on site but not factoring fees
1st Commercial Credit is a factoring company in Canada that works with businesses across North America. It offers supply chain financing solutions, including A/R financing, P/O financing, and trade payable financing.
1st Commercial Credit offers funding for small and large companies ranging from as little as $10,000 a month to $10 million in credit line facilities. Financing rates range from 0.69%-4%. Businesses can access up to $350,000 with no financials needed.
- No setup fees
- Customized rates
- Setup in just 3-5 days
- Access to free invoicing software
- Once approved, funds are advanced in 24 hours
- Online portal slightly outdated
- No dedicated account representative
eCapital – which acquired Accutrac Capital in 2019 – provides a wide range factoring solutions and lending services for businesses of different sizes with varying needs. It offers invoice factoring in addition to freight factoring, payroll funding, asset-based lending, lines of credit, and other services.
With eCapital, there’s no predetermined funding amount. The more invoices you produce, the more funding becomes available. You will, however, need to have at least $30,000 in monthly sales in order to qualify. It offers credit facilities up to $30 million.
- Non-recourse factoring
- Purchase order financing
- Funds released same day
- No hidden fees
- Must have $30,000 in monthly sales minimum to qualify
- No fee transparency
J D Factors has been providing non-recourse receivables factoring since 1989, and boasts its superior customer service and support. They work with businesses in the manufacturing, staffing, oil and gas, and trucking industries.
J D Factors provides invoice factoring services from $5,000 – $2,000,000. Their fee starts at a 2% discount rate per invoice.
- Non-recourse factoring
- Provides customized solutions
- Flexible terms
- Upfront, transparent pricing
- Advances up to 95%
Express Business Funding is a factoring company in Canada that is a leader in non-notification factoring to Canadian companies. They work with businesses in the staffing, trucking companies, oil and gas, manufacturing, and business services industries. They have both east and west coast offices to serve businesses in all time zones across the country.
With factoring amounts of $100,000 – $5,000,000, EBF is best suited to large scale businesses. Their fees use a daily rate based on the value of your invoices. Dependent on the risk – this can be somewhere between 0.03% per day to 0.075% per day.
- Non-notification factoring
- Upfront, transparent pricing
- Also offer construction factoring
- Advances only 80%
- Daily rate can be confusing to calculate
- Requires two years of financial statements
Accord Financial is a leading finance company that provides an array of working capital solutions to small and medium-sized companies across the United States and Canada. In addition to accounts receivable financing, they also offer asset-based lending, small business loans, and equipment financing.
Accord has credit facilities between $500,000-$2 million, and provides an offer letter within 48 hours. Unfortunately, it does not publish its factoring fees on its website, and the customer support representatives we spoke to would not share rates without an application.
- No setup or application fee
- No financial covenants requirements
- Single debtor factoring available
- Available credit facilities for those with capital requirements greater than $2M
- Advances only 75-90%
- Requires 30-days cancellation notice
- No fee transparency
REV Capital is a leading provider of full-service factoring services in Canada and the United States, with eight offices across North America. It supports thousands of businesses with its invoice management, credit underwriting, and collection services.
Fees range from 1% to 3%, and they offer facilities up to $25 million.
- Online portal for 24/7 monitoring
- Customized financial solutions
- Dedicated client relationship manager
- Full service facilities
- Advance rates of 100%
- No liens on A/R