Selling an invoice is a registrable transaction
The PPSA is written for security interests, but it deliberately reaches further than lending. Ontario's Act applies to “a transfer of an account or chattel paper even though the transfer may not secure payment or performance of an obligation” (s. 2(b)), and Alberta's applies to “a transfer of an account or chattel paper … that does not secure payment or performance of an obligation” (s. 3(2)(a)). Manitoba gets to the same place by definition rather than by an application section, folding a transferee's interest in an assigned account into “security interest” itself (s. 1). A true sale is not a loan, and is still caught. So your factor registers a financing statement against your business, and that registration is public — anyone who runs a personal property registry search on you will see it. Owners often read that as a sign the factor doubts them. It is not a credit judgment: it is how the factor protects the invoices it bought, and it would register against a client with flawless credit. One carve-out is worth knowing if you bank against inventory or crops: Alberta's Act does not apply to “any agreement governed by sections 425 to 436 of the Bank Act (Canada)” (s. 4(b)), so security a bank takes under that federal regime sits in a separate system from the provincial registry.
Your bank's GSA almost certainly got there first
When two registered interests cover the same receivable, the residual rule is chronological rather than moral. Between two interests perfected by registration, Ontario determines priority “by the order of registration regardless of the order of perfection” (s. 30(1), rule 1); Alberta ranks conflicting perfected interests by the earliest of registration, possession, control or perfection (s. 35(1)(a)). A general security agreement signed when you opened your business account — registered years ago, covering all present and after-acquired personal property — therefore outranks a factor registering this week, and “all personal property” includes your accounts receivable. This is a common reason a factoring file stalls after the credit decision is made. The factor cannot take the receivable cleanly while an earlier registration sits ahead of it, so it will ask your bank for a partial discharge limited to accounts, a no-interest letter, or a priority agreement. Whether that is granted is negotiated case by case, and it tends to turn on whether the bank's own facility depends on those receivables — an operating line margined against your AR is the hard case, since the bank is being asked to release the collateral it lends against. Raise it with your account manager early; waiting on a bank's credit department is the part of the timeline no factor can compress.
A notice of assignment is what actually moves the money
Registration settles rank between creditors. It does nothing to your customer, who needs to be told where to send the money. Until then they can keep paying you and be discharged: in Ontario “an account debtor may pay the assignor until the account debtor receives notice, reasonably identifying the relevant rights, that the account or chattel paper has been assigned” (s. 40(2)). Alberta is more prescriptive about the notice itself — it must state that the amount payable has been assigned and that payment is to be made to the assignee, and it must identify the contract (s. 41(9)(a)) — and a payment made to the assignee under such a notice “discharges the obligation of the account debtor to the extent of the payment” (s. 41(10)). Your customer is also entitled to demand proof, and the statutes differ on the clock. Ontario requires the assignee to furnish proof “within a reasonable time,” and if it does not, the customer may go on paying you (s. 40(2)). Alberta puts a number on the same idea: the customer may pay the assignor after requesting proof if the assignee “fails to furnish the proof within 15 days from the date of the request” (s. 41(9)(b)). So when a customer's AP clerk asks the factor to prove the assignment, that is a request with a statutory clock behind it, not obstruction.
A no-assignment clause is weaker than it reads — but it still bites you
Plenty of supply agreements and subcontracts say that amounts owing under them may not be assigned without written consent. The common-law provinces neutralise that clause as against the factor. Ontario provides that such a term “is binding on the assignor only to the extent of making the assignor liable to the account debtor for breach of their contract” and “is unenforceable against third parties” (s. 40(4)); Alberta's s. 41(11) and Manitoba's s. 41(9) say the same. Their scope differs, though, and the difference is the one you care about: Ontario expressly catches both a term restricting assignment of “the whole of the account” and one “that requires the account debtor's consent,” while Alberta and Manitoba are drafted only around the whole-of-the-account restriction. Read those two halves separately, because they point in opposite directions. The factor's purchase is good despite the clause, and your customer cannot treat the assignment as a nullity or refuse to pay on that basis. You, however, remain exposed to your own customer in damages for breaching a term you agreed to, and on a relationship you intend to keep that is a commercial problem the statute does not solve for you. So a consent clause is squarely covered in Ontario and less certainly so further west, and none of the three sections addresses a separate contractual right to terminate if you assign. Where the relationship matters more than the week of float, ask for consent first and factor second.
Set-off is the risk nobody prices
A factor buys your invoice subject to whatever your customer could already have raised against you — which is why the advance is never the full face value. Absent an enforceable agreement by your customer not to assert them, Ontario preserves “all defences available to the account debtor against the assignor arising out of the terms of the contract or a related contract, including equitable set-off and misrepresentation,” together with the right to set off any debt you owe them “that was payable to the account debtor before the account debtor received notice of the assignment” (s. 40(1.1)). Alberta's equivalent, subject to the same kind of waiver, preserves defences and claims, including set-off, “that accrues before the account debtor has knowledge of the assignment” (s. 41(2)(c)). Two things follow. First, timing is money: the notice date is what freezes the pool of debts your customer can net off, so serving notice early is worth more than serving it tidily. Second, performance never stops mattering. A customer with a genuine backcharge, deficiency claim or unissued credit note can still raise it against the factor, which is why factors hold a reserve instead of advancing the full invoice, and why a disputed invoice usually comes back to you as a chargeback. Factoring converts collection delay into cash. It does not convert a dispute about your work into cash, and no advance rate will make it do so.
Quebec runs on the Civil Code, not the PPSA
Quebec has no PPSA and no account-debtor section, so the vocabulary changes even where the outcome rhymes. The Civil Code lets a creditor “assign to a third person all or part of a claim or a right of action” (art. 1637), subject to the limit that the assignment must not be “injurious to the rights of the debtor” or render the debtor's obligation “more onerous.” An assignment may be set up against the debtor and against third persons “as soon as the debtor has acquiesced in it or received a copy or a pertinent extract of the act of assignment” (art. 1641) — so in Quebec the step that binds your customer and the one that protects the factor against other creditors can be the same, unlike the common-law provinces. Where a business assigns a whole book of receivables rather than single invoices, art. 1642 allows an assignment of a “universality of claims, present or future” to be set up by registering it in the register of personal and movable real rights, the RDPRM, provided the other formalities have been observed. The same freeze applies: art. 1643 lets the debtor set up any payment made to you, or other extinction of the obligation, occurring before the assignment could be set up against them. One difference deserves flagging rather than glossing. The Code's articles on the assignment of claims carry no provision equivalent to Ontario's s. 40(4), so the common-law conclusion that a no-assignment clause is unenforceable against third parties does not simply travel across the Ottawa River. If the contract is governed by Quebec law and restricts assignment, get advice on that contract rather than assuming the answer.
Questions operators ask
Will factoring show up on a PPSA search of my business?
Yes, and it should. Because the PPSA applies to an outright transfer of accounts as well as to loans (Ontario s. 2(b); Alberta s. 3(2)(a)), a factor registers a financing statement even though it is buying your invoices rather than lending against them. A registration is a claim to specific collateral, not a judgment or a credit blemish. It can still complicate a later application to a lender who reads the registry before reading your file, so raise the facility yourself instead of letting them discover it.
Can my bank stop me from factoring my receivables?
Not by veto, but effectively yes through two routes. Its earlier registration ranks ahead of the factor's (Ontario s. 30(1); Alberta s. 35(1)), so the factor will normally want a partial discharge over accounts or a priority agreement before it funds. Separately, your credit agreement may carry covenants restricting the disposal of assets or the granting of security. Read the facility letter and speak to your account manager before you sign with a factor, not after.
My customer's contract says I can't assign the invoice. Can I still factor it?
In Ontario and Alberta the clause does not defeat the factor's purchase — it is “unenforceable against third parties” (Ontario s. 40(4)(b); Alberta s. 41(11)). But the same provisions leave you liable to your customer in damages for breaching the term, and their scope differs: Ontario expressly covers a clause requiring your customer's consent, while Alberta's is drafted only around restrictions on assigning the whole of the account. Where the relationship matters, ask for consent first.
What happens if my customer pays me instead of the factor after the notice?
Paying the wrong party after a compliant notice does not reliably discharge the debt. Alberta provides expressly that payment to the assignee under such a notice discharges the obligation to the extent of the payment (s. 41(10)), and the permission to keep paying you runs only until that notice arrives (s. 41(9)) — so a customer who ignores it risks paying twice. In practice the money that reaches you is the factor's, and your agreement will require you to remit it immediately. Holding on to misdirected payments is the quickest way to lose a facility and, depending on the wording, to breach the agreement.