Invoice Factoring in Canada

What invoice factoring is

Invoice factoring is the sale of an unpaid business-to-business invoice to a factor, at a discount. The factor advances most of the face value now, collects the full amount from your customer when it falls due, and pays you the remainder less its fee. You have not borrowed; you have sold an asset.

Three things follow from that, and they are the whole reason the product exists.

Your customer's credit is assessed, not yours. The factor is buying your customer's obligation to pay, so it underwrites them. A young business with thin credit and strong customers can factor when it cannot borrow.

It does not sit on your balance sheet as debt in the way a loan does. You sold a receivable. Lenders reading your statements afterwards see a smaller receivables line, not a new liability.

Your customer usually finds out. Under notification factoring, the customer is told to pay the factor directly. Non-notification factoring exists and costs more.

The provider on this page, and why the list is short

We list a lender on a product page only when we have verified on the lender's own website that it sells that product. Across our business network of more than thirty lenders, that verification found one listed provider selling invoice factoring in Canada, and it is the one card above.

Its published terms, which are also the clearest worked example of how factoring is priced:

Source: lender published terms, reviewed September 2026.

Two things that table does not tell you, and that you should establish before signing anywhere: whether the arrangement is recourse or non-recourse, and whether the fee is charged per 30 days or per day past 30. Both change the cost a great deal.

How the money actually moves

Three numbers, and only the first is advertised.

The advance rate. The share of the invoice paid up front, here 70% to 90%. The rest is held in reserve.

The fee. Charged against the face value, per period the invoice stays unpaid. A fee quoted per 30 days doubles if the customer takes 60.

The reserve. Released when the customer pays, less the fee. If the customer pays late, your reserve is held longer and the fee grows.

A worked example on the terms above. A $20,000 invoice at an 85% advance puts $17,000 in your account now. At 2% per 30 days, a customer who pays on day 60 costs $800. The reserve of $3,000 is released less that $800, so you receive $2,200, and $19,200 in total. The $800 bought you $17,000 for 60 days, which annualises to roughly 28.6%. Pay on day 30 and the same invoice costs $400; pay on day 90 and it costs $1,200.

That is the shape of every factoring arrangement: the cost depends on how long your customers take to pay, which means factoring is most expensive precisely when your receivables are slowest. The MCA true cost calculator annualises any per-period fee against any repayment period, and the arithmetic is the same.

Factoring, invoice financing and a receivables line

Three products get called factoring, and only one of them is.

Factoring is the sale of the invoice. The factor owns it, collects it, and usually tells your customer. Your customer's credit is the file.

Invoice financing, sometimes called invoice discounting, is a loan secured against the invoice. You keep the invoice, you collect it, your customer is not told, and you repay the lender when it pays. Your own credit matters more, because you are the borrower. One lender in our network sells this under the name invoice financing rather than factoring; it is a different product and it is not on this page.

A receivables-backed line of credit is a revolving facility whose limit is set as a share of your eligible receivables. It is a business line of credit with a particular way of setting the limit, and it suits a business with a steady book of invoices rather than a few large ones.

The practical difference is who carries the customer's credit risk and who your customer talks to. Factoring moves both to the factor. The other two leave both with you. Which is better depends on whether your customers' credit is stronger than yours, which for a young business selling to large buyers it often is.

Recourse, and the part that catches people

Recourse factoring means that if your customer does not pay, you buy the invoice back. Most Canadian factoring is recourse. You have transferred the timing of the payment, not the credit risk.

Non-recourse transfers the risk of your customer's insolvency to the factor, at a higher fee, and usually with conditions narrow enough that ordinary non-payment, a dispute, a short-payment, a customer who simply stalls, remains your problem. Read what is covered. "Non-recourse" on a sales page is often narrower than it sounds in the agreement.

When factoring fits, and when it does not

It fits a business with long payment terms and creditworthy customers: net 60 from a large buyer and a payroll every two weeks is the classic case. It fits growth that has outrun working capital, where the orders are already invoiced. It fits a young business whose own credit cannot carry a loan but whose customers' can. It also fits a business that has been declined for a term loan on its own history but sells to customers a lender would happily finance; the factor is, in effect, lending to them through you.

It does not fit consumer invoices, or many small ones; factoring economics favour fewer, larger, business-to-business invoices, and the $15,000 minimum above reflects that. It does not fit invoices likely to be disputed, since a disputed invoice is not factorable and creates friction with the factor. And it does not fit as a permanent structure. Factoring every invoice indefinitely is expensive; it is a bridge to being financed conventionally. Our Lending Demand Index puts 68.8% of business requests in the first half of 2026 under $50,000, which is why a facility capped at $100,000 per business covers most of the demand that would ever use it.

If your gap is not entirely timing on invoices already issued, a working capital loan or a business line of credit may be cheaper. If your customers pay by card rather than by invoice, factoring is the wrong instrument and a merchant cash advance is the one built for that revenue. The Business Development Bank of Canada publishes general guidance on receivables financing at bdc.ca.

Before you apply

• A receivables ageing report. Who owes you what, and how old each invoice is. The factor underwrites this list.
• Your largest customers' names and terms. Their credit, not yours, is the file.
• The invoices themselves, with proof of delivery or acceptance. An undelivered or disputed invoice cannot be sold.
• Your own terms of sale, since a customer with a right of set-off changes what the factor will advance.
• Whether you can accept notification. If your customers must not know, say so first; it narrows the options and raises the price.

The application below routes directly to the provider above. If you would rather see every business product the same application reaches, the business loans hub lists them.

Reviewed by Vlad Sherbatov, Co-Founder and President, Smarter Loans. Last reviewed 5 September 2026.