Asset-based Lending at TD Bank, N.A.

Asset-based lending (ABL) from TD Bank, N.A. is a flexible financing solution designed to provide companies with working capital, growth funding, acquisition support, and balance sheet restructuring by leveraging a borrower’s tangible assets as collateral. This product is tailored for businesses that require reliable liquidity and predictable access to capital while managing seasonality, inventory build, or rapid growth cycles. The structure centers on a borrowing base comprised of eligible accounts receivable, inventory, and in some instances equipment, real estate, or other tangible assets.

Core Features

• Borrowing Base Financing: Advances are calculated as a percentage of eligible assets — principally receivables and inventory — with regular re-calculation to reflect current asset balances.
• Revolver and Term Structures: ABL facilities can be structured as revolvers for ongoing working capital needs or combined with term loans for specific capital projects or acquisitions.
• Advance Rates and Reserves: Advance rates vary by asset type and quality and may include reserves for concentrated receivables, slow-moving inventory, or other exposure items.
• Flexible Collateral Options: Eligible collateral typically includes accounts receivable, inventory, machinery and equipment, real estate, and certain contract proceeds.
• Customized Covenants and Reporting: Covenants and reporting requirements are tailored to the borrower’s operating model and may include borrowing base certificates, accounts receivable aging reports, inventory details, and periodic financial statements.
• Senior Secured Position: ABL facilities are structured as secured credit with documented lien priority, often supported by UCC-1 filings and, when applicable, real property mortgages.

Benefits for Borrowers

• Predictable Liquidity: Access to a borrowing base tied to current assets provides a clear mechanism for generating working capital aligned with business activity.
• Growth Enablement: Companies can support expansion, seasonal inventory build, and acquisitions without diluting ownership or altering long-term capital structure.
• Operational Flexibility: Revolving availability can be used for payroll, supplier payments, financing receivable conversion, and other day-to-day needs.
• Responsive to Business Cycles: Because availability is periodically recalculated, the facility adjusts to changing asset levels during peak and off-peak periods.
• Relationship-Based Service: Structured lending is supported by experienced underwriting, monitoring, and servicing teams offering responsive credit decisions and portfolio oversight.

Typical Use Cases

Asset-based lending is often the right choice for middle-market and larger enterprises in sectors such as manufacturing, distribution, wholesale trade, retail, business services, healthcare supply, and construction. Typical scenarios include:

• Managing seasonal upswing in inventory and receivable terms.
• Financing growth initiatives or acquisition-related working capital needs.
• Refinancing higher-cost capital or providing bridge financing in a turnaround plan.
• Facilitating supply chain extensions where suppliers require prompt payment terms.
• Providing capital to support rapid invoice conversion cycles or accelerated expansion into new markets.

Underwriting & Credit Considerations

Underwriting for an asset-based facility focuses on the quality and collectability of collateral, historical cash conversion cycles, concentration risk, and the stability of customer relationships. Key elements of the credit assessment typically include:

• Analysis of accounts receivable aging and customer creditworthiness.
• Inventory valuation, turnover analysis, and identification of slow-moving or obsolete stock.
• Verification of ownership, lien searches, and appraisal or field audit of collateral where appropriate.
• Review of historical and projected financial statements to assess coverage and liquidity trends.
• Discussion of industry dynamics, supplier concentration, and customer dependence.

Documentation & Ongoing Monitoring

Documentation for an asset-based credit facility typically includes a credit agreement, security agreement(s), UCC filings, and ancillary documents such as account control agreements, real estate mortgages, and intercreditor arrangements when necessary. Once the facility is in place, ongoing monitoring ensures the borrowing base is accurately reported and that the collateral remains viable. Common monitoring actions include periodic borrowing base certificates, field exams, inventory appraisals, and routine financial covenant testing.

Pricing & Structure Considerations

Pricing reflects the structure of the facility, collateral composition, borrower credit profile, and market conditions. Components may include a commitment fee, utilization-based interest pricing, and customary agency or administrative fees. Advance rates are calibrated to the quality of receivables and inventory, with specific haircuts applied to reflect concentration or risk of non-collection. Facilities can include sublimits for swingline loans, letters of credit, and fixed-term capital components.

Implementation Process

1. Initial Consultation: Review of business needs, recent financials, and a preliminary assessment of eligible collateral.
2. Due Diligence: Detailed analysis of receivable aging, inventory, legal title, and operational practices.
3. Term Structuring: Agreement on advance rates, covenants, reporting cadence, and facility size.
4. Documentation: Preparation and execution of loan and security documents, filings, and account control arrangements.
5. Funding & Onboarding: Facility activation, initial borrowing base calculation, and integration of reporting procedures.
6. Ongoing Relationship Management: Regular reviews, availability adjustments, and proactive support as business needs evolve.

Who Should Consider Asset-Based Lending?

ABL is well suited to companies that have substantial tangible assets but may not qualify for traditional cash-flow lending at the desired size or terms. Ideal candidates include businesses with strong receivable collections, inventory that can be monetized efficiently, or capital structures that benefit from a secured, asset-driven facility. Companies experiencing rapid growth, seasonal variability, or undergoing strategic transactions may find ABL a practical and effective financing tool.

Final Considerations

Asset-based lending at TD Bank, N.A. provides a pragmatic source of capital that aligns borrowing capacity with the underlying asset base of the business. The product is designed to be adaptable to a range of industries and operating models, combining rigorous underwriting with flexible structuring to meet operational and strategic objectives. Prospective borrowers can expect a collaborative underwriting process, tailored documentation, and ongoing support intended to preserve liquidity and enable business continuity and growth.