Bank of America has reached a 5-year agreement to offer a large line of credit to one of America's largest payday lenders.
In an SEC filing distributed to the public last week, payday lender Advance America
reported that it secured $300 million in financing. With the deal, Advance America gets a $200 million line of credit and a $100 million term loan. Both are good for five years.
The term loan comes with a balloon. At a minimum, Advance has to pay $1 million per month in principal, but they can wait to pay as much as $40 million until December 2016.
Bank of America is a long-time companion to Advance America. This loan actually serves to refinance an existing line of credit, last amended in March 2008, of $109.7 million. Advance is taking advantage of low interest rates to reduce its debt service. Some of the funds will go to offer dividends to investors.
This is one of the lose loans that Bank of America will never want to see go bad. The deal says that if the loan does not perform, then Bank of America can take up to all of the voting shares on the domestic business and 65 percent of the stock in foreign entities. In other words, if Advance America struggles than Bank of America is in line to become a national payday lender.