How to Get Working Capital Facilities from Alternative Lenders
How to Get Working Capital Facilities from Alternative Lenders
Traditional banks often hesitate to extend working capital lines to small and mid-market companies, especially when cash flow is uneven or collateral is unconventional. That’s where alternative lenders — private credit funds, specialty finance firms, and non-bank institutions — step in. They structure facilities around receivables, contracts, or inventory, and they move faster than banks. The trade-off is higher pricing, but for many companies it’s the bridge between stagnation and growth.
What Alternative Lenders Look For
Unlike banks, alternative lenders are not lending against a relationship or generic balance sheet strength. They focus on assets that can be ring-fenced and monetized. Common focus areas include:
- Accounts receivable: confirmed invoices from creditworthy counterparties.
- Contracts: purchase orders, supply agreements, or service contracts with recurring revenues.
- Inventory: commodities or finished goods with established market value.
- Cash flow visibility: recurring payments that can be pledged.
They will underwrite the counterparty risk as much as the borrower’s own creditworthiness.
Common Facility Structures
Working capital facilities from alternative lenders are usually structured as:
- Invoice discounting / factoring: advance rates of 70%–90% against receivables.
- Asset-based lending (ABL): lines secured by receivables, inventory, or equipment.
- Revolving credit facilities: tied to a borrowing base, updated monthly or quarterly.
- Contract finance: disbursement against purchase orders or awarded contracts.
Pricing and Terms
Because they take more risk and move quickly, alternative lenders charge more than banks. Typical ranges include:
- Interest rates: 8% – 20% per annum, depending on risk and tenor.
- Commitment or arrangement fees: 1% – 3% of facility size.
- Advance rates: 50% – 90%, depending on asset quality.
- Tenors: usually 6 – 24 months, with rollover options.
Application Process
Getting a working capital line from an alternative lender is faster than a bank, but documentation is still key. Borrowers should expect to provide:
- Financial statements and management accounts.
- Accounts receivable and payable aging reports.
- Contracts or purchase orders supporting the borrowing base.
- KYC/AML documentation for compliance.
With a clean data room, term sheets can be issued in 1–2 weeks, and funding often closes within 3–5 weeks.
Secure Working Capital Facilities
Financely connects companies with private credit and specialty lenders who can structure working capital lines quickly and effectively.
Contact UsFinancely acts as an arranger and advisor. We are not a direct lender. All facilities are subject to lender underwriting, compliance checks, and contractual documentation. Pricing and advance rates depend on asset quality and borrower profile.
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