A contract between two or more lenders to the same borrower that sets whose lien and payments come first and what each may do if the borrower defaults.
When two lenders finance the same borrower or property, the law gives a default order. For business assets the general rule is that the first lender to file or perfect has priority. Lenders can change that order by contract; the Uniform Commercial Code says it does not preclude subordination by agreement by a person entitled to priority. An intercreditor agreement is that contract. It typically covers lien priority, who gets paid first, and what the junior lender may do while the senior loan is in default.
Borrowers meet it in a few settings: a first mortgage with a second behind it, a line of credit lender and a term lender sharing business collateral, or mezzanine debt.
Two programs fix the form. In SBA 504, the bank’s first mortgage and the development company’s second are governed by SBA Form 2287, the Third Party Lender Agreement, and SBA’s manual bars a development company from signing any other intercreditor agreement with that lender without SBA’s written consent. Fannie Mae requires an intercreditor agreement it has signed off on between its lender and any mezzanine lender, and the borrower pays the legal fees if Fannie Mae engages outside counsel to review it.
How it shows up in the data here
Not shown on this site. Agreements between lenders are private contracts, and some are recorded with the county, none of which this site loads. The clearest two-lender structure in the data is SBA 504, where a bank holds the first mortgage and a development company the second: see SBA 504 lenders. If your deal has two lenders, ask each early whether it will sign the other's form.
Go further
- SBA 504 lenders: Lenders that made the first mortgage on 504 projects.
- Search lenders: Filter banks, credit unions and non-bank lenders by what they hold and made.
- SBA 504 structure calculator: Bank loan, debenture and down payment for a project, and the fees that sit around them.
- SBA 504 loan package checklist: A 504 project has three parties, two loans and a closing date set by a monthly bond sale. Build the package for all three.
- SBA 7(a) or 504: which fits your loan: Both are SBA loans, and they work differently. The choice usually turns on what you are buying and how much cash you can put in.
Related terms
- Third-party lender (SBA 504): The bank or other lender that makes the first-lien loan, usually about half the project cost, in an SBA 504 project. SBA does not guarantee its loan.
- SBA 504 loan: A fixed-asset financing in which a bank lends 50 percent or more, a certified development company funds up to 40 percent through an SBA debenture, and the borrower puts in at least 10 percent.
- Blanket lien: A security interest that covers all or nearly all of a borrower's assets, present and future, instead of one named piece of collateral.
- Cross-collateralization: An arrangement in which two or more properties or assets secure the same loan, or each secures the borrower's other loans, so the lender can look to any of them if one loan defaults.
- UCC lien: A lender's claim on business assets other than real estate, made public by filing a financing statement under Article 9 of the Uniform Commercial Code.
- Loan participation: A loan in which other lenders buy shares from the lender that made it, under a written agreement that keeps the first lender in the loan for its whole life.
Sources
- Uniform Commercial Code 9-339, Priority Subject to Subordination (as enacted in the District of Columbia, D.C. Code 28:9-339; each state enacts its own version), retrieved .
- Uniform Commercial Code 9-322, Priorities Among Conflicting Security Interests (as enacted in the District of Columbia, D.C. Code 28:9-322; each state enacts its own version), retrieved .
- SBA SOP 50 10 8.1, Section C, Chapter 1 (Third Party Loan; SBA Form 2287, Third Party Lender Agreement), effective .
- Fannie Mae Multifamily Guide, Part III, Chapter 15, Section 1501.04, Intercreditor Agreement, retrieved .
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.