Inventory Financing Agreement for Canada

Inventory Financing Agreement Template for Canada

A Canadian Inventory Financing Agreement is a specialized secured lending document that enables businesses to obtain financing using their inventory as collateral. The agreement, governed by Canadian federal laws and provincial Personal Property Security Act (PPSA) regulations, establishes the terms and conditions under which a lender provides revolving credit facilities against eligible inventory. It includes detailed provisions for borrowing base calculations, inventory valuation methods, reporting requirements, and security interests compliant with Canadian secured transactions law.

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What is a Inventory Financing Agreement?

An Inventory Financing Agreement is essential for businesses seeking to leverage their inventory assets for working capital financing. This document is particularly relevant in the Canadian market where businesses maintain significant inventory levels and require flexible financing solutions. The agreement establishes a revolving credit facility where the borrowing availability fluctuates based on the value of eligible inventory. It must comply with Canadian federal laws and provincial PPSA requirements, including specific provisions for security registration and perfection. The document includes comprehensive terms covering inventory valuation, eligibility criteria, advance rates, reporting requirements, and lender's rights. It's commonly used by manufacturers, distributors, and retailers who need ongoing access to working capital to manage inventory purchases and cash flow cycles.

What sections should be included in a Inventory Financing Agreement?

1. Parties: Identification of the lender and borrower, including full legal names and addresses

2. Background: Context of the financing arrangement and general purpose

3. Definitions: Detailed definitions of key terms including 'Inventory', 'Borrowing Base', 'Eligible Inventory', 'Advance Rate', etc.

4. Facility and Purpose: Details of the credit facility, maximum amount, and permitted use of funds

5. Security Interest: Grant of security interest in inventory and related assets, PPSA compliance provisions

6. Borrowing Base: Formula for calculating available credit based on eligible inventory

7. Interest and Fees: Interest rates, calculation methods, fees, and payment terms

8. Conditions Precedent: Requirements to be met before initial and subsequent advances

9. Representations and Warranties: Borrower's statements regarding business, inventory, and legal compliance

10. Covenants: Ongoing obligations regarding inventory management, reporting, and business operations

11. Reporting Requirements: Required inventory reports, financial statements, and other periodic reporting

12. Insurance: Required insurance coverage for inventory and proof of insurance obligations

13. Events of Default: Circumstances constituting default and consequences

14. Remedies: Lender's rights and remedies upon default

15. General Provisions: Standard clauses including notices, amendments, governing law, etc.

What sections are optional to include in a Inventory Financing Agreement?

1. Multiple Location Provisions: Required when inventory is stored at multiple locations, addressing specific requirements for each location

2. Third Party Agreements: Needed when third-party warehouses or processors are involved, including PPSA acknowledgments

3. Intercreditor Provisions: Required when there are multiple lenders or existing security interests

4. Foreign Currency Provisions: Necessary when inventory is purchased or valued in multiple currencies

5. Environmental Compliance: Required for inventory that involves hazardous materials or environmental regulations

6. Seasonal Advance Rate Adjustments: Used for seasonal businesses with fluctuating inventory levels

7. Consignment Provisions: Required when dealing with consignment inventory arrangements

8. Field Examination Rights: Detailed provisions for lender's right to examine and audit inventory

What schedules should be included in a Inventory Financing Agreement?

1. Schedule A - Eligible Inventory Criteria: Detailed criteria for determining eligible inventory for borrowing base

2. Schedule B - Approved Locations: List of approved locations for inventory storage

3. Schedule C - Borrowing Base Certificate: Form of borrowing base calculation and certification

4. Schedule D - Permitted Liens: List of pre-approved liens or encumbrances on inventory

5. Schedule E - Insurance Requirements: Detailed insurance requirements and minimum coverage amounts

6. Schedule F - Reporting Forms: Templates for required inventory and financial reporting

7. Appendix 1 - PPSA Financing Statements: Copies of PPSA financing statements and registrations

8. Appendix 2 - Warehouse Agreements: Copies of agreements with third-party warehouse operators if applicable

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Genie AI

Document Type

Finance Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Retail

Manufacturing

Wholesale Distribution

Automotive

Electronics

Fashion and Apparel

Food and Beverage

Construction Materials

Agricultural Products

Pharmaceuticals

Consumer Goods

Industrial Equipment

Relevant Teams

Legal

Finance

Treasury

Operations

Supply Chain

Risk Management

Credit

Procurement

Warehouse Operations

Compliance

Commercial Banking

Asset-Based Lending

Relevant Roles

Chief Financial Officer

Treasury Manager

Finance Director

Credit Manager

Commercial Lending Officer

Risk Manager

Inventory Controller

Supply Chain Manager

Operations Director

Corporate Counsel

Legal Counsel

Commercial Banking Manager

Asset-Based Lending Manager

Warehouse Manager

Financial Controller

Procurement Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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