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Understanding factoring for business financing


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What is factoring?

Factoring is a type of financing where your business borrows money based on expected future income from an account receivable or invoice. The Factor (the lender or agent) advances 75-90% of the face value of your account receivables, and you get the remaining 10-25% when your customer pays their invoice. It’s like a real-time line of credit in terms of cash flow.

Is factoring the right financing solution for your business?

  • Factoring is a good financing option if your business is outgrowing your line of credit or if you don’t qualify for a line of credit. Essentially you can access as much financing as you have in eligible receivables.

  • If your business is in a challenging financial situation, you can still get the financing you need while you work out a game plan.

  • Companies that need more flexibility can benefit greatly from factoring. If your business is seasonal, for instance, you might have wildly fluctuating financial needs.

Myths about factoring

Factoring isn’t last resort financing. In fact, it can be a great solution if your business is facing high-growth opportunities. Knowing you have access to funds means you can seek out and accept purchase orders with confidence.

Factoring isn’t a one-size-fits-all solution. With full notification factoring, your customer makes payments directly to the factor. In other cases your customer pays a lockbox or into a blocked account. The factor will determine the best structure based on your specific situation.

You can still borrow against inventory or equipment. An asset-based loan can be granted in tandem with a factoring facility.

Accord Financial

Meridian has partnered with Accord Financial, one of North America's most dynamic finance company, to bring our business Members more financing options.

Accord offers the one of the most flexible programs in Canada for companies looking for financing between $500,000 to $2,000,000.

Factoring with Accord Financial:

  • No fixed term

  • No set up fee

  • Disbursement within 10 days

  • Credit approval is based on the quality of the customer, not the company’s balance sheet

  • No covenants

  • Spot Factoring is available

Accord has a long track record of successfully supporting small business. Learn more about Accord Financial

If you have questions about Factoring, or other types of business financing, talk to a Meridian Small Business Advisor or Commercial Banking Relationship Manager

Learn more about business financing

Asset based lending

Meridian Credit Union communications are intended for informational purposes only and do not constitute financial advice or an opinion on any issue. We would be pleased to provide additional details or advice about specific situations if desired.

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