Typical Invoice Factoring Fees in Canada
What Are Common Rate Ranges?
- Most factoring providers charge 1%–5% of the invoice value per month as a discount fee.
- Specialized industries often fare better:
- Transportation: around 1.95%–4.0%, with advance rates up to 97%–100%
- General SMEs: typically 1.95%–4.5% with advances of 85%–95%
- Construction: slightly higher at 3%–6%
Flat vs Variable Fee Structures
- Flat Fee: A fixed percentage (1%–5%) of the invoice; consistent regardless of payment timing.
- Variable/Tiered Fee: Starts with a base (e.g., 2.5% for first 30 days) and increases over time if payment is delayed.
What Other Fees Can Apply?
Beyond the basic discount fee, additional charges may include:
- Service or admin fees: 0%–2% of invoice value for handling and processing.
- Setup or sign-up fees: One-time charges (e.g. $100) at onboarding.
- Late payment penalties: In tiered models, fees may increase if the invoice remains unpaid past initial terms.
- Minimum volume or contractual fees: Some providers require monthly minimums or contract durations.
- Credit check or onboarding costs: Occasionally charged to cover risk assessment.
How Advance Rates Affect Cost
- Advance Rate is the percentage of invoice value you receive upfront (commonly 70%–95%).
- For transportation, advance rates can range from 97% to over 100%.
Example: With a 3% fee on a $100,000 invoice and 80% advance, you receive $77,000 upfront. Once the invoice is paid, you get the remaining $20,000 minus fees.
Why Canadian Businesses Pay These Rates
- Speed of access: Funds often hit within 24–48 hours.
- Credit flexibility: Approval is based on client credit, not your business history.
- Operational simplicity: Many providers collect invoices and reduce workload.
FAQs: Costs of Invoice Factoring
- What percentage is typically charged monthly?
1%–5% of the invoice value; industry and payment terms affect the exact rate.
- Are there additional fees?
Yes—admin, setup, late payment, and contract minimums can apply.
- How much do I get upfront?
Usually 70%–95%, with top industries like transportation reaching 100%+.
- Flat vs variable fee—what's the difference?
Flat stays consistent; variable increases over time or with payment delays.
- Can volume lower my costs?
Yes—higher monthly factoring volumes often qualify for discounts and better terms.
- Is it worth the cost?
For fast cash flow or scaling, the fee is often acceptable—especially compared to the cash impact of waiting 30–90 days for invoices to clear.
Final Thoughts
In Canada, expect to pay between 1–5% per invoice, potentially higher depending on your industry and risk. Factor in advance rates, hidden fees, and contract terms to understand the real net cost.
Mehmi Financial Group offers transparent invoice & freight factoring solutions tailored to Canadian businesses. Want to model your cost and cash flow before diving in? Try our calculator or reach out via Contact Us.
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