Invoice-Backed LOC Loans
The main principle behind this is that when the customer is waited on to pay up, it can cause slowdowns and gaps in the flow of cash. The invoice backed LOC loans provide a sort of bridge wherein their accounts receivable gets financed, which means they are not left in the cold when someone else defaults on payment.
Capital can be had when it is needed, and there is no need for the borrower to suffer due to someone else’s tardiness. The former needs to submit their accounts receivable as well as A/R aging, which are both used to arrive at the LOC maximum which they qualify for (usually around 80% of the invoices). Payments made on these invoices enter the lender’s bank account and gradually pay off the borrower’s LOC debts. If no funds are drawn, then the money gets directed back into the business.
In short, invoice backed LOC loans pay off most of the borrower’s invoices so that they are able to use their available capital in the places and ways that they want. However, it still bears thinking on the question, “What banks offer a line of credit?”