Factoring Companies in Canada

Factoring companies in Canada

What is a factoring company?

A factoring company is an accounts receivable finance company that provides a service called factoring. Factoring is a transaction where a business sells its invoices to an invoice factoring company to gain access to the cash tied up in outstanding accounts receivables. These invoices or receivables are removed from your books and are added to the factoring company’s balance sheet at their fair value.

The factoring company is purchasing these accounts receivable at a discount rate and then waiting on your customers to pay the invoice, whether that is 30, 60 or 90 days later.

The discount amount depends on a number of different things, such as:

  • The dollar amounts of the invoices you are selling;
  • How long it takes for your clients to pay;
  • How credit-worthy your customers are; and,
  • Which factoring company you choose, this rate can vary from under 1% of the invoice value to 3 or 4%.

    What to look for in a factoring company in Canada?

    Rate:

    As much as rates are competitive among the top factoring companies, there are many factoring companies that still charge up to double or more than what you can get in the market for the same core service. Make sure that the rate you agree on is a competitive one that is not going to take all the profit out of your business but give you that infusion of cash to really help you grow!

    Term:

    Often when a business starts with a factoring company, they continue to use the service as they grow in the years to come. Sometimes a factoring company will ask a business to sign a contract that is longer then a business owner feels comfortable with it. Make sure the factoring company you sign up with is reasonable and only agree on a term that you feel comfortable signing.

    Currency:

    There are many great factoring companies in North America. Some were started in Canada and others were started in the United States and have expanded into Canada. Both types can provide the service you need, but one thing to make sure of is that the funding company is going to be funding your invoices in the currency of the invoice. Some U.S. companies will fund in Canada but will only fund in USD. With conversion fees being up to 2% you may be doubling your cost just to have the bank convert the funds from USD TO CAD, so make sure that the company you choose funds in Canadian Dollars.

    Service:

    A factoring company is a financing partner to your business. Making sure you can receive the funding you need and have great service is important for a long lasting mutually beneficial relationship. If you would like to really find out about a factoring companies service, ask to see some testimonials or speak with one of their clients.

    Does Meritus Capital provide factoring for businesses in Canada?

    Yes, we have many clients in Canada and the U.S. We have found that we are able to educate and help provide financing for many growing Canadian businesses.

    If you have any questions or want to discuss how Meritus can help provide invoice factoring for your Canadian business, contact us at 877-648-3709 or complete the contact form.

    The Basics Of Factoring in Canada

    Factoring Is Great For: Business small and large with receivables Eg Staffing, Oil & Gas, Transportation, Manufacturing etc.
    Credit Lines: 10K-25 Million Dollar Lines
    Advance Rate: 80-95% (Of Outstanding AR)
    Discount Rate or Fees: 0.3% - 4%
    Years in business No requirement! (We have funded many great startups)
    Qualifications: Creditworthy Businesses As Customers or Government Contracts
    Repayment Terms: Client pays to factor on terms. Typically, 30-90 days.
    Application Process Easy and Online, E-sign enabled
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