INVOICE FACTORING IN CANADA

Invoice factoring is a financing solution that allows your small business or medium sized business to release cash against your outstanding customer invoices before they’ve been paid. Factoring invoices is the fastest way to improve cash flow to your business bank account.  

Here’s how the invoice factoring process typically works:

1. Invoice Submission: The business provides copies of its invoices to eCapital, indicating the outstanding amounts owed by its customers.
2. Verification and Approval: eCapital evaluates the creditworthiness of the business’s customers, focusing more on their ability to pay rather than the business’s credit history. Once approved, eCapital determines the maximum advance rate and establishes the fee structure.
3. Cash Advance: Upon approval, eCapital advances a percentage of the invoice value, usually within 24 to 48 hours. The advance can be as high as 100% of the invoice amount, depending on the specific terms agreed upon.
4. Payment Collection: eCapital assumes responsibility for collecting payment from the business’s customers. Depending on the agreement, the customers are typically notified to remit their payments directly to eCapital rather than the business.
5. Final Payment and Fee Deduction: Once eCapital collects the payment from the customer, we deduct our fees (which can range from 1% to 5% or more) and remit the remaining balance to the business. The fees are typically based on factors such as the creditworthiness of the customers, the volume of invoices, and the length of time until payment.

Invoice factoring provides immediate cash flow for businesses by accelerating the receipt of funds that would otherwise be tied up in accounts receivable. It helps businesses bridge the gap between invoicing and customer payment, providing them with the working capital needed to cover operational expenses, invest in growth, and meet financial obligations. Additionally, invoice factoring offers businesses the advantage of outsourced credit analysis and collections, reducing administrative burdens and allowing them to focus on core operations.

No, invoice factoring is not considered a business loan. While both invoice factoring and business loans provide businesses with access to capital, they differ in fundamental ways:

1. Nature of Transaction: Invoice factoring involves the sale of accounts receivable (invoices) to eCapital, where we purchase the invoices at a discounted price and provides an immediate cash advance to the business. eCapital then collects the full payment from the customers directly. In contrast, a business loan involves borrowing a specific amount of money from a lender, which must be repaid over time, typically with interest.
2. Debt Incurred: Invoice factoring does not create additional debt for the business. When a business sells its invoices to eCapital, it is essentially selling an asset (the invoice) and receiving payment for it. The transaction does not require repayment or accrue interest. Conversely, a business loan creates a debt obligation, and the borrowed amount, along with interest and potentially other fees, must be repaid according to the agreed-upon terms.
3. Risk Assessment: In invoice factoring, eCapital primarily evaluates the creditworthiness of your business’s customers, as they are responsible for repaying the invoices. The focus is on the customers’ ability to pay, rather than the creditworthiness of the business itself. In a business loan, the lender assesses the creditworthiness of the business, considering factors such as credit history, financial statements, and collateral.
4. Collections Responsibility: With invoice factoring, eCapital assumes responsibility for collecting payment from the business’s customers. The customers are typically notified to remit payments directly to eCapital. In a business loan, the business is solely responsible for repaying the borrowed amount and managing the repayment process.
5. Flexibility: Invoice factoring offers scalability based on the business’s sales volume and outstanding invoices. As the business generates more invoices, the available funding also increases. This flexibility allows businesses to access funds in proportion to their needs. Business loans, on the other hand, typically have fixed loan amounts and repayment schedules, which may not align with a business’s evolving requirements.

In summary, while invoice factoring and business loans serve the purpose of providing businesses with access to capital, invoice factoring is a distinct financial transaction that does not involve borrowing or incurring debt.

Factoring services are a financial solution for businesses who trade with other businesses.  

Invoice factoring is quick and easy to set-up! We’ll reach out within 24 hours of you contacting us. That’s why our clients like working with us. We don’t hang around.

Costs (factoring fees) are dependent on the invoice factoring services you use and the amount of invoices and invoice amounts we handle for you. We want to earn your business and offer extremely competitive rates. Contact us today for a free, no-obligation quote.

In a traditional environment, a company or small business owner will borrow money in the form of a cash advance from a lending institution and pledge collateral to secure the bank loan. Over time, the company or individual will work to pay this loan back with interest. Depending on the loan structure, payments may be due monthly, starting immediately, or the full principal and interest will be due at some specified date in the future.

Invoice factoring, by contrast, uses your existing invoices as collateral. If you have outstanding invoices due from your customers, you can sell those invoices to a third party for a discount. You’ll get an immediate injection of cash, and your customers will pay their invoices directly to the third party for goods and services.

Since invoice factoring does not cause your company to incur any debt, it can actually increase your credit score through consistent cash flow and financial stability.