Due Diligence Consulting for ABL Loan Qualifications

Focus Lenders Services Group, LLC® can help Lenders determine who is able to meet its requirements in terms of asset quality as well as reporting ability. In some cases, this can be done before full due diligence occurs, including appraisals. The professionals at Focus can tailor their analysis for each individual situation including:

  • A determination of the age of all receivables through data manipulation.
  • A determination of any underlying "non-invoices" included in the aging such as debit memos, unapplied payments, unpaid balances, or any evidence of cash accounts which would serve to be included as "reserves" and deducted from the lending base.
  • An understanding of the client's system to determine whether their system would create situations of pre-billing and therefore pre-assigning to the lender, that is, providing an invoice to be financed prior to it being shipped. For instance, a client's system could be designed to generate sales invoices as a picking slip is generated. This entails that while the goods are still in "picking" mode they have already been invoiced and may only be shipped within 1 to 5 days, depending on the client's business. Invoices are only eligible for lending purposes once the goods have been shipped. Therefore situations of pre-billing could result in loan modifications or eligibility, or even reserves that the lender and client are comfortable with.
  • An understanding of the borrower's accounts receivables and shipping terms. For instance, when does ownership transfer to the customer and therefore when does the invoice become a true sale?
  • A determination of the age of inventory through data manipulation and extraction in order to obtain a slow-moving analysis.
  • A determination of the turnover of inventory and therefore understanding of the seasonal/cyclical periods affecting the business thereby determining the high and low advance periods in the client's borrowing life. This may allow the lender to determine different advance rates based on the seasonal periods in order to meet the client's business needs.
  • An understanding of the potential borrower's inventory by location and whether "control" over the inventory can be obtained. For instance any inventory kept in trailers constitutes inventory "on wheels" and should not be included in the lending base.
  • An understanding of the potential borrower's goods in transit and their payment method to determine at what point the ownership has transferred to the borrower and whether such inventory can be included in the lending base.
  • A quick analysis of the company's cash disbursements to gain an understanding of their vendor relationships and whether any vendor pressure is noted.

These services can be billed directly to the Lender's client as to keep the up front lender's costs down and be more competitive with new deals.