Lender Finance
Lender finance provides working capital or warehouse capacity to companies that originate financing, whether that is a factor, another specialty originator, or a similar platform. The collateral is that company’s own portfolio of advances, not the end customer’s P&L. Conventional banks often will not take that book. Specialty lenders will, against eligibility, dilution, servicing, and concentration.
Terms and facility size sit on Specialty Finance.
How This File Is Underwritten
The lender underwrites the originator and how their book performs.
- What the originator funds: Invoice factors, other receivable buyers, and similar platforms are the usual fit. The end-borrower product has to be understandable and reportable.
- Eligibility and dilution: Which assets enter the base, what ages out, chargebacks, fraud, and how often the book is marked. A portfolio reconciled weekly gives a lender more confidence than one updated only at month-end, as stale marks hide dilution.
- Servicing: Who collects, who reports, and whether the warehouse lender can see the portfolio. An originator that services in-house needs to show discipline, since the warehouse lender is relying on that collection process to convert the portfolio into cash.
- Portfolio performance: Historical collections, delinquency, losses, recoveries, and portfolio turnover. A track record across at least one full credit cycle carries more weight than a short run of strong recent months, as that shows how the book behaves when conditions turn.
- Concentration: One end customer, one industry, or one originator product can cap the line. A book spread across many small end-borrowers funds more comfortably than one where a handful of large exposures could move the numbers on their own.
- The originator’s own operations: Underwriting quality, compliance, and capital already in the book. A weak credit process shows up as losses eventually, so a lender is financing the originator’s underwriting discipline as much as the portfolio itself.
This is for companies that factor other companies’ invoices and need more capacity. If the company is the operating business, use invoice factoring or ABL.
What Usually Binds
- Originator product type: Must be understandable and reportable.
- Eligibility and dilution: What ages out, chargebacks, fraud, and how often the book is marked.
- Servicing: Who collects, who reports, and whether the lender can see the portfolio.
- Portfolio performance: Historical collections, delinquency, losses, recoveries, and turnover.
- Concentration: One end customer, one industry, or one originator product.
- Originator operations: Underwriting quality, compliance, and capital already in the book.
- Existing capital stack: Whether a warehouse or senior facility is already in place.
What To Send First
- Description of the product the originator funds, whether it is invoice factoring, equipment paper, or another recurring receivable type
- Portfolio tape, including balances, aging, delinquency, concentration, and recent performance
- Historical dilution and loss by vintage
- Originator financials
- Debt schedule and existing warehouse or senior line
- Servicing and reporting package
- Credit policy summary
When Lender Finance Is Not The Right Fit
Lender finance starts when the borrower is already a funder.
If the originator’s need is growth capital for its own operations rather than leverage against the portfolio it funds, a general working-capital or cash-flow product may fit better than a structure built around the book itself.
A healthcare provider wants healthcare receivables financing. A law firm wants litigation finance. An operating company that needs a line on its invoices wants ABL or factoring, not lender finance.
FAQs
Is this a warehouse line?
Yes, typically. Lender finance usually takes the shape of a warehouse facility, advancing against a defined eligible book, with reporting and reserves built around how the portfolio performs. Exact structure still follows the originator’s own product and whatever senior lender, if any, is already in place.
Can it sit behind an existing senior?
Sometimes, with an intercreditor agreement in place. Many files end up as either a full takeout of the existing lender or a single warehouse, since running two lenders against one portfolio adds reporting and reconciliation work that most originators would rather avoid.
Do you finance the originator’s clients directly?
No. This facility is the originator’s own line, not a program for its underlying customers. The client relationship, underwriting, and servicing stay with the originator. The lender is financing the originator’s book, not stepping into its business.
What size originator does this fit?
There is no fixed minimum, but the portfolio needs enough scale and history to underwrite on its own merits. An originator with a short track record or a small book may need to grow further, or start with a smaller facility, before this structure makes sense.