In today’s competitive lending market, non-bank lenders face a common challenge: balancing rapid growth with the need for consistent, scalable funding. For lenders striving to expand, warehouse lines offer a reliable way to fund new loans and grow their portfolios without the need for continual equity raises or high-interest short-term loans. In this article, we’ll explore how warehouse lines work, what makes them such a valuable tool for scaling lenders, and share a real-life example of how Avon River Ventures helped a fintech lender leverage a warehouse line to accelerate its growth.
What Exactly Is a Warehouse Line?
A warehouse line of credit is a revolving credit facility that allows lenders to draw funds based on the loans or receivables they generate. Think of it as a pool of ready capital that a lender can access whenever they originate new loans. These warehouse lines are “secured,” meaning they’re backed by the lender’s existing loan assets, which act as collateral. This collateral-based structure is why warehouse lines are particularly suited to lenders with active, performing portfolios who are seeking to increase their reach without taking on additional investors.
For lenders, warehouse lines operate similarly to credit lines. As loans in the warehouse line are repaid by the lender’s customers, the lender can re-borrow against the facility, creating a revolving capital base that helps them maintain liquidity and support ongoing operations. This steady access to funds is invaluable for lenders who need to respond quickly to customer demand, enter new markets, or launch new products.
Why Warehouse Lines Are More Popular Than Ever
Warehouse financing has grown rapidly in the past decade, fueled by increased demand from fintechs, alternative finance providers, and specialized lenders. As of 2023, warehouse lines represented approximately 35% of the capital raised by non- bank lenders, with that share expected to keep rising. Demand is especially high among lenders focused on small business loans, equipment finance, and merchant cash advances, where flexible capital solutions are essential. In fact, the warehouse financing market is projected to grow at an impressive 7% annual rate through 2028, driven by the need for funding structures that can keep pace with new technology, evolving risk management practices, and high borrower demand.
The Key Benefits of Warehouse Lines for Growing Lenders
Warehouse lines offer several unique advantages that set them apart from traditional loan facilities or investor capital:
Immediate Access to Capital: With a revolving structure, warehouse lines give lenders continuous access to capital. As soon as loans are repaid, funds become available again, allowing lenders to meet demand as it arises and avoid the delays associated with new capital raises.
Flexible Terms and Repayment Structures: Warehouse facilities are designed to support the business model of the lender, not the other way around. From interest-only periods to custom amortization schedules, warehouse lines provide the flexibility lenders need to stay cash-flow positive. This flexibility can be crucial for lenders experiencing seasonal or cyclical demand.
Retention of Ownership and Control: Because warehouse lines are secured by receivables rather than equity, they allow lenders to expand their capital without giving up ownership or control. For lenders committed to building long-term value, warehouse financing is a way to maintain autonomy while still accessing growth capital.
Scalability: As the lender’s portfolio grows, so does the potential borrowing base. This scalability allows the lender to use their own growth as leverage, continually increasing their funding capacity and giving them the financial muscle needed to meet larger demand.
Risk Mitigation: Unlike equity financing, which increases exposure, warehouse lines provide a self-collateralizing structure. The lender’s own loans back the line, creating a built-in risk management feature that protects both the lender and the financing provider.
Avon River Ventures: Customizing Warehouse Lines for Today’s Lenders
At Avon River Ventures, we understand that every lender is unique, and so are their financing needs. Our warehouse facilities are designed to be adaptable, offering initial deal sizes ranging from $1.5 million to $30 million and follow-on deals up to
$75 million, depending on growth and performance. Each facility is structured around the specific needs of the lender, allowing them to focus on scaling rather than worrying about cash flow. Our streamlined process also ensures that lenders can access their capital quickly and efficiently, with initial funding generally available in just a few weeks.
Case Study: Helping a Fintech Lender Scale with a Warehouse Line
Background: In early 2023, a fast-growing fintech lender specializing in merchant cash advances (MCAs) approached Avon River Ventures. This lender was already serving a robust client base, but demand was skyrocketing. They needed more capital to fund MCAs for new clients and didn’t want to dilute ownership by seeking new investors. Additionally, they were under pressure to provide rapid funding to stay competitive in the MCA market, where clients expect quick access to funds.
Challenge: The lender’s rapid growth meant they were outpacing their available funds. While traditional banks were an option, these lenders couldn’t provide the flexibility and speed needed to keep up with client demand. The fintech lender also wanted to avoid the rigid repayment structures that traditional loans entail, which wouldn’t align with their business model.
Solution: Avon River Ventures structured a $3 million initial warehouse line secured by the fintech lender’s existing MCA receivables. This facility was designed with a 24-month interest-only period to give the lender breathing room, followed by an asset-specific amortization schedule that matched their receivables. This structure allowed the lender to access funds as needed, respond to new demand, and preserve their cash flow.
Results: With Avon River Ventures’ warehouse line in place, the fintech lender was able to increase originations by over 50% within just six months. Their revenue growth accelerated, client acquisition increased by 40%, and they continued to meet rising demand without slowing down. Today, the lender is a leading MCA provider in their region, thanks to the flexibility and efficiency that their warehouse line enabled. They’re now exploring additional follow-on funding to support their next stage of growth.
This case illustrates how the right warehouse line can make a tangible difference in a lender’s ability to scale. By structuring the facility to match the client’s business model, Avon River Ventures helped this fintech lender turn a capital need into a springboard for growth, all while retaining control and optimizing cash flow.
Why Warehouse Lines Are the Future for Modern Lenders
Warehouse lines have quickly become a preferred choice for lenders who want to maintain their independence and avoid the constraints of traditional loans or equity raises. With demand for flexible lending solutions growing, warehouse lines offer a unique opportunity for lenders to secure capital, leverage their own assets, and grow without sacrificing their strategic vision.
For lenders, the benefits of warehouse lines extend beyond the immediate capital injection. These facilities provide a strategic, scalable way to continually meet client demand, adapt to market changes, and drive growth. By aligning the terms of each facility to match the lender’s business, Avon River Ventures ensures that warehouse financing is a catalyst for success, not a constraint.
At Avon River Ventures, we specialize in building warehouse facilities that empower lenders to scale sustainably. Whether you’re an established lender or just entering the market, our warehouse lines are designed to provide both the financial flexibility and operational support needed for long-term growth. Ready to take your lending business to the next level?
Reach out to us today, and let’s discuss how a customized warehouse line can help you achieve your goals.