Custom Credit:  

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• Asset-Based Loans (ABL).  In standard asset-based lending, banks apply a rigid, historical calculation to determine how much money they will advance against collateral (typically accounts receivable and inventory).

  • The Custom Credit Play: If a borrower has a seasonal business or an unusual concentration of high-quality corporate clients, a bank using custom credit might adjust the "borrowing base" rules. For instance, they might increase the standard advance rate on inventory from 50% to 65% during peak production months, or extend the definition of "eligible receivables" from 90 days to 120 days for highly creditworthy foreign buyers.

• Cash Flow Loans.  Cash flow loans depend on a company’s historical earnings (usually EBITDA) rather than physical collateral. Standard loans use fixed, historical leverage multiples (e.g., maximum Debt/EBITDA of 3.0x).

  • The Custom Credit Play: If a company is in a rapid growth phase or has just acquired another business, its historical cash flow will look artificially weak. A custom credit approach allows the bank to use "Adjusted EBITDA" or "forward-looking pro-forma cash flows." The bank might also customize the principal repayment schedule, offering a principal moratorium (interest-only period) for the first 12 to 18 months until the acquired company's cash flow is fully integrated.

• Unsecured Loans.  Unsecured loans carry no collateral, meaning the bank relies entirely on the borrower's creditworthiness and signature. Standard approval lines usually feature strict caps on loan size and require flawless financial ratios.

  • The Custom Credit Play: To get a large unsecured loan approved, a bank might introduce specific negative covenants (e.g., a promise that the borrower will not pledge assets to any other lender, or a restriction on paying dividends to shareholders). They might also tie the loan’s interest rate to performance triggers, effectively using custom structural guardrails to substitute for physical collateral.

• Commercial Real Estate (CRE) Loans.  Standard CRE loans look strictly at Debt Service Coverage Ratios (DSCR) based on current rent rolls.

  • The Custom Credit Play: For a property undergoing a major renovation or tenant transition, the bank might build a "capitalized interest reserve" into the loan. This means part of the loan proceeds are set aside specifically to make the loan payments during the vacancy period, allowing the project to fit within approval lines despite temporarily generating zero organic cash flow.