Factoring in Canada

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Published: 20th August 2017
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Interstate Capital entered the Canadian factoring market in January 2004 by signing clients in Saskatoon, Toronto, Vancouver and Calgary. By fall of 2007, Interstate Capital had enough critical mass in Canada to incorporate a new subsidiary, ICC Canada, Ltd., which opened its first office in the Toronto suburb of Mississauga.

For clients, factoring in Canada works almost exactly as it does in the United States. ICC funds its Canadian clients either in Canadian dollars or in U.S. dollars. It disburses funds through Toronto Dominion Bank, and its clients’ customers remit payment to Toronto Dominion’s Toronto lockbox address. Payments originating in Canada do not cross the border, and the entire transaction is considered domestic.

Factoring law in Canada governing Canada factoring transactions has very few meaningful differences from its American counterpart. Some terminology is different, and some laws may vary slightly from province to province. Quebec law, for example, is somewhat unique to Quebec, so certain steps are necessary for factoring companies to secure payments from their clients’ customers. For complicated transactions in Quebec, it is sometimes necessary to obtain legal counsel. Consequently, factoring transactions that originate in Quebec may be more time-consuming to close.

The Canadian law that governs secured transactions is called the Personal Property Security Act (“PPSA”). The American counterpart, the Uniform Commercial Code (“UCC”), performs the same function. Both sets of laws are intended to be uniform throughout the United States and Canada, with some exceptions. Both set out the manner in which factoring companies must notify their clients’ customers that payments are assigned to the factor; both set out the rules for lien priority among competing creditors; and both perform the function of public registry of secured parties’ claims against debtors’ assets.

Canada Factoring vs US Factoring

Factoring in Canada is only slightly trickier than in the U.S. because public credit information on Canadian businesses is not as widely available as it is for businesses in the U.S., where there are numerous resources available for a factoring company to check credit worthiness and payment habits.

Perhaps the largest provider of credit information on businesses in North America is Dun & Bradstreet. Factoring companies rely extensively on Dun & Bradstreet files in the U.S., and the company reports on Canadian businesses as well. In our experience, however, there is less depth in the Dun & Bradstreet files on Canadian companies. Factoring companies may rely on other sources of information to gather information about their clients’ customers in Canada. Experian provides some good information in some sectors. In addition, factoring companies will generally have a credit application that they will ask their clients’ customers to sign if there is no publicly available information.

The Interstate Capital Group of Companies is a leading marketer of accounts receivable factoring ("invoice factoring"), freight factoring, fuel debit and credit cards, freight matching, freight broker credit reports, property broker bonds ("freight broker bonds"), fuel advances, truck and trailer financing, freight brokerage, accounts payable auction management services, and supply chain finance technology. Founded in 1993, Interstate Capital has provided $ billions of funding for over 7,000 small businesses, motor carriers, owner/operators, manufacturers, oilfield service companies, and services businesses in the U.S., Canada, and Mexico. Go to http://www.interstatecapital.com/factoring-in-canada/ to get more information on Factoring in Canada.

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