Is Invoice Factoring Worth It?

What Is Invoice Factoring?

Invoice factoring is when a business sells its unpaid invoices to a factoring company for immediate cash. Instead of waiting 30–90 days for customers to pay, you get up to 95% of the invoice value within 24–48 hours.

At Mehmi Financial Group, we provide invoice and freight factoring programs that help Canadian businesses overcome cash flow delays without taking on new debt.

Why Businesses Ask: “Is It Worth It?”

Factoring comes with fees, so the question is whether the benefits outweigh the costs. For many Canadian SMEs, the answer is yes — especially if cash flow is holding the business back.

When Factoring Is Worth It:

• You’re waiting 30–90 days for payment but need funds for payroll, fuel, or supplies.
  
  
• You’re growing quickly and need cash to take on new contracts.
  
  
• You want flexibility — approvals depend on customer credit, not yours.
  
  
• You want to avoid new debt — factoring is a sale of receivables, not a loan.
  
  

When It Might Not Be Worth It:

• Your customers pay within 15 days consistently.
  
  
• You have access to a low-interest line of credit.

• Your margins are so tight that factoring fees erode profitability.

Industries That Benefit Most

• Transportation & Trucking: Waiting 60–90 days for freight bills is common. See transportation expertise.
  
  
• Construction & Contractors: Long projects create gaps between billing and payment.
  
  
• Manufacturing & Wholesale: Distributors often pay slowly while suppliers need cash upfront.
  
  
• Agriculture: Seasonal cycles mean factoring stabilizes income.
  

• Small Business Services: B2B service providers with net-30+ payment terms gain predictable cash flow.

Case Study: Ontario Trucking Fleet

A trucking company in Mississauga with five trucks was waiting 60 days for freight brokers to pay. Fuel, insurance, and payroll costs nearly stalled operations.

By using freight invoice factoring, they received 85% of invoice values within 24 hours. This:

• Kept trucks fueled and drivers paid on time
  
  
• Allowed them to accept new contracts
  
  
• Expanded their fleet to seven trucks within a year
  
  

The small fee was worth it compared to missing opportunities and risking downtime.

FAQ: Is Invoice Factoring Worth It?

1. How much does factoring cost?
Typically 1–5% of invoice value, depending on volume and risk.

2. Is it better than a loan?
For immediate cash flow, yes. Loans are cheaper but harder to qualify for and slower to access.

3. Will my customers know I’m factoring?
Yes, customers pay the factoring company directly. This is standard in trucking, construction, and B2B.

4. Is factoring legal in Canada?
Yes. It’s a regulated and common financing practice.

5. Can startups use factoring?
Yes, if they have invoices from creditworthy clients.

6. When is it not worth it?
If you have strong reserves, fast-paying customers, or cheap bank financing available.

‍

Final Thoughts

So — is invoice factoring worth it? For many Canadian SMEs, the answer is yes. The ability to get cash within 24 hours to cover fuel, payroll, and supplier costs often outweighs the fees.

At Mehmi, we tailor invoice & freight factoring to transportation, construction, and manufacturing businesses across Canada.

Test scenarios with our financing calculator, or contact our credit analysts for a personalized assessment.

‍

Are you looking for a truck? See our used inventory.