Closing an Asset-Based Facility or Factoring Line: A Practical Guide

Document type: Guide Practice area: Finance — Commercial Lending Jurisdiction: United States Last reviewed: 5 September 2026

Stage 1 — The term sheet, and what it does not say

An asset-based term sheet states the commitment, the pricing, the advance rates, and the tenor. It does not state availability, and the gap between the commitment and actual availability is routinely thirty percent.

Questions to ask before signing the term sheet:

• What eligibility criteria will apply? Ask for the lender's standard exclusions in writing.
• Is the inventory advance rate against cost or net orderly liquidation value, or the lesser of both? If NOLV, what percentage is assumed pending appraisal?
• What reserves does the lender anticipate, and on what standard may it establish more?
• What are the concentration and cross-aging thresholds?
• Will there be a springing financial covenant, and at what availability trigger?
• Full or springing dominion?
• How many field exams and appraisals per year, and at whose cost?
• What third-party documents are conditions to closing — control agreements, landlord waivers, bailee letters — and for which locations?

Then model availability using the borrower's actual aging, inventory report, and locations. Do this before signing, because a term sheet that implies $50 million of liquidity and delivers $35 million has changed the transaction the board approved.

Stage 2 — Field examination and appraisal

These run in parallel with documentation and drive the economics.

The field examination

Two to five days on site, conducted by the lender's examiners or an outside firm.

What they test:

• Accounts receivable aging accuracy — sampling invoices, confirming shipment, tracing to the ledger
• Dilution — credits, returns, discounts, and write-offs as a percentage of sales, typically over twelve months
• Concentration — the customer profile and the largest exposures
• Contra relationships — customers who are also suppliers
• Ineligibility categories — how much of the ledger falls out and why
• Systems reliability — can the borrower produce the reports the facility requires?
• Inventory records — perpetual system accuracy, cycle counts, location detail
• Payables and accruals — for reserve sizing
• Payroll and tax — for reserve sizing

How the borrower should prepare. Produce the aging, inventory report, and reconciliations before the examiners arrive. Identify the contra relationships yourself. Have the person who owns the reports available. An exam that finds the borrower cannot readily produce its own data produces reserves, regardless of the underlying collateral quality.

The appraisal

An independent appraiser values inventory at net orderly liquidation value — what it would realize in an orderly disposition over a defined period, net of costs. Machinery and equipment and real estate are appraised separately if included.

What drives NOLV: the breadth of the resale market, brand and specification, obsolescence, condition, location, and disposal costs. Commodity products in demand appraise well; custom, branded, or slow-moving inventory does not.

The borrower's opportunity. Provide the appraiser with sales data by SKU, turn rates, and evidence of secondary market pricing. Appraisers work from limited information and are conservative in its absence. A well-supported appraisal is worth more availability than any negotiation on the advance rate.

Stage 3 — Negotiating the borrowing base

This is where counsel earns the fee.

Eligibility criteria — the negotiable items:

Reserves — the four protections to insist on:

1. A standard: "in the exercise of its reasonable credit judgment," or "commercially reasonable."
2. Notice: three to five business days before a new or increased reserve takes effect.
3. No double-counting: no reserve for an item already excluded by the eligibility criteria.
4. A change requirement: reserves reflect changed circumstances, not a reassessment of facts known and diligenced at closing.

The inventory advance rate mechanic. If the facility says "the lesser of 65% of cost and 85% of NOLV," and NOLV is 48% of cost, the effective rate is 40.8% of cost — the NOLV branch binds. Negotiate either a single measure or a higher NOLV percentage, and know which branch will control before agreeing to the formula.

The springing covenant trigger. Model the borrower's seasonal low point. A trigger at "the greater of $5 million and 12.5% of the commitment" will spring every year in a seasonal business. Set it against the actual trough, with margin.

Stage 4 — Documentation

The core documents:

• Credit agreement, with the borrowing base definitions
• Security agreement (often within the credit agreement)
• Guarantees from each subsidiary, with a security agreement from each
• Pledge agreements for equity of subsidiaries
• Mortgages, if real estate is included
• Intellectual property security agreements, in recordable form
• Fee letter

The third-party documents, which drive the timetable:

• Deposit account control agreements, for every account. Start these first. Banks use their own forms, take two to four weeks, and negotiate slowly. Determine whether the bank will agree to springing control.
• Landlord waivers, for every leased location holding inventory. Landlords have no incentive to sign quickly and often demand consideration. Six weeks is typical.
• Bailee letters, for inventory at third-party warehouses, processors, and consignees.
• Intercreditor agreement, if there is a term lender.
• Payoff letters and lien releases, for every existing secured creditor.
• Insurance certificates with lender loss payee and additional insured endorsements.

The practical sequencing point: control agreements, landlord waivers, and bailee letters are the long poles. Send them in week one, not when the credit agreement is in final form. Facilities close late because a warehouse operator in another state has not returned a letter.

Stage 5 — Perfection

Complete before funding.

• UCC-1 financing statements filed in the state of organization for each loan party, with the debtor's name exactly as it appears on the public organic record
• Lien searches — UCC, tax, and judgment — in every relevant jurisdiction, with results reviewed and every prior filing either released or subordinated
• Deposit account control agreements executed
• Securities account control agreements, if applicable
• IP security agreements recorded with the Patent and Trademark Office and the Copyright Office
• Certificates of title noted for vehicles and titled equipment
• Mortgages recorded, with title insurance
• Possession taken of instruments and certificated securities
• Post-closing searches run to confirm the filings appear of record

The step most often missed is deposit account control. A financing statement does not perfect a deposit account, and the collections are the collateral.

Stage 6 — The intercreditor negotiation

Where a term lender shares the collateral, the intercreditor agreement allocates it.

The standard split:

• ABL Priority Collateral: accounts, inventory, deposit accounts, related general intangibles, and proceeds — first lien to the asset-based lender, second to the term lender.
• Term Priority Collateral: real estate, equipment, intellectual property, equity of subsidiaries, and proceeds — first lien to the term lender, second to the asset-based lender.

The provisions that matter:

• Standstill: how long the second lien holder must wait before enforcing against the other's priority collateral (typically 90–180 days)
• Access rights: the asset-based lender's right to enter the term lender's real property and use its equipment and IP to liquidate inventory, for a defined period — essential, and frequently under-negotiated
• Purchase option: each lender's right to buy out the other at par on a trigger
• Application of proceeds, including proceeds of mixed collateral
• Bankruptcy provisions: consent to debtor-in-possession financing and cash collateral use by the priority lender, agreement not to object to specified relief, and treatment of adequate protection
• Amendments: what each may agree with the borrower without the other's consent, particularly increases in the commitment

The access rights provision deserves emphasis. Inventory is worth far less if it cannot be sold from the premises where it sits, using the equipment and brands needed to sell it. An asset-based lender without adequate access rights has priority over collateral it cannot realize.

Stage 7 — Factoring: the alternative structure

Where the borrower is too small or too distressed for a bank facility, factoring may be the answer, and the closing is different.

The documents:

• Factoring agreement, specifying whether purchases are with or without recourse, the advance rate, the reserve, the discount and fees, and the repurchase triggers
• Schedule of accounts, delivered periodically as invoices are sold
• Notification letters to account debtors, if notification factoring
• UCC-1 filing — required for a sale of accounts as well as for a security interest
• Validity guaranty from the principals, covering fraud and the accuracy of invoices rather than credit losses
• Intercreditor or subordination with any existing lender

Structuring for true sale, where it matters:

• No recourse for credit losses; recourse limited to breach of representations about the receivable's existence, validity, and freedom from dispute
• Pricing reflecting transferred risk, with the buyer keeping the upside
• No surplus remittance obligation and no deficiency right
• Buyer control of collection and credit decisions, with the seller servicing as agent under a terminable arrangement
• A true sale opinion, and for a securitization a non-consolidation opinion
• A backup grant of a security interest and a precautionary filing — always

Diligence the factor performs. On the account debtors, not the seller: their credit, their payment history, their disputes. Plus verification of the seller's invoices directly with debtors, and confirmation that the receivables are not already assigned.

Stage 8 — First funding and the first ninety days

At closing:

• Confirm every perfection step is complete and searches confirm it
• Deliver the initial borrowing base certificate, prepared from actual data and reviewed by counsel against the criteria
• Confirm availability and the funding amount
• Fund existing debt payoffs simultaneously with the release of prior liens

In the first ninety days, where facilities go wrong:

• Name the person who owns the borrowing base. By name, at closing.
• Give them a written procedure with the eligibility criteria translated into their reporting language, with worked examples.
• Run a practice certificate before the first one is due.
• Walk the criteria together — finance and counsel — so the preparer understands what a contra account is and why cross-aging matters.
• Complete the post-closing items on the schedule: outstanding landlord waivers, remaining control agreements, title notations. These are conditions to eligibility, and until they are done, availability is lower than modeled.
• Calendar the reporting obligations and the field exam and appraisal cycle.
• Reconcile the first three certificates against the general ledger and investigate every variance.

Why the first ninety days matter disproportionately. The lender is forming a view about whether the borrower's reporting is reliable. A borrower that delivers accurate certificates on time for three months is treated differently, permanently, from one that does not — in reserve decisions, in exam frequency, and in how the lender responds to the first real problem.

Administering the facility after closing

An asset-based facility is a relationship that requires attention every month, and the borrower's counsel has a continuing role that cash flow facilities do not generate.

The monthly cycle.

1. Finance produces the aging, the inventory report, and the reconciliations
2. Ineligibility determinations applied per the criteria
3. Borrowing base certificate prepared and reviewed
4. Certificate delivered by the contractual deadline
5. Lender confirms availability
6. Variances investigated and explained proactively

What counsel should watch.

Certificate accuracy. The certificate is a representation by an officer. Counsel should review the first several, and should review any certificate prepared during a period of stress — which is exactly when eligibility judgments become optimistic.

Reserve notices. When a reserve notice arrives, check it against the negotiated protections: was notice given, is the standard satisfied, does it double-count an existing exclusion, and does it reflect changed circumstances? Reserves imposed without the negotiated procedure should be challenged promptly, because acquiescence establishes a pattern.

Field exam findings. The report drives reserve and eligibility decisions. Ask for it, read it, and respond to findings the borrower disputes in writing before they become permanent adjustments.

Availability trend. Track availability against the springing covenant trigger. A borrower approaching the trigger has weeks, not days, to act, and the actions available — accelerating collections, deferring purchases, obtaining a landlord waiver that releases a reserve, arranging credit insurance on foreign accounts — take time.

Post-closing conditions. The schedule of items due within 30, 60, or 90 days. These lapse into defaults quietly.

Amendments and waivers. Asset-based facilities are amended frequently — for acquisitions, for new locations, for changes in the customer base, for eligibility adjustments. Build the relationship so that these are conversations rather than negotiations. Lenders in this market are transactional and pragmatic, and a borrower with a clean reporting record gets accommodations that one without does not.

The over-advance. Where availability is temporarily insufficient, lenders will sometimes permit a formula over-advance — lending above the borrowing base for a defined period and amount, usually at a premium. Negotiating an over-advance line at closing, even a small one, is cheaper than negotiating one during a crisis, and it buys the exact flexibility asset-based facilities otherwise lack.

A worked sequence: the Nakagawa closing

The borrower. Nakagawa Components, a $180 million distributor, refinancing from a maturing cash flow facility into a $40 million asset-based revolver, with a $12 million term loan from a separate lender secured by equipment and real estate.

Week 1. Term sheet signed. Counsel immediately: requests the lender's standard eligibility criteria in writing; sends control agreement forms to Nakagawa's three banks; sends landlord waiver requests to five landlords; and orders lien searches in four states.

Week 2. Availability modeled from Nakagawa's actual aging. The model shows $27 million against a $40 million commitment, driven by a 22% customer concentration and $6 million of foreign accounts. Counsel raises both immediately rather than at documentation.

Weeks 3–4. Field exam and appraisal. Exam finds dilution of 4.1% — below baseline, so no advance rate reduction, which is good news counsel should confirm is reflected. Appraisal returns NOLV at 55% of cost.

Week 4. The two negotiated wins: the lender agrees a 25% concentration limit for the named investment-grade customer, adding $2.6 million of eligibility; and Nakagawa arranges credit insurance on the foreign accounts, making $6 million eligible. Availability model rises to $34 million.

Weeks 5–6. Documentation, in parallel with the third-party chase. Two of three control agreements are back. One landlord — a private owner in a state where the lease predates the current ownership — has not responded. Counsel proposes a rent reserve for that location as a post-closing item with a 60-day cure, rather than delaying the closing.

Week 6. Intercreditor negotiation with the term lender. The contested point is access rights: how long the asset-based lender may occupy the real property to liquidate inventory. The term lender proposes 90 days; the asset-based lender wants 180. They settle at 120 days plus a rent payment obligation, which is the market answer.

Week 7. Perfection completed. Searches confirm the filings. IP security agreements recorded. Payoff letters exchanged.

Week 8, closing. Initial borrowing base certificate delivered: availability $33.4 million, funding $28 million to retire the prior facility. The missing landlord waiver produces a $410,000 rent reserve.

Week 9. Counsel and Nakagawa's controller spend two hours walking the eligibility criteria line by line, and the controller produces a practice certificate. It contains two errors — a contra account not excluded, and inventory at a third-party processor treated as eligible without a bailee letter. Both are corrected before the first real certificate, which is exactly the point of the exercise.

Week 14. The last landlord signs. The reserve comes off.

What made this closing work. The third-party documents went out in week one. Availability was modeled before the term sheet was signed and the two problems were raised immediately. And someone sat down with the person who would actually prepare the certificates.

When things go wrong

Asset-based facilities deteriorate in a characteristic sequence, and recognizing where you are in it determines what is still possible.

Stage one: availability tightens. A large customer slows, or inventory builds, or a reserve is imposed. This is the stage at which action works. Options: accelerate collections; complete the outstanding landlord waivers and bailee letters; obtain credit insurance to make foreign accounts eligible; challenge a reserve that does not meet the negotiated standard; negotiate a higher concentration limit for a strong customer; reduce dilution by tightening credits and returns; sell slow-moving inventory even at a loss, since ineligible inventory generates no availability at all.

Stage two: the covenant springs. Availability falls below the trigger and the fixed charge coverage test applies. Compute it immediately and, if it will fail, approach the lender before the certificate is due. Lenders respond very differently to a borrower who brings a problem early than to one who delivers a failing certificate on the deadline.

Stage three: an over-advance. The lender permits borrowing above the base, for a period, at a premium and usually with conditions — a consultant, a milestone plan, additional reporting, a guarantee. Accept the consultant. Resisting it consumes the goodwill that produced the over-advance.

Stage four: forbearance. A written agreement in which the lender agrees not to enforce for a period, in exchange for acknowledgments of the debt and the defaults, releases, additional reporting, a milestone schedule, and often additional collateral or fees. Read the acknowledgment and release provisions carefully; they are the price and they are permanent.

Stage five: enforcement or a filing. The asset-based lender's position — a monitored, perfected lien on liquid collateral with cash dominion — makes it the dominant creditor. It will typically become the debtor-in-possession lender because nobody else can, and it will negotiate a roll-up. For the borrower, the practical question at this stage is whether there is an enterprise worth preserving, and the honest answer determines whether to seek a going-concern sale, an orderly wind-down, or a reorganization.

The advice that matters at every stage. Availability is measured in days, not quarters. Model it forward at least thirteen weeks, weekly, and update the model every week once it tightens. Borrowers who discover a liquidity problem when the certificate is due have lost the options that existed a month earlier.

Third-party documents: getting them signed

The control agreements, landlord waivers, and bailee letters determine the closing date, and each has its own dynamics.

Deposit account control agreements

Who signs: the depositary bank, which has no economic interest and considerable operational caution.

What they negotiate: the bank's fee; its right to charge back returned items and to exercise setoff for its own fees; the notice period before it must follow the lender's instructions; its liability standard and indemnity; and whether the arrangement is "springing" — the bank follows the borrower's instructions until the lender delivers a notice of exclusive control.

How to move faster: use the bank's form rather than the lender's, if the lender will accept it. Identify the bank's treasury management contact, not the relationship banker. Send it in week one. And accept the bank's standard fee and indemnity language, which is not worth negotiating.

The common failure: discovering at closing that an operating account at a fourth bank, holding a small balance, was never identified. Inventory every account from the borrower's bank statements, not from its memory.

Landlord waivers

Who signs: the landlord, which has a statutory or contractual lien on the tenant's property and no reason to give it up.

What they want: payment of any arrears; sometimes a fee; a limit on how long the lender may occupy after a default; an obligation to pay rent during that period; and restoration obligations.

How to move faster: send in week one with a cover letter explaining that no rent is at risk. Offer to pay the landlord's reasonable legal fees, which is cheap and effective. Identify the actual decision-maker — for institutional landlords, asset management; for private owners, the owner.

When it will not happen: some landlords simply do not sign. Plan for a rent reserve at those locations, quantify it, and treat it as a cost rather than a closing obstacle. A reserve of two to six months' rent per unwaived location is the usual formulation.

Bailee letters

Who signs: third-party warehouses, processors, and consignees holding the borrower's inventory.

What they acknowledge: that they hold the goods for the lender's account, that they have no lien or that they subordinate it, that they will not release goods contrary to the lender's instructions after notice, and that they will permit access.

The complication: warehousemen and processors have statutory liens for their charges, and they will not subordinate them entirely. The usual compromise is subordination except for accrued charges, with a cap.

The practical point: inventory at an unwaived third-party location is ineligible. For a borrower with a distributed footprint, this can be a large fraction of the base, and it should be modeled before the term sheet is signed.

Diligence: what to examine and why

The lender's diligence is collateral diligence, and borrower's counsel should run the same review first, because everything found late is a reserve.

The customer base. Obtain a full accounts receivable aging by customer and analyze: the concentration profile against the proposed limit; the payment behavior of the largest customers; any customer in financial distress; and any contra relationship. Identify the contra relationships yourself — the field exam will find them, and finding them first allows the borrower to explain them.

The underlying contracts. Terms of sale, return and credit policies, warranty obligations, rebate and volume-discount programs, consignment arrangements, and any bill-and-hold practice. Each of these is a dilution driver or an eligibility exclusion. Companies frequently do not know what their own standard terms say.

Anti-assignment and setoff provisions in major customer contracts, and any requirement of customer consent to an assignment. Article 9 overrides most restrictions on assigning accounts, but a customer contract requiring notice or containing a broad setoff right affects value.

Government contracts, and whether the assignment of claims procedures have been or can be followed.

The inventory. Location by location, including third-party sites. Ownership — consigned inventory is not the borrower's. Branding and licensing restrictions that would prevent a lender from selling goods bearing a licensor's mark. Obsolescence and turns by category.

Locations and leases. Every location holding collateral, with the landlord's identity and the lease's terms regarding landlord liens and access.

Liens. UCC, tax, and judgment searches in every jurisdiction of organization and operation. Purchase money security interests in inventory and equipment — these prime, and they are common in equipment-heavy businesses.

Corporate. Exact legal names as shown on the public organic record for each loan party, jurisdictions of organization, good standing, and the ownership chart.

Insurance. Property coverage adequate to the inventory value, business interruption, and the ability to add lender endorsements.

Systems. Can the borrower produce, monthly, an aging that ties to the ledger and an inventory report by location and category? If the answer is no, that is the finding that costs the most, because unreliable reporting produces reserves that no negotiation removes.

An eight-week timetable

The two entries that determine whether the timetable holds are week one's third-party document dispatch and week zero's availability model. Everything else can be compressed; those two cannot.

Errors that recur

Borrower side.

• Signing a term sheet without modeling availability from the actual aging, inventory report, and location list. This is the error that causes the most surprise and the most damage.
• Treating the eligibility criteria as boilerplate and the interest rate as the negotiation.
• Not understanding whether the inventory advance rate runs against cost or net orderly liquidation value.
• Accepting an unqualified discretionary reserve right with no notice and no standard.
• Setting the springing covenant trigger above the seasonal trough.
• Sending third-party documents in week five.
• Failing to inventory every deposit account.
• Not identifying contra relationships before the field exam does.
• Assigning the borrowing base certificate to a controller with no capacity and no procedure.
• Delivering the first certificate without anyone checking it against the criteria.

Lender side.

• Funding before deposit account control agreements are executed.
• Failing to record IP security agreements.
• Accepting a debtor name that does not match the public organic record exactly.
• Not obtaining an intercreditor with adequate access rights to realize inventory.
• Missing purchase money security interest notices, which prime the inventory lien.
• Relying on an appraisal that the appraiser prepared without adequate SKU-level data.

Both.

• Leaving the post-closing schedule to look after itself. Post-closing items are eligibility conditions, and until they are done, availability is lower than everyone modeled.
• Failing to build the working relationship in the first ninety days, when the lender is deciding whether this borrower's reporting can be trusted.

Choosing between an asset-based facility and a factoring line

Borrowers ask which is right, and the answer follows from a small number of facts.

An asset-based revolver fits a borrower with: revenue above roughly $20 million; a finance function capable of monthly reporting that ties to the ledger; a diversified customer base; inventory with a resale market; and a preference for keeping customer relationships unnotified. The cost is a spread over a reference rate plus fees, in the mid single digits to low double digits all-in, and the burden is the reporting.

Factoring fits a borrower with: smaller revenue; limited finance capacity; strong customers but weak own credit; a need for cash faster than a monthly borrowing base cycle provides; or a history that makes a bank facility unavailable. The cost is materially higher — often the equivalent of high double-digit annualized rates on the funds employed — and the trade-off is that the factor does the credit work, the collection, and the ledger administration.

The hybrid. Many companies use both: an asset-based revolver for the core, and spot factoring of specific large invoices or foreign receivables that the revolver excludes. This requires the asset-based lender's consent and an intercreditor arrangement, and it is common enough that lenders have standard forms.

The honest comparison. Compare the factoring cost not to a bank rate but to the alternative: what is the cost of not having the working capital? For a distributor turning inventory four times a year at a 22% gross margin, financing a receivable at an effective 20% annualized rate to make the sale is straightforwardly accretive. The mistake is comparing the factoring discount to a mortgage rate, which is a comparison of two unrelated things.

The question that decides it in practice. Can the borrower produce a reliable monthly aging and inventory report that ties to the general ledger? If yes, an asset-based facility is available and cheaper. If no, factoring is the answer — and the underlying deficiency should be fixed, because it is also the reason the company cannot borrow on better terms.

Quick reference

Before the term sheet. Model availability from the actual aging, inventory report, and location list. The gap between the commitment and availability is routinely thirty percent, and it is entirely in the eligibility criteria, the appraisal methodology, and the reserves.

Week one. Send the deposit account control agreements, the landlord waivers, and the bailee letters. They determine the closing date. Order the lien searches.

Where to negotiate. Eligibility criteria first, reserves second, the inventory advance rate mechanic third, the springing covenant trigger fourth. Pricing last — it is worth less than any of the others.

The four reserve protections. A standard, notice, no double-counting, and a change-in-circumstances requirement.

Before funding. Every perfection step complete, with searches confirming. Deposit account control is the step most often missed, and the accounts hold the collateral.

The intercreditor provision that matters most. Access rights — the period during which the asset-based lender may occupy the term lender's real property and use its equipment and marks to liquidate inventory. Without it, priority over inventory is priority over something that cannot be sold.

After closing. Name the person who owns the borrowing base, give them a written procedure, run a practice certificate, and reconcile the first three. The lender is deciding, in the first ninety days, whether this borrower's reporting can be trusted — and that judgment is durable.

When it tightens. Model availability weekly, thirteen weeks forward. The options that exist a month before a covenant springs do not exist the week the certificate is due.

Multi-jurisdictional and cross-border facilities

Where the borrower group includes foreign entities or holds collateral abroad, the structure becomes materially more complex and the timetable longer.

Foreign receivables. Excluded from the borrowing base unless credit-insured, letter-of-credit supported, or owed by a debtor in an agreed jurisdiction with an acceptable enforcement regime. Credit insurance is the usual answer and is inexpensive relative to the availability it creates — the policy must name the lender as loss payee and the assignment of policy proceeds must be documented.

Foreign inventory. Requires local security, local perfection, and — in many jurisdictions — a local law security document, local counsel opinion, registration, and sometimes notarization or stamp duty. Timetables of eight to twelve weeks per jurisdiction are normal. Decide early which jurisdictions justify the cost, and exclude the rest from the base rather than delaying the closing.

Foreign guarantors. Financial assistance rules, corporate benefit requirements, and thin capitalization or withholding consequences vary and can make a guarantee unavailable or unenforceable. Local counsel opinions are required and are qualified.

Structural considerations. Where the US borrower's foreign subsidiaries hold significant assets, tax considerations frequently limit the guarantees and pledges available. The customary approach — a limited pledge of the voting equity of a first-tier foreign subsidiary — has been reconsidered as the tax rules changed, and current practice should be confirmed rather than assumed.

Collections across borders. Foreign collections must reach the lender's control, which requires local account arrangements, and exchange controls in some jurisdictions restrict remittance.

Practical advice. For a first cross-border facility, scope the foreign jurisdictions ruthlessly: include only those where the collateral is material and the enforcement regime is workable, exclude the rest, and revisit at the first amendment once the domestic facility is running smoothly. A borrower that tries to include six jurisdictions at closing will close three months late and will discover that two of them contributed almost no availability.

Related documents

• Asset-based lending and receivables finance: borrowing bases, factoring, and control of collateral
• Asset-based lending diligence checklist
• Receivables finance toolkit: borrowing base certificates, factoring agreements, and control documents
• Secured transactions under UCC Article 9: attachment, perfection, and priority
• Syndicated loan documentation checklist