Asset-based Lending in Synchrony Financial

Asset-based Lending (ABL) at Synchrony Financial is a flexible financing solution structured around a borrower’s collateral — most commonly receivables, inventory, machinery, equipment, and other tangible assets. Designed for businesses that require working capital or term financing but have limited access to unsecured credit, ABL provides disciplined lending based on the value and liquidity of underlying assets, enabling companies to grow, stabilize cash flow, and execute strategic initiatives.

Core Features

• Collateral-driven advances: Borrowing capacity tied to verified asset values, including accounts receivable and inventory, with advances calculated based on pools or borrowing base certificates.
• Revolving and term structures: Revolving lines of credit for ongoing working capital needs, term loans for capital expenditures or acquisitions, or hybrid facilities combining both.
• Seasonal flexibility: Accommodations for seasonal businesses with tailored borrowing base formulas and seasonal capacity adjustments.
• Focused underwriting: Asset valuation, concentration limits, and aging controls implemented to manage credit risk while aligning to business cycles.
• Collateral management: Periodic reporting, audits, and, where appropriate, field examinations or inventory observations to maintain transparency and support borrowing base calculations.

Benefits for Borrowers

• Access to capital: Convert liquid and semi-liquid assets into immediate funding without the need for higher-cost unsecured borrowing.
• Scalable financing: Lines that grow and contract with the business as receivables and inventory fluctuate, improving liquidity management.
• Preserve ownership: Financing that supports operational continuity and growth without diluting equity or changing governance structures.
• Competitive pricing: Interest rates and fee structures that reflect the collateralized nature of the facility and the borrower's risk profile.
• Operational alignment: Financing designed to match payment cycles, supplier terms, and inventory turnover, reducing cash conversion cycle pressure.

Typical Uses

Asset-based loans at Synchrony are frequently used for:

• Working capital to manage day-to-day operations and seasonal fluctuations.
• Inventory buildup for peak selling seasons or new product launches.
• Financing accounts receivable to accelerate cash collections and support growth.
• Acquisitions, roll-ups, and restructurings where asset coverage supports leverage.
• Equipment purchases and capital investments that secure term financing against the new assets.

Collateral Types and Valuation

The collateral mix determines availability and pricing. Common categories include:

• Accounts receivable: Eligible receivables are often advanced at a defined percentage after exclusions for aged, disputed, or related-party balances.
• Inventory: Advances depend on inventory type, turnover rates, resale value, and storage conditions; raw materials, WIP, and finished goods are evaluated differently.
• Equipment and machinery: Appraisals and depreciation schedules inform advance rates for tangible fixed assets.
• Intangible or mixed assets: Where applicable, hybrid approaches may include partial consideration of intellectual property or contract rights, subject to valuation and legal perfection.

Underwriting and Documentation

Underwriting centers on asset quality and the borrower’s operational controls. Key components of the credit process include:

• Detailed analysis of aging schedules, concentration risks, and customer creditworthiness.
• Verification of inventory location, ownership, and condition through inspections and third-party reports.
• Review of financial performance, cash flow, and covenant capacity to ensure sustainable operations.
• Security documentation to perfect liens on collateral, including UCC filings and control agreements where applicable.

Covenants, Reporting, and Compliance

ABL facilities typically require regular reporting to maintain transparency and protect both borrower and lender interests. Common requirements include:

• Monthly borrowing base certificates and financial statements.
• Periodic audits or field examinations of inventory and receivables.
• Affirmative and negative covenants addressing insurance, preservation of collateral, and restrictions on liens or disposition of assets.
• Event-driven reporting for material changes in business operations or financial condition.

Structure and Pricing Considerations

Pricing is influenced by collateral quality, advance rates, facility size, borrower credit profile, and market conditions. Typical elements include an interest rate spread, facility fees, commitment fees for unused capacity, and administrative fees tied to reporting and audits. Customized amortization schedules, availability blocks, and intercreditor arrangements can be structured to meet transaction-specific needs.

Who Benefits Most

Ideal candidates for asset-based lending include mid-market companies, distributors, manufacturers, and retail businesses that maintain substantial receivables and inventory relative to earnings. Firms undergoing transitional phases—such as expansion, M&A activity, or working capital stress—often leverage ABL to stabilize cash flow while pursuing strategic goals.

Why Choose Synchrony Financial ABL

Synchrony’s approach blends disciplined underwriting with operational understanding. The focus is on pragmatic facilities that align collateral management with business realities, offering predictability and flexibility. ABL solutions are structured to enable growth while maintaining strong governance and credit discipline.

Getting Started

Evaluation begins with an assessment of asset quality and borrowing needs. Initial steps typically include a review of receivables and inventory composition, historical financials, and an outline of desired facility terms. From there, a tailored proposal defines advance rates, reporting cadence, covenants, and pricing to match the borrower’s operational profile.

Conclusion

Asset-based lending at Synchrony Financial offers a practical path to liquidity for asset-rich businesses seeking flexible, collateral-driven financing. By converting inventory and receivables into working capital, companies can support growth, manage seasonality, and execute strategic initiatives while preserving financial control and ownership.

Address Bank: Stamford, Connecticut, U.S.
Bank: Synchrony Financial
Headquarters: Stamford, Connecticut
Products: Loans & Credit
Type: Asset-Based Lending