CADENCE for Asset Based Lending
CADENCE enables diverse collateral strategies...
The Problem:
Bayside was approached by a well known asset based lender to review their systems relative to client retention and customer service. They were very knowledgeable in accounts receivable purchasing and accounts receivable borrowing base lending. Their processes and controls were very strong, losses were historically minimal, and savings were passed on to clients, keeping the lender very competitive.
However, despite this business plan, the lender often lost customers after 18 months. They learned that when clients needed additional capital that extended beyond the value of receivables, the borrowers turned to another lender that offered working capital based on inventory.
The Solution:
In developing a business solution geared towards keeping good customers, the lender sought to offer new ways to use other assets in the lending relationship. Their research revealed the CADENCE platform to be the only system capable of handling blended lending products and blended collateral processes.
The key component of the lender's new strategy was inventory lending. They determined that they could use inventory safely in the lending formula if they could classify components of inventory and advance based on the net realizable value of the inventory segment or key items. The items with high value could be advanced using a higher advance rate. Conversely, those segments that did not provide significant value could carry much lower advance rate. This strategy would help the lender by avoiding over lending into risky inventories.
The other strategy implemented was to tie the pricing structure directly to the risks associated with managing inventory.
The lender now uses inventory accommodations in association with more typical receivable products. The nature of the receivables determines the receivable pricing, and the inventory pricing is based on the risks associated with the specific characteristic of the inventory being considered.
CADENCE provides the perfect solution for managing clients that require multiple lending products and managing risks according to the asset nature
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