Oh Yeah, We Handle Those Too:
Credit Agreements & Asset-Based Loans

Credit Agreements and Asset-Based Loans (“ABLs”) are both financial arrangements companies use to secure funding, but they have critical differences in structure, collateral, and flexibility. When considering financing options for your business, choosing between Credit Agreements and ABLs is a crucial decision that can significantly impact your financial flexibility. Both options serve as valuable tools, but their structures and benefits differ. The easy decision for you is that RR&A is the right firm for the job.

Credit Agreements are often term loans or revolving credit facilities. Term loans have a fixed repayment schedule, while revolving credit facilities provide a maximum borrowing amount with flexibility in borrowing and repaying. Collateral for Credit Agreements can vary and may include both tangible and intangible assets. Lenders may rely more on the borrower’s overall creditworthiness, financial statements, and cash flow.  A Credit Agreement may be more suitable if your business requires flexibility in fund usage. Credit Agreements typically offer a broader scope for capital allocation, allowing you to use the funds for various purposes, including expansion, acquisitions, or general working capital needs.

As the name implies, ABLs are a type of secured loan backed by specific assets of the borrowing company, such as accounts receivable, inventory, and equipment. ABLs provide a clear advantage in terms of security. Lenders have a more secure collateral base by tying the loan to specific assets. This can lead to lower interest rates and increased borrowing capacity, making ABLs attractive for businesses with substantial assets. If your business faces temporary financial challenges, having a collateralized loan can provide a safety net, making ABLs a prudent choice for companies seeking stability and risk mitigation.

The decision between Credit Agreements and ABLs hinges on your business’ specific circumstances, risk tolerance, and financial goals. While Credit Agreements offer flexibility and versatility, ABLs provide a secure foundation and risk mitigation. Carefully assessing your business needs and priorities will guide you toward the financing solution that aligns best with your long-term goals.

RR&A is a legal firm known for providing valuable legal services to clients seeking professional insights into securing Credit Agreements and Asset-Based Loans. Our highly skilled attorneys have years of experience in this field, and we have a proven track record of delivering top-notch corporate services to our clients. Contact us today to experience our unparalleled services firsthand!

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Miranda Caballero

Miranda is an Associate at R. Reese & Associates and part of the Transactions and Corporate teams. Miranda’s practice is primarily focused on transactions from due diligence to post-closing and everything in between. She has also had the opportunity to gain a wealth of experience drafting and negotiating commercial contracts as well as handling corporate and general business practice matters. To learn more about Miranda, visit her attorney page.

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Disclaimer: The information and material on this website is general information about our practice and firm. This information does not offer specific legal advice and the use of this information does not create an attorney-client relationship with RR&A or any of its attorneys. The information on this website should not be used for legal advice, and persons should not act upon the information on this website without engaging professional legal counsel.

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