Line of Credit for an IT Infrastructure Company: How Receivables Can Support Working Capital
Your unpaid invoices could be worth more than you think. If you run an established B2B technology business, the money your clients already owe you may help support a revolving line of credit. That can be particularly relevant for MSPs, systems integrators, data centers, cloud services companies, and other IT businesses that may not own a lot of traditional hard assets.
You might buy hardware that goes straight to a client, pay engineers and technicians before a project is complete, or cover software licensing costs while waiting 30, 60, or even 90 days for an enterprise customer to pay.
In those situations, your accounts receivable may be an important part of the financing picture.
Why IT Companies Often Pay Out Before They Get Paid
Your expenses don't necessarily wait for your clients to pay.
Say you land a data-center buildout. You purchase servers and networking equipment, put engineers and subcontractors on the project for six weeks, and invoice at agreed-upon milestones. Then you wait for the client's AP department to process payment.
Or you add three new managed-services accounts in one quarter. You may need additional technicians, software licenses, and other resources right away, while your clients pay their invoices on 30- to 90-day terms.
That creates a working capital gap between paying the costs required to deliver the work and collecting the revenue you've earned.
And growth can make that gap larger. More projects and clients can mean more payroll, hardware, software, and other costs to cover before more cash reaches your account.
Why an Established IT Company Can Still Have Trouble Getting the Credit It Needs
IT infrastructure and services companies can present an unusual lending picture. A growing MSP or systems integrator may have strong revenue and a healthy pipeline but relatively few hard assets for a lender to consider. Servers or networking equipment purchased for a project may ultimately belong to the client. Other technology equipment may lose value quickly.
What the business does have is a growing balance of B2B invoices. Different financing structures place different weight on those receivables. A conventional line of credit may be based primarily on the company's overall financial profile and cash flow, while an asset-based line explicitly ties borrowing availability to eligible business assets such as accounts receivable.
That distinction can matter for an established IT company whose clients reliably pay for work after it has been delivered. Of course, the financing structure isn't always the issue. Lenders also consider factors such as cash flow, existing debt, credit history, customer concentration, and the overall financial health of the business. But when a lack of hard assets is limiting the amount of credit available, a receivables-backed alternative may be worth considering.
What Makes an IT Receivable Eligible?
The important distinction isn't simply whether you expect to get paid. It's whether you've already earned and billed the money.
Every lender sets its own requirements, but lenders generally look for receivables supported by an issued invoice, evidence that the product or service has been delivered, and a defined payment obligation.
They may also consider how old the invoice is, the financial strength and payment history of the customer, whether a large portion of receivables is concentrated with one customer, and whether an invoice is disputed or subject to offsets or cancellation.
For IT companies, that distinction is particularly important when it comes to recurring revenue.
Suppose an MSP signs a three-year managed-services agreement worth $20,000 a month. The contract may make future revenue more predictable, but the entire three-year value isn't automatically an account receivable.
Once the MSP delivers a month of service and invoices the client for $20,000, that invoice may become an eligible receivable, subject to the lender's criteria. The same process repeats as future work is performed and billed.
In other words, recurring revenue and accounts receivable aren't the same thing.
How a Receivables-Backed Line of Credit Works
A receivables-backed line is a form of asset-based lending. Rather than relying primarily on hard assets, the lender can use eligible receivables to help determine how much credit is available.
The lender first approves an overall credit limit based on its underwriting of the business. It then applies an advance rate to eligible receivables to determine current borrowing availability.
For an IT company, that means borrowing availability can change as the business generates new eligible invoices and customers pay existing ones, without exceeding the approved limit.
The company can draw from the line when it needs working capital — for example, to cover technician payroll, purchase hardware for a deployment, or pay software licensing costs — and repay and draw again as needed.
That revolving structure can be useful when the working capital need itself is recurring rather than a one-time expense.
Comparing Financing Options for an IT Infrastructure Company
There isn't one financing structure that works best for every IT company. The useful question is how each option matches the way your business generates revenue and uses capital.
When comparing options, consider more than the headline rate. Look at how much capital you can actually access, how that availability may change as the business grows, how and when costs are charged, and what the financing arrangement means for your customer relationships and day-to-day cash management.
Using Receivables to Support IT Growth
An IT infrastructure company doesn't necessarily need a warehouse full of equipment to have assets that can support financing.
For many MSPs, systems integrators, data centers, and cloud services businesses, a meaningful asset is already sitting on the balance sheet: money owed for work that's been completed and invoiced.
Aion's asset-based line of credit can be backed by eligible accounts receivable, inventory, or both. Qualifying businesses can access lines from $50,000 to $5 million, with advance rates of up to 85% of eligible receivables, depending on underwriting.
As eligible receivables grow, borrowing availability can grow with them, up to the approved credit limit. That can give an established IT business a source of working capital for expenses such as payroll, hardware purchases, software licensing, and other costs that arrive before customer payments do.
Aion also combines the credit facility with business banking and financial tools on one platform, giving businesses a single place to manage banking, payments, receivables, and available credit.
If the gap between doing the work and getting paid is becoming harder to fund as your company grows, it may be worth finding out how much credit your receivables could support.
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