Through the leadership of our managing director, Hudson Robillard, CPA, who has nearly 10 years of extensive experience providing audit and business consulting services to entities in various industries including financial institutions (Community Banks), Hospitality, non-profit, and merchandising business, our Firm specializes in asset based lending field audit. We work with community banks and lending companies to evaluate collateral securing an asset based lending facility.
ASSET BASED LENDING - Evaluating the Collateral
One of the most important aspects for this type of lending is the evaluation of the collateral. The analysis of accounts receivable must commence with the evaluation of the quality of the borrower's customer base. The first requirement that must be met to properly underwrite an asset based loan is to perform a field audit by a vendor engaged directly by the Bank.
Among the factors to be considered in the audit are:
> Quality of the Customer base
> Borrower's policies
Inventory is also eligible to secure an asset based lending facility. The advance rate against the inventory may be lower than those on accounts receivable as this type of asset is less liquid. Additionally, the risk of priority lien by the supplier of the inventory goods (when the inventory is not manufactured by the borrower) exists as purchase money security interest is an automatic lien prior to the Bank's even when there is no UCC filed by the supplier. Inventory must be evaluated in terms of its nature, condition, obsolescence and marketability.
As asset lending specialists, we can help Banks in minimizing the risks associated with this type of lending by assisting the Bank in monitoring the value of the collateral through performance field audits.