Bank Line Of Credit



A bank line of credit is most appropriate for companies seeking a long-term debt partner that is willing to grow alongside the business. Businesses that are experiencing rapid growth and need an efficient capital injection are great candidates for a bank line of credit. Lines of credit are intended to grow in tandem with a company’s sales. Pricing generally starts at Prime or SOFR. A cash-flow piece (air-ball) based on EBITDA or net income is also offered. Pricing also varies by the financial strength of a given company.

Highlights 

TIME TO CLOSE  4-6 weeks from a signed term sheet

SECURITY  Senior Secured

PG  Sometimes required, depends on the owner’s credit/facility size

CHECK SIZE$  1-$50+ Million

RATE  Start at Prime or SOFR

TERM  Varies, depends on the bank and structure

Asset based loans are generally used by small to mid-sized businesses to cover short to long term cash flow demands and are secured by some sort of collateral. Examples of collateral include account receivable, inventory, equipment, real estate, or other property owned by the borrower. This product could be best suited for high growth companies who need capital that will grow along-side revenues, A/R, and inventory. Years in business and poor personal credit are not obstacles to receiving approval for a loan.


Highlights 

CHECK SIZE $500,000- $40+ million

RATE Start at Prime +1

TERM Depends if it is term debt or a line of credit

TIME TO CLOSE4-6 weeks from a signed term sheet

SECURITY Senior secured on all assets

PERSONAL GUARANTEE - No true personal guarantee required (validity guarantee), typically required with Inventory borrowing

Junior Term Loans are the most inexpensive junior capital facility currently offered in the United States. Companies with profitable corporate tax returns qualify for this facility and can receive funding at 9.50% annually with low monthly payments and no prepayment penalties. This product is suitable for companies that need additional working capital behind their senior secured lender and require no collateral. The terms and structure of a junior term loan are generally more attractive than a merchant cash advance. To qualify, client needs to have a credit score above 650. The application also includes no upfront costs or application fees.


Highlights 

CHECK SIZE  Depends on profitability of 2 most recent tax returns (Up to $500,000)

RATE  Start at 9.50%

TERM  4-5 years with a monthly payment (no prepayment penalties)

TIME TO CLOSE  2-3 weeks

SECURITY  Subordinate to any senior secured lender

PERSONAL GUARANTEE  Required

An unsecured advance / business loan is most suitable for companies who have need short-term liquidity and working capital need quickly. This type of business loan allows companies who have a senior secured lender and do not want to sell equity (or are unable to), with under $3 million of EBITDA access to efficient capital. This type of facility allows companies to get through an inflection point or close on an event that will increase their enterprise value without dilution of shareholders equity. No collateral is required. Tax liens and/or prior bankruptcies are okay. Owners with higher personal credit would qualify for cheaper pricing. Approvals are submitted in under 24 hours, with funding to follow within 1-2 business days.

HIGHLIGHTS

TIME TO CLOSE  3-4 business days.

SECURITY  Security: Subordinate, can be fully unsecured with no UCC filing in some cases

PERSONAL GUARANTEE  Typically, not required

CHECK SIZE   10% of trailing twelve-month sales or 1x last month’s sales

RATE High single digits-Mid 20's (Prepayment discounts offered in first half of the investment)

TERM  8-24 months

An A/R Line of Credit is a suitable product to speed up cash-flow so that your business does not need to wait 30-90 days for your clients to pay you. It is half the cost of invoice factoring with a better structure with no invoice notification requirement. With factoring you get one rate up to 30 days past invoice date, but that rate keeps getting increased every 10 or 15 days your customer does not pay their invoice. The A/R line of credit product offers one low interest rate up to 90 days past invoice date. If you currently have an invoice factoring product, you may want to consider switching to an A/R line of credit as a significantly more cost-effective capital tool. Factoring products generally come with hidden fees if you want to void the agreement. Clients general save tens of thousands of dollars by switching from factoring to an A/R Line of Credit.


Highlights 

CHECK SIZE  85-90% of A/R less than 90 days old. Inventory: 50-65% advance rate at cost (can sometimes borrow against raw goods/goods in transit)

RATE  Start at Prime/SOFR

TERM   The initial term is 2-3 years, then auto-renews after that unless you want to cancel.

TIME TO CLOSE  45-60 days from a signed term sheet

SECURITY   Senior Secured

PERSONAL GUARANTEE  Depends on the transaction, typically required with Inventory borrowing