Encina's $480M Lender Finance Book Changes Hands
Your lender finance line is something another firm can buy, and this week the book of a lender whose published target list included MCA funders changed hands.
On October 14, Franklin Templeton and Benefit Street Partners (BSP) said a new fund backed by Franklin Templeton and BSP-affiliated funds had acquired a seed portfolio of about $480 million of commitments originated by Encina, and that a 14-person Encina team had joined BSP to keep managing and originating the strategy.1 2 The lender that underwrote your line may not be the one that renews it.
Encina's published commercial target list named small balance SMB lending, merchant cash advance, small-ticket equipment finance, corporate charge card, earned wage access and supply chain or trade finance.3
What Alternative Business Lenders Need to Know
What did BSP actually buy?
A seed book and a team, not a company. Commitments are facility limits, not drawn balances, so the funded amount may be lower than $480 million.1 The book moves into a new fund inside BSP, which manages about $97 billion and says its asset-backed finance platform now has about 100 investment professionals and the capacity to originate more than $3 billion a year across corporate asset-backed lending, equipment leasing, aircraft leasing, consumer finance and lender finance.1
This is the second Encina and Oaktree platform to land with BSP-managed vehicles. In January 2022, two BDCs advised by BSP affiliates bought substantially all of the equity of Encina Equipment Finance, whose chief executive thanked "our founding partners at Encina Capital Partners and funds managed by Oaktree Capital Management."4 The same pair launched Encina Lender Finance in 2020.5 Its public deal record runs from a facility for a non-prime credit card platform, upsized to $125 million in March 2025, to a $50 million line for a BDC's financing subsidiary.3 6
What one Encina borrower paid, then and now
That BDC is Saratoga Investment Corp., and its filings are the only detailed public view of Encina terms we found. Read them as one borrower's cost over four years, not as a bank-versus-nonbank spread. The October 2021 facility carried advance rates of 50% to 75% of eligible loans, a minimum drawn amount that rose to the greater of $25 million or 50% of commitments, an unused fee of 0.50% to 0.75%, and coverage tests.6 A January 2023 amendment raised it to $65 million, priced it at one-month Term SOFR plus a 0.10% adjustment plus a margin raised from 4.00% to 4.25%, and rewrote the list of industries the BDC's own borrowers could not be in.7 8 The new list added consumer lending, payday lending, title lending, pawn shops and illegal or internet gaming to the existing bars on firearms, adult entertainment and marijuana, and dropped assisted living and skilled nursing.8 Saratoga got $15 million more capacity and paid for it twice, with a higher margin and tighter eligibility, the kind of trade a new owner can offer at renewal.
In November 2025, nearly three years after that amendment, Saratoga paid off Encina and signed a larger $85 million facility with Valley National Bank at Term SOFR plus 2.85%.9 Private credit spreads, the facility's size and Saratoga's own book all changed in between, so the lower rate reflects timing as much as the type of lender.
What will a new owner ask about MCA that it doesn't ask about card receivables?
A platform that also lends against aircraft and consumer pools prices MCA against those pools, and MCA carries legal risks those pools rarely face in the same form.
Recharacterization: an MCA is a purchase of future receivables only if a court agrees. Courts applying New York law, the law many MCA contracts choose, look at three factors, which New York's Appellate Division, Second Department, applied in LG Funding v. United Senior Properties of Olathe in 2020: whether the agreement has a reconciliation provision, whether it has a finite term, and whether the funder has recourse if the merchant files for bankruptcy.10 A contract that fails the test can be treated as a loan, which brings usury exposure into the collateral a line lends against.
Reconciliation in practice: in LG Funding the court focused on wording that let the funder choose whether to adjust payments when the merchant's sales fell.10 Expect a buyer to ask for your reconciliation records, not only the clause.
State registration: Texas now requires MCA providers and brokers to register with the Office of Consumer Credit Commissioner by December 31, 2026, requires signed disclosures on deals under $1 million, voids confession-of-judgment clauses, and bars automatic debits unless the provider holds a first-priority perfected security interest in the deposit account.11
Inside a single line, caps and haircuts decide how much of that risk a lender will carry. A public MCA warehouse shows the pattern: Payoneer's 2021 facility, secured by merchant cash advance receivables, advanced 80% of the eligible balance, and any amount owed by the single largest merchant above 5% of the pool came out of the borrowing base first.12 Saratoga's Encina line used the same tools at a different scale, with any single obligor, or any single industry other than healthcare, capped at 15% of the collateral value.13 These are limits inside one borrowing base. We found no public asset-backed finance fund mandate that caps MCA across a whole fund, which is why the action list says to ask.
Does your lender need your consent to sell your line?
Saratoga's Encina agreement, which is filed in full with the SEC, shows the answer for one Encina line. Encina could assign its commitment with Saratoga's consent, "not to be unreasonably withheld, delayed or conditioned," and that consent was deemed granted if Saratoga did not object in writing within five business days.13 No consent was needed to assign to an existing lender or its affiliates, to a fund one of them managed, or to anyone while an event of default continued.13 Apart from barring sales to Saratoga, its affiliates and individuals, the agreement set no list of approved or excluded buyers, and lenders could pledge their position or sell participations without asking.13 Participations matter more than they look: a participant could take a share of the economics behind Saratoga's line while Saratoga kept dealing only with Encina, which kept the sole right to approve amendments and waivers.13 For a borrower, that means part of your line can sit with a holder you never deal with.
Syndicated bank loans use the same "not unreasonably withheld" standard, and borrowers grant consent in the vast majority of cases.14 On terms like Saratoga's, five days of silence counts as a yes.
What should MCA and factoring funders with a lender finance line do now?
Pull your credit agreement and read the assignment section: whether your lender needs your consent to transfer its commitment, whether that consent falls away after a default, whether silence counts as consent after a set number of days, and whether there is a list of assignees you can refuse.
If your line moves, ask the new owner whether its fund mandate caps merchant cash advance or factoring receivables, and whether its own leverage could force another sale of your commitment.
Build the file a new owner will ask for: your reconciliation records, the legal analysis behind treating your advances as purchases, your pre-funding lien and stacking checks, and your state registrations, starting with Texas before its December 31 deadline.11
Compare renewal offers on the terms Saratoga's filing lists: advance rate, eligibility criteria, minimum draw and unused fee.6
These are Beyond Banks' suggestions, not legal or financial advice.
What the record does not yet show
The purchase price, the drawn balance behind the $480 million of commitments, and any borrower names, including whether any merchant cash advance or factoring funder is in the seed book.1
Whether existing borrowers had to consent, and what happens to the Encina Lender Finance entity and its Oaktree-affiliated backer.1
Who lends to the new fund, and on what terms.1
Beyond Banks did not ask BSP or Encina for comment before publication; everything above comes from the release and public filings.
Our Opinion
One manager, two Encina platforms. BSP-managed vehicles have now taken on an equipment lender in 2022 and a lender finance book and team this week.1 4 For a mid-sized MCA, factoring or small-ticket equipment funder, that can be good news: a bigger owner can write bigger lines and hold through a bad quarter.
The risk is distance. Inside a platform that also lends against aircraft, equipment and consumer pools, MCA gets judged on questions those pools rarely raise in the same form: recharacterization, reconciliation and state registration. The funders that come through the next sale best will be the ones whose files answer a stranger's questions on the first request.
1-Minute Video: How Same-Day Verification Can Improve Your Default Rate
Search Again Before the Wire Goes Out
In this video: a UCC search run once at application can be out of date by funding day, because a merchant may apply to several funders at the same time. The video walks through checking at three points: application intake, after underwriting, and the same day as disbursement.
Cobalt's UCC Filing Data API returns UCC filings from 11 supported states as part of a Secretary of State search, at one credit per lookup. Coverage is limited to those states, and a search shows only liens already filed, so a repeat check before funding narrows the stacking gap rather than closing it.
Free Tools for Lending Teams
Headlines You Don’t Want to Miss
The OCC's final debanking report, released October 14, says all nine of the largest national banks it supervises had policies between 2020 and September 2025 that required, encouraged or influenced denying or limiting services based on customers' political or religious beliefs or lawful business activities.15 The industries it names are oil and gas, coal, firearms, detention facilities, tobacco and digital assets; we searched the report's full text and found no mention of payday, merchant cash advance or nonbank lenders.15 16 In one example in the report, TD's escalation team recommended against a small business line of credit worth less than $50,000 to a maker of rifle components; we found no public response from TD.16 The report says the OCC "continues to evaluate" whether banks' Bank Secrecy Act compliance policies have led them to derisk categories of lawful businesses.16 JPMorgan said the report "discusses a limited number of historical interactions" among the customers it serves.17
Our read: the open review of Bank Secrecy Act derisking is the piece that could reach other categories of bank customer, including nonbank funders.
JPMorgan's third-quarter supplement shows average Business Banking loans of $17.8 billion, down 6% from a year earlier, and Business Banking originations of $700 million, down 15%.18 Firmwide, average loans rose 10% over the same period.19
Our read: over the same twelve months, the largest U.S. bank grew its total lending while its own small-business book shrank. The small-business demand JPMorgan is not booking still has to be met somewhere, and nonbank funders are one place it may go.
Saluda Grade was the sole investor in a $20 million Series C for Zippy, an originator and servicer of manufactured housing loans in 27 states, and will work with Zippy on credit, capital markets, balance sheet management and product development.20 21 Zippy says it secured more than $600 million of capital commitments in 2026, without a breakdown.20 Filings by Forum Markets, a public company that buys Zippy's loans, show one such arrangement: a subsidiary committed, subject to conditions, to buy Zippy's manufactured-home chattel loans up to $150 million over five years, with eligibility criteria on FICO score, loan-to-value, loan size, term and geographic concentration, and repurchase obligations on Zippy.22
Our read: this is consumer lending, but the structure applies to business funders seeking forward-flow capital. Expect a committed buyer to set eligibility gates and repurchase terms like these.
Sources
1 Benefit Street Partners | Franklin Templeton and Benefit Street Partners Expand Asset-Backed Finance Capabilities with Encina Lender Finance Transaction (Oct. 14, 2026)
2 Alternative Credit Investor | Benefit Street bulks up ABF capabilities with Encina deal (Oct. 14, 2026)
3 Secured Finance Network, TSL Express | Encina Lender Finance Upsizes Credit Facility for Non-Prime Credit Card Platform to $125 Million (Mar. 19, 2025)
4 SEC EDGAR | Franklin BSP Lending Corp., Form 8-K, Exhibit 99.1, acquisition of Encina Equipment Finance (Jan. 5, 2022)
5 Secured Finance Network, The Secured Lender | Encina Capital Partners and Oaktree Affiliate Launch New Independent Lender Finance Platform (2020)
6 SEC EDGAR | Saratoga Investment Corp., Form 8-K, Item 1.01, Encina Lender Finance credit facility (Oct. 7, 2021)
7 SEC EDGAR | Saratoga Investment Corp., Form 8-K, Item 1.01, First Amendment to the Encina credit facility (Feb. 2, 2023)
8 SEC EDGAR | Saratoga Investment Funding II LLC, First Amendment to Credit and Security Agreement, Exhibit 10.1 (Jan. 27, 2023)
9 SEC EDGAR | Saratoga Investment Corp., Form 8-K, Items 1.01 and 1.02, Valley National Bank facility and Encina termination (Nov. 7, 2025)
10 CourtListener | LG Funding, LLC v. United Senior Props. of Olathe, LLC, 122 N.Y.S.3d 309 (App. Div. 2d Dep't, Mar. 11, 2020)
11 Texas Legislature | H.B. 700, 89th Legislature, enrolled text adding Finance Code Chapter 398, Commercial Sales-Based Financing (2025)
12 SEC EDGAR | Payoneer Global Inc., Form 8-K, Exhibit 1.1, Receivables Loan and Security Agreement for merchant cash advance receivables (Oct. 28, 2021)
13 SEC EDGAR | Saratoga Investment Funding II LLC, Credit and Security Agreement with Encina Lender Finance as agent, Exhibit 10.1 (Oct. 4, 2021)
14 Crowell & Moring, Bloomberg Law Professional Perspective | Implications of Borrowers Rejecting Assignments of Syndicated Bank Loans (June 2023)
15 Office of the Comptroller of the Currency | OCC Releases Report on Large Banks' Debanking Activities, News Release 2026-90 (Oct. 14, 2026)
16 Office of the Comptroller of the Currency | Guaranteeing Fair Banking for All Americans, report on large banks' debanking activities (Oct. 14, 2026)
17 Fox Business | US regulator accuses nation's largest banks of debanking customers over political views (Oct. 14, 2026)
18 SEC EDGAR | JPMorgan Chase & Co., Form 8-K, Exhibit 99.2, 3Q26 earnings release financial supplement (Oct. 13, 2026)
19 SEC EDGAR | JPMorgan Chase & Co., Form 8-K, Exhibit 99.1, 3Q26 earnings release (Oct. 13, 2026)
20 Saluda Grade and Zippy via Business Wire | Saluda Grade and Zippy Announce $20 Million Series C and Strategic Partnership (Oct. 14, 2026)
21 HousingWire | Saluda Grade invests $20M in manufactured housing lender Zippy (Oct. 14, 2026)
22 SEC EDGAR | Forum Markets, Inc., Form 10-K, Zippy loan purchase agreement (Apr. 1, 2026)
