Side by side

Choose Chartered bank term loan when

• Your credit, history, and financial statements pass bank underwriting
• The need is a fixed amount with a clear repayment plan
• You can wait several weeks for approval and funding
• Lowest cost matters more than speed or flexibility

Choose Invoice Factoring when

• Cash is trapped in net-30 to net-90 receivables
• The business is growing faster than its balance sheet
• Bank credit was declined or capped below what billings support
• You invoice creditworthy commercial or government customers

When both make sense

Mature businesses often run both: a bank term loan for fixed investments and a factoring facility carrying the receivable cycle. The two secure different assets, so the structure works — as long as both lenders agree in writing on who holds the receivables.

Factoring is also a bridge, not always a destination: businesses commonly factor through a growth phase, build the balance sheet, and graduate to bank credit — the repayment history helps the bank file.

Frequently asked questions

Why would I pay more for factoring when bank debt is cheaper?

Because the comparison is rarely available on the same file. The business choosing factoring typically cannot access bank credit at the size it needs, or cannot wait for it. The real comparison is factoring versus the cost of turning down orders, missing payroll, or losing supplier discounts while waiting to be paid.

Does factoring hurt my chances of bank financing later?

Generally the opposite. A factoring facility that runs cleanly demonstrates disciplined receivables and payment history. Many businesses factor through a growth phase and then move to a bank facility once the balance sheet supports it.

What does the bank see that factoring ignores?

The bank underwrites your business: credit score, financial statements, years of history, and personal guarantees. A factor underwrites your customers: who owes you money and whether they pay. That is why a young business with strong customers can be declined by the bank and approved for factoring in the same week.

Related

• Chartered bank term loan vs Business Line of Credit — A chartered bank term loan is cheaper and should be your first call if the business is bankable — two or more years of history, clean financials and strong credit.
• Invoice Factoring vs Merchant Cash Advance (MCA) — If the business invoices other businesses, factoring is almost always the cheaper answer — it advances money the business has already earned, priced from 1.5% per 30 days, and creates no debt.
• Term Loan vs Merchant Cash Advance (MCA) — A term loan is the cheaper instrument and the right one whenever the file can carry it — fixed payments, a defined end date, and pricing quoted as an annual rate.
• Equipment Financing vs Term Loan — If the money is going into a specific piece of equipment, finance the equipment.
• Purchase Order Financing vs Invoice Factoring — These are not alternatives — they are consecutive.
• Inventory Financing vs Business Line of Credit — A line of credit is underwritten on the business as a whole and can be spent on anything; inventory financing is underwritten on the stock and is used to buy stock.
• Equipment Financing vs Business Line of Credit — Buy the machine on equipment financing and keep the line of credit for working capital.
• Chartered bank term loan vs Merchant Cash Advance (MCA) — These sit at opposite ends of the same spectrum.
• Inventory Financing vs Purchase Order Financing — The difference is whether a customer exists yet.
• RBC Royal Bank business operating line vs Business Line of Credit — If RBC will approve the operating line inside your timeline, take it — the rate on a bank line is lower than anything a non-bank lender can price.
• TD Canada Trust business line of credit vs Business Line of Credit — For a business with filed statements and clean guarantor credit, a TD business line of credit is cheaper than any non-bank alternative and should be the first application.
• Scotiabank receivables-secured operating facility vs Invoice Factoring — A Scotiabank receivables facility is the cheaper way to finance invoices and the right call if your receivables fit a bank margin formula: many customers, none dominant, all under ninety days, all easy to credit-check.
• BMO Bank of Montreal equipment term loan vs Equipment Financing — If BMO will write the equipment term loan and the delivery date allows, take the bank rate — nothing else prices lower on a long-lived asset.
• CIBC business term loan vs Term Loan — A CIBC business term loan is the cheapest way to fund a defined, one-time capital need, and a bankable file should apply there first.
• National Bank of Canada receivables-secured operating facility vs Invoice Factoring — For a Quebec business with a diversified receivables book, a National Bank operating facility is cheaper than factoring and easier to run in French from end to end.
• Desjardins equipment financing through a caisse vs Equipment Financing — If you are an established Desjardins member and the caisse will finance the machine, that is the cheapest capital available and the relationship is worth protecting.
• Vancity business line of credit vs Business Line of Credit — For a British Columbia business whose work fits Vancity's mandate, a credit union line of credit is cheaper than a non-bank facility and worth the application.
• ATB Financial equipment term loan vs Equipment Financing — For an Alberta business buying new equipment, ATB is a genuinely well-matched lender and should get the first quote — provincial focus means the underwriting understands your cycle.

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