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Trade Credit Agreement for Canada

Trade Credit Agreement Template for Canada

A Trade Credit Agreement is a legally binding document used in Canadian jurisdictions to establish and govern the terms of a credit facility between a supplier/credit provider and a business customer. The agreement complies with federal Canadian legislation including the Interest Act and provincial Personal Property Security Acts (PPSA). It details credit limits, payment terms, security arrangements, interest rates, and default provisions, while incorporating specific provincial requirements for secured transactions and registration of security interests. The document includes provisions for compliance with Canadian usury laws and provincial consumer protection regulations where applicable.

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What is a Trade Credit Agreement?

A Trade Credit Agreement is essential for businesses operating in Canada that provide goods or services on credit terms to their customers. This document is particularly relevant when establishing ongoing trading relationships that involve deferred payment arrangements. The agreement must comply with Canadian federal laws governing interest rates and secured transactions, as well as provincial legislation including the Personal Property Security Act (PPSA) of the relevant province. It typically includes comprehensive terms covering credit limits, payment obligations, security arrangements, events of default, and enforcement rights. The agreement is commonly used across various industries where suppliers extend credit to their business customers, and it can be adapted to accommodate different provincial requirements and specific business needs. The document should be reviewed by legal counsel to ensure compliance with both federal and provincial Canadian legislation.

What sections should be included in a Trade Credit Agreement?

1. Parties: Identification of the credit provider and the customer, including full legal names and addresses

2. Background: Context of the trade relationship and purpose of the credit arrangement

3. Definitions: Definitions of key terms used throughout the agreement

4. Credit Facility: Details of the credit facility including credit limit, nature of credit, and purpose

5. Payment Terms: Payment obligations, including payment period, method of payment, and early payment discounts if applicable

6. Interest and Fees: Interest rates, calculation methods, and any applicable fees or charges

7. Security: Description of any security interests granted to secure the credit facility

8. Representations and Warranties: Standard representations and warranties from the customer regarding their business and ability to pay

9. Covenants: Ongoing obligations of the customer, including financial covenants and reporting requirements

10. Events of Default: Circumstances constituting default and consequences of default

11. Remedies: Rights and remedies of the credit provider upon default

12. Term and Termination: Duration of the agreement and circumstances for termination

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

What sections are optional to include in a Trade Credit Agreement?

1. Cross-Border Provisions: Required when trade credit involves international transactions, addressing currency conversion, trade regulations, and cross-border security

2. Personal Guarantee: Used when additional security is required through personal guarantees from directors or shareholders

3. Insurance Requirements: Detailed insurance obligations when specific insurance coverage is required to protect the credit provider's interests

4. Credit Insurance: Terms relating to credit insurance when the facility is backed by credit insurance

5. Subordination: Required when there are multiple creditors and priority arrangements need to be established

6. Financial Covenants: Detailed financial maintenance covenants when dealing with larger credit facilities or higher-risk customers

7. Change of Control: Provisions dealing with changes in ownership or control of the customer's business

8. Electronic Commerce: Provisions for electronic ordering and payment systems when relevant to the trading relationship

What schedules should be included in a Trade Credit Agreement?

1. Schedule A - Credit Limit and Pricing: Detailed breakdown of credit limits, interest rates, and fee structure

2. Schedule B - Security Documents: List and copies of security documents, including PPSA registrations

3. Schedule C - Payment Terms Matrix: Detailed payment terms for different products or order types if applicable

4. Schedule D - Reporting Requirements: Format and timing of required financial and operational reports

5. Schedule E - Permitted Security Interests: List of pre-existing or permitted security interests on the customer's assets

6. Schedule F - Form of Compliance Certificate: Template for periodic compliance certification by the customer

7. Appendix 1 - Application Form: Standard credit application form completed by the customer

8. Appendix 2 - Personal Guarantee Form: Standard form of personal guarantee 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

Manufacturing

Wholesale Trade

Retail

Construction

Agriculture

Mining

Transportation and Logistics

Industrial Supply

Consumer Goods

Technology and Electronics

Automotive

Energy

Healthcare and Medical Supplies

Food and Beverage

Chemical and Materials

Relevant Teams

Legal

Finance

Credit Control

Treasury

Risk Management

Sales

Commercial

Procurement

Collections

Accounts Receivable

Corporate Secretariat

Relevant Roles

Chief Financial Officer

Credit Manager

Finance Director

Commercial Director

Treasury Manager

Credit Controller

Account Manager

Risk Manager

Financial Controller

Legal Counsel

Contracts Manager

Sales Director

Procurement Manager

Collections Manager

Corporate Secretary

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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