How does an Asset Based Lender monitor its borrowers?
The level of controls and monitoring by the Asset Based Lender is directly related to the credit-worthiness of the borrower. Typical controls include: Borrowing Base Formula Is a borrowing base formula that monitors the relationship between the value of the collateral available, to secure the outstanding loan and the actual balance of the loan on a regular basis. Collateral Reporting Funding controls, or collateral reporting, may be required daily, weekly, or monthly and range from submission of sales invoices/shipping documents to accounts receivable aging and listings/inventory listings. Collection Controls The asset based lender requires dominion, or control, over cash by establishing a collateral account into which accounts receivable collections are deposited. Access to this account is restricted to the asset based lender. Ongoing Audits Ongoing audits are also used to monitor the account. The asset based lender will audit the borrower’s books and records periodically to verify th
