For trucking businesses in Canada, maintaining consistent cash flow can be a challenge—especially when you’re waiting 30, 60, or even 90 days for clients to pay their invoices. That’s where financial tools like invoice factoring and business lines of credit come into play.
Both options offer liquidity, but they function differently and suit different business goals. In this article, we’ll explore how these tools work, their pros and cons, and how Mehmi Financial Group can support your business with tailored solutions.
What Is Invoice Factoring?
Invoice factoring, also known as freight factoring, allows trucking companies to sell their unpaid invoices to a third-party factoring company at a discount. Instead of waiting for customers to pay, you receive most of the invoice amount immediately—improving your working capital without taking on debt.
How It Works:
- Deliver freight and issue an invoice to your client (usually due in 30–90 days).
- Sell the invoice to a factoring company like Mehmi Financial Group.
- Receive 70–90% of the invoice’s value up front.
- The factoring company collects payment directly from your client.
- Once the invoice is paid, you receive the remaining balance, minus a small fee.
Benefits of Invoice Factoring:
- Immediate cash flow to cover fuel, payroll, or repairs.
- No new debt—you’re simply converting receivables into cash.
- No credit impact—approval is based on your client’s credit, not yours.
- Simplified collections—the factoring company manages follow-ups.
Considerations:
- Factoring fees may reduce your margins.
- Client communication may be managed by the factoring partner.
- Overreliance can make your business dependent on third-party financing.
Learn More About Invoice Factoring →
What Is a Business Line of Credit?
A business line of credit is a revolving credit account that allows truckers to borrow funds as needed, up to a set limit. Unlike a term loan, you only pay interest on the amount you draw—not the full credit line.
How It Works:
- Apply and get approved by a lender, based on your business’s financial health.
- Access your credit limit as needed—withdraw and repay flexibly.
- Only pay interest on the borrowed amount.
- Make monthly repayments, which restore your available credit.
Benefits of a Line of Credit:
- Flexible access to cash for variable expenses.
- Lower interest rates than most short-term loans or factoring fees.
- Builds credit history with consistent repayment.
- Ideal for expansion or seasonal needs.
Considerations:
- Credit score and financial history matter—stronger businesses qualify easier.
- Approval process may take time.
- Debt risk—you’re borrowing money, so repayment discipline is essential.
- Variable interest rates can increase over time.
Explore Working Capital & Lines of Credit →
Invoice Factoring vs. Line of Credit: Side-by-Side Comparison
| Feature |
Invoice Factoring |
Line of Credit |
| Funding Speed |
Fast – often within 24–48 hours |
Slower – depends on approval timeline |
| Credit Requirements |
Based on your client’s credit |
Based on your business’s credit |
| Debt Incurred |
No – it's a sale of receivables |
Yes – borrowed funds must be repaid |
| Repayment Obligation |
None – client pays factoring company |
Ongoing monthly repayments |
| Use Case |
Immediate cash for operations |
Flexible access to funds for growth or emergencies |
| Cost |
Factoring fee (1–5% per invoice) |
Interest on used amount (typically lower than factoring fees) |
Real-World Scenarios: What Truckers Should Consider
Case Study 1: Small Fleet Operator Needing Quick Cash
A small trucking business in Mississauga hauls cross-border freight. Cash flow is tight due to slow-paying clients, making it hard to cover fuel and payroll. They use invoice factoring through Mehmi Financial Group to turn invoices into fast cash—keeping trucks on the road without adding debt.
Case Study 2: Established Carrier Planning to Expand
A well-established trucking company in Ontario is looking to expand its fleet and invest in route optimization technology. With a strong credit score, they secure a business line of credit to fund new trucks and hire additional drivers—reaping the benefit of lower interest and more control over repayments.
Which Option Is Best for Your Trucking Business?
The right choice depends on your goals, credit profile, and cash flow needs.
Choose Invoice Factoring If:
- You need immediate cash to manage day-to-day expenses.
- Your clients take a long time to pay invoices.
- You want to avoid taking on additional debt.
- You don’t qualify for traditional credit due to limited history.
Choose a Line of Credit If:
- You have a strong credit profile and financial stability.
- You’re planning long-term investments or managing seasonal demand.
- You want flexibility with lower long-term costs.
- You prefer managing collections yourself.
Work with a Trusted Financing Partner
At Mehmi Financial Group, we offer both invoice factoring and working capital solutions—helping Canadian trucking businesses stay liquid, grow efficiently, and reduce financial stress. Whether you're an owner-operator or manage a growing fleet, our team will tailor the right solution to your business’s needs.
Speak to a Financing Advisor →
Calculate Your Monthly Payment →
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