What Is A Warehouse Facility?

A warehouse facility is a form of credit facility issued by a lender to a third party that intends to provide some percentage of the capital to a non-related party. Like a credit facility, the startup approved for the credit draws down the available balance as it issues credit to other parties. Typically the startup issuing the credit is responsible for underwriting the deal and collecting the outstanding monthly payment, so they can repay the initial lender.

The term originates from the mortgage industry, where mortgage loans were temporarily stored in a hypothetical "warehouse" for several weeks before being sold on the secondary market. In essence, lenders required short-term financing to finalize the mortgage loans for investors who were purchasing bundles of homes.