Asset based lender question

searcher profile

August 09, 2024

by a searcher in Chicago, IL, USA

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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commentor profile
Reply by a searcher
from Queens University in Toronto, ON, Canada
Happy to chime in. Senior lenders are, well, senior lenders. They'll want first rank but will be open to specific carve-outs for other lenders. You're solution to this based off the information you provided is to would with a senior lender on a term loan like find a private credit ABL for doing the working capital. Depending on the private credit ABL, they may want to also share the senior position, but they could work an intercreditor arrangement with the senior lender to be 2nd on all none working capital assets.
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Reply by a lender
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
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