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Given its advantages over cash-flow loans in covenant flexibility, borrowing capacity and pricing, asset-based loans can be a powerful financing tool for many companies across a broad range of industries.

Key Takeaways

  • Prospective borrowers should consider a bifurcated collateral structure with an asset-based revolver and term loan when making financing decisions.
  • Even if conventional financing is available, an asset-based facility and term loan can provide flexibility, pricing advantages, and borrowing capacity benefits over a cash-flow revolver.
  • The credit markets for bifurcated collateral structures are well developed and can often accommodate smaller deals involving fewer creditors.