Borrowers often want to keep their bank line and add a private loan behind it for a specific purpose: an acquisition, a building, a partner buyout. The bank holds a general security agreement over everything, so the second lender needs the bank’s written agreement to its position. That document is an intercreditor or priority agreement.
What it covers
- Priority: which lender ranks first over which assets
- Standstill: how long the second lender must wait before enforcing after a default
- Notice: each lender’s obligation to tell the other about defaults
- Payment blockage: whether the second lender can be paid while the first is in default
- Amendments: limits on the first lender increasing its loan or changing terms
How to ask
Go to your relationship manager early with a one-page summary: the purpose, the amount, the second lender, the collateral and the exit. Banks say yes to intercreditor agreements when the second loan improves the credit, for example by clearing CRA arrears or funding an acquisition that strengthens cash flow. They say no when it adds leverage without a plan.
What we do
Cascade provides a draft agreement the banks have seen before, pays our own legal costs on it and keeps the standstill terms reasonable. We tell borrowers early whether we think their bank will sign, so nobody spends legal fees on a structure that cannot close.
Have a situation like this? Tell us about the deal and a principal will respond within two business days. Cascade lends to businesses only, in Canadian dollars, and every rate we quote is an annual rate.
