Accounts Receivable Factoring: Get Paid Now, Not in 60 Days

You’ve done the work. You’ve sent the invoice. And now? You’re playing the waiting game.

Your client takes 30 days to pay. Sometimes 60. Sometimes 90. Meanwhile, your bills don’t wait. Payroll doesn’t wait. That next property deal definitely won’t wait.

I’ve seen this story play out hundreds of times with contractors, property managers, and real estate investors who run businesses on the side. They’re cash-flow positive on paper but cash-poor in reality. The money’s coming—it’s just not here yet.

Accounts receivable factoring fixes this problem. You sell your unpaid invoices to a factoring company. They give you 80-90% of the money immediately. They collect from your customer. You move on with your life.

It’s not magic. It’s not free. But for the right situation? It’s a game-changer.

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Why Factoring Beats Waiting Around for Banks

Let’s talk about why you’d even consider this.

You walk into a Canadian bank asking for a $50,000 line of credit. They want two years of financial statements. Tax returns. Business plans. A credit check that makes you feel like you’re applying to adopt a child. Then you wait. Two weeks. Four weeks. Maybe eight.

By the time they say yes—if they say yes—the renovation project you needed the cash for has gone to someone else.

Factoring works differently. Setup takes 3-5 business days. After that? You submit an invoice in the morning, you’ve got cash by end of day.

Here’s how the options stack up:

Financing Option	Approval Time	Based On	Adds Debt	Collection Service
Bank Loan	2-8 weeks	Your credit	Yes	No
Line of Credit	1-4 weeks	Your credit	Yes	No
Factoring	1-3 days	Customer credit	No	Yes
Private Lending	1-2 weeks	Collateral	Yes	No

Here’s the part most people miss: factoring isn’t debt. You’re not borrowing money. You’re selling an asset you already own—your receivables. That’s a big deal if your balance sheet is already stretched or you’re worried about debt-to-income ratios for your next mortgage application.

Who Actually Benefits from Factoring?

Factoring works for businesses that invoice other businesses or government agencies. If you’re collecting rent from residential tenants, this isn’t your tool. But if you run any kind of B2B operation alongside your real estate investing? Keep reading.

Contractors and construction firms. You finished the basement reno three weeks ago. The general contractor won’t pay you for another 45 days because that’s what the contract says. Meanwhile, you’ve got materials to buy for the next job. I’ve seen contractors turn down work because they couldn’t float the gap between paying their crew and getting paid themselves. Factoring eliminates that gap.

Property management companies. You’re billing property owners monthly for management services. Some pay on time. Some… don’t. Factoring those slow-paying accounts keeps your operations running smoothly.

Staffing agencies. This one’s extreme. You pay employees every Friday. Clients pay you in 30-60 days. Without factoring, you’d need a massive cash reserve just to survive. That’s why factoring is practically standard in the staffing industry.

Fast-growing businesses. Here’s an ironic problem: success can kill your cash flow. You land a huge contract—great! Now you need to hire people and buy materials to deliver on it. But you won’t get paid until the work’s done. Banks see a young company with limited history. Factoring companies see a pile of invoices from a Fortune 500 customer. Guess which one funds faster?

Business owners with bruised credit. Maybe you had some rough years. Maybe a bankruptcy sits on your record. Banks won’t touch you. But factoring companies care more about your customers’ creditworthiness than yours. If you’re invoicing solid companies, your personal credit history matters less.

Invoice factoring can unlock cash flow that’s stuck in receivables — book a free strategy call with LendCity to explore whether factoring fits your investment strategy.

How Accounts Receivable Factoring Actually Works

Let me walk you through a real example.

You’re a renovation contractor. You just finished a $25,000 commercial project for a property management company. You invoice them with net-30 terms.

Instead of waiting 30 days (or let’s be honest, 45 days because they’ll be late), you submit that invoice to your factoring company. Within 24 hours, they advance you $22,500—that’s 90% of the invoice value.

The factoring company now owns that invoice. They collect from your customer. When the property management company pays the full $25,000, the factoring company sends you the remaining $2,500 minus their fee.

If the fee is 2%, that’s $500. So you net $24,500 instead of $25,000. You “lost” $500. But you had $22,500 in your account 29 days earlier than you would have otherwise.

Was it worth it? Depends. If that $22,500 let you start a $40,000 job you otherwise couldn’t have taken, absolutely. If you were just going to let it sit in your account anyway, probably not.

Factoring fees typically run 1-5% of invoice value. The variables that affect your rate:

Volume. Factor more invoices, get better rates.
Customer creditworthiness. Invoices to government agencies or major corporations cost less to factor than invoices to small businesses.
Payment terms. Net-30 invoices cost less than net-90 invoices.
Your industry. Some industries have higher default rates.

For solid customers on 30-day terms with decent volume, you can find rates around 1.5-2% here in Canada.

Setting Up Your Factoring Account

Getting started is simpler than you’d expect.

The factoring company needs:

Your accounts receivable aging report (shows who owes you what)
A customer list with contact information
Two years of financial statements
Business formation documents (articles of incorporation, etc.)
Sample invoices showing your billing format

They’ll spend most of their time evaluating your customers, not you. They want to know the people owing you money are creditworthy and likely to pay.

Initial setup takes 3-5 business days. Once you’re approved, ongoing factoring usually funds within 24 hours of submitting an invoice.

Not every financing tool is a mortgage — factoring gives you liquidity fast. schedule a free strategy session with us to see how it can work alongside your real estate portfolio.

How to Pick the Right Factoring Partner

I’ve seen investors sign terrible factoring agreements because they didn’t know what to look for. Don’t be that person.

Compare rates from at least three providers. Headline rates can be misleading. Ask about all fees: setup fees, wire fees, minimum volume fees, early termination fees. Get the all-in cost in writing.

Check their line size. Factoring lines range from $10,000 to $10 million+. Make sure they can handle your current volume and grow with you. Switching factoring companies is a hassle you don’t want.

Confirm funding speed. Same-day or next-day funding should be standard for established accounts. If they’re quoting 3-5 days for routine invoices, keep shopping.

Ask how they treat your customers. The factoring company will be calling your clients about payment. Are they professional? Aggressive? Ask for references from businesses in your industry and actually call them.

Read the contract carefully. Some agreements require you to factor all invoices above a certain amount. Some lock you into exclusive arrangements for 12-24 months. Some have minimum volume requirements. Understand what you’re signing.

Recourse vs. Non-Recourse Factoring

This is where people get confused, so let me be clear.

Recourse factoring means if your customer doesn’t pay, you’re on the hook. You either buy back the invoice or replace it with another one. Most factoring is recourse factoring. It’s cheaper because you’re carrying the default risk.

Non-recourse factoring means the factoring company absorbs the loss if your customer doesn’t pay. Sounds great, right? Here’s the catch: “non-recourse” typically only protects against customer bankruptcy. If your customer refuses to pay because they claim the work was defective, that’s a “dispute,” not a default—and you’re still responsible.

Non-recourse costs more. Whether it’s worth it depends on your customer base. If you’re factoring invoices to major corporations or government agencies that aren’t going bankrupt anytime soon, recourse factoring makes more sense.

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Frequently Asked Questions

How much does factoring cost?

Expect 1-5% of invoice value depending on volume, customer quality, and payment terms. A $10,000 invoice factored at 2% costs you $200. Run the numbers: if waiting 60 days for payment costs you more than $200 in lost opportunities, factoring wins.

Will my customers know I'm factoring?

Yes, in most cases. They'll receive notice to send payment to the factoring company instead of you. This is standard business practice—your customers have seen it before. Some factoring companies offer confidential programs where your name stays on correspondence, but you'll pay a premium for that.

What happens if my customer doesn't pay?

With recourse factoring (most common), you buy back the unpaid invoice or replace it. With non-recourse factoring, the factoring company absorbs losses from customer bankruptcy—but not from payment disputes. Always know which type you have.

Can I factor just some of my invoices?

Some factoring companies require you to factor all invoices from specific customers or above certain dollar amounts. Others allow selective factoring—you pick which invoices to sell. Ask about this before signing anything.

Does factoring make sense for my real estate business?

If you generate B2B invoices—construction, property management services, renovation contracting—factoring can smooth your cash flow. Standard residential rental income doesn't apply since tenants aren't businesses being invoiced. But if you're running a side business that supports your investing, factoring might be exactly what you need.

How fast can I get funded once I'm set up?

Initial setup takes 3-5 business days while the factoring company reviews your customer base. After that, you should receive funds within 24 hours of submitting an invoice. That makes factoring one of the fastest ways to turn receivables into working capital.

Is factoring better than a business line of credit?

Different tools for different situations. Lines of credit are cheaper (prime + 1-3% vs. factoring's 1-5% per invoice) but harder to qualify for and slower to set up. Factoring is faster, doesn't add debt to your balance sheet, and cares more about your customers' credit than yours. If you can get a line of credit, it's usually cheaper. If you can't—or can't wait—factoring fills the gap.

The Real Question: Is the Fee Worth It?

Here’s how I think about factoring costs.

Paying 2% to get your money 60 days early sounds expensive when you annualize it. But that’s not the right calculation for most business owners.

The right question: What can you do with $22,500 today that you can’t do if you wait 60 days?

If the answer is “start a profitable project,” “meet payroll without stress,” or “grab a property deal before someone else does”—then 2% is cheap.

If the answer is “nothing, it would just sit in my account”—then wait for the check.

Factoring isn’t a permanent financing solution for most businesses. It’s a tool for specific situations: rapid growth, seasonal gaps, credit challenges, or opportunities that won’t wait.

The best factoring relationships work quietly in the background. You submit invoices, cash appears, you focus on growing your business instead of chasing payments.

For contractors, property managers, and real estate investors running B2B operations here in Canada, that’s worth knowing about.

Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.

Written by

LendCity

Published

February 1, 2026

Reading Time

8 min read