Full turnover factoring is the structure most providers build for. Instead of choosing invoices one at a time, you agree that all or most of your invoicing will be sold to one provider for a defined term. The arrangement sometimes appears under other names, including whole-ledger factoring and contract factoring.
The shape of the deal is simple: the provider gets volume and a spread of customers, and you get an arrangement that does not need to be renegotiated every time you raise an invoice. The trade is commitment, and the terms around that commitment are what you should read most carefully.
How full turnover factoring works
You invoice your customers as normal. Each invoice is submitted to the provider, verified and bought. The provider advances part of the value, collects from your customers under whichever notification arrangement applies, and releases the reserve less its fee when payment arrives.
Because the whole ledger is involved, the provider can look at your customer base as a portfolio rather than a series of one-off debts. That usually means it will set limits per customer, and may decline invoices from customers it has not approved. Those limits are worth knowing before you rely on the arrangement for a particular month.
Agreements in this family are commonly supported by a security interest registered against your business in the relevant provincial registry, and in Quebec in the RDPRM. Registration is normal for this structure, not a sign of trouble, and it should be discharged when the agreement ends.
What the commitment looks like
The commitment usually appears in three places. There is a term, often expressed in months, with a notice period to leave. There may be a minimum monthly volume, expressed as a value of invoices you agree to submit. And there is normally a definition of what counts as your turnover for the purposes of the agreement, which decides whether an invoice can be sold elsewhere.
Early termination is the clause most often overlooked. If you leave before the term ends, some agreements provide for a charge, or for the provider to be compensated for the remaining period. The size of that exposure is worth understanding before you sign, particularly if your business changes shape quickly.
When it fits
- You invoice a spread of customers regularly rather than occasionally.
- You want one arrangement rather than a decision each time cash is tight.
- Your cash gap is structural, not seasonal.
- You can commit to a term and a volume you are confident about.
- You are comfortable with a security registration against your receivables.
When it does not
If your revenue is concentrated in one or two customers, a whole-ledger arrangement puts the provider's exposure in the same place as yours, and it may decline or limit the arrangement. If your need is occasional, the commitment is hard to justify, and spot factoring is the simpler route.
Businesses whose customers pay quickly may also find the fee hard to justify. Factoring answers a timing gap. Where there is no real gap, it is an added cost for a service you do not need.
Questions to ask
- How long is the term, and does the agreement renew automatically?
- What notice do I need to give to leave, and what does early exit cost?
- Is there a minimum monthly volume, and what happens if I fall short?
- Which customers are approved, and are any excluded from the arrangement?
- Is the arrangement recourse or non-recourse?
- Will directors be asked for a personal guarantee?
- When will the security registration be discharged after the term ends?
Related types
The risk question runs alongside the volume question. Read recourse and non-recourse factoring to see which version of that commitment you are being offered. For trades where this structure is routine, the staffing guide and the wholesale and distribution guide explain how it is used. The process guide covers verification, notification and security registration in more detail.