Overview

Asset-based lending is a structured credit facility where borrowing capacity is determined primarily by the value of eligible collateral rather than solely by cash flow metrics. MidFirst Bank’s approach combines industry knowledge, responsive underwriting, and proactive portfolio management to deliver lending arrangements that match each borrower’s operating dynamics and asset mix. The bank works with manufacturing, distribution, retail, service, and specialty finance businesses to design lending programs that support working capital needs, capital expenditures, and strategic initiatives.

Key Features

• Collateral-driven advance rates: Borrowing base calculations based on accounts receivable, inventory, equipment, and other eligible assets with advance rates tailored to asset quality and industry norms.
• Revolving and term structures: Flexible revolvers for ongoing working capital, combined with term loans for asset purchases or strategic investments.
• Seasonal and swing lines: Facility features that accommodate predictable seasonal peaks and valleys in working capital demand.
• Customized covenants: Financial and reporting covenants calibrated to the borrower’s business cycle and liquidity profile, focusing on transparency and early-warning indicators.
• Operational support: Optional treasury and cash management services to streamline collections, disbursements, and collateral monitoring.

Benefits

• Improved liquidity: Unlocks capital tied up in receivables, inventory, and equipment to fund daily operations and growth initiatives.
• Scalable financing: Facilities can grow with the business as eligible collateral increases, providing a financing solution that adapts to expansion.
• Shorter time to funding: A collateral-based underwriting focus often accelerates access to capital compared to pure cash-flow lending.
• Resilience in cycles: Supports businesses through cyclical demand, working capital pressure, and transitional periods like ownership changes or restructurings.
• Strategic flexibility: Can be combined with acquisition financing, equipment loans, and other credit products for a comprehensive capital plan.

Eligible Collateral

MidFirst Bank evaluates a broad range of assets when structuring an ABL facility. Typical eligible categories include:

• Accounts receivable from creditworthy customers, often subject to aging and concentration limits.
• Inventory, including raw materials, work-in-process, and finished goods, with consideration for liquidity, obsolescence risk, and valuation methodology.
• Tangible fixed assets and equipment, appraised and analyzed for marketability and useful life.
• Select other assets such as commercial real estate leasehold improvements or intellectual property in certain transactions, evaluated on a case-by-case basis.

Underwriting and Credit Structure

MidFirst Bank’s underwriting process focuses on collateral quality, collection history, customer creditworthiness, and the borrower’s operational controls. Typical considerations include:

• Detailed borrowing base schedules and periodic certifications to establish available borrowing capacity.
• Advance rates that reflect asset liquidity and concentration risk, adjusted for industry-specific characteristics.
• Prudent reserves and holdbacks to address disputed receivables, slow-moving inventory, or equipment valuation uncertainty.
• Financial covenants and performance triggers designed to provide early detection of deterioration while allowing operational flexibility.

Documentation and Reporting

Transparent and consistent reporting is central to effective ABL relationships. Borrowers typically provide:

• Periodic borrowing base certificates detailing receivables and inventory balances, aged schedules, and reserve calculations.
• Monthly financial statements and compliance certificates, as agreed in the credit documents.
• Access to customer confirmations, accounts receivable sub-ledgers, and inventory reports to facilitate collateral verification and audits.
• Electronic reporting and cash management arrangements when appropriate, to accelerate reconciliations and reduce operational friction.

Risk Management and Monitoring

Effective risk management ensures the long-term stability of the lending relationship. MidFirst Bank emphasizes ongoing monitoring and collaborative problem-solving, including:

• Regular reviews of customer credit trends and concentration exposures to mitigate collection risk.
• Inventory inspections and valuation assessments to monitor obsolescence or shrinkage.
• Proactive covenant management and dialogue to address operational shifts before they become credit issues.
• Partnership with borrowers to implement improved internal controls, accounts receivable processes, and inventory management practices when needed.

Use Cases

Asset-based lending can be valuable across a range of corporate scenarios:

• Growing distributors and manufacturers needing working capital to support increased production and inventory purchases.
• Companies undergoing ownership transitions or turnarounds that require liquidity while operations are stabilized.
• Businesses pursuing acquisitions that need bridge financing linked to collateral and integration timelines.
• Seasonal retailers and suppliers that require higher borrowing capacity during peak seasons with repayment during slower periods.

Application Process

The application process is structured to be efficient and collaborative:

1. Initial consultation to understand the business, collateral profile, and financing objectives.
2. Submission of financial statements, accounts receivable and inventory schedules, and other customary due diligence materials.
3. Underwriting and site visits or audits as required to validate collateral and operations.
4. Negotiation of facility terms, covenants, and documentation, followed by closing and funding.
5. Ongoing account management with periodic reporting and reviews to ensure the facility continues to meet business needs.

Why Choose MidFirst Bank for ABL

MidFirst Bank combines regional banking responsiveness with the capabilities required to support middle-market and growth-oriented companies. Borrowers benefit from experienced credit teams, flexible structuring, and a focus on building long-term relationships. The bank aims to partner with clients to deliver financing solutions that address immediate liquidity needs while enabling strategic growth.