When customers pay slowly, a business can run short on cash even while sales are strong. One way to fix that is to combine two tools: a working capital loan for day-to-day operations and an accounts receivable (A/R) line of credit that bridges the wait for customer payments. ROK Financial recently structured exactly that for a pipeline services company.
Disclosure: JWAT Enterprises Inc may earn a referral fee if you're funded through ROK Financial links on this page, at no cost to you. JWAT is not a lender. Not financial advice.
The Deal: Two Tools Instead of One
A business consultant referred a utilities company to ROK Financial. The company specializes in pipeline construction management and inspection services, and like many contractors, its customers can sometimes take a while to pay.
ROK secured two pieces of financing for it:
- A $1.25M working capital loan to cover operations
- A $5M A/R line of credit to bridge the gap while receivables come in
Paired together, they gave the company the cash flow and flexibility it needed to keep things moving. Instead of relying on one solution, ROK used both to give the client the capital and flexibility it needed to get the job done.
The Real Problem: Profitable on Paper, Short on Cash
Businesses that invoice other businesses or government agencies often work on net-30, net-60 or longer payment terms. The work is done and the invoice is sent, but payroll, equipment, fuel, materials and insurance are due long before the customer pays.
The bigger the contracts, the bigger that gap gets. A business can be winning work and still struggle to fund the next job, because its cash is tied up in invoices it hasn't collected yet.
Working Capital Loan vs A/R Line of Credit
The two tools solve different parts of the same problem:
| Working Capital Loan | A/R Line of Credit | |
|---|---|---|
| What it's for | Operating needs: payroll, equipment, materials, growth | Bridging the time between invoicing and getting paid |
| What it's based on | Your business's overall revenue and financial profile | Your outstanding receivables (unpaid customer invoices) |
| How you use it | Typically a lump sum, repaid on a set schedule | Draw as needed against eligible invoices, repay as customers pay |
| Best for | A known, planned cash need | A recurring gap caused by slow-paying customers |
Used together, the loan keeps the business running while the line smooths out the swings in when customer money actually arrives.
A/R Line of Credit vs Invoice Factoring
Both use your receivables, but they work differently. With invoice factoring, you usually sell invoices to a factoring company, which often collects from your customers directly. With an A/R line of credit, you borrow against your receivables and typically keep collecting from your customers yourself. Exact terms vary by lender, so compare offers carefully.
Who This Structure Fits
A combined working capital and A/R structure is worth a look if you invoice other businesses or government and wait to get paid. That often includes:
- Utilities, pipeline and infrastructure services
- Construction subcontractors and specialty trades
- Government and federal subcontractors waiting on prime contractor payments
- Staffing agencies
- Trucking and logistics companies
- Manufacturers and distributors
- Engineering and inspection firms
What Lenders Typically Ask For
Every lender is different, but for receivables-based financing, expect to be asked for some or all of these:
- An accounts receivable aging report
- Your customer list and their payment history
- Recent business bank statements
- Recent financial statements and tax returns
Having these ready before you apply can speed up the review.
See What Structure Fits Your Business
ROK Financial works with businesses that have larger or more complex funding needs and can combine products rather than forcing everything into one loan. If your customers are slow to pay, see what you qualify for with ROK Financial.
FAQ
Can I get an A/R line of credit if my customers take 60 to 90 days to pay?
Slow-paying commercial or government customers are exactly the situation A/R financing is designed for. Approval and the size of the line depend on the lender's review of your receivables, your customers' payment history and your business financials, so no amount is guaranteed.
Is an A/R line of credit the same as invoice factoring?
No. With factoring you usually sell invoices to a factoring company, which often collects from your customers. With an A/R line of credit you borrow against your receivables and typically keep collecting from your customers yourself. Terms differ by lender.
Can a business combine a working capital loan and a line of credit?
It can. In the example in this article, ROK Financial paired a $1.25M working capital loan with a $5M A/R line of credit for a pipeline services company. Whether a combined structure fits your business depends on your numbers.
ROK Financial: Funding Built Around How You Get Paid
Working capital, A/R financing and more. One application, and ROK can combine products to fit a larger or more complex need.
See What You Qualify For →Example deal reported by ROK Financial; results vary and approval is not guaranteed. Affiliate disclosure: JWAT Enterprises Inc may earn a referral fee if you're funded through links on this page, at no cost to you. JWAT is not a lender. Not financial advice.
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