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Waiting 30–90 days to get paid? Compare factoring, A/R lines and working-capital funding for slow receivables in the U.S. and Canada.
Your business completed the work. The invoice was approved. Your customer is expected to pay.
The problem is timing.
Payroll, fuel, suppliers, rent and taxes are due now, while a large commercial customer may not pay for another 30, 60 or 90 days.
When sales are healthy but cash is trapped in accounts receivable, the right financing can bridge that delay without treating a collections problem like a long-term debt problem.
Quick Answer: Businesses with slow-paying B2B customers can use invoice factoring, accounts-receivable financing, asset-based lines of credit or working-capital loans to bridge the period between invoicing and collection. The right option depends on invoice quality, customer credit, concentration, existing liens, margins and whether the cash-flow gap repeats. Financing should accelerate good receivables, not hide uncollectible ones.
Revenue does not become usable cash the moment an invoice is issued.
Consider a staffing company that pays workers every Friday but invoices corporate clients on Net 45 terms.
Or a trucking company that pays fuel, drivers and insurance long before a shipper pays the freight invoice.
A manufacturer may purchase raw materials, produce an order, ship it and then wait another 60 days for payment.
The company can be profitable while its bank account remains tight.
That is the basic cash-conversion problem behind receivables financing.
BDC defines factoring as selling accounts receivable to a third party in exchange for immediate funds instead of waiting for customers to pay. BDC specifically notes its usefulness when businesses face slow-paying customers or need cash to fulfill additional orders.
For a Canadian explanation of the mechanics, Mehmi's guide on how invoice factoring works walks through the sequence from issuing an invoice to receiving the advance and final reserve payment.
There is no single "slow receivables loan."
Different financing structures solve the problem differently.
Factoring involves selling eligible accounts receivable to a factor.
You issue an invoice for completed work or delivered goods. The factor verifies the receivable and advances part of its value.
Your customer later pays according to the approved collection arrangement. The factor deducts its agreed charges and releases the remaining reserve where applicable.
Factoring differs from an ordinary term loan because the financing is primarily tied to the receivable and the party responsible for paying it.
That can make it useful for businesses whose customers are financially stronger than the business itself.
Canadian companies comparing approval mechanics and costs can review Mehmi's Invoice Factoring in Canada: Costs & Approval.
Accounts-receivable financing is broader than factoring.
Instead of selling individual invoices, the business may borrow against a pool of eligible receivables.
A lender can establish a borrowing base, such as a percentage of qualifying accounts receivable, and adjust availability as invoices are created and collected.
The company may continue handling customer collections depending on the structure.
This can be useful for established businesses with a substantial and recurring A/R ledger.
Mehmi's Canadian Accounts Receivable Financing guide explains factoring, invoice discounting and borrowing-base structures as distinct approaches to financing receivables.
Larger businesses may need more than invoice-by-invoice funding.
An asset-based lending facility can create revolving availability against eligible receivables and sometimes inventory or other assets.
Availability changes with the borrowing base.
That means a growing distributor might have greater financing availability as eligible receivables rise, rather than returning for a completely new term loan every time sales expand.
The tradeoff is reporting.
Expect regular A/R aging, borrowing-base calculations and lender monitoring.
Canadian manufacturers and wholesalers can see the mechanics in Mehmi's Asset-Based Lending Canada Borrowing Base Guide.
U.S. businesses may also have an SBA-backed alternative. The SBA's 7(a) Working Capital Pilot supports monitored lines of credit of up to $5 million for eligible businesses and specifically contemplates borrowing against accounts receivable and inventory. Participating lenders make and underwrite the loans.
A conventional line of credit can work when receivable timing is only one of several recurring working-capital needs.
The business draws when cash is tight and repays as customers pay.
The difference is underwriting.
A general line may depend more heavily on the company's financial strength, profitability, bank conduct and overall collateral than a factoring facility focused primarily on individual invoices.
Canadian owners choosing between the two can use Mehmi's Factoring vs. Line of Credit guide and its deeper comparison of secured versus unsecured business lines.
A term loan can still make sense when the receivables delay is temporary or tied to one defined event.
For example, a contractor may need $100,000 today to mobilize a project but expects several progress payments over the next four months.
A defined loan may be simpler than establishing a full receivables facility.
But borrowing repeatedly every time invoices age is usually a sign that a revolving or receivables-based structure deserves consideration.
Mehmi's guide on how to use a working-capital loan similarly separates one-time needs from recurring slow-pay situations.
A lender or factor wants receivables that are real, earned and collectible.
That usually means the product has been delivered or the work has been completed, the invoice is valid and the customer does not have a reasonable dispute.
The payer's credit quality matters.
A $100,000 invoice to an established commercial customer can be more financeable than a $25,000 invoice owed by a financially weak business.
Age matters too.
A current invoice is generally easier to finance than one that has already gone materially past due.
Concentration can also become a problem.
If one customer represents 75% of your total receivables, your entire financing facility may effectively depend on one payer.
Mehmi's Canadian receivables guide highlights customer concentration, invoice eligibility and collectability as major underwriting issues.
Invoices become more difficult when payment depends on unresolved conditions.
Common examples include disputed work, significant offsets or credits, unresolved returns, uncertain change orders and invoices that have not actually been earned.
Progress billing and construction receivables can require additional review because of retainage, lien rights, contractual setoffs and completion conditions.
Related-party invoices can also receive little or no borrowing-base value.
The lender may exclude older accounts entirely.
The lesson is important:
Financing cannot turn a weak receivable into a good receivable.
A factor advances money because it expects the customer to pay.
If the customer has a legitimate reason not to pay, financing only moves the problem earlier.
Often, yes.
In notification factoring, the customer receives instructions to make payment to the factor or a controlled account.
That can include a notice of assignment or updated remittance instructions.
Other structures may keep collection less visible, but they usually involve different controls and eligibility standards.
This is worth considering before signing, especially when customer relationships are sensitive.
Mehmi's article on what customers see during invoice factoring explains payment notices, verification calls and customer-facing collection changes in more detail for Canadian businesses.
A good provider should treat your customer professionally.
A low factoring fee has limited value if aggressive collection practices damage a profitable long-term account.
Factoring is usually priced differently from an amortizing term loan.
The provider may charge a discount fee based on invoice value and how long the customer takes to pay.
Other potential costs can include transaction fees, minimums, wire charges, due-diligence costs and other contractual fees.
The important variable is time outstanding.
If your customer normally pays in 30 days, your cost can be very different from a customer taking 75 days.
That is why comparing only the headline percentage can be misleading.
Canadian businesses wanting a deeper cost analysis can review Mehmi's Invoice Factoring Cost guide.
Transportation companies have industry-specific considerations involving paperwork, brokers and shipper credit. Mehmi's Freight Factoring for Canadian Trucking Companies guide addresses those issues separately.
Assume a U.S. B2B company has completed work and issued a USD $100,000 invoice payable in 60 days.
For illustration only, assume:
Invoice amount: USD $100,000
Initial advance: 85%
Initial cash received: USD $85,000
Reserve held initially: USD $15,000
Assumed factoring charge after 60 days: 3% of invoice value
Factoring charge: USD $3,000
Additional transaction, legal, wire and other fees: $0 assumed
When the customer pays the full invoice, the factor deducts the USD $3,000 assumed charge from the USD $15,000 reserve and releases USD $12,000 to the business.
The business therefore receives:
USD $85,000 initially + USD $12,000 later = USD $97,000 total.
Total assumed factoring cost is USD $3,000.
This example is not a Mehmi Financial Group offer and does not represent available pricing.
It also should not automatically be converted into an APR.
The cash flows include an initial advance, a retained reserve and a customer payment whose exact timing can change. Additional fees and different legal structures can materially change the economics.
The practical question is whether getting USD $85,000 approximately two months earlier creates more than USD $3,000 of value.
If it prevents missed payroll or enables the business to fulfill another profitable order, it may.
If gross margins are already extremely thin, the factoring charge may consume too much of the profit.
Start with the advance amount.
A larger advance provides more cash today, but it is not automatically the best offer if fees are higher.
Then examine the fee schedule.
Ask what the invoice costs if the customer pays in 30, 45, 60 and 90 days.
Understand whether the arrangement is recourse or non-recourse and exactly what those terms mean in the contract.
"Non-recourse" usually does not mean the factor accepts every possible reason for non-payment. Disputes, fraud, warranty claims and contractual offsets can be treated differently from a customer's credit failure.
Review minimum volumes and termination provisions.
Some agreements require a minimum monthly fee or long-term commitment.
Also understand whether you must factor every invoice, every invoice from a particular customer or only the invoices you choose.
The economics are determined by the contract, not simply by the percentage in the marketing material.
With factoring, the customer invoice is generally sold or assigned as part of the funding transaction.
With an A/R-backed revolving loan, the receivables generally support borrowing availability while remaining collateral for the debt.
The latter can be less intrusive for established companies, but it may require stronger financial reporting, covenants and lender controls.
A receivables line can also become more economical at scale because the business is not necessarily pricing every invoice separately.
The decision often comes down to maturity.
A younger or rapidly growing business may find factoring accessible because the payer's credit carries substantial weight.
An established company with strong reporting and a large A/R book may prefer a revolving borrowing-base facility.
This can become a major closing issue.
A new factor or A/R lender generally wants to know whether another secured creditor already claims the receivables.
Security interests in business assets are generally handled under state versions of UCC Article 9.
A UCC-1 financing statement can be filed to perfect a security interest in named collateral and establish priority against competing claims. The California Secretary of State provides one official example of this filing process; the applicable filing jurisdiction depends on the specific debtor and transaction.
An existing blanket lien can therefore prevent a new receivables provider from taking the position it requires unless the creditors agree on priority or the existing lien is released.
Common-law provinces generally use provincial PPSA systems.
Ontario's PPSA expressly applies to transfers of accounts as well as transactions creating security interests. Ontario's Personal Property Security Registration system allows creditors to register financing statements and establish priority against competing claims.
Quebec uses its civil-law framework and the RDPRM rather than PPSA terminology. The RDPRM records rights affecting movable property and commercial assets.
Do not assume you can add factoring on top of an existing secured credit facility without reviewing lien priority.
Factoring can be particularly logical when the business's core problem is obvious:
The money has already been earned. You are simply waiting to collect it.
A term loan adds a fixed debt payment regardless of which customers pay.
Factoring ties the financing more directly to the receivable cycle.
It can also scale with sales. More eligible invoices can create more financing capacity.
But it may be less attractive when customers pay quickly, margins are thin or the business easily qualifies for a lower-cost revolving line.
BDC advises businesses to examine the complete cost-benefit case, including fees and the potential operational benefits of faster cash.
Do not factor invoices simply because collections management is weak.
If customers are paying late because invoices are sent incorrectly, purchase-order numbers are missing or disputes sit unresolved for weeks, fix the process first.
Do not use receivables financing to hide poor margins.
A company that loses money on every sale becomes less healthy as sales increase, regardless of how quickly those invoices are financed.
Also be careful when one questionable customer represents most of the A/R ledger.
If that customer fails, the problem is not merely timing.
It is concentration risk.
Sometimes the least expensive source of working capital is simply collecting faster.
Require deposits where commercially appropriate, invoice immediately, correct documentation errors quickly and follow up before invoices become seriously past due.
A lender-ready receivables package generally starts with a current accounts-receivable aging.
The lender may also request accounts-payable aging, customer concentration information, sample invoices, contracts or purchase orders, recent bank statements, financial statements and a current debt schedule.
Proof of delivery or completion can matter.
Trucking businesses may need bills of lading or delivery confirmations.
A staffing company may need approved timesheets.
A contractor may need progress certificates or other proof that billing milestones were achieved.
Accuracy matters more than volume.
An A/R report containing invoices that were already paid, disputed or credited will quickly weaken lender confidence.
Slow receivables sometimes explain only part of the cash shortage.
A company may also need inventory, marketing, hiring or other operating capital unrelated to specific invoices.
A working-capital loan or line can therefore be cleaner.
The tradeoff is that the lender places more weight on the business itself rather than the customer's ability to pay one specific invoice.
Canadian owners considering fixed debt should first stress-test the payment. Mehmi's Business Loan Payments in Canada guide explains how payment frequency and late-A/R months affect debt-service capacity.
For companies where the problem is mostly receivables and inventory rather than general credit strength, asset-based financing may provide a closer match.
Potentially. Eligible B2B receivables can support factoring, invoice financing or a receivables-backed revolving facility. Invoice validity, payer credit, aging, concentration and existing liens are important.
Potentially. A newer business with valid invoices to established commercial customers can sometimes be considered even when its own operating history is limited. Approval is not guaranteed.
Some providers offer selective or spot factoring, while others require all invoices from certain customers or minimum monthly volume. Review the agreement rather than assuming complete flexibility.
Not necessarily. Factoring is used in many B2B industries. The larger risk is poor communication or aggressive collection practices. Understand exactly what customers will see before signing.
Your cost may increase if the fee is time-based. Eligibility can also change as invoices age. Model the cost at several possible payment dates, not only the contractual due date.
Usually this is much harder. A financier needs confidence the invoice is valid and collectible. Resolve material disputes before relying on that receivable for funding.
Traditional factoring is generally structured as a sale of receivables rather than a conventional loan. Other invoice-financing structures can be loans secured by receivables. The contract controls the legal and economic structure. BDC likewise distinguishes factoring from ordinary business loans.
Factoring is most directly aligned with slow-paying invoices and can place greater emphasis on customer credit. A line of credit is broader and reusable but usually puts more weight on your company's overall credit quality and cash flow.
If customers reliably pay but take 30, 60 or 90 days, the problem may be the timing of cash rather than the quality of the business.
Start with your A/R aging.
Identify which customers are slow, how much cash is tied up, whether invoices are disputed and what the waiting period costs the business.
Then compare factoring, receivables-backed credit, asset-based lending and a general business line based on total cost, customer impact, reporting requirements and lien structure.
Mehmi Financial Group's current Invoice & Freight Factoring service is positioned for North American businesses with B2B receivables, including transportation, construction, staffing, manufacturing, wholesale and service companies. Mehmi Financial Group operates as a financing brokerage and intermediary rather than a direct lender, and independent financing institutions determine final approvals and terms.
To discuss funding for slow receivables, contact Mehmi Financial Group at 833-863-4644 through the verified Mehmi Financial Group contact page. The current page confirms the toll-free number.
Include your financing amount, U.S. or Canada, state or province, use of funds, current A/R aging and expected customer payment timing so the receivables problem can be evaluated against factoring, a revolving facility or another appropriate working-capital structure.
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