How to choose the right factoring company

Not sure how to choose a factoring company that aligns with your business needs and preferences? It can seem like a complicated process if you haven’t done it before or aren’t sure what to look for, but it’s easier than you might think. On this page, we’ll walk you through identifying your own criteria, finding factoring companies that meet your needs, evaluating which ones are best, and sealing the deal, so you can start factoring quickly.

Why Choosing the Right Factoring Company Creates a Better Experience

There are 1.9 million small businesses in Canada, according to government data. If you operate one of them and have tried to work with a bank before, you know how challenging it can be to get approved for a loan. It’s so tricky that some business owners will select a lender based exclusively on who will accept them. Factoring isn’t that way. You have more freedom to choose a factoring company committed to strengthening your company. Your factoring company selection determines the following:

  • Availability of funding
  • Speed of funding
  • Terms
  • Costs
  • Access to additional services
  • Scalability
  • Communication
  • And more

Combined, these things determine how well you work together and the outcome of your partnership.

How to Choose a Factoring Company

Choosing the Right Factoring Company in 5 Easy Steps

Now that we’ve covered why finding the right partner matters let’s explore how to create your shortlist and how to choose a factoring company that will be instrumental in your growth.

Step 1: Familiarize Yourself with Invoice Factoring

Some of the high points of invoice factoring are outlined below. Additional details, if needed, can be found in our invoice factoring guide.

What is Invoice Factoring?

Invoice factoring is like getting an advance on your B2B invoices. Instead of waiting 30 or more days for your client to pay, you sell your invoices at a discount and get paid most of the invoice’s value upfront. Because your client is the one paying their invoice, there’s no debt and nothing to pay back. This also makes the approval process easier. Instead of relying on rigid criteria like banks use to gauge the creditworthiness of your business, invoice factoring companies evaluate the strength of your clients.

What is a Factoring Company?

A factoring company, sometimes called a factor, is a funding firm specializing in purchasing receivables. Some factoring companies offer additional services, such as business lines of credit, commercial credit cards, equipment financing, and asset-based lending.

What is an Invoice Factoring Broker?

Invoice factoring brokers are specialists that can connect you with a factoring company. You don’t need to work with a broker to select a factoring company, but sometimes it’s helpful if you haven’t factored before or want someone with experience to help you navigate the decision.

What Are Signs Your Business Needs Invoice Factoring?

More than a quarter of small businesses with fewer than 19 employees can’t take on additional debt, according to Statistics Canada. Others prefer not to. Invoice factoring is one of the few ways to obtain funding that doesn’t create debt.

Invoice factoring may also be ideal if issues such as slow-paying clients, seasonality, or rapid growth impact your ability to cover things like payroll and inventory.

It’s also a good solution if you require funding to seize a growth opportunity, particularly if you don’t qualify for a loan or if traditional funding won’t come through fast enough.

Step 2: Identify Your Business Needs

Next, consider your business needs and identify factoring company criteria. Some questions to ask yourself are detailed below.

Do I Need an Industry Specialist?

Working with a factoring company specializing in your industry is generally best. Someone who knows the ins and outs of your business is in a better position to support you.

How Often Will I Be Factoring Invoices?

Some factoring companies are geared toward long-term contracts, while others are more flexible. For instance, you’ll want to search for a company that offers spot factoring if you only want to factor one invoice. If you think you’ll factor more than once, but your needs will be inconsistent, or you intend to minimize your advances, look for companies with no minimums or nominal volume requirements.

How Much Money Will I Need Advanced?

Consider the level of funding your business needs today and tomorrow. For example, your typical invoice may be $50,000 today, but you bid on government contracts, and some could reach $500,000 as your business grows. You’ll want to work with someone who can support your needs now and scale with you.  

Could I Benefit from Additional Funding Solutions?

Again, consider your situation today and going forward. If you’re planning to purchase equipment or expand your business, developing a relationship with a business funding specialist who can handle all these needs makes sense.

Could I Benefit from Additional Services?

Factoring companies differ in the level of service they provide. For instance, some expect you to invoice your clients, while others can prepare invoices for you. Many will offer client credit checks and collections services too. Some can also provide you with fuel discount cards. While these may seem like secondary considerations, tapping into value-added services or outsourcing some of your back-office functions to your factoring company may save you money and free you to focus on running the business.

Step 3: Research Different Factoring Companies

The next step in the factoring company selection process is to create a shortlist of potential partners that meet the criteria you established in step two.

Factoring Companies Canada is Your Comprehensive Resource

We’re happy to connect you with a factoring company that can meet your needs.

Factoring Companies Canada is your comprehensive resource when choosing a factoring company

Step 4: Perform a Factoring Service Comparison

Next, use your gathered data to perform a factoring company evaluation. If two or more companies seem like they could be a good fit, try breaking your list of needs into three groups: deal-breakers, preferences, and nice-to-haves. Anything that’s an absolute must for your business goes in the “deal-breakers” column. Things you’d really like to have in your factoring company go in the “preferences” column. Anything remaining can go in the “nice-to-haves” column. Once the traits are listed, order them by how important each item is to you.

You should be able to reduce your list of options considerably by eliminating any that don’t meet all your deal-breakers criteria. From there, go through the rest of your requirements individually and eliminate prospective companies that don’t meet your needs.

Additional Considerations When Choosing a Factoring Company

Before you move to the negotiation table with any of your shortlisted candidates, try to get a better feel for what working with each company will be like and request a quote.

To gauge what your experience will be like, look for online reviews and find out how long the company has been in business. Also, consider perks such as having a dedicated account manager and 24 x 7 access to your account.

When you get a quote, pay close attention to the overall cost, any fees, and the contract terms.

Step 5: Negotiate Your Factoring Agreement and Seal the Deal

Remember, factoring companies are not banks, and you’re not applying for a loan. You may have some power to negotiate. For instance, if you’re planning to factor large invoices or regularly, you may be able to negotiate a lower rate. If you’re not planning to factor much or you’re getting established with a factoring company to have a backup source of funding, you may want to ask about removing minimums and/or penalties for not meeting minimums.

It’s worth noting that some factoring companies have structured plans and provide their most competitive offer from the start. It doesn’t hurt to ask for a better offer. You can also compare quotes from multiple factoring companies. However, remember that the lowest rate may not be the best choice. Always confirm that the service is up to par before moving forward.

Get Help Finding a Factoring Company to Support Your Business Growth                            

With these easy steps to choose a factoring company, you should be able to get set up with your ideal partner in a matter of days, if not less. To streamline the process even more, request a factoring quote.

factoring companies sticky retina logo

About Factoring Companies Canada

Factoring Companies Canada is your premier guide to navigating the complex landscape of invoice factoring. With decades of combined expertise in factoring solutions and firsthand experience with top invoice factoring companies, the platform is a dedicated resource for businesses across Canada, specializing in connecting companies of all sizes and industries with the ideal factoring providers to meet their unique financial needs. Factoring Companies Canada demystifies the factoring process, offering a clear guide to selling unpaid invoices for immediate cash flow and highlighting its flexibility as a financial solution.
For the latest insights into invoice factoring, exclusive guides, and updates, follow Factoring Companies Canada on LinkedIn, Facebook, and Twitter (x). Join the community of forward-thinking businesses and get ahead with strategic financial solutions tailored to your needs.

Get an instant factoring estimate

Two columns
Name Total
"{{getWooProductName}}" has been added to your cart
Have a promocode?
Promocode Hide Show

Factoring results estimation is based on the total dollar value of your invoices.
The actual rates may differ.


You can reach us at

Get an instant factoring estimate

Two columns
Name Total
"{{getWooProductName}}" has been added to your cart
Have a promocode?
Promocode Hide Show

Factoring results estimation is based on the total dollar value of your invoices.
The actual rates may differ.


PREFER TO TALK? You can reach us at 1-866-477-1778