Negotiating an Intercreditor Agreement

Intercreditor Agreements are used when there are multiple lenders financing multiple assets from the same borrower. They establish the priority of each lender’s claim on the borrower’s assets and set guidelines on how they will work together in the event of a default. Essentially, they determine the order in which the lenders will be repaid and ensure that all parties are aware of each other’s rights and obligations.

Negotiating Intercreditor Agreements can be challenging as they require lenders to be on the same page, i.e., who gets what if there’s a liquidation. Negotiation can be especially challenging when one lender finances the accounts receivable (A/R) and another lender finances the inventory. Inventory turns into A/R; does that mean the inventory lender loses collateral? And what happens if products are returned?

Lenders going into a deal (the “new” lender) should ask some important questions up front. For example, if they’re taking over from a bank, will the bank still be involved? If so, who gets what assets? And for referring lenders who will still play a part in the deal (the “old” lender), they need to refer to a lender they’ve worked with before; one with whom they have a good track record in terms of being reasonable and agreeable.

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