Business Financing For Small Companies in Toronto

As one of the entrepreneurial engines of Canada, Toronto hosts a growing number of small companies. One of the main challenges that small companies face is finding the right source of financing to help support their growth. And, as many small business owners can attest, finding business financing is difficult.

Cash flow is key

Actually, a common problem for early-stage companies is running out of money as a result of offering terms to commercial clients. Although it’s common business practice for customers to pay invoices 30 to 60 days after the goods/services are delivered, this practice can create serious problems if your company is not well capitalized.

Few entrepreneurs consider this fact when building their financial projections. And slow payments can throw a serious “wrench” into their finances, especially if the businesses is growing. Ultimately, as cash reserves dwindle, they face a liquidity problem.

Bank financing is hard to get

Almost instinctively, business owners try to get bank financing to capitalize their businesses. While bank financing can help, it is often hard to get in Canada. Institutions have rigorous application and qualification standards that few owners can meet.

However, bank financing is not the only option to solve this problem. Another solution has been gaining popularity in Toronto as a way to help companies with cash flow problems: factoring.

What is factoring?

Factoring addresses this issue by financing your open invoices from creditworthy customers. Instead of waiting up to two months for payment, you finance your invoices to get immediate liquidity that can help you pay for important business expenses. Most of these transactions are self-liquidating, which means that the individual transaction concludes when the customer pays the invoice.

When used correctly, factoring can provide your company with an ongoing source of liquidity, ensuring it’s ready to capitalize on opportunities as they present themselves. You can find more information in the articles, “What is factoring?” and “How does invoice factoring work?


One advantage of financing your invoices is that most factors have simple qualification requirements. Obviously, your invoices must be of high credit quality, as they represent the collateral being financed. Additionally, your company should be well managed and your invoices should be free of liens.

Also, you can use factoring as a tool to offer terms to your customers. If you were not taking on new clients because you were unable to offer payment terms, an invoice factoring solution can be a game-changer. Factoring enables you to offer terms with confidence because it minimizes concerns about slow payments.

The most important benefit is that factoring supports your growth. The line can increase as your sales to qualified clients grow. This feature ensures that, as your company expands, you always have funding to cover expenses. Consequently, invoice factoring can be an ideal solution for small and growing businesses.

One important detail

Invoice factoring should not be used with invoices that have collections problems or are paying slowly because of disputes. Financing troubled invoices can actually generate more problems than it solves because your company remains tied to those invoices. Factoring should be used with invoices that pay slowly but are backed by solid clients.

Costs and time

The cost of factoring in Ontario varies based on the risk profile and size of the account. In general, rates range from 1.5% to 3.5% per 30 days, depending on the situation. Most lines get initial funding five to ten days after the application is submitted. Subsequent invoices can be funded in a day or so.

If your small business has cash flow problems because of slow-paying commercial clients, consider factoring your invoices as a way to improve your finances.

Get a factoring quote

We are a leading factoring company in Canada and can provide financing at competitive rates. For more information, get a factoring quote or call (877) 300 3258.