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.

As you may know, the typical terms when dealing with China are 30% payment with the order and the 70% balance before they are shipped.

The company was selling on average about $125,000 worth of goods per month, and with the Accounts Receivable sitting at about 45 days to collect, the $50,000 Operating Line of Credit was of little good to them. The average open Invoices were $200,000.

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.

As you can understand, the owners tied up their personal assets to get personal loans to aid in the cash flow crunch so they would have sufficient inventory to operate.

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.

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.

The company imports goods from China and has been experiencing strong growth over the last year which lead them to outgrow their current Operations Financing and their current Financial Institution would not increase their limit of $50K.

As you may know, the typical terms when dealing with China are 30% payment with the order and the 70% balance before they are shipped.

The company was selling on average about $125,000 worth of goods per month, and with the Accounts Receivable sitting at about 45 days to collect, the $50,000 Operating Line of Credit was of little good to them. The average open Invoices were $200,000.

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.

As you can understand, the owners tied up their personal assets to get personal loans to aid in the cash flow crunch so they would have sufficient inventory to operate.

The cash flow crunch was cured by my office setting up a new Business Line of Credit for the company using Accounts Receivable Factoring.

With an advance rate of 85% against the $200,000 open invoices, the company now has $170,000 available to them which allowed them to order sufficient inventory to support their growth, pay off the bank Line of Credit and pay off the personal loans they had taken to support the business.

Because the new Funding Line was based on outstanding sales, the Line increased as the sales increased. So as sales grew, so did the availability of funds.