The AR Funding Structure That Matches Your Customer Base

 Bridge the Cash Flow Gap Using Accounts Receivable Funding Today

 

 

YOUR COMPANY IS LOOKING FOR A/R FINANCING! IN CANADA

ACCOUNTS RECEIVABLE FUNDING IN CANADA

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Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT  BUSINESS FINANCING OPTIONS?

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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

 

 

What Is Accounts Receivable Funding?

 

Accounts receivable funding is a lending solution that converts eligible unpaid customer invoices into immediate working capital to improve cash flow.

 

It's short-term borrowing as your business receives an advance on the amount due from a lender or factor and repays the facility when customers pay their invoices. For businesses looking to fund day-to-day operations and grow, it's the most popular version of alternative lending.

 

The key issue is timing when your business borrows money.  Your company may have earned the revenue, but the cash needed for payroll, inventory and suppliers can remain tied up for 30, 60 or 90 days. A powerful tool to fix that challenge is receivables finance for your government or regular trade receivables

 

 

 We can safely say that Canadian business owners/managers view this method of financing as somewhat of their own review of '  THE GOOD, THE BAD, AND THE UGLY '.   Let's dig in a bit more!

 

What Is the Real Cost of Waiting for Customer Payment?

 

The cost of factoring should not be compared only with a 1.5%–2% financing fee. Waiting 30–90 days for payment can also mean losing supplier early-payment discounts, turning down profitable purchase orders, delaying growth, and spending more time managing collections.

 

For example, taking a 2/10, net 30 supplier discount saves 2% by paying 20 days early—an annualized return of roughly 36%, depending on the calculation method. If receivables financing unlocks that discount or protects profitable sales, its net economic cost may be much lower than its quoted fee.

 

 

Why Do 60- to 90-Day Payment Terms Restrict Growth?

 

Long payment terms force your business to finance the customer’s purchase after the sale has been completed.

 

Expenses such as wages, materials, freight and taxes usually become due before the related customer payment arrives.

 

This mismatch can leave you feeling frustrated because strong sales do not necessarily produce available cash. Accounts receivable funding shortens that waiting period without requiring your customers to pay sooner.

 

 

WHEN DOES ACCOUNTS RECEIVABLE FINANCING MAKE SENSE?

 

No small business owner or manager in Canada, especially in the start-up to SME sector business denies that financing a business is a challenge.

 

So when exactly does utilizing A/R finance for unpaid invoices make sense, and when, if ever, does it get ' bad' and 'ugly '?

 

Which Accounts Receivable Funding Structure Fits Your Business?

 

Structure	How it works	Best suited to
Invoice factoring	Individual invoices or the receivables ledger are assigned to a factor	Businesses needing funding and collection support
Confidential invoice discounting	Receivables support a revolving facility without routine customer notification	Established businesses with reliable internal collections
Asset-based revolving line	Receivables form part of a borrowing base that may also include inventory	Larger borrowers needing scalable working capital
Selective invoice funding	The business chooses particular invoices to fund	Companies with occasional cash-flow gaps
Non-recourse factoring	The factor assumes defined customer credit risks	Businesses concerned about approved customer insolvency
Export receivables funding	Foreign receivables support advances, sometimes with credit insurance	Canadian exporters selling on open-account terms

 

 

3 SITUATIONS THAT SIGNIFY YOU NEED A CASH FLOW FINANCING SOLUTION

 

When to utilize invoice discounting is probably the easier one for us to address first, with the aim of allowing you to quickly see whether you're a solid candidate for this method of financing your firm.

 

Typically, you find yourself in one of probably 3 different situations.

 

Three Signs Invoice Factoring May Be a Good Fit

 

 

1. Bank financing is unavailable or insufficient. Banks typically require consistent profits, adequate cash-flow coverage, and strong owner credit. Factoring focuses primarily on the quality of your receivables and customers.
2. Rapid growth is creating cash-flow pressure. When large orders or opportunities arise, selling receivables can provide immediate working capital without waiting for customers to pay.
3. Your business is expanding or diversifying. Factoring can support larger contracts, new product launches, and sales into U.S. or international markets.

 

 

 

All of the above scenarios lend themselves to a Factoring/invoice discounting solution.

 

THE COST OF SHORT TERM  INVOICE FACTORING  / HOW DOES FACTORING OR  INVOICE DISCOUNTING WORK?

 

How does accounts receivable funding work

 

Accounts receivable funding advances a percentage of your invoice value and releases the remainder once customers pay.

• Submit invoices

• Receive an advance (typically 70–90%)

• Balance released after customer payment

 

The “bad and ugly” of factoring can include customer notification, extra paperwork, loss of collection control, and unclear pricing.

 

Confidential, non-notification receivables financing avoids customer involvement and lets your company continue billing and collecting. Compare all fees carefully; invoice financing is typically priced as a fee on each invoice, often around 1.5%–2%, rather than as an interest rate.

 

The Customer Relationship Myth:

 

Using accounts receivable funding does not automatically signal financial trouble.

 

In today’s B2B market, professionally managed notification factoring is widely accepted as a practical cash flow tool. Businesses concerned about customer involvement can also consider confidential, non-notification receivables financing.

 

 

What Does Accounts Receivable Funding Cost?

 

Pricing may include a discount fee, interest charge, administration fee, due-diligence cost, minimum monthly charge or unused facility fee. The correct comparison is the total dollar cost over your expected collection period.

Review these items before accepting a facility:

• Advance rate
• Interest or discount rate
• Minimum monthly volume
• Origination and renewal fees
• Invoice-processing charges
• Credit-check fees
• Reserve-release timing
• Audit or field-examination costs
• Early termination charges
• Personal guarantee requirements
• Cost of overdue invoices

 

A factoring fee should not automatically be treated as an annual percentage rate. Factoring prices a transaction and collection period, while a conventional loan charges interest on outstanding principal over time.

 

AR FUNDING  FIXES YOUR BALANCE SHEET - HERE'S HOW 

 

In factoring, a true sale of receivables may convert invoices into cash without recording additional debt, helping preserve the company’s debt-to-equity ratio.

 

By comparison, a short-term loan increases liabilities and leverage, which can weaken financial covenants or institutional credit assessments. Accounting treatment depends on whether the receivables are legally transferred and substantially all risks and rewards are removed.

 

CASE STUDY# 1

FROM THE 7 PARK AVENUE FINANCIAL CLIENT FILES

 

Company: ABC Company — Ontario-based commercial printing business

Challenge: ABC Company landed a major contract with a national retail chain on net-60 terms. Their existing bank line was too small to bridge the gap, and the bank declined an increase. Two of their largest legacy customers were smaller, family-run businesses ABC didn't want contacted by a third party.

How We Got There: We structured a blended facility — notification funding on the new national retail receivable, where a factoring notice was routine and unremarkable, and confidential funding on the legacy accounts, preserving those relationships. ABC's aging reports and collection history were clean enough to qualify for the confidential portion without added conditions.

Results: ABC accessed working capital against both receivable pools within days, kept its long-standing customer relationships untouched, and secured pricing on the notification portion below what a fully confidential facility would have cost.

 

Case study: Benefits of accounts receivable funding

 

Company: ABC Company, a mid‑sized industrial parts distributor

 

Challenge: ABC faced 45–60-day payment terms from large customers, causing cash flow strain and limiting inventory purchases.

 

Solution – Invoice Finance - How We Got There:

• Implemented accounts receivable financing to advance cash on approved invoices

• Used predictable liquidity to negotiate better supplier terms

• Accounts receivable financing programs delivered reduced reliance on high‑interest short‑term debt

 

 

Results:

• 30% improvement in cash flow stability

• Ability to accept larger customer orders

• Inventory turnover increased by 22%

• Owner reported reduced stress and more time for strategic planning

 

 

CONCLUSION - FUNDING UNPAID INVOICES

 

So, if your working capital financing is 'broken ', consider  ' unbreaking' it with a solid invoice finance solution from a factoring company.

 

Factoring or invoice discounting solutions can cash flow your sales revenues immediately.

Call 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor who can assist you with surmounting the business finance challenge and experts in any type of funding your business.

 

7 PARK AVENUE FINANCIAL ORIGINATES ACCOUNTS RECEIVABLE FUNDING

 

 

FAQ/FREQUENTLY ASKED QUESTIONS

 

How much can you receive from accounts receivable funding?

The available amount depends on eligible receivables and the negotiated advance rate.

• Typical non-bank advances are approximately 80% to 90%.
• Older and disputed invoices may be excluded.
• Concentrated customer balances may be capped.
• Existing advances and reserves reduce immediate availability.

How quickly can accounts receivable funding be arranged?

Initial setup commonly takes several business days to several weeks, depending on due diligence and security registrations. Approved invoices can often be funded within 24 to 48 hours after the facility is operational.

Who qualifies for accounts receivable funding?

Businesses selling completed goods or services to creditworthy commercial customers are generally the strongest candidates. Approval focuses on customer quality, invoice validity and collection performance.

Can you qualify when your business has weak credit?

Accounts receivable funding may remain available when the owner’s credit or company balance sheet does not meet conventional bank standards. Serious tax arrears, legal claims, fraud concerns or unreliable invoicing can still prevent approval.

What is the difference between factoring and accounts receivable funding?

Factoring normally involves the purchase or assignment of receivables and may include collection services. Accounts receivable funding is a broader term covering factoring, invoice discounting and revolving loans secured by receivables.

Will customers know that invoices are being funded?

Customer notification depends on the facility.

• Traditional factoring normally includes notice of assignment.
• Confidential invoice discounting may avoid routine notification.
• A blocked or controlled collection account may still be required.
• Verification calls can occur even under some confidential programs.How do CRA arrears affect receivables funding?

• CRA payroll source-deduction claims can rank ahead of a secured lender’s interest in some business assets. Lenders therefore review CRA status carefully and may require arrears to be paid, controlled or covered by additional reserves.

 

 

How do CRA arrears affect receivables funding?

CRA payroll source-deduction claims can rank ahead of a secured lender’s interest in some business assets. Lenders therefore review CRA status carefully and may require arrears to be paid, controlled or covered by additional reserves.

 

 

What happens if a customer does not pay?

Responsibility depends on whether the facility is recourse or non-recourse.

• Recourse facilities normally require the business to replace or repay an unpaid invoice.
• Non-recourse protection applies only to specifically defined credit events.
• Customer disputes and performance problems usually remain with the business.
• Overdue invoices may become ineligible before a loss occurs.

Can government invoices be funded?

Government receivables may be financeable, but assignment rules and contract terms require review. Some contracts restrict assignment or require consent before payment can be redirected.

Can export receivables be funded?

Export receivables can be funded when the lender accepts the country, currency, customer and documentation risks. Credit insurance may improve lender recognition of eligible foreign invoices.

 

STATISTICS

 

 

• Canadian businesses wait an average of 55 days to get paid on B2B invoices (Source: Canadian Federation of Independent Business).

• Over 40% of Canadian SMEs report cash flow as their top operational challenge (BDC).

• Companies using receivable financing grow 20–30% faster due to improved liquidity (Industry estimates).

 

Citations 

 

 

Export Development Canada. “How to Calculate the Cost versus Benefit of Insuring Sales.” https://www.edc.ca/en/premium/guide/to-insure-or-not.html. Main website: https://www.edc.ca/.

Innovation, Science and Economic Development Canada. “Determinants of Trade Credit Use by Small and Medium-Sized Enterprises in Canada.” 2010. https://ised-isde.canada.ca/site/sme-research-statistics/en/research-reports/determinants-trade-credit-use-small-and-medium-sized-enterprises-canada/determinants-trade-credit-use-small-and-medium-sized-enterprises-canada. Main website: https://ised-isde.canada.ca/

7 Park Avenue Financial ."Receivable Finance: How Canadian Businesses Are Solving Cash Flow Challenges".https://www.7parkavenuefinancial.com/financing-receivables-cost-of-factoring-funding.html

Downes, John, and Jordan Elliot Goodman. Dictionary of Finance and Investment Terms. 9th ed. Hauppauge, NY: Barron's Educational Series, 2014. https://www.barrons.com

Medium/Prokop/7 Park Avenue Financial."What is Accounts Receivable Funding and How Can It Help Your Business?".https://medium.com/@stanprokop/what-is-accounts-receivable-funding-and-how-can-it-help-your-business-9a9488878857

Klapper, Leora. "The Role of Factoring in Financing Small and Medium Enterprises." Journal of Banking & Finance 30, no. 11 (2006): 3111–3130. https://www.sciencedirect.com

Secured Finance Network. Asset-Based Lending and Factoring Survey Analysis. Chicago: Secured Finance Network, 2024. https://www.sfnet.com

 

A/R Finance - The Working Capital Strategy CFOs Use That Most Owners Never Consider

Accounts Receivable Funding for Canadian Businesses

 

WHAT IS ACCOUNTS RECEIVABLE FUNDING

Accounts Receivable Funding is a financing solution from a third-party financial company that allows a business to receive cash by selling its receivables against unpaid customer invoices, instead of waiting for customers to pay. The amount available is based primarily on the quality of the receivables rather than future sales projections.

 

Three Uncommon Takes On Factoring Receivables

 

1. Compare AR Funding to Equity, Not Just Bank Loans
   If bank financing isn't available through business loans or credit lines, the real alternative may be to give up ownership. For many growing businesses, a 1–1.5% monthly AR funding cost on the company's accounts receivable is far less expensive than permanent equity dilution.
2. AR Funding Can Reduce Overall Financing Costs
   Used strategically, factoring receivables using your unpaid invoices via Invoice factoring, can generate supplier early-payment discounts, avoid penalties, and eliminate rush-order costs. In many cases, these savings offset much—or even all—of the funding cost.That's a  lending solution via short-term borrowing  with a benefit when you borrow money
3. AR Funding Scales Automatically With Growth
   Unlike fixed bank lines or term loans, AR funding increases as receivables grow. Win more business, issue more invoices, and your borrowing capacity expands without renegotiating your facility based on amount due.

 

Accounts Receivable Credit Financing -  For the majority of Canadian business owners and financial managers who are considering receivables funding as a finance strategy, the main question seems to be:

 

WHAT IS THE DIFFERENCE BETWEEN BANK FINANCING AND COMMERCIAL A/R FACTORING  WHEN FINANCING UNPAID INVOICES?

 

What is the difference between A/R receivables finance and bank financing for their company? It's a legitimate question, so let’s dig in!

 

A/R FUNDING IS SHORT-TERM BUSINESS FINANCING

 

One of the main reasons, in fact, that many companies choose an A/R  financing accounts receivable credit solution is that it simply doesn't involve new long-term financing for your company.  The simplest explanation of that difference between a commercial finance solution vs. a bank scenario simply involves understanding that the receivables factoring/discounting solution is simply the sale of your receivables, as opposed to the financing of them. Both get you immediate cash flow - they just work a little differently.

 

The Cost of Inaction in Factoring

 

The true cost of factoring isn't just the financing fee—it's the cost of not having the cash when you need it. Delayed working capital can lead to missed sales, production delays, supplier issues, and strained customer relationships.

 

Example: A 1.5% fee on a $50,000 invoice is $750. If that advance allows you to fulfill a $200,000 contract, avoid production delays, and retain a key customer, the value created can far exceed the financing cost. The better comparison is often the cost of missed opportunities, not the interest rate alone.

 

 

HOW FUNDING WORKS

 

On a daily basis, the sale of a receivable generates cash flow for your firm. In Canada, you typically get 90% of all your invoices the same day you initiate the AR financing discounting process. The other 10%, less financing costs of approx. 1.5-2%, is remitted to you as soon as your client pays. Simple so far, right? It is your new business line of credit!

 

That 2% fee in fact becomes larger, commensurate with the time your receivable financing accounts are outstanding.

 

So don’t be lulled into a false sense of security by your new cash flow tool, because whether you are holding outstanding invoices and waiting or financing them in an accounts receivable credit-factoring situation, it is still going to cost you money. 

 

Carrying balance sheet accounts such as A/R and inventory is a hidden but very real cost of doing business - and the faster you turn over balance sheet accounts, the greater the profits and operating efficiencies.

 

Confidential Invoice Discounting vs. Traditional Factoring

 

Both confidential invoice discounting and traditional factoring convert unpaid invoices into immediate working capital, but they differ in how customer collections are handled.

 

Confidential Invoice Discounting: Your customers are not informed that you are using financing. You continue to issue invoices, collect payments, and manage customer relationships in your own name, making it a popular option for established businesses.

 

Traditional Factoring: Customers are notified that invoices have been assigned to the factor and typically make payments directly to the financing company. This structure is often used by businesses seeking more comprehensive funding and receivables management services.

 

ADVANTAGES OF RECEIVABLE FACTORING

 

The key advantages of a factoring solution are:

 

Immediate ongoing cash flow

 

Funding as needed for your business if you have seasonality or bulge requirements

 

A more solid balance sheet that reflects cash, not A/R

 

It's important to us when we’re in front of clients to maintain a balanced position when it comes to explaining receivables funding.

 

So we do point out that if you enter into the wrong facility when your business borrows money (and Canadian companies do that every day), the actual optics of how people think you are financing your company can be perceived as negative. It should not be that way, but it is.

 

RECOURSE / NON RECOURSE FINANCING /  CREDIT INSURANCE -

Remember also that this method of financing doesn't take away the risk of carrying A/R unless you have a receivables funding insurance program, which most companies don't. So, making sound credit decisions based on your client's needs should still be top of mind. It is certainly not unusual for many invoices to be paid within 90 days these days. Additional solutions from factoring companies should be considered in receivable factoring.

 

Can a company secure funding if it has CRA GST/HST arrears?

 

Answer: Yes, in many cases. A company with CRA GST/HST arrears may still qualify for financing, but approval depends on the size of the arrears, whether CRA has registered liens, and the lender's risk assessment.

Many non-bank lenders, including accounts receivable funding, asset-based lending, factoring, and some cash flow lenders, can finance businesses with CRA arrears. In some cases, a portion of the proceeds may be used to reduce or repay the tax debt as a condition of closing.

 

Key factors lenders review include:

 

• The amount and age of the GST/HST arrears
• Whether CRA has registered a lien or taken enforcement action
• The quality of the company's receivables and other collateral
• Current cash flow and ability to stay current on future tax obligations
• Whether a repayment arrangement with CRA is in place

 

Businesses should address CRA arrears early, as unresolved tax debts can limit financing options and complicate lender security. However, CRA GST/HST arrears do not automatically prevent a company from obtaining funding.

 

 

 

Case Study# 1

From The 7 Park Avenue Financial Client Files

 

Company: ABC Company, a Canadian industrial safety equipment distributor.

Challenge: Slow-paying customers (55–70 days) and supplier deposits created a cash flow gap, causing the company to miss growth opportunities while its bank line remained too small.

Solution: 7 Park Avenue Financial arranged a confidential accounts receivable funding facility with a 90% advance rate that expanded automatically as receivables grew.

Results: Accounts Receivable Financing Programs delivered! Effective DSO fell from 62 days to 2, supplier discounts offset much of the funding cost, and the company increased revenue 34% in one year without equity dilution or new bank covenants.

 

Case Study #2

 

Company / Challenge / Solution / Results

 

Company: ABC Company
Industry: Mid-sized manufacturing and distribution firm in Ontario

 

Challenge:
ABC Company had strong sales but faced 60–90 day payment terms from large retailers. This created cash gaps that:

• Delayed payroll during slow months

• Prevented them from taking early-payment discounts with suppliers

• Limited their ability to buy inventory for new product lines

 

 

Solution:

How we got there:
We structured an accounts receivable funding facility using ABC Company’s eligible invoices as collateral. The steps included:

• Reviewing the receivables pool and customer concentration

• Setting advance rates based on invoice age and customer risk

• Building a simple reporting process for ongoing invoice submissions

• Aligning funding limits with projected sales growth

 

 

Results:

Within 6 months:

• Cash flow gaps were reduced significantly, allowing consistent payroll

• ABC Company took early-payment discounts, lowering采购 costs

• Inventory purchases for new product lines increased without additional equity

• The facility scaled automatically as sales grew, removing the need for repeated loan approvals

 

Transition to Bankability: How Structured Funding Can Lead to Lower-Cost Bank Financing

 

Many businesses view invoice financing as a permanent solution, but it is often a temporary bridge to conventional bank credit. By demonstrating consistent cash flow, disciplined reporting, and reliable collections, a company builds the financial track record banks want to see.

As the business grows, improves profitability, and strengthens its balance sheet, it may qualify for a lower-cost bank operating line or revolving credit facility. In this way, structured funding can serve as a practical stepping stone to long-term bankability rather than a long-term substitute for bank financing.

 

AR Funding Within a Broader Capital Stack

 

Accounts receivable (AR) funding is most effective when used as one component of a broader financing strategy, with each facility matched to a specific business need rather than relying on a single source of capital.

 

For example:

• Accounts Receivable Funding: Finances unpaid invoices and day-to-day working capital.
• CSBFP Loans: Fund eligible equipment, leasehold improvements, and certain intangible assets through the Canada Small Business Financing Program.
• Equipment Leasing: Preserves working capital by financing machinery, vehicles, and technology over their useful lives.
• SR&ED Financing: Advances funds against expected Scientific Research and Experimental Development (SR&ED) tax credits, improving cash flow before the refund is received.
•  

By combining these facilities, businesses can finance working capital, equipment purchases, and growth initiatives while reducing pressure on any single lender and improving overall liquidity.

 

Government Receivables Financing in Factoring

Government receivables financing is a form of factoring or invoice financing that advances cash against approved invoices issued to federal, provincial, municipal, or other public-sector customers.

Because government entities are generally considered highly creditworthy, these receivables often qualify for high advance rates and competitive pricing. Businesses can receive cash shortly after invoicing, rather than waiting for government payment terms, thereby improving working capital while continuing to serve public-sector contracts.

 

CONCLUSION

 

One of the key things to understand in a/r financing is simply that the cost of using this method of cash flow and working capital is a rising and falling process, depending on how much you are drawing down, what that final approximate 90% advance rate is, and the administrative costs you need to run an a/r finance program.

 

Small businesses can achieve the benefits of funding in the same manner that large corporations do.

 

So, no need to be naïve when you weigh the costs of receivables funding vs. bank financing; consider seeking and speaking with experts - 

 

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can help you set the record straight on those pros and cons of each method of finance. 7 Park Avenue Financial originates receivable funding.

FAQ / FREQUENTLY ASKED QUESTIONS - RECEIVABLES FACTORING

 

 

How does accounts receivable funding improve cash flow?

Answer: It converts invoices into cash within 24–48 hours, shortening the cash conversion cycle and reducing working capital tied up in receivables.

When is accounts receivable funding cost-effective?

Answer: It can be cost-effective when it avoids equity dilution, captures supplier discounts, or enables profitable contracts that would otherwise be delayed or declined.

How much does accounts receivable funding cost in Canada?

Answer: Most facilities cost 1%–2% per month of funded invoice value, depending on customer credit quality, invoice volume, and facility structure.

Can accounts receivable funding grow with my sales?

Answer: Yes. Funding capacity increases as eligible receivables grow, eliminating the need to renegotiate a fixed credit limit.

Will my customers know I'm using accounts receivable funding?

Answer: Not with a confidential (non-notification) facility. Traditional factoring, however, generally requires customers to pay the funder directly.

Which invoices qualify for accounts receivable funding?

Answer: Eligible invoices are typically B2B or government receivables for completed goods or services, with creditworthy customers, no disputes, and usually less than 90 days outstanding.

 

How fast can I get funded with AR funding?
In many Canadian cases, funding can happen within:

• 24–72 hours after initial documentation

• As soon as 1 business day for repeat borrowers with clean receivables
  Speed depends on invoice quality, customer concentration, and completeness of your financials.

What happens if my customer doesn’t pay the invoice?
Depending on the structure:

• In AR loans, you remain responsible for collecting and repaying the advance if the customer fails to pay.

• In some factoring arrangements, the lender may assume more risk, but fees and discount rates are higher.
  You must have a clear plan for problematic invoices before using AR funding.

Can I use AR funding if I’m not profitable yet?
Many AR lenders focus on invoice quality rather than profitability, so:

• You may qualify if your customers are strong and contracts are clear

• You may need stronger personal credit or collateral if cash flow is weak
  Profitability helps, but it is not always the primary factor.

How does AR funding work with long project cycles?
For projects with 60–90 day terms:

• You can fund each milestone invoice as it is issued

• This smooths cash flow across the project lifecycle

• You avoid having to borrow large lump sums for the entire project duration

 

 

Statistics

 

• The Cash Flow Gap: Cash flow friction remains the leading cause of SMB insolvency, with roughly 82% of small business failures directly attributed to poor cash flow management and slow-paying clients.

• Global Market Expansion: The global market size for financing accounts receivable is estimated to reach $182.63 billion USD in 2026, growing at a compound annual growth rate (CAGR) of 11.3% as businesses seek flexible alternatives to traditional bank debt.

• Administration Burden: Canadian and global SMB owners spend an average of four hours per week actively chasing late payments, translating to more than eight lost business days every single month.

 

 

Citations

FCI. World Factoring Statistics 2025. Amsterdam: FCI, 2026. https://fci.nl

Statistics Canada. Quarterly Financial Statistics for Canadian Business Enterprises. Ottawa: Statistics Canada, 2025. https://www.statcan.gc.ca

Business Development Bank of Canada. Financing High-Growth Firms in Canada. Montreal: BDC, 2025. https://www.bdc.ca

Canadian Federation of Independent Business. Small Business Cash Flow and Payment Terms Survey. Toronto: CFIB, 2025. https://www.cfib-fcei.ca

Bank of Canada. Business Outlook Survey: Credit Conditions and Financing Needs. Ottawa: Bank of Canada, 2025. https://www.bankofcanada.ca

7 Park Avenue Financial. "AR Funding – Accounts Receivable Financing." https://www.7parkavenuefinancial.com/ar-funding-selling-receivables-asset-finance.html

' Canadian Business Financing With The Intelligent Use Of Experience '

 STAN PROKOP
7 Park Avenue Financial/Copyright/2026

How Factoring and Accounts Receivable Funding Can Fix your Working Captital problems

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The Fix Is In ! Cash Flow Problem Solutions

Information on factoring and accounts receivable funding solutions . This type of financing fixes cash flow challenges when properly understood and utilized

When your payments from key customers are significantly slowing down many firms in Canada turn to accounts receivable financing
, otherwise known as ‘factoring’ for a solution to their working capital challenges. As unbelievable as it seems in many cases it is not unusual to have clients tell us that receivables are getting paid in 90 days these days, sometimes longer in fact. Gone seem the days when the 30 day term on your invoice seems acknowledged and honored.



When those payments do slow down that tends to cripple your cash flow. Naturally the solution to the problem, or the obvious one to most business owners is to make an all our effort to improve collections but focusing on increased accounts receivable turnover.

As an aside we think it’s very important that Canadian business owners and financial mangers know their accounts receivable collection period – you don’t have to be an analyst to do that - the simple formula is as follows –



A/R Times 365 Divided by Sales

To illustrate, if your firms year end balance sheet has receivables of 400k and your annual sales are three million dollars your collection period is 48 days. (We wish our collection period was 48 days we can hear you saying!)

Naturally you can alter the above formula on a quarterly or monthly basis by adjusting the A/R and sales level for your required period.

You can address the additional cost in carrying receivables by attempting to raise your prices with your customer to cover those increased A/R cost. However, that gets you profit, and not liquidity. That is where factoring and receivable financing comes in.

Factoring is quickly becoming the first alternative solution for firms who wish to get 85-90% of their cash immediately after they invoice. This solution is available through a pure factoring solution, or, if your firm is a bit larger ( 250k + in receivables) as part of a working capital facility or asset based lending facility.

The challenge, we tell clients, is ensuring you have the type of facility and factoring partner that meets your overall goals in day to day business financing. It certainly also helps when you have a solid business with good clients, but the hard reality is that factoring is available to almost every size and type of business is Canada – what will differentiate your facility is simply the overall pricing, terms, and structure of your facility .

Is your firm a candidate for a factoring or accounts receivable financing facility. It probably is if your customer payments are slowing down, sales are growing, and you are unable to obtain traditional bank lines of credit from Chartered banks. Factoring is hugely popular in the U.S. - Over 140 Billion dollars (yes that’s billion!) was done in 2009. The Canadian landscape is much smaller and fragmented, but bottom line, its growing.

We can’t over emphasize to clients that your factoring facility grows with your business, and your factoring credit facility can be adjusted upward very easily in terms of your growth.

Is there any downside at all to a factoring and working capital facility? When we sit down with clients and work them through the process we focus on 3 main areas –

Choosing the right factoring and receivable financing partner

Ensuring you understand your true costs ( and how to offset them )

Picking the right facility from a day to day ease of doing business perspective



Speak to a trusted, credible and experienced advisor in this area to ensure that you are comfortable that such a business financing is the solution to your cash flow and working capital problems.



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7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.

Stan Prokop