How Lending Really Works (And Why It Starts with a Warehouse)

Most people think lending begins when someone applies for a loan.

But that’s not where it starts. Not really.

Behind every car loan, home loan, credit card or buy-now-pay-later transaction is something far less visible but just as important: a warehouse. Not a building full of boxes—but a financial warehouse. A pool of capital that lenders draw from to do what they do best: lend.

These warehouses keep the credit system moving. And once you understand how they work, you’ll start seeing them everywhere.

The Basics (Without the Buzzwords)

Let’s say you run a lending business. Maybe you fund small businesses. Maybe you help people buy second-hand cars. You’ve got the model, the tech, the underwriting engine—and now you need capital to grow.

Instead of raising equity (which dilutes ownership) or applying for a bank loan (which can be rigid), you set up a warehouse facility. That means you partner with investors—like Eldium—who provide the capital into a legal structure called a Special Purpose Vehicle (SPV).

This SPV buys the loans you originate. It holds them. Tracks them. And repays the investors over time as borrowers make repayments.

What Makes It Safe for Funders?

Investors in a warehouse facility don’t just throw money into the unknown. Here’s what’s protecting their position:

• Security over the loans held in the structure
• A cash buffer and first-loss equity from the originator
• Built-in rules and triggers that pause or adjust the facility if loan performance drops
• And the fact that they’re first in line for repayments
  
  

So you’re not backing one borrower. You’re backing a system—with oversight, structure, and real alignment between the lender and the investor.

It’s not speculative. It’s measured. Repeatable. Built to scale.

Who Uses These Structures?

Lots of people.

• Banks use warehouses to fund mortgage portfolios
• Credit card companies use them to pre-fund spending
• Bridgit, JustFund, Pepper Money use them to on-lend to their customers
• Zip and Afterpay use them to offer instant consumer finance
• In the U.S. and UK, warehouse lending is standard in non-bank credit markets
  
  

They’re not new. They’re just under the radar. But they power much of the lending system we interact with every day.

Why We Do It at Eldium

We’re not here to reinvent lending. We’re here to support the people who do it well—and connect them to investors who want real-world, risk-adjusted returns.

Warehouse lending makes that possible. It gives lenders the capital they need to serve more customers. It gives investors structured exposure to a diversified, professionally managed pool of loans. And it keeps both sides aligned.

If you're trying to understand how non-bank credit actually works—or how capital moves through the real economy—this is a piece worth knowing.

Important Information

This article is for general information only. It is not financial advice and does not take into account your personal objectives, financial situation, or needs. You should seek independent financial, legal, and tax advice before making any investment decisions. Eldium provides capital solutions exclusively to wholesale clients as defined under the Corporations Act 2001 (Cth). All warehouse lending arrangements are subject to legal documentation, due diligence, and ongoing risk monitoring. Past performance is not a reliable indicator of future results.

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