Factoring Financing in Quebec

One of the challenges of working with larger companies is that they often take 30 to 60 days to pay invoices. This delay can create problems for small businesses that can’t afford to wait and need to get paid sooner.

A simple way to solve this problem is to ask clients to pay sooner, often by providing them with an early payment discount. Unfortunately, this strategy doesn’t always work and many clients prefer to pay on their usual terms.

Another option is to improve your cash flow by using business financing. However, getting conventional business financing in Quebec isn’t easy. There aren’t a lot of alternatives for small and mid-sized companies. And most banks have strict lending criteria.

An increasingly popular solution in Quebec is invoice factoring. Factoring provides financing to companies that have to offer payment terms to clients but need to get paid sooner. This solution improves their cash flow, providing them with working capital to pay expenses and make investments.

How does factoring work?

Transactions are relatively simple. A factoring company purchases your accounts receivable and pays you for them immediately. This advance payment gives you access to immediate funds, while the factor holds the invoice until it’s paid by your client.

Factoring companies purchase accounts receivable in two payments. The first payment is deposited to your bank account as soon as you submit an invoice to your customer. The first payment can be up to 90% of your invoice, but this amount varies by industry.

The second payment, which covers the remaining 10% (less the service fee), is deposited to your account once your customer pays the invoice. To learn more about invoice factoring, read this article.

Can factoring help me?

Factoring invoices can help you if you have cash flow problems because your clients are paying slowly. The solution is specifically designed to solve this problem.

Generally, you should consider factoring invoices if:

  • You work with corporate clients
  • Your clients pay you in 30 – 60 days
  • Your clients have good commercial credit

Can my company qualify?

Qualifying for invoice factoring is simpler and easier than qualifying for other types of financing. It is available to small and mid-sized companies.

The most important requirement is that your clients have excellent commercial credit. Additionally, your company should:

  • Be incorporated/registered
  • Sell on 30- to 60-day terms
  • Not have encumbrances and liens (e.g., through a hypothèque)
  • Not have major tax or legal problems

Quebec experts

You should work with a company that has experience in your industry and understands local laws. Financing and security laws in Quebec differ from those of other provinces.

For example, corporate assets in Quebec are secured using a hypothèque instead of the Personal Property Security Act (PPSA). Working with a company that understands local differences provides for faster funding and more effective service.

For more information, read “Choosing the Right Factoring Company in Quebec.”

Get an instant quote

We are a leading factoring provider in Quebec and can provide you with high advances at low rates. For more information, get an online quote or call us toll-free at (877) 300 3258.