The Clients and their Lender of record will be responsible for submitting supporting financials to Credit no later than the 10th of each month when detailed collateral reporting is required. While situations may differ, the Bank’s standard process on ABL monitoring is as follows:

•  A/R, inventory and Borrowing Base Certificate (BBC) information due from client by the 10th day following period end. 
• If not received by the 20th day, line will be frozen until received and evaluated (in most cases, at this point, the loan may be technically in default). 
• If not received by the 30th day, the line may be considered to be in default, and subject to the default provisions within the Bank’s loan documents. 
• The above assumes no response from client or relationship manager (or other problem has arisen). 
• There will be times when exceptions to the above are needed, and exceptions can be made with approval by Credit Administration. 
• Credit can request additional financial information, including but not limited to, Accounts Payable (AP) detail, balance sheet and income statements, to complete the BBC for eligibility. 
• BBC levels will be calculated by a member of Credit, and 10% of the ABL’s will be spot checked by a 2nd associate of the bank on a sample basis. If errors are noted during sample review, the sample size will be expanded.

If an account is out of trust, or missing any required information, an email will normally be sent to the client’s relationship manager, and the lender’s manager on the 15th of the month. Credit may also reach out directly to the client as needed. The required reporting terms will be listed and approved on the loan memorandum (Memo). Credit will pull all ABL approvals and renewals from one of the Bank’s credit management software suites. Approval and renewal terms will be found within the Bank’s loan origination platform.

ABL clients normally will be required to submit their detailed eligibility information. Credit will provide reporting instructions to the ABL’s managing lender or directly to the client as well. 

Detailed AR aging information will include the client’s debtor’s name, the invoice number, the billing date and the invoice amount. If inventory is approved as an eligible portion of the ABL, detailed collateral information will also be required (for example: Raw Materials, Work In Progress, Finished Goods, and Age). Summary Aging’s will be accepted if approved by Credit Administration. 

Credit can change reporting terms or require higher quality financial statements, random inspections, or field audits. All reporting changes will be documented to the credit file after the changes are requested. 

Credit has the right to require payments to be made to CCB’s lockbox. Lockbox should be highly encouraged on ABLs with reporting one month or more to prevent fraud and normal losses associated with an AR LOC. Lockbox is a strong credit management tool when used for additional monitoring, loss prevention, fraud detection, or random account sampling. 

Credit will use collateral reports to calculate the Borrowing Base Certificate (BBC). The BBC will determine the ABL’s eligibility and availability according to approval memo. Once a BBC is completed, Loan Servicing will be notified through Synapsys with instructions to increase, lower, or make no change to the ABL’s borrowing eligibility. Synapsys generates an e-mail containing a subject stating the client’s name and if there are changes to the client’s line eligibility. The e-mail will also be sent to the lender. The BBC will be saved to a centralized accessible location, which may be either Abrigo or Synergy or similar. 

No Account Receivables will be funded from a client that is identified by CCB as a “Contra” account, receivables from affiliated companies, officers of the company, employees of the company, or foreign accounts. 

Credit Administration approval will be required for ABLs in the following industry groups: 

• Medical
• Building and Utility Construction
• Attorneys
• Title Companies
• Payroll Companies
• Property Managers 
• Real Estate Companies

Normally, ABL’s will not require a 30 day clean-up (must have a $0 balance) period at least once annually, unless specifically required as part of approval. In some cases, such as agricultural lines or similar, a cleanup period should be required to coincide with cash flows of the business. If any amount is unable to be paid down for 30 days or is otherwise stale, it may be deemed permanent working capital. In those cases, the LOC should be reduced by the amount of the permanent working capital, and the permanent working capital will typically be amortized. The Bank may make exceptions to this requirement when warranted (for example: good revolving activity, strong collateral, good financial profile).

If the client’s ABL is out of trust for 20 days or more Credit will  notify the loan officer. All the ABL’s related accounts will be frozen. The line must remain frozen until it is back in compliance or a temporary waiver is approved. Credit can make exceptions on a case by case basis. 

Most ABL’s collateral will be secured with an UCC-1, filed by the lender, at closing. If there is an exception to the borrowing base (for example: a portion of the LOC is secured by real estate or titled equipment) this exception must be approved by Credit, and a special note mentioning the exception to CCB’s Loan Document Preparation team before closing.

ABLs will be priced from JP Morgan Prime rate, SOFR, or comparable replacement indexes. ABLs will have variable interest rates with floor limits. The typical price margin over the stated index will be derived from an internal tiered risk model. 

CCB will offer, as a standard, 1 and 3 year maturities on all ABLs. 5 year maturities will be offered to the top rated credit clients. Any ABL having a maturity longer than 3 years or is on a demand bias, will be reported to Credit within 5 business days of the approval. Short maturities can be approved if deemed necessary to mitigate an ABL’s risk. 

The relationship manager will complete the review for all ABLs under $500M. Credit will review all ABLs $500M and above at least once annually as part of the normal annual review process. 

The Bank may advance 75% of client’s receivables with a due date of 60 days or less from invoice date and advance 50% of client’s receivables with a due date greater than 60 days, but less than or equal to 90 days, from the date of invoice. Client’s receivables with a due date over 90 days from date of invoice are usually considered ineligible, unless approved by Credit Administration.

Inventory advances are normally limited to 50% and will not include obsolete, scrap, stale or damaged inventory. The Bank should be allowed to do site inspections upon request, or if deemed warranted, require audit procedures to be performed (see below).

In some cases, like government projects, the Bank may advance 75% of client’s receivables with a due date of 90 days or less from invoice date and advance 35% of client’s receivables with a due date greater than 91 days, but less than or equal to 120 days, from the date of invoice. Client’s receivables with a due date over 120 days from date of invoice are normally considered ineligible.

Terms other than those noted above may be granted with approval by Credit Administration or Credit Committee; however the Bank desires standardized terms as much as possible. 

Account Debtors eligibility is limited to 30% of client’s total relationships. If an Account Debtor exceeds 30% concentration of client’s total relationships at any time under any circumstance, the amount over 30% is considered ineligible. Agreed upon advanced rates will apply to amounts up to the 30% limit. Credit can make exceptions to the concentration requirements when reviewing the credit request or BBC. 

The Bank normally requires Aging Accounts Receivable and Accounts Payable detail reports to be provided by the 10th of each month and should include account code name, account debtor name and address, date, invoice number, and invoice amount for each invoice submitted to Lender. 

*Any exceptions to advance rates must be approved by Credit Administration. 

All 3rd party audits or official site inspections will be reported to Credit within 5 business days. All outside vendors will be vetted by Credit and CCB’s Security Administration. All auditors will sign a confidentiality agreement before any 3rd party work is completed. 

All inventory audits and / or inspections, regarding multiple locations will be completed simultaneously if any inventory held outside the primary storage location is financially material. 

Credit will have the right to request financial or inventory audits regarding any ABL clients.