VC & PE Glossary
What Is Warehouse Line?
Updated
Definition
A warehouse line is a revolving credit facility that funds a pool of assets — usually loans or receivables — until they are sold or securitized into longer-term funding.
Useful for: Founders, Investors
A warehouse line is revolving debt that finances newly originated assets on your balance sheet until permanent funding replaces the warehouse lender.
How it works
Key terms founders negotiate:
- Advance rate: percent of eligible receivable/loan balance funded (often 80–95% depending on asset quality)
- Eligible assets: credit boxes, geography, tenor limits
- Covenants: delinquency triggers, minimum equity, concentration caps, monthly reporting
- Takeout: requirement to securitize or sell within facility tenor
Example: a SMB lender originates $10M monthly in loans. A warehouse line at 90% advance provides $9M liquidity per cohort, recycled as principal pays down. When pools reach $100M, an ABS issuance repays the warehouse and sets up the next cycle.
Multiple warehouse banks may participate — senior and mezz tranches. Cost is SOFR plus spread plus unused fees. Personal guarantees appear in early-stage facilities but fade with scale.
Why it matters
- Founders: Line headroom caps originations — equity raises often precede warehouse upsizes. Covenant breaches freeze funding and force portfolio shrink.
- Investors: Underwriting quality shows in warehouse audits. Strong ABS takeout history lowers future spread; weak performance closes facilities.
Common mistake
Scaling marketing before warehouse capacity is committed. Originations without funding force fire sales of loans at bad prices.
Related ideas
See also warehouse deal, warehousing, and working capital.
Related terms
- Warehouse Deal — A warehouse deal is an arrangement where an investor or bank temporarily holds assets — often loans or securities — before packaging and selling them to longer-term holders or securitization vehicles.
- Warehousing — Warehousing is the practice of temporarily holding financial assets on a balance sheet or credit facility — staging them until they can be sold, securitized, or allocated to long-term investors.
Common questions
Short answers for founders, LPs, and operators