Senior Credit Facilities: What Every Factor and Lender Needs to Know

Written by: Nolan Reichert, VP, Head of Originations, Haversine Funding 

In a capital-intensive industry like specialty finance, growth hinges on the right funding strategy, combined with strong flexible capital sources. For commercial lenders, factors, asset-based lenders (ABLs), and equipment finance firms, a senior credit facility provides the scalable capital needed to expand, improve liquidity, and increase competitiveness. 

When seeking additional capital, many factors and lenders default to traditional bank options. But increasingly, non-bank senior facilities offer a more strategic fit, especially for lenders looking for speed, flexibility, and customized structures. In this article, we examine what a senior line is, how non-bank options differ, and what to expect when preparing for one. 

What Is a Senior Line of Credit? 

A senior line of credit is a revolving facility secured by a factor or lender’s receivables or other eligible collateral. These lines are "senior" because they take repayment priority over other obligations. Senior Lines of Credit are structured such that a lender under a Senior Line of Credit (“SLOC”) will loan – or advance – capital equivalent to a percentage of a factor or lender’s eligible portfolio.   This percentage “advanced” under a line of credit is an advance rate. (“Eligible” is an important concept that we will revisit.) 

Advance rates to factors and lenders typically range from 75% to 85%, depending on collateral type, structure, industry, and borrower risk. Under some structures, advance rates can run as high as 95% depending on the type of lender providing the SLOC.   

For factors and lenders alike, these facilities unlock working capital from their own portfolios. Rather than being forced into an expensive equity raise to facilitate growth, a SLOC allows: 

• Greater confidence in capital availability to fund new clients and borrowers 

• Larger deal size opportunity conversions with scalable capital 

• Improved liquidity and margin efficiency 

Done right, a SLOC becomes the financial backbone of a factoring or lending platform. 

When is the Right Time to Pursue a Senior Line? 

Timing will always depend on your portfolio size, industry experience, and funding needs. Newer platforms may not qualify for traditional lender-finance bank facilities without a track record or deep equity (or subordinated debt) support. Regional banks or non-bank senior lenders are options available to bridge that early-stage gap and build growth momentum, further helping to build a strong track record for your financial platform.   

If you’re launching a platform from scratch, expect the process to take time. You will need to assemble reliable financials, strengthen reporting, and formulate a model that can be presented to potential senior lenders. A senior lender is making a bet on you AND your team, as well, so finding strong expertise is vital in the process. 

Our advice at Haversine: always be looking. Capital markets shift quickly. What’s available today may not be tomorrow. Get to know lenders early. Understand what matters most to you: flexibility, price, speed, or scalability. Your needs may change as you grow. Preparation pays off when the time comes to pursue a SLOC.  

Bank vs. Non-Bank Senior Facilities 

Banks have traditionally provided senior credit to lenders, and there is currently a great variety of lender-finance verticals in the banking sector. Still, with tighter regulation and more rigid underwriting and covenants in the banking sector, non-bank options are finding increasing room to expand. 

Lower rate, more structured senior lines work well for many established platforms with significant history, diversification, traditional collateral, and solid equity and other capital support. While bank rates are attractive, they often come with constraints: tighter eligibility, slower turnaround, higher compliance costs, and stricter terms.  

A headline 85% advance rate may result in effective availability of just 65-75% once ineligibles and reserves are applied. A capacity shortfall resulting from ineligibility must be covered elsewhere, usually through equity, sub-debt, or mezzanine capital. If the remedies for funding gaps are expensive, your true cost of funds may rise significantly above what is anticipated.  

Non-bank lenders offer more flexibility, fewer restrictions, and faster execution. For growing or specialized lenders, that trade-off of higher rates for greater flexibility may make more strategic sense. Senior facilities are never a “one size fits all” solution. The details of each structure are what will determine what makes the most sense for your platform and what you are trying to achieve. Be sure to review the availability structure to best understand the amount of capital needed to support your finance company’s growth. Run iterative scenarios to compare the individual costs and blended costs under different structures. Although this may seem obvious, many groups only make this assessment late in the diligence process, after committing to a deal or reaching a point where it's difficult to change course. 

What You Should Expect: Preparing for a Senior Line 

1. The BBC: Borrowing Base Certificate 

The BBC determines how much of your receivables (or other collateral such as inventory, equipment, real estate, purchase orders, etc.) you can borrow against. It considers concentration limits, invoice aging, collateral type, and exclusions. Even with an 85% advance rate, ineligibles (like the ones listed below) lower net availability significantly. 

• Client or debtor concentrations 

• Invoice agings (typically up to 90 days from invoice, though some lenders allow up to 120) 

• Collateral type eligibility (AR, inventory, equipment, real estate, IP, etc.) and varying advance rates 

• Category limits or caps (e.g., buckets for collateral types, industries, etc.) with additional concentration caps 

• Other reserves or exclusions 

All of this means that while a lender, bank or non-bank, may offer an 85% advance rate on your ‘advances’ to the clients/borrowers, the net effective availability might be closer to 65–75% after applying ineligible restrictions depending on portfolio composition. Waiting until closing to understand what can be declared “ineligible” will create cash shortfalls and last-minute friction.  

Again, we recommend running a sample BBC early in the process, both for your current portfolio and projected growth. Model different eligibility scenarios, track availability trends, and assess if you have sufficient equity or capital cushion to support any shortfall. Ask yourself: What happens if we’re short? Do we have enough running room to operate through tight cycles? 

2. Reporting and Infrastructure 

Senior lenders will evaluate your ability to report timely, accurate information. Expect requirements for: 

• Monthly financials (possibly audited financials annually for larger portfolios) 

• Portfolio and aging reports (by client and debtor) 

• Cash activity reports and bank statements   

• Covenant tracking and liquidity forecasts 

Being prepared to provide reporting on additional KPIs - delinquency, dilution or turnover - demonstrates readiness and earns credibility. The more consistency and transparency you offer, the more flexibility you gain. 

Conversely, slower reporting with limited information, or reporting delays in general, will cause lender finance groups to reassess risk, require additional capital, and potentially impact future increases, advance rates, or pricing.  

3. Financial Health and Leverage 

Your equity cushion and leverage metrics matter. Lenders want assurance that you can absorb losses, support growth, and stay liquid during stress periods. 

Bank lenders tend to prefer leverage ratios of 3x to 5x, with a first-loss layer of equity and potentially sub-debt. Non-bank lenders are often more flexible but still expect reserves, capital coverage, and limited covenant structures. 

Beyond Terms: Evaluating the Right Fit 

Not all facilities are created equal. Having the right kind of capital is even more important than having the right amount of capital.  Anticipate how loan terms and reporting requirements will function on a day-to-day basis. Do restrictions limit your ability to lend? Do you have the capital to cover gaps? Can your platform grow under the proposed structure? 

Haversine, for example, combines senior and junior (subordinated debt) structures to push borrowing capacity toward 90–95% of eligible collateral. That allows: 

• Faster execution 

• Fewer capital raises 

• Greater operational control 

The right lender should be more than a capital provider; they should be a strategic partner. 

What Else to Expect 

In addition to structuring and approvals, expect: 

• Field exams (operational and portfolio reviews initially and ongoing) 

• Legal diligence (docs, UCCs, compliance) 

• Background checks on management and ownership 

• Policy and credit testing 

• Sample file reviews on certain client or borrower facilities  

The process steps vary, as does the timing to get a SLOC established. Banks can take 6 to 12 months. Non-bank timelines often range from 30 to 90 days, depending on deal size, complexity, and third parties. Planning ahead is essential. 

Questions to Consider 

• Are we ready for the reporting and operational demands? 

• Can we absorb short-term cash flow volatility? 

• What happens if parts of the portfolio become ineligible? 

• How strong is our credit and collections infrastructure? 

• Do we have a roadmap to support future scale? 

These questions aren’t just diligence checkpoints. They’re part of building a durable, scalable lending platform. 

About Nolan Reichert 

Nolan Reichert is the Vice President, Head of Originations at Haversine Funding, where he leads the firm’s origination efforts, expanding lender finance partnerships and growing portfolios. In addition to his leadership role, Nolan is the host of "In Focus with Haversine Funding," a podcast dedicated to exploring insights, trends, and strategies that drive success in specialty finance. Nolan’s contributions to the industry have been recognized with the NEXGEN Leader Award from the International Factoring Association. He also was a 2025 recipient for the SFNet’s “Top 40 Under 40” Awards. 

Prior to joining Haversine, Nolan was with RTS Financial, where he managed a sales team. He began his career as a Business Development Officer at Allied Affiliated Funding in 2011. 

The views expressed in the Commercial Factor website are those of the authors and do not necessarily represent the views of, and should not be attributed to, the International Factoring Association.