Mesures Physiques Annecy - IUT Annecy

ABL Dispute Risk FactorsThe risk of legal disputes arises at every stage of the ABL relationship—from the initial credit evaluation and origination to administration, andloan supervision when events of default are declared.Account assignments and other transfers of rights can increase thecomplexity—and cost—of sorting out disputes in court. An additional riskfactor in lending against inventory is a potential priority claim by thesupplier of the inventory goods to recover his interest. Conflicting securityinterests and competing claims on the secured assets can give rise tolengthy litigation.According to the Office of the Comptroller of the Currency:This type of specialized lending carries with it a higherdegree of risk than most other types of commercial lending.ARIF [accounts receivable and inventory finance]borrowers typically exhibit higher default risk than othercommercial borrowers…. Because ARIF lenders normallysupervise a borrower’s business very closely, they can bevulnerable to lender liability suits whether or not theyterminate funding or liquidate assets.Sometimes a lender must terminate funding and liquidatecollateral because the customer is experiencing financialdifficulties. Lenders, however, should be careful aboutdoing so, especially if the action could be consideredabrupt, because courts have found lenders liable forcontributing to the failure of a customer’s business. 8Effective use of alternative dispute resolution can minimize the risk oflengthy and expensive lawsuits in asset-based lending. Parties’ retain allremedies related to the collateral, and their legal disputes can be resolvedout of court through mediation and arbitration in less time and at lowercost than court litigation.Out-of-Court Solutions for Resolving Asset-Based Lending Disputes 2