Business Loans In Canada: Accounts Receivable Factoring

Recently an Importer in Ontario Canada contacted my office after having exhausted its efforts in seeking a Business Loan from its local banks in Toronto, Ontario, Canada.

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.

In their industry, it is expected that the goods that are ordered by their customers are to be shipped within 7 days which required the Importer to carry inventory as their source of goods was in China.

Against the owners wishes, they had to use personal loans to cover the cash shortage so that they could operate and carry the required 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.

As if this were not enough, due to the fact their sales are growing, the Operation Funds availability grows as their sales do. The more Accounts Receivable, the higher their available funds are to replenish stock.