Invoice factoring is a widely used financing solution among Canadian trucking companies and small businesses looking to improve cash flow. However, many business owners are uncertain about the true cost of factoring and how fees are structured.
Whether you’re evaluating Mehmi Financial Group or another provider, understanding factoring fees is crucial to making the right decision for your business. In this guide, we’ll break down the types of fees, how they’re calculated, and what to watch out for before signing a factoring agreement.
Factoring fees are the costs a business pays when selling its unpaid invoices to a third-party company (known as a factor) for immediate cash. Instead of waiting 30, 60, or 90 days for payment, you receive a large portion of the invoice up front—minus a fee that covers the factor’s service and risk.
This fee structure can vary depending on your industry, customer payment behavior, and the agreement terms.
Unlike loans, invoice factoring doesn’t add debt to your balance sheet. It’s a cash flow solution that converts your receivables into working capital.
Explore Invoice Factoring Solutions offered by Mehmi Financial Group across Canada.
Factoring agreements can include several types of fees. Understanding each one ensures transparency and helps you compare providers accurately.
The discount fee is the primary cost of factoring. It’s typically a percentage of the total invoice value and can range from 1% to 5% depending on:
For example, a 2% discount fee on a $10,000 invoice means you’ll receive $9,800 initially.
Some factoring companies charge an ongoing service fee for account management, collections, and reporting. This may be:
Service fees are more common in non-recourse factoring agreements or full-service factoring packages.
Here are some common extra charges you may encounter:
Always ask for a complete fee schedule before signing a contract.
Several factors influence the total cost of factoring:
Larger or more frequent invoice submissions may qualify for tiered pricing or reduced discount fees.
Factoring companies evaluate your clients’ ability to pay. If your customers have good payment histories, the factor may lower your fees because the risk is reduced.
Invoices with longer payment cycles (60–90 days) typically result in higher fees, as the factor must wait longer to get paid.
Industries like construction or freight brokerage may carry higher default risks, increasing your discount rate.
Cost matters—but choosing the right factoring partner goes beyond the rate.
Work with a provider who understands your industry. For example, Mehmi Financial Group specializes in freight and small business factoring, helping companies across Canada manage working capital.
Read the agreement carefully. Check for:
Responsive and reliable service can make a big difference. Choose a partner that provides:
Some businesses need to factor only select invoices or clients. Look for providers offering:
A Mississauga-based logistics company with a growing client base needed faster access to cash to cover payroll and fuel costs. Traditional loans weren’t feasible due to limited collateral, so they turned to factoring with Mehmi Financial Group.
They received funding within 48 hours of invoicing and used invoice factoring to scale operations. The fees—under 3%—were offset by improved cash flow and reduced reliance on credit lines.
This helped them accept larger contracts with extended payment terms, fueling expansion while maintaining financial stability.
Factoring fees can be complex, but understanding them is essential for making sound financial decisions. From discount rates to service charges, being aware of what’s included—and what’s not—ensures that invoice factoring works for your business, not against it.
When choosing a factoring company in Canada, weigh the fees against benefits like speed, service, and flexibility. A trusted partner like Mehmi Financial Group offers clear terms and tailored support to help you improve cash flow without taking on debt.
Get a transparent quote from Mehmi Financial Group.
Speak to an advisor or calculate your factoring costs today.
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