Due Diligence Matters
Feb 01,2018
A company’s financial statements are important in assessing a potential borrower’s situation. But thorough due diligence requires looking closely and deeply at all aspects of the company’s operations, from applicable economic and industry conditions to sources of collateral and business operations — and beyond. Only then can you, as lender, accurately evaluate the borrower’s financial status and minimize your risks of delayed payments and default.Assess risk and review financialsBefore you review a borrower’s financial statements, research industry risks. This risk assessment identifies what’s most relevant and where your greatest exposure lies, what trends you expect in this year’s financials, and which bank products the customer might need. Risk assessments save time because you’re targeting due diligence on what matters most.Now tackle the financial statements. First evaluate the reliability of the financial information. If an in-house bookkeeper or accountant prepared it, consider his or her skill level and whether the statements...
Seize the Opportunity: Lending to E-commerce Companies
Feb 01,2018
Like brick-and-mortar businesses, e-commerce companies need capital for working capital and fixed asset purchases. To help meet their financing needs, they’ve historically turned to alternative online lenders. Nontraditional lenders may provide needed capital, but they also can saddle e-commerce companies with onerous terms and high interest rates.As the online distribution channel has matured and become more mainstream, traditional lenders have become more open to lending to e-commerce companies. Before adding these types of companies to your loan portfolio, it’s important to recognize how their business model differs and consider adjusting your underwriting process accordingly.Here are three ways you can vet loan applications from e-commerce companies.1. Learn about customer acquisitionOnline marketing expense consumes a significant portion of an e-commerce company’s budget. Ask for a detailed analysis of the company’s marketing efforts, including the total spent on each campaign and the effective acquisition cost of each customer in the previous 12 months.Focus...
Fundamentals of Asset Based Lending
Mar 23,2016
OverviewBusinesses large and small have been affected by recent economic challenges caused by the financial crisis and the resulting tightening of lending standards. Many companies are getting rejected for unsecured loans that they would have qualified for just a few short years ago.  Asset-based lending (“ABL”), also known as secured lending, was once considered a last-resort finance option; however, it is now the most common form of lending on the market. This type of lending is usually done when the normal routes of raising funds, such as capital markets (selling  bonds), normal unsecured or mortgage-secured bank lending is not possible or the company has a need for immediate capital for project financing (such as inventory purchases, mergers, acquisitions and debt purchasing).  In contrast to ABL, “cash flow” lending are loans repaid through the business’ cash flow and are not related to any specific collateral. Consumers include retailers, wholesalers, producers, distributors,...

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