Ledgered lines of credit provide larger small businesses and middle-market companies in Canada with revolving financing secured by accounts receivable. The facilities are available to companies that invoice at least $1,000,000 per month.
The emphasis on receivables gives us more flexibility. As a result, ledgered lines have simpler compliance requirements than conventional lines of credit and can be deployed quickly.
Note: Smaller companies should consider invoice factoring, which has lower minimums and simpler qualification requirements.
How does a ledgered line of credit work?
A ledgered line of credit operates as a revolving facility secured by accounts receivable. The available credit is determined by the value of eligible receivables.
Drawing funds from the line is simple. The company submits the invoices it wants to finance with supporting documentation. Once processed, the funds are deposited into the company’s bank account.
The outstanding balance declines as customers pay their invoices and increases as invoices are added. This revolving structure allows companies to access financing as needed for operations and growth.
High funding availability
The amount available is based primarily on eligible accounts receivable. Companies can usually access 85% to 90% of eligible A/R at any given time.
Availability varies based on several factors. These include customer concentration, invoice age, dilution, and overall risk profile.
Competitive pricing
Ledgered lines are typically priced based on the size of the line and the company’s risk profile. Most use a public reference rate plus a fixed percentage. For example, a facility may be priced at Prime + X% or SOFR + X%.
Simpler compliance
Ledgered lines of credit are a good fit for companies that have outgrown factoring but are not yet ready for an asset-based loan or conventional line of credit with heavier covenants and compliance obligations.
The lines typically eliminate many of the redundant operational controls found in comparably sized factoring facilities. This makes them easier to manage for both the company and its customers.
Qualification requirements
Ledgered lines of credit have simpler qualification requirements than conventional bank lines and asset-based loans. Typical requirements include:
Industries
We work with companies that provide products and services to businesses and government entities. Industries include:
Unfortunately, these lines are not available to construction companies. Construction companies should consider construction factoring instead.