Situation

Business funding with customer concentration: how it is read and what helps.

Depending on one or two large customers raises a question a reviewer will ask.

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How this is read

Depending on one or two large customers raises a question a reviewer will ask.

If a large share of deposits comes from one client, the file depends on that relationship. Length of the relationship, contract terms and payment history matter.

What helps

A long history with the main customer
A signed contract with a term
Steady payments from that customer
Smaller customers growing alongside

What hurts

A new, unproven main customer
Late or irregular payments
No contract

A sensible plan

Explain the relationship in one line: how long, what the contract says and how reliably they pay. Size the request so the business could still carry the payment if that customer slowed down.

Illustrative arithmetic

A trucking contractor depositing about $110,000 a month asks for $35,000 for a second truck. At a 1.24 factor the payback is $43,400, a cost of $8,400. Over roughly 6 months that is about $344 per business day, or close to 7% of monthly deposits.

Total payback: $43,400.
Cost: $8,400.
Payment: about $344 per business day, close to 7% of monthly deposits.

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

Typical starting points

Monthly revenueTypically from around $20,000 a month in deposits for Canadian files. The exact line varies by funder and by file.

Time in businessTypically about 12 months. Newer businesses can be reviewed, but the options narrow.

Account healthLimited low-balance or negative days. Funders read the last few months of bank statements for this.

CreditScores from 500 are considered. A score of 600 or higher opens more options and better offers.

DocumentsA signed application and recent business bank statements, typically the last four months.

Existing advancesFiles with an existing advance can be reviewed, including second position.

One more thing that helps

Concentration cuts both ways. A long relationship with a large, reliable customer can be a strength. The risk is the unknown: what happens if they leave. Showing other customers and a plan to diversify answers that question before it is asked.

Practical tip

A practical way to reduce the concern is to show how much revenue the business would keep without its largest client and whether the payment would still fit. If it would, say so. If it would not, consider a smaller request.

What to send with your application

The main customer contract or purchase orders
Payment history from that customer
A list of other customers and their share

Common questions

Is concentration a deal-breaker?

No. It is read closely, with the strength of the relationship.

Does a contract help?

Yes, especially with a long term.

What share is high?

There is no fixed number. Over a third of deposits from one customer is usually discussed.

Keep reading

Underwriting situationsCredit, NSFs, time in business and more Funding requirementsTypical starting points for Canadian files Documents you needWhat to have ready before you apply Bad credit business fundingHow files with weaker credit are read GlossaryPlain-language definitions

Educational information only. It is not legal, tax or accounting advice.

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