What are asset based loans/funding?
These loans are secured by the borrower’s inventory accounts receivables or other assets. The bank calculates the value of the borrower’s assets and then lends the monetary value with a suitable margin. The bank also accepts the obligation to collect all the receivables from the debtors. In effect, the bank purchases the borrower’s accounts at an agreed discount. For most banks, asset-based lending portrays the last frontier in large margin loans. Many times introducing factoring companies to assess your situation is helpful. If your bank is investing in asset based lending, there are a couple of PC based software that can reduce the issues that come up from maintenance activities.
Look for specialized programs and follow these guidelines:
- Mainframe programs unavailable – Less than a decade ago, complex documentation, collection and tracking programs of asset based lending were not available. You had to depend on standard mainframe financial systems that were very expensive to buy and to customize for asset based lending.
- However, with the emergence of advanced computer-based programs, repayment tracking, calculations, reporting, asset management and so much more, that once required days, weeks and even months to complete can now be finished in a few minutes.
- It allows amateur banks to venture into the lucrative asset based lending market with little startup cost (s), training and also system management.
- The right software is essential for success Once you decide to use the asset based lending into your general loan function, you need to choose the right program.
- The main difference between traditional commercial lending and asset based lending is control (having comprehensive knowledge of the status of the property based loans at every moment).
The software should also help you know when to remove your cash out of the collateral just in case the loan goes bad.
- Your software must help you track the real market value of the stock as well as the liquidity, suppose you need to seize your assets.
- When choosing an asset based lending software, the first thing you need to do is to evaluate your loan management system. It includes your all your manual controls.
- If you have unidentified issues, your new software will only escalate the error faster. You may want to seek outside assistance (a consultant) to acquire a fair analysis. However, you can do much yourself- internally.
When evaluating this software, you need to consider the following key points:
- If you can, select the software before you buy the hardware. If you want to use the existing hardware, check for compatibility.
- Also, make sure the program is expandable in terms of the customers and also the number of useful features that it offers.
- The best software is modular, and it can grow in response to varying needs.
- You also need to ensure that the software can easily process asset based loans, produce timely reports, calculate interest correctly, reduce principal and red flag debts that are overdue and first payment defaults.
Lastly, make sure that your program has a history of being upgraded- this is critical to note.