There’s a frustrating stage of growth that doesn’t get talked about much: your business is too big for the credit line that got you here, but you may not feel like the kind of company that needs a massive traditional bank loan.
Maybe your current line tops out at $250K. Itworked fine a few years ago, but now you’re buying more inventory, taking onlarger contracts, or funding much bigger production runs before your clientspay you. The business is healthy and the opportunities are there; the financingjust hasn’t kept up.
A lot of business owners assume their choicesare limited to a smaller fintech line because it’s easy, or a much larger bankloan with a more involved process. For established businesses with meaningful receivables or inventory, there’s another option: asset-based revolving credit.
An asset-based line can provide substantially more working capital by looking at the assets the business is already creating as it grows. So if you need a business line of credit over $500K, it may be worth looking beyond a bigger version of the same product and considering a different kind of credit altogether.
Your $250K Line May Be Doing Its Job —and Still Be Holding You Back
There’s nothing inherently wrong with asmaller fintech line of credit. It can be straightforward, convenient, and perfectly adequate at the right stage of the business.
The problem comes when the business grows beyond what that line was designed to support.
Say you run a $10 million manufacturing company and win a major order. Before you can invoice the client, you need to buy raw materials, increase production, cover payroll — and your $250K line isalready partially drawn.
At that point, you may find yourself turningdown the order, stretching suppliers, slowing production, or piecing togetheradditional financing. That’s a sign the business may have outgrown the type ofcredit line it’s using.
A credit limit that is too low can become aninvisible restriction on growth. Over time, you start making operatingdecisions based on the financing you have rather than the opportunities thebusiness can realistically support.
Looking for a Business Loan More Than$ 250K? Don’t Start With the Number
If you’re searching for a business loan formore than $250K, it’s natural to focus on which lender offers the biggestlimit. But the more useful question is how the lender decides what yourbusiness can support.
Many smaller business credit products relyheavily on standardized inputs such as revenue, time in business, and credit history. Those factors still matter with asset-based lending, but the lender can also look closely at assets such as your accounts receivable and inventory when making underwriting decisions.
Imagine two companies that both generate $10million in annual revenue. One has relatively little in receivables or inventory. The other routinely carries $2 million in high-quality B2B receivables from established clients. On a simple scorecard, they may look similar. From an asset-based lending perspective, the second company has assetsthat may help support a larger revolving line of credit.
That’s one of the potential benefits ofasset-based credit: the lender looks at both the performance of the businessand the assets it has created when making underwriting decisions.
The Financing Market Isn’t Just “Fintech or Big Bank”
Growing businesses often see the market asoffering two basic choices: a smaller fintech line that is relatively easy toaccess but may not provide enough capital, or a larger traditional bank loanthat may come with a more involved process.
There’s something in between.
These aren’t rigid categories. Banks can offerasset-based lending, and every lender structures its credit productsdifferently.
The key point is that a $250K credit line anda large traditional bank loan aren’t the only options. For the right business,an asset-based revolving line can fill a useful gap by providing more capitalwhile structuring the line around receivables or inventory the business already has.
How Asset-Based Revolving Credit Works
The concept is simpler than the terminologymakes it sound. Say you invoice a client for $200,000. That invoice representsmoney your company has earned but has not collected yet. An asset-based lendermay consider that receivable, along with your other eligible receivables orinventory, when determining how much borrowing capacity the business can support.
The lender does not count every dollar of ARor inventory at face value. It evaluates eligibility based on factors such asreceivable age, client concentration, payment history, inventory quality, andother credit considerations.
From there, eligible assets help determine theborrowing base — the amount of eligible collateral currently supporting whatyou can borrow, subject to your overall approved credit limit.
The line of credit is designed to flex withyour business. As your eligible receivables or inventory grows, more capitalcan become available; when those assets decline, your available credit maydecrease. Instead of being locked into a static loan amount, your borrowingcapacity can adjust to what’s happening in your business.
As invoices are paid and outstanding balancescome down, credit can become available again. If eligible collateral grows,your available borrowing capacity may grow within the approved limit. If thebusiness eventually needs a higher approved limit, that is a separateunderwriting and approval decision.
When Does a $1 Million or $2 Million Business Credit Line Start to Make Sense?
There isn’t one magic revenue number. Abusiness credit line in the $1 million to $2 million range may become relevantwhen the size and timing of your operating needs have moved well beyond what asmaller line can support.
You might be reaching that point if:
● A large new contract requiressignificantly more working capital before you get paid.
● Your existing line is regularlyclose to its maximum even as the business continues to grow.
● You are buying more inventory thanyour current line can comfortably support.
● You are combining multiplefinancing products simply to get enough capital.
● You are pacing orders, production,hiring, or fulfillment around your credit limit.
● Your receivables or inventory havegrown substantially since you first opened your original line.
That last point is worth paying attention to.If your company has become larger and more asset-rich, but you’re stillfinancing it with a product designed for a much smaller business, yourfinancing may be based on an outdated version of the company.
A Large Business Line of Credit Can Be Especially Relevant in Manufacturing
Manufacturing makes the issue easy to seebecause growth often costs money well before it produces cash. A larger ordermeans more materials, more labor, more production capacity, and potentiallymore inventory. Then you ship the product and wait for the client to pay.
That means a successful manufacturing businessmay need a large line of credit precisely because it is growing. The samedynamic appears in logistics and fulfillment, where a new contract can increasepayroll, facilities, and vendor expenses immediately while payment arrivesweeks later. For CPG businesses, growth can mean committing to a much largerinventory purchase well before retailers pay.
Working capital matters so much in thesebusinesses because higher sales can tie up more cash in the operating cycle atany given moment. A credit line that felt comfortable when the business wassmaller can become restrictive, surprisingly quickly.
Aion’s Higher Credit Alternative to Other Fintech Lenders
Aion is built for established businesses thathave reached this stage. It provides business banking with built-in asset-basedgrowth capital, combining revolving credit, banking, payments, and corefinancial tools in one platform.
Aion’s revolving lines of credit go up to $5million and can be backed by eligible receivables, inventory, or both.Availability within the line is based on eligible collateral and is subject tothe approved credit limit. As client payments come in and outstanding balancesare repaid, credit can become available to use again.
Clients using Aion’s revolving line of creditalso make Aion their primary business banking relationship, so banking is partof how the credit relationship works rather than a separate add-on. For agrowing business, that brings banking and credit into the same operating systeminstead of forcing you to manage them separately.
The Question Isn’t Just “How Do I Get a Bigger Line?”
If your company has outgrown a $250K creditline, the obvious next step is to look for someone willing to lend more. Inmany cases, though, it’s also worth reconsidering whether the financing productyou chose at an earlier stage still reflects the business you run today.
You may now have more revenue, larger clients,more inventory, more receivables, and bigger opportunities than you did whenyou opened the line. Your capital strategy may need to evolve with the rest ofthe company.
Before settling for another line that stillfeels too small — or assuming your only alternative is a massive traditionalbank loan — take a closer look at asset-based revolving credit. For the rightestablished business, it may be the financing option that fits the next stageof growth.
Curious about an Aion line of credit? Check your limit with no impact to your credit here.