Vectra Bank Claims Colorado Factoring Company Owes $4.5M After Alleged Collateral Shell Game

Vectra Bank has filed suit claiming CSI Holdings LLC and its related factoring entities defaulted on a $6.5 million credit facility and now owe more than $4.5 million in unpaid principal and interest.¹² The lawsuit alleges the borrowers refused to cure the default, won't turn over pledged collateral, and secretly acquired an Oregon farm property worth $1.7 million without disclosing it to their senior lender.¹

• Original facility: $2 million secured loan originated in 2014, amended July 2025 to $6.5 million with October 2025 maturity¹

• Defendants: CSI Holdings LLC, CSI Factoring LLC, CSI Financial LLC, and CEO Christopher A. Smith¹²

• Hidden asset allegation: CSI allegedly took title to an Oregon farm (Willamette Valley Hop Farms Inc.) in 2024 as debt satisfaction for $1.7 million—without disclosing the acquisition to Vectra¹

• Relief sought: Repayment of $4.5M+ outstanding plus constructive trust over the Oregon farm¹

The case is Zions Bancorporation v. CSI Holdings LLC et al., Case No. 2026CV30034, Colorado 2nd Judicial District Court.¹²

What Alternative Business Lenders Need to Know

Why did Vectra keep extending this facility?

The $2 million to $6.5 million growth over a decade raises obvious questions.¹ CSI Holdings operated multiple related entities—CSI Factoring LLC and CSI Financial LLC—with all assets cross-collateralized under the security agreement.¹ Standard structure for factoring shops. The problem wasn't the structure—it was the monitoring.

When a borrower takes title to real property in satisfaction of a $1.7 million receivable and doesn't notify the senior lender, that's not an oversight.¹ That's either deliberate concealment or a relationship where the borrower stopped treating covenant compliance as mandatory.

The July 2025 amendment—tripling exposure to $6.5 million with a three-month maturity—suggests Vectra saw value in the relationship.¹ A facility maturing in three months without repayment usually means the refinancing didn't materialize or performance deteriorated faster than expected.

What does the Oregon farm tell us about collateral monitoring?

CSI allegedly acquired title to the Willamette Valley Hop Farms property in 2024 as debt satisfaction for $1.7 million owed by that entity.¹ Under most security agreements, that acquisition should have triggered immediate disclosure requirements. Real property worth $1.7 million becoming part of your collateral base isn't a detail you forget to mention.

The complaint alleges CSI then attempted to market and sell the property without Vectra's consent.¹ This suggests one of two failure modes:

Monitoring failure: Vectra wasn't tracking CSI's asset base closely enough to catch a $1.7 million property acquisition through public records, UCC filings, or financial statement review.¹ For a factoring company with pledged A/R as primary collateral, real property acquisitions should have triggered immediate investigation.

Enforcement failure: Vectra knew about the property but didn't act quickly enough to perfect their interest or prevent the attempted sale. The constructive trust claim suggests they're now trying to recover equitably what they should have controlled contractually.¹

What should factoring lenders monitor differently?

Factoring companies present unique monitoring challenges because their primary collateral—accounts receivable—is inherently liquid. A/R can be collected, swept, and redeployed before a lender catches the discrepancy.

Bank account monitoring: Do you have view-only access to your borrowers' operating accounts? CSI's alleged acquisition of the Oregon property required capital outlay or debt assumption—that should have been visible in cash flows.¹

Concentration reporting: A single $1.7 million receivable from one entity (Willamette Valley Hop Farms) becoming a real property asset suggests that obligor was a significant concentration.¹ Were the underlying credit metrics tracked?

UCC and public records sweeps: Quarterly searches of UCC filings, county recorder records, and Secretary of State databases can catch undisclosed collateral movements before they become litigation.

Field exams: For facilities above $5 million, periodic field examinations verify that A/R aging reports match actual collections. CSI's alleged activities—acquiring farm property, marketing it for sale—suggest operations had drifted from core factoring.¹

What's the likely outcome?

Commercial lending disputes of this size rarely go to trial—expect a negotiated settlement or forced sale of the Oregon property.

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