Overview

Asset-based lending is a form of secured financing that uses a borrower's eligible assets as collateral. At Prosperity Bancshares, our ABL facility is built to accommodate a wide range of asset classes, including accounts receivable, inventory, equipment, and eligible real estate. The facility size is determined by the value and quality of the collateral, industry dynamics, and the borrower’s operational profile. Our objective is to convert company assets into dependable liquidity with transparent advance rates and comprehensive servicing.

Key Features

• Customized Advance Rates: Advance rates are applied to eligible collateral categories and tailored to the borrower’s industry and risk profile.
• Revolving and Term Options: Facilities can be structured as revolving credit lines, delayed-draw term loans, or a combination to meet working capital and capital expenditure needs.
• Flexible Collateral Mix: Support for accounts receivable, inventory, machinery and equipment, and certain real estate, subject to appraisal and eligibility criteria.
• Seasonal and Growth Capacity: Seasonal borrowing bases and growth capital accommodations help businesses manage cyclical cash flow and expansion.
• Structured Reporting: Borrowers receive clear reporting requirements, with online or periodic reporting options for greater transparency and control.
• Integrated Treasury Services: Optional cash management and payment services to streamline collections and borrowing base administration.

Benefits to Businesses

Asset-based lending at Prosperity Bancshares delivers several strategic advantages:

• Improved Liquidity: Unlock working capital tied up in receivables and inventory, providing funds for daily operations and growth initiatives.
• Predictability: Borrowing base mechanics establish clear borrowing capacity and reduce uncertainty about available funds.
• Scalability: Facilities expand or contract with the business, offering financing that grows with sales and assets.
• Competitive Pricing: Pricing is set to reflect collateral quality and borrower credit, combining competitiveness with transparency.
• Operational Partnership: Dedicated relationship teams collaborate with management to optimize working capital and support business goals.

Eligibility and Typical Borrower Profile

Asset-based lending is most appropriate for companies that have tangible assets and require a financing solution tied to those assets. Typical borrowers include:

• Wholesale distributors and manufacturers with substantial inventory and receivables.
• Service providers with strong receivables and recurring billing.
• Seasonal businesses that need working capital during peak periods.
• Companies undergoing growth, turnaround, or ownership transitions that need flexible liquidity.

Eligibility is assessed based on collateral quality, financial performance, industry risk, and management strength.

Underwriting and Documentation

Prosperity Bancshares applies a rigorous but efficient underwriting process that balances speed with thorough risk assessment. The process typically includes:

• Review of historical and projected financial statements.
• Analysis of accounts receivable aging, concentrations, and customer credit quality.
• Inventory valuation, turnover analysis, and eligibility testing.
• Appraisals and UCC searches for equipment and real property as needed.
• Assessment of legal and regulatory considerations relevant to the borrower’s operations.

Documentation is structured to define advance rates, borrowing base calculations, reporting cadence, and covenants. Collateral perfection and control agreements ensure the bank’s security interest is enforceable and clear.

Pricing and Fees

Pricing is competitive and reflective of the borrower’s credit profile, collateral mix, and market conditions. The cost of the facility may include interest on outstanding balances, facility fees, commitment or utilization charges, and customary administrative fees. Fee structures can be negotiated to align with a company’s cash flow cycles and usage patterns.

Covenants and Monitoring

To maintain credit discipline and early-warning indicators, ABL facilities commonly include covenants and monitoring tools such as:

• Reporting covenants: monthly or weekly borrowing base certificates, aged receivable and inventory reports, and periodic financial statements.
• Affirmative covenants: requirements to maintain insurance, preserve assets, and comply with laws.
• Negative covenants: restrictions on additional liens, material asset sales, or changes in ownership without consent.
• Periodic audits and field examinations to verify collateral and control processes.

These measures protect both the borrower’s long-term viability and the lender’s collateral position while enabling transparent communication about performance.

Industries We Serve

Prosperity Bancshares has experience tailoring ABL structures for a variety of sectors, including:

• Distribution and wholesale trade
• Manufacturing and industrial supply
• Consumer goods and retail supply chains
• Business services and professional firms
• Construction supply and subcontractors

Our team adapts collateral definitions and advance rates to reflect industry dynamics and product lifecycles.

How the Process Works

1. Initial Consultation: Understand the borrower’s needs, asset mix, and cash flow requirements.
2. Due Diligence: Collect and analyze financials, collateral schedules, and operational data.
3. Facility Structuring: Define advance rates, covenants, pricing, and reporting protocols.
4. Documentation and Closing: Execute agreements, perfect security interests, and finalize operational setups.
5. Ongoing Service: Monitor the borrowing base, provide treasury support, and partner on working capital strategies.

Why Choose Prosperity Bancshares

Our approach combines local decision-making, experienced credit specialists, and flexible product design. We emphasize transparent terms, collaborative underwriting, and practical servicing to help companies convert assets into reliable liquidity. Prosperity Bancshares strives to be a long-term financial partner, offering solutions that align with growth objectives, operational realities, and risk management priorities.