Commercial Bankers: Before Exiting a Client…

Bankers looking to exit a client would benefit from taking a look at the borrowing base criteria from the standpoint of a non-bank lender. Why? For one, it’s impractical to tell the borrower, “You need to find another lender” if it’s unrealistic for the borrower to find one. And two, it tells them if it’s possible to get the bank paid off.

Most accounts receivable (A/R) lending criteria are fairly comparable (bank to non-bank). They look at eligibility in roughly the same way. The differences are mostly on the inventory or equipment side.

On inventory, banks typically lend 50% and don’t look at the level of borrowing in relationship to the A/R borrowing (if they’re even tracking the assets at all as opposed to an open line of credit). Conversely, most non-bank lenders do set inventory borrowing limits tied to the A/R. On equipment, non-bank lenders look at forced liquidation value; banks may look at a higher valuation.

In a case where an exiting bank client won’t meet non-bank lending criteria such that there’s enough to get the bank out in full, the bank needs to determine what it wants to do. Is it prepared to:

  • Discount the debt?
  • Term out the debt?
  • Take other collateral?
  • Stay in on the inventory or equipment and send only the A/R to a non-bank lender?

Bottom Line: Before asking clients to find a new lender, bankers who help point them on the right path will not only make it an easier for clients; it will make it quicker for the bank to settle the relationship.

About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.

As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.

If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or, or visit us at