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What is factoring and how does it work?

Factoring is an effective financing solution for companies wishing to convert their receivables into cash. Rather than waiting for customers to pay their invoices, factoring allows you to sell your accounts receivable to a factor, thereby obtaining an immediate cash advance. This financing frees up capital that can be reinvested in growth projects, ongoing operations, or to meet urgent cash needs.

The factoring process comprises several stages:

  • Assignment of receivables: You assign your issued invoices, guaranteeing an immediate source of income.
  • Cash advance: The factor pays up to 90% of the value of the receivables, depending on the quality of the invoices and the creditworthiness of the customers.
  • Payment collection: The factor collects payments from your customers.
  • Remaining balance: Once the invoice has been paid, the factor pays you the balance, less factoring fees.

An ideal solution

Cash-strapped companies with high-quality receivables are the ideal customers for factoring in Quebec, Ontario and the Maritimes. More specifically, factoring is designed for start-ups, fast-growing or restructuring companies, as well as those with seasonal or cyclical sales.

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An agent explaining why factoring is an ideal financing solution for a business

Do you have any questions?

Read our frequently asked questions about factoring. Don't forget that you can always contact us to speak to a member of our team!

FAQ - Factoring

Frequently asked questions

What are the different types of factoring?

There are several factoring options, each with its own specific features to suit different needs:

  • Recourse factoring: If a customer fails to pay, the company remains responsible for repaying the amount advanced to the factor. This type of factoring is generally less costly and is designed for companies with a solvent customer base.
  • Non-recourse factoring: The factor assumes the risk of customer insolvency, ideal for companies wishing to reduce their exposure to bad debts.
  • Domestic and international factoring: If your company trades with international customers, international factoring offers solutions to minimize the risks associated with international transactions.

Who can benefit from factoring?

Factoring is suitable for a wide variety of companies. Here are just a few of the types of companies that often benefit from this solution:

  • Startups and growing companies: Factoring provides liquidity without the need for collateral, which is essential for young companies that have not yet built up assets.
  • Seasonal businesses: For companies whose sales fluctuate with the seasons, such as those in the tourism or retail sectors, factoring provides cash in times of low liquidity.
  • Industries with long payment cycles: Companies operating in sectors with long payment cycles, such as construction or business services, use factoring to maintain stable cash flow.
  • Exporting companies: International factoring helps companies manage their receivables in multiple currencies, while minimizing foreign exchange and insolvency risks.

What are the advantages of factoring?

Factoring offers benefits that go far beyond simply generating liquidity:

  • Freeing up cash: By transforming receivables into available funds, companies can invest immediately in new opportunities.
  • Improved supplier relationships: With available cash, you can offer prompt payments to your suppliers, which can lead to more favorable discounts and payment terms.
  • Strengthened operations: Factoring helps you maintain smooth operations without being limited by customer payment deadlines.
  • Reduced credit risk: Companies avoid the risk of non-payment by entrusting debt collection to a credit management specialist.

How does the approval process work?

Unlike traditional loans, factoring relies primarily on the quality of your invoices and the creditworthiness of your customers, rather than your credit history. Here's how the factoring approval and integration process generally works:

  • Receivables analysis: The factor evaluates the receivables to be financed, ensuring that they are eligible.
  • Credit assessment: Customers to whom invoices are addressed are analyzed to minimize the risk of non-payment.
  • Contract signature: Once approved, you sign a factoring contract specifying the conditions, fees and terms of assignment of receivables.
  • Continuous integration: Factoring can be implemented on an ongoing basis to support your company's recurring financial needs.

Factoring costs: what to expect?

The cost of factoring varies according to several factors:

  • Amount of receivables: The higher the amount, the more advantageous the rates can be.
  • Customer solvency: Customers with a good payment history help reduce factoring costs.
  • Financing period: The longer the collection period, the higher the factoring costs.
  • Type of factoring: Fees are generally lower for factoring with recourse, as the risk is lower for the factor.



Factoring contributes to a sound financial strategy

Integrating factoring into an overall financial strategy can offer significant benefits, particularly for growing companies. By using factoring, you can optimize your sources of funds and stabilize your operations.

Apply for factoring

Our team is ready to guide you through the implementation of a factoring solution tailored to your specific needs. Whether you’re just starting up or expanding, we can offer you personalized support to manage your receivables and improve your cash flow. Don’t wait any longer and find out how factoring can become a strategic asset for your company’s success by filling in the form below.