We spoke with Bernadine Geary, Director, Cashflow Finance at Fundamental Business Finance, who provided some insights to the...
What is a receivables-based revolving line of credit?
"Eliminate gaps from invoice payments instantly"Team Waddle
A receivables-based revolving line of credit is a very attractive form of invoice financing for small businesses.
It’s a short-term working capital option that is secured by the unpaid accounts receivable of businesses that sell or perform services on credit terms. It’s structured as a straight credit line instead of an invoice factoring arrangement that’s traditionally disclosed to customers.
SMEs need to understand that a revolving line of credit isn’t like a regular business loan where you get one large cash injection of funds that you need to repay daily, weekly or monthly. Instead, it works just like a huge credit card: You get granted a credit limit and you borrow and repay it as you please.
Instead of the credit line being based on your real estate assets, it’s instead secured against your on-going receivables and will fluctuate up or down depending on how much you invoice.
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The most attractive thing about a receivables based credit line is that you’re only charged interest on the money you’ve actually drawn down which makes it perfect for shorter-term funding needs like inventory purchases and wages that you can repay funds when needed to reduce your borrowing costs without penalty or being locked into lengthy repayment schedules.
Waddle’s revolving line of credit is one option
Our asset-based line of credit lets you borrow up to 80% of your outstanding invoices up to $800,000 and you only pay interest on the amount you’ve borrowed.
Let’s take a look at a couple of benefits:
- Flexible: A line of credit can provide you with the financial flexibility to manage cash flow to run your small business. You have access to cash that you can borrow and repay as needed. This can help you better manage cash flow or unexpected expenses.
- Maintain control: You maintain control over the relationship with your customers and will remain responsible for collecting invoices. At no point is the arrangement disclosed to your customers.
- Low cost: Waddle’s revolving line of credit starts 9.95%, making it less expensive than an unsecured loan or invoice factoring options.
- No administration: Waddle syncs all invoicing and payment data with your cloud accounting software, which removes any unnecessary costs to your business.
Receivables-based credit lines don’t suit every business however, if you invoice on credit terms and can benefit from accelerating your customer payments it’s a healthy alternative to a bank property secured loan or other expensive options.
Eliminate gaps from invoice payments instantly