Credit Lines

We offer ABL and A/R lines of credit. ABL is a specialized loan product that provides fully collateralized cred it facilities to borrowers that may have high leverage, erratic earnings, or marginal cash flows.

These loans are based on the assets pledged as collateral and are structured to provide a flexible source of working capital by monetizing assets on the balance sheet. While troubled companies often rely on ABL to provide turnaround, recapitalization, and debtor-in-possession (DIP) financing, ABL is also used by healthy companies seeking greater flexibility in executing operating plans without tripping restrictive financial covenants.

The primary source of repayment for revolving ABL facilities is the conversion of the collateral to cash over the company's business cycle. Loan advances are limited to a percentage of eligible collateral (the "borrowing base"). Strong controls and close monitoring are essential features of ABL. ABL lenders may also provide term financing for borrowers requiring longer-term capital or funding needs.

National banks may engage in ABL with no aggregate limitations, provided the volume and nature of the lending do not pose unwarranted risk to the bank's financial condition. Certain limitations apply to FSAs as set forth in 12 USC 1464(c)(2) and 12 CFR 160.30. ABL loans typically would be classified as commercial loans, which cannot exceed 20 percent of total assets provided the amounts in excess of 10 percent of total assets are used only for small business loans as defined in 12 CFR 160.3, "Lending and Investment - Definitions."1 An FSA, however, might engage in ABL under other authority, depending on the circumstances.2 For example, to the extent an ABL loan is secured by nonresidential real property, an FSA may make the loan under its nonresidential real property loan authority.