In separate comment letters submitted this week to Federal bank regulatory agencies, the Equipment Leasing & Finance Association (ELFA) and the Secured Finance Network (SFNet) urged the agencies to consider additional recommendations to the proposed Basel III rulemaking to preserve the critical role of asset-based lending in financing businesses and driving U.S. economic activity.
The comments were submitted to the board of governors of the Federal Reserve System, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC), in response to the jointly proposed revised rulemaking modernizing regulatory capital requirements.
Both associations expressed appreciation for the agencies’ work on this revised proposal and the extended comment period, while advocating for the agencies to address three primary areas of concern to preserve asset-based loans that provide vital working capital to U.S. small and medium-sized businesses:
- Changes to credit conversion factors for commitments
- The newly proposed definition of a “commitment”
- The need to recognize the value of non-financial collateral, such as receivables, inventory, and marketable equipment, in determining capital requirements
The asset-based lending, equipment finance, factoring and secured finance sectors play a critical role in providing capital to businesses of all sizes. This financing, secured by assets such as receivables, inventory and equipment, is particularly important for middle-market companies and businesses operating in cyclical industries which was reflected in both letters. Extending credit based on the value of collateral rather than solely on a borrower’s cash flow or earnings has proven to be a dependable source of capital, particularly during economic downturns when traditional sources of credit may become constrained.
ELFA and SFNet stand ready to offer further input, particularly if the agencies commit to collecting additional data on non-financial collateral and, following that assessment, addressing the true value and risks of underlying credit exposures.

