Asset-based Lending in First Citizens BancShares

Asset-based lending (ABL) at First Citizens BancShares is a tailored financing solution designed to provide flexible working capital and term borrowing secured primarily by a borrower’s assets. This product is structured to support middle-market companies, rapidly growing enterprises, and businesses undergoing transition, turnaround, or acquisition activity. By focusing on collateral value rather than solely on cash-flow coverage, asset-based lending enables companies with significant tangible assets—such as accounts receivable, inventory, machinery, equipment, and real estate—to access funding that scales with their operating needs.

Core Features

• Collateral-centric lending: Borrowing capacity is anchored to eligible collateral categories with advance rates that reflect asset liquidity and industry characteristics.
• Flexible structures: Revolving facilities, seasonal lines, letters of credit, term loans, and combination structures are available to match cash flow and capital expenditure requirements.
• Customized advance rates: Advance percentages are determined by collateral mix, historical performance, and risk profile, allowing tailored borrowing base calculations.
• Interim and acquisition financing: Short-term financing for acquisitions, inventory build-ups, or restructuring is supported by real-time collateral valuation.
• Integrated treasury services: Cash management and collection controls can be aligned with the ABL facility to optimize cash flow and collateral realization.

Types of Collateral

The ABL product accepts a broad range of assets as collateral, with each category subject to eligibility and concentration limits:

• Accounts receivable: Domestic and select international receivables, often with concentration and aging criteria, can provide a primary source of borrowing capacity.
• Inventory: Raw materials, work-in-process, and finished goods are evaluated based on turnover, storage, and marketability.
• Equipment and machinery: Commercial equipment with identifiable value may be financed on a collateral-per-asset basis.
• Real estate: Owner-occupied or investment real estate can augment borrowing capacity where appropriate.
• Other assets: Intellectual property, contract rights, and certain subsidiary assets may be considered subject to valuation and enforceability assessments.

Structure and Terms

ABL facilities are structured to match operating cycles and business objectives. Typical components include a revolving borrowing base that adjusts to eligible collateral levels, a term loan for capital expenditures or acquisitions, and ancillary products such as letters of credit or swingline loans. Pricing is generally tied to a credit spread over a base rate and may include facility fees, commitment fees, and customary transaction expenses. Collateral advance rates and facility size are subject to periodic re-evaluation through reporting and audits.

Underwriting and Covenants

Underwriting emphasizes collateral quality, documentation, and the borrower’s operational controls. Eligibility criteria often include receivable aging, debtor concentration limits, inventory turnover evidence, and insurance coverage. Covenants are designed to protect collateral value and may include reporting requirements (daily or weekly cash reports, monthly borrowing base certificates), liquidity covenants, minimum net worth tests, fixed charge coverage, and restrictions on liens or additional indebtedness. The covenant package balances lender protection with operational flexibility for the borrower.

Benefits for Borrowers

• Access to capital linked to assets: Companies with substantial asset bases can draw financing proportional to their collateral, often enabling larger facilities than unsecured options.
• Working capital optimization: Revolving structures provide day-to-day liquidity for seasonal demand, growth initiatives, or inventory cycles.
• Speed and predictability: With an established borrowing base and periodic reporting, borrowers can predict availability and reduce the need for frequent credit renewals.
• Support for transition scenarios: ABL is frequently used in acquisitions, recapitalizations, and restructuring cases where cash flow history may be uneven but asset value is substantial.
• Operational alignment: Coupling ABL with treasury services and collection controls can improve receivables management and cash conversion cycles.

Risk Management and Monitoring

Ongoing monitoring is central to ABL. Borrowers provide regular collateral reporting, and periodic audits or field examinations validate asset values and compliance. Risk management practices include concentration limits on single obligors, inventory tagging or control agreements, UCC filings, and insurance requirements. These measures reduce recovery uncertainty and help maintain transparent lender-borrower communication. In addition, contingency planning for potential collateral shortfalls is integrated into facility terms to preserve liquidity and operational continuity.

Use Cases

Asset-based lending is appropriate for a wide range of scenarios:

• Companies experiencing rapid growth that need working capital to fund receivables and inventory expansion.
• Businesses undergoing industry consolidation that require acquisition financing with collateral support.
• Seasonal businesses that need temporary increases in liquidity during peak selling periods.
• Organizations in turnaround or restructuring phases with strong asset coverage but inconsistent cash flow.
• Manufacturing and distribution firms that can leverage inventory and equipment to secure capital.

Why Choose an ABL Facility with First Citizens BancShares

The asset-based lending offering at First Citizens BancShares emphasizes individualized underwriting, operational alignment, and scalability. Facilities are designed to reflect the borrower’s industry dynamics and collateral composition, with a focus on transparent reporting and pragmatic covenant structures. The objective is to provide a financing solution that enables operational flexibility, supports strategic initiatives, and maintains discipline around collateral protection and credit risk mitigation.

Getting Started

Prospective borrowers typically begin with a confidential evaluation of collateral, historical performance, and financing needs. The preliminary assessment considers eligible asset types, anticipated advance rates, and potential facility sizing. From there, a tailored proposal outlines the structure, documentation expectations, reporting cadence, and pricing. The realization of an ABL facility involves coordinated legal, operational, and financial due diligence to ensure the facility aligns with business objectives and risk management standards.

Asset-based lending within First Citizens BancShares is a versatile tool for businesses seeking asset-backed liquidity, structured credit solutions, and the flexibility to grow while preserving cash flow stability. When designed and executed effectively, an ABL facility can be an integral component of a company’s capital structure and operational strategy.

Address Bank: Raleigh, North Carolina, U.S.
Bank: First Citizens BancShares
Headquarters: Raleigh
Products: Loans & Credit
Type: Asset-Based Lending