Frequently Asked Questions

Asset-based lending is a financing structure where a lender extends credit based on the value of a borrower's assets—typically accounts receivable, inventory, machinery, or real estate. Unlike traditional cash-flow lending, ABL focuses on the liquidation value of collateral rather than earnings or projections. This makes it particularly suitable for companies with substantial assets but variable cash flow, including turnarounds, acquisitions, or seasonal businesses.

Traditional bank lending relies primarily on cash flow analysis, credit ratings, and financial covenants. ABL, by contrast, is collateral-focused and asset-based. ABL facilities typically offer higher advance rates against assets, more flexible covenant packages, and greater availability during periods of operational stress. Traditional lending suits stable, cash-generative businesses; ABL serves companies with strong asset bases but variable earnings, growth businesses, or those undergoing operational changes.

Advance rates vary by asset class and quality. Typical ranges include: 75-90% of eligible accounts receivable (depending on concentration, aging, and customer credit quality), 50-65% of eligible inventory (lower for raw materials, higher for finished goods), and 70-80% of machinery and equipment appraised values. Rates depend on asset quality, industry dynamics, borrower operational history, and lender risk appetite. Advance rates are subject to regular monitoring and borrowing base certificates.

ABL is typically appropriate when: (1) the company has substantial tangible assets but inconsistent cash flow; (2) traditional lenders won't provide sufficient leverage based on EBITDA multiples; (3) the business is growing rapidly and needs working capital flexibility; (4) the company is undergoing a turnaround or restructuring; (5) seasonal working capital needs exceed what term loans can support; or (6) the business is executing a leveraged buyout or acquisition requiring higher leverage than senior term debt can provide alone.

Structured credit refers to debt instruments created through securitization—pooling cash-flow-generating assets (such as loans, receivables, or bonds) and issuing securities backed by those cash flows. Common structures include CLOs (collateralized loan obligations), securitizations, warehouse facilities, and structured finance vehicles. Legal work involves structuring cash flow waterfalls, credit enhancement mechanisms, intercreditor arrangements, and regulatory compliance. Structured credit allows lenders to manage risk, achieve regulatory capital relief, and provide efficient financing for originators.

Unitranche financing combines senior and subordinated debt into a single facility with a blended interest rate, simplifying the capital structure and reducing documentation complexity. Rather than negotiating separate senior and mezzanine facilities with intercreditor agreements, borrowers deal with one lender (or a club of lenders) providing the full debt stack. This streamlines execution, reduces closing costs, and simplifies ongoing administration. Unitranche is common in sponsor-backed transactions, middle-market LBOs, and growth equity financings where speed and certainty are priorities.

Private credit refers to debt financing provided by non-bank lenders—primarily debt funds, private equity-affiliated credit arms, and specialty finance firms. Unlike regulated banks, private credit funds are not subject to Basel capital requirements, can hold loans to maturity without mark-to-market concerns, and typically have more flexible underwriting parameters. They often provide larger hold sizes, more flexible structures, higher leverage, and fewer covenant restrictions than traditional banks. Private credit has grown significantly as banks have retreated from certain middle-market and leveraged segments due to regulatory capital requirements.

An intercreditor agreement governs the relationship between different classes of lenders in a capital structure—typically senior lenders and mezzanine or second-lien lenders. It establishes priority of claims, payment waterfalls, voting rights, enforcement restrictions, and standstill provisions. Key provisions include lien priorities (who gets paid first from collateral proceeds), payment subordination (timing and conditions for junior lender payments), and control rights (which lender group directs enforcement and restructuring decisions). These agreements are critical in any multi-tranche financing and become particularly important in default or restructuring scenarios.

Venture debt is a specialized form of growth capital provided to venture-backed companies, typically alongside equity financing rounds. It's structured as term debt (usually 3-4 years) with warrants, allowing companies to extend runway and reduce equity dilution. Venture debt is most appropriate when: (1) the company has recently closed an equity round and wants to extend runway without further dilution; (2) growth capital needs exceed what equity investors are willing to provide; (3) the business has predictable revenue but isn't yet cash-flow positive; or (4) the company needs bridge financing to reach the next value inflection point. It's not suitable for pre-revenue startups or companies without clear paths to profitability.

Venture debt is specifically structured for high-growth, often pre-profitable technology and life sciences companies. Unlike traditional corporate debt, venture debt: (1) typically includes warrants (equity kickers) as additional compensation for higher risk; (2) relies more on equity backing and future growth prospects than current cash flow; (3) has lighter covenant packages focused on liquidity and material adverse change rather than leverage or coverage ratios; (4) is usually provided by specialized lenders who understand venture economics; and (5) has shorter tenors (3-4 years) aligned with equity fundraising cycles rather than longer-term amortization.

Venture debt typically includes: (1) Loan amount of 20-40% of the most recent equity round; (2) 3-4 year term with interest-only periods followed by amortization; (3) Interest rates of 8-13% depending on company stage and market conditions; (4) Warrants representing 5-15% warrant coverage (percentage of loan amount); (5) Minimal financial covenants—usually just minimum cash requirements; (6) Material adverse change provisions and equity raise requirements; and (7) Security over all company assets, though typically with senior lien carve-outs for equipment financing. Terms vary significantly based on company maturity, revenue visibility, and competitive dynamics.

TULA Legal operates as a specialized network rather than a traditional partnership. This structure eliminates conflicts that plague firms serving both lenders and borrowers, removes billing-driven incentives, and ensures every lawyer focuses exclusively on finance law. Our distributed model means we have specialists in key financial centers without the overhead of large offices, allowing us to offer transparent pricing and fast execution. We're not generalists—every member of our network is a finance specialist with deep experience in alternative lending markets.

We use transparent, transaction-appropriate fee structures—typically fixed fees or capped arrangements aligned with deal economics rather than open-ended hourly billing. For recurring work or platform relationships, we offer subscription arrangements. Our pricing is determined by transaction complexity, size, and cross-border requirements, not by arbitrary billing targets. Because we don't have traditional law firm overhead, we can offer institutional-quality work at economics that make sense for middle-market and growth-stage transactions.

We handle the full spectrum of alternative finance transactions: ABL facilities from €10M to €500M+, unitranche and direct lending transactions, mezzanine and second-lien financings, venture debt from seed to growth stage, structured credit warehouses and securitizations, cross-border multi-jurisdictional facilities, acquisition and LBO financing, receivables and supply chain finance, specialty finance structures, and restructuring and refinancing work. We work with banks, alternative lenders, private credit funds, sponsors, and borrowers across Europe, North America, and Asia.

Our network structure allows flexibility that traditional firms cannot offer. Because we're not a single entity with firm-wide conflicts, different network members can represent different parties—a lender-side specialist can work on one transaction while a borrower-side specialist works on another without creating conflicts. This is particularly valuable in competitive markets where traditional firms must decline engagements due to conflicts. That said, individual lawyers maintain their own ethical walls and don't switch sides on the same transaction or with the same counterparties.

Because our network members are already active in the market (not associates waiting for assignments), we can typically staff transactions within 24-48 hours. For ABL and direct lending transactions, we maintain relationships with specialists who regularly handle these structures. For more complex or cross-border transactions, we assemble teams based on jurisdictional and product expertise. Our distributed model means we're not limited by office location or internal resource availability—we engage the right specialist for each transaction, regardless of geography.

Our network includes specialists across Europe, North America, and Asia who regularly coordinate cross-border transactions. We structure facilities with parallel debt mechanics, security trustee arrangements, and jurisdiction-appropriate documentation. For multi-jurisdictional ABL facilities, we coordinate borrowing base mechanics, local law security perfection, and inter-company lending structures. We handle regulatory approvals, transfer pricing considerations, and withholding tax optimization. Because our network members work together regularly, we've developed efficient coordination processes that avoid the friction common when traditional firms engage multiple local counsel relationships.

Alternative lending implicates various regulatory regimes depending on lender type and structure. Bank lenders face Basel capital requirements, leverage restrictions, and regulatory capital charges that influence structure decisions. Non-bank lenders must consider fund regulations (AIFMD in Europe, registration requirements in the US), licensing requirements for certain activities, and disclosure obligations. Securitization structures involve complex regulatory capital treatment, retention requirements, and disclosure frameworks (Regulation AB in the US, Securitisation Regulation in Europe). We help structure transactions to optimize regulatory capital treatment while ensuring compliance with applicable requirements.