If you run a fulfillment or third-party logistics (3PL) company, you probably think about operational capacity all the time. Do you have enough warehouse space? Enough people? The right systems and equipment to handle the next big account?
What gets less attention is whether you have the financial capacity — aka working capital — to pay for all of that before the new revenue comes in.
Growth often creates costs before it creates cash. You may need to add a shift, hire temporary labor, expand warehouse space, or pay vendors weeks before a new customer pays its first invoice. The right kind of financing can help bridge that gap.
There are several ways to finance growth, and different options can make sense in different situations. It helps to determine what you need to fund, how often you expect to need capital, and how those needs may change as your operation grows.
Start With What You Actually Need to Fund
A growing fulfillment or 3PL business may need financing for various reasons. For example, maybe you need to expand operations as order volume rises, buy equipment that will last for years, or simply cover the timing gap between weekly payroll and customers paying on net-30, net-45, or net-60 terms.
A useful first step is to identify the need:
- Recurring operating costs: payroll, temporary labor, vendors, warehouse expenses, and other costs that rise with volume
- Long-term investments: conveyors, racking, automation systems, forklifts, or facility improvements
- Receivables timing: you’ve completed the work and invoiced the customer, but the cash hasn’t arrived yet
- Growth beyond your current credit limit: your existing financing worked at one stage of the business, but is getting tight as volume increases
Once you know what you’re trying to fund, it’s easier to compare your financing options.
5 Common Financing Options for Fulfillment & 3PL Companies
1. Term Loans: Best for Defined, One-Time Investments
A term loan gives you a set amount of money that you repay over a defined period.
That can make sense when the expense is easy to define upfront. If you’re buying conveyors, installing an automation system, making facility improvements, or investing in another asset that will support the business for years, a term loan lets you spread the cost over time.
But what happens when the need keeps coming back as the business grows?
Say a new account requires an extra $150,000 for payroll, temporary labor, and warehouse expenses during the ramp-up period. Once that customer is fully up and running, another new account may create a similar need.
You could apply for another term loan, but that means going through the borrowing process again. Each new loan is another underwriting decision, and approval isn’t guaranteed. The lender may look at how much debt you already have, your current cash flow, your credit profile, and other factors before deciding whether to extend more financing.
That can make a series of term loans cumbersome for a business with recurring working capital needs — especially if you need to move quickly when a new opportunity comes along.
A useful way to think about it: term loans tend to fit defined, long-term investments better than recurring operating needs.
2. Fintech Lines of Credit: Flexible, but the Max Borrowing Amount Matters
For recurring operating costs, a revolving line of credit (LOC) may be a better fit.
A revolving LOC lets you draw from available credit when you need it, repay the balance as customer payments come in, and use that credit again. That structure can work well when costs rise with volume.
A fintech line of credit can be particularly appealing because the application process is often relatively simple, but many of these LOCs max out at around $250,000 — regardless of your credit profile. That may be fine for a while, but what happens when growth requires a business line of credit over $500K?
At that point, the question isn’t simply whether you can get more credit, but whether a fintech line of credit can keep pace with the size of business you’re running today.
3. Bank Lines of Credit: Familiar, but They Still Have to Keep Pace
A traditional bank line of credit can also work well for recurring working-capital needs.
The mechanics are straightforward: you borrow when expenses rise, pay the balance down as customers pay you, and borrow again when you need the capital. For many established businesses, that’s a great solution.
The challenge can come when the company grows faster than the line. Higher revenue doesn’t always mean the bank will increase your credit limit. That can leave a fulfillment or logistics company with more customers, more receivables, and a larger operation — but not necessarily more borrowing capacity.
If you find yourself delaying hiring, slowing expansion, stretching vendor payments, or getting uncomfortable every time a large new customer signs on, it may be worth asking whether this financing option still fits the business.
4. Factoring: Useful When You Need Cash From Invoices Sooner
If your main challenge is waiting for customers to pay, you might consider invoice financing for fulfillment companies. That term can describe several types of financing, so it’s worth understanding how they differ.
With factoring, you sell receivables to a factoring company, or “factor,” in exchange for getting cash sooner. Factoring can be used occasionally or as an ongoing source of working capital. Because the factor owns the receivable, your customer will typically send payment to the factor or a factor-controlled account, and the factor may also be involved in collections.
That can be an important consideration for fulfillment and logistics companies that want to maintain more control over the customer relationship.
An asset-based line of credit works differently. You keep the receivables, while eligible invoices help support a revolving line of credit. As customers settle up, you can pay down the line and borrow again as new working-capital needs arise.
Neither structure is inherently better. The fit depends on how you want to access working capital and how much control you want to maintain over customer payments and collections.
5. Asset-Based Lines of Credit: Built For How Logistics Businesses Grow
For an established logistics or 3PL company with meaningful receivables, inventory, or both, asset-based lending may be worth a closer look.
With asset-based lending, eligible business assets help support a revolving line of credit, along with the company’s broader financial profile.
Say your business regularly carries $2 million in B2B receivables because customers pay 30 to 60 days after you invoice them. That’s money you’ve earned but haven’t collected yet. An asset-based lender may be able to use a portion of those receivables to help determine how much credit is available.
You can draw on the line to cover payroll, labor, warehouse costs, or other expenses while you wait for customers to pay. As those payments come in and you pay down the balance, that credit becomes available to use again.
That can be a particularly good match for growing fulfillment and logistics companies. More volume often means higher operating costs, but it can also mean more receivables. An asset-based line is designed to take those growing assets into account.
The overall credit limit is still based on underwriting, but the structure can make borrowing capacity more responsive to the scale of the business.
How Aion Supports Logistics and 3PL Businesses
Aion offers business banking with built-in asset-based growth capital for established, growing businesses.
Aion’s revolving line of credit goes up to $5 million and can be backed by eligible accounts receivable, inventory, or both. For asset-heavy fulfillment and logistics companies, that means the assets the business generates can actually unlock the working capital needed to add labor, ramp up new accounts, and expand capacity.
Aion also brings lending, business banking, payments, and financial tools together in one banking platform. Businesses using an Aion line make Aion their primary banking relationship, so banking and credit work together rather than as separate products.
Growth should be a good thing. The right financing can help keep it that way — giving you the working capital to take on new business without creating unnecessary strain elsewhere.
If your current financing no longer gives you enough room to fund the next stage of growth, check your potential credit limit with Aion.