If you’re a business owner in Canada, maintaining steady cash flow is likely one of your top priorities.
When clients take 30, 60, or even 90 days to pay invoices, it can create gaps that impact payroll, inventory purchases, or other day-to-day operations. That’s where invoice factoring comes in.
So, what is invoice factoring? In simple terms, invoice factoring is a financing solution where a business sells its unpaid invoices to a third party (called a factoring company) in exchange for immediate cash. Rather than waiting weeks or months for customer payments, businesses receive up to 90% of the invoice value upfront—typically within 24 to 48 hours. Once the factoring company collects payment from the customer, the remaining balance is returned to the business, minus a small fee.
How Is Invoice Factoring Different from a Loan?
A common question we hear is: how is invoice factoring different from a traditional loan?
The biggest difference is that factoring is not debt. Unlike a loan or line of credit, you’re not borrowing money—you’re accessing funds that are already owed to your business. That means there are no monthly repayments, no interest charges, and no impact on your company’s credit rating.
Approval for invoice factoring is also faster and easier to secure than bank financing. Instead of relying heavily on your credit score or collateral, factoring companies focus on your customers’ ability to pay. This makes it a smart option for startups, growing companies, or those with limited credit history.
Industry Example: How It Works in Transportation
Let’s say you operate a mid-sized trucking company based in Ontario. Your drivers deliver goods for clients across the province, but your invoices are on 60-day terms. Meanwhile, you need to pay for fuel, vehicle maintenance, and driver wages weekly.
Rather than stretching your resources thin or relying on expensive short-term loans, you decide to factor your outstanding invoices. With invoice factoring, you receive, say, 85% of the invoice value within 24 hours. This gives you the liquidity to keep your business moving—literally—while the factoring company waits for your client to pay.
Who Can Benefit from Invoice Factoring?
What is invoice factoring really good for? It’s particularly well-suited to B2B companies with consistent invoicing and reliable customers. Common industries include:
- Transportation and logistics
- Manufacturing and wholesale
- Oilfield services
- Staffing and professional services
- Construction and trades (time and materials billing only)
If your business routinely provides services or delivers goods before receiving payment, factoring can smooth out the cash flow rollercoaster.
Capitally’s Approach to Invoice Factoring
At Capitally, we specialize in helping Canadian business owners access specialty funding solutions like invoice factoring. We work directly with you—and your financial advisor or banker if needed—to create a custom solution that fits your cash flow needs. Our process is transparent, fast, and tailored to your industry.
Whether you’re managing seasonal fluctuations, scaling up operations, or simply need quicker access to working capital, understanding what invoice factoring is can help you unlock cash flow and growth —without taking on additional debt.Want to learn more about what invoice factoring could do for your business? Talk to a Capitally advisor today and explore a flexible funding solution built for Canadian businesses.
