Managing cash flow effectively is one of the biggest challenges for businesses, especially those that operate on credit terms. Long payment cycles can create gaps in working capital, making it difficult to cover operating expenses, payroll, or growth initiatives. A Ledgered Line of Credit (LLOC) provides a flexible financing solution that allows businesses to leverage their accounts receivable as a dynamic source of working capital.
In this blog, we explore Ledgered Line of Credit, how it works, how it compares to other financing options, and why it could be the right solution for your business.
What Is a Ledgered Line of Credit?
A Ledgered Line of Credit (LLOC) is a financing solution where businesses borrow against their accounts receivable (invoices) on a revolving basis. Unlike a traditional line of credit with a fixed credit limit, an LLOC is structured around the business’s accounts receivable ledger, meaning the borrowing capacity adjusts dynamically based on the outstanding receivables.
This structure makes LLOCs highly beneficial for businesses that operate on credit terms and often wait 30, 60, or 90 days for customer payments.
Key Features of a Ledgered Line of Credit:
- Revolving Credit – The borrowing limit increases and decreases as invoices are generated and paid.
- Invoice-Based Funding – The credit is tied to receivables, making it scalable with business growth.
- Cash Flow Optimization – Immediate access to funds without waiting for customer payments.
- Flexible Repayment – No fixed monthly repayment schedule—funds are repaid as invoices are paid.
How Does a Ledgered Line of Credit Work?
- Business Issues Invoices – After delivering goods or services, the business generates invoices for customers.
- Lender Advances Funds – The lender provides a percentage (typically 70%-90%) of the invoice value.
- Customer Pays Invoice – Once the customer pays, the funds replenish the credit line.
- Business Withdraws as Needed – The business can continue drawing funds against new invoices.
Benefits of a Ledgered Line of Credit
- Enhanced Cash Flow Management
- Businesses can access working capital immediately instead of waiting for customers to pay invoices, reducing financial strain.
- Greater Flexibility Compared to Traditional Loans
- Unlike lump-sum loans that require fixed monthly repayments, an LLOC allows businesses to borrow only what they need, reducing unnecessary interest costs.
- Lower Costs Than Merchant Cash Advances (MCA)
- MCAs often have higher fees and daily repayment deductions that can strain cash flow. LLOCs offer lower-cost access to capital without affecting daily revenue.
- Scales with Business Growth
- As a business generates more invoices, the available credit increases, making it a scalable financing solution.
- No Need for Hard Collateral
- Unlike asset-based loans that require real estate or equipment as collateral, an LLOC uses accounts receivable, making it accessible for more businesses.
Is a Ledgered Line of Credit Right for Your Business?
A Ledgered Line of Credit is ideal for businesses that:
- Operate in industries with long payment cycles (e.g., manufacturing, wholesale, B2B services).
- Experience seasonal revenue fluctuations and need flexible funding.
- Want a financing solution that grows with their business.
- Prefer to avoid long-term debt and fixed repayment obligations.
- Leveraging unpaid invoices allows businesses to optimize cash flow and maintain financial stability without taking on unnecessary risk.
Conclusion
A Ledgered Line of Credit offers a dynamic and cost-effective alternative to traditional loans and high-cost financing methods. It’s particularly useful for businesses that operate on credit terms and need a flexible solution to manage cash flow efficiently.
If you’re looking for a financing option that adapts to your accounts receivable collection cycle, a Ledgered Line of Credit could be the perfect solution.
Contact us to consult our team of financial experts. Discover our vast array of flexible financing solutions to improve cash flow, maximize access to credit, and stabilize financial structures.
Key Takeaways
- Managing cash flow effectively is one of the biggest challenges for businesses, especially those that operate on credit terms.
- A Ledgered Line of Credit (LLOC) is a flexible financing solution that allows businesses to borrow against their accounts receivable on a revolving basis, with the credit limit adjusting based on outstanding invoices.
- This flexible financing option offers a dynamic and cost-effective alternative to traditional loans and high-cost financing methods.
ABOUT eCapital
At eCapital, we accelerate business growth by delivering fast, flexible access to capital through cutting-edge technology and deep industry insight.
Across North America and the U.K., we’ve redefined how small and medium-sized businesses access funding—eliminating friction, speeding approvals, and empowering clients with access to the capital they need to move forward. With the capacity to fund facilities from $5 million to $250 million, we support a wide range of business needs at every stage.
With a powerful blend of innovation, scalability, and personalized service, we’re not just a funding provider, we’re a strategic partner built for what’s next.
