It Is Possible To Get Business Loans In Canada: Accounts Receivable Factoring

Not long ago I was contacted by a company that had been unsuccessful in acquiring a new Operating Line of Credit from its bank in Toronto, Canada. The company is in the Import Business.

Their customers are all across Canada and they have plans to expand into the US market and due to growing orders they had been maxing out their Operating Line of Credit consistently. Their bank had then capped at $50,000 and would not increase it.

The terms with their suppliers in China are 30% with the order placement and the balance before the product leaves the warehouse. These are quite popular terms when dealing with China for goods.

Their days to collect on their invoices was quite typical, it is 45 days. With average Accounts Receivables outstanding is $200,000 you can see why the $50,000 Credit Line was pretty useless to them.

The company had to carry inventory since their customers expected orders to be shipped within 1 week of receipt and the fact the main supplier was in China meant they had to have sufficient stock to carry them for a months sales at any given time.

The owners had tied up their personal assets as much as possible in order to have the cash flow needed to carry the inventory.

The solution to this problem was to set up a new Operating Line of Credit for the company using the Invoices for delivered goods as security in an Accounts Receivable Factoring facility.

Now the company has access to $170,000 for their operations which allowed the owners of the company to pay off the personal loans they had taken for operations, pay off the bank Line of Credit they had and still have sufficient funds to carry the required inventory to service their customers.

To make it even better, the Operating Line of Credit they have now will grow with their outstanding Receivables. So as their sales grow, so does their Line of Credit.