Asset-based lending (often referred to as “ABL”) is a form of commercial lending designed to finance safely the working capital needs of a borrower whose cash flow currently may not support debt repayment. Like other commercial loans, cash flow is the primary repayment source for an asset-based loan but with stronger reliance on the company's assets as collateral and firmer control over the receipts of the collateral’s liquidation.

 Collateral typically available to secure the asset-based loan includes accounts receivable, inventory, machinery and equipment, general and specific intangibles, real estate, and other assets. Because working capital support is the primary objective of most asset-based loan facilities, accounts receivable and inventory generally are the bank's core collateral. Personal guaranties, often secured, can be taken.

Monitoring and controlling collateral is critical to the asset-based lender to mitigate repayment risk. Collateral evaluation begins with a comprehensive field examination to determine value, followed by a continuing program of periodic examinations. The collateral and loan values are monitored continuously (daily/weekly/monthly) to ensure that the realizable value of the collateral is always sufficient to repay outstandings.

Topics covered in this session

·      Characteristics of ABL borrowers

• Rapid sales growth
• Negative operating cash flow
• "Evergreen” lending

Customers’ advantages for an ABL facility vs factoring

Collateral considerations

• Receivables eligibility
• Inventory  eligibility

Credit risk mitigation

• Lock boxes
• Audits
• Borrowing base certificate

Types of facilities

• Lines of credit
• Longer-term revolving facilities

How advance rates are determined

• Frequency of funding
• Financial condition and operating performance
• Cost of funds

Who Should Attend:

• Credit Analysts
• Credit Managers
• Loan review officers
• Work-out officers
• Commercial lenders
• ABL officers and managers
• Credit Risk Managers
• Chief Credit Officers
• Senior Lenders
• Senior Lending Officer
• Bank Director
• Chief Executive Officer
• President