Asset based lender question

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by a searcher from Murdoch University
in Chicago, IL, USA

1yr ago

Asset based lender question

Im speaking with a traditional senior lender for a loan while simultaneously speaking with an asset based lender for a LOC based on the AR.

The problem I see is that the LOC lender will want to take the AR as collateral and perhaps file a UCC lien on the assets.

Will the senior lender then take a second position in the assets? Or will they deny me a loan all together because they aren't in first position?

There is more than sufficient cashflow to cover the senior loan. Serviceability isn't an issue.

Ideally the senior lender would provide the LOC as well but this isn't an option because it's not an SBA loan.

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reply by a lender 1yr ago
from Belmont Abbey College in Boca Raton, FL, USA

Typically in this scenario (if the traditional bank is willing), both companies file UCC1 on all assets and then enter into a subordination and intercreditor agreement with the AR lender taking a priority interest in the AR.

reply by a lender 1yr ago
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

If you have a senior lender willing to fund the acquisition, they should be able to provide the line of credit as well. You might not see as aggressive an advance rate as you would see with an asset based lender however. You could also request the senior lender release the A/R to support the asset based loan. We would be happy to talk a look and see if we can provide any assistance. Please let me know. You can reach me here or directly at redacted