The housing resurgence has led to increased demand for new mortgages and an expanding market for mortgage bankers. However, without sufficient capital, smaller mortgage bankers are limited in what they can offer. By establishing a warehouse line of credit, any licensed mortgage banker can have immediate access to capital on demand to fund loans in anticipation of reselling them in the secondary market. Warehouse lending is a form of asset-based lending that relies on the completed and signed loan documentation as collateral for advancing the funds necessary to close the loan. Once established, the line of credit can become a perpetual source of capital allowing the mortgage banker fund loan closings without having to use its own capital. The primary requirements for a mortgage banker to access a warehouse line of credit are a positive net worth and a verified buyer of the loan.
Secondary Market Liquidation
When unsold or obsolete inventory collects dust on the warehouse shelves it creates a drag on the bottom line of retailers, distributors and manufacturers. Although there have always been ways to offload inventory, such as auctions and liquidation sales, they are inefficient and they generate limited buying opportunities. Now, there is a better way. Through a vast secondary market created by liquidators, where bulk buyers purchase millions of dollars of goods each week, companies can maximize their recovery value. With their extensive networks of buyers, liquidators are able to match the inventory to the market segment most likely to pay top dollar, while handling all of the logistics for getting the goods to the market. Secondary market liquidation offers inventory-based companies a turnkey solution for offloading inventory throughout the year creating greater efficiency and bigger profits.
Rediscounting Line of Credit
With the increasing demand for short-term financing by small and mid-sized companies, factoring has become a growth industry, attracting new entrants into the market. The problem is smaller factors are often constrained by the availability of capital which limits their capacity to grow their business. In the last several, a host of non-traditional financing companies have emerged that are willing to offer small factoring companies unconstrained access to capital through rediscounting lines of credit.
The concept of a rediscounting line of credit is easy for a factoring company to understand because it works much the same way as a factoring line works. After the factor purchases an invoice from a customer, it resells the invoice to a financing company for an advance of capital. The advance is repaid once the invoice is paid by the end-customer. The invoice has, in effect, been discounted twice, once with the initial purchase from the customer, and the second time with the purchase by the financing company. The line of credit provides the factoring company with capital it can use to factor an increasing number of invoices in perpetuity.