If my company presently has a line of credit with a bank, would assigning the receivables to Capital Solutions create a conflict with them?
When Capital Solutions enters into an agreement with a client, we file a UCC-1 on the client’s receivables and inventory. This is so that the Client cannot pledge the same receivables as liens to more than one creditor. To the extent that usually Banks require a blanket UCC-1 on all assets before they lend any money, there would be a conflict. However, it is usually possible to negotiate with the bank for them to share the first position or subordinate their claim on the receivables to Capital Solutions, up to a certain limit while continuing their Senior Lien on the other assets. This is called ‘Inter-Creditor Agreement’. There are standard forms for these Agreements and most banks are quite used to them.
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