It is of significant importance to have and maintain high-quality information on the condition of your borrower or customer, and the assets supporting the credit granted. Independent third-parties can be of vital importance when your account is requesting new consideration, increasing current lines of credit, renewing existing facilities, or experiencing financial difficulties, resulting in possible asset deterioration.
Our services support lenders and creditors during the credit granting and loan review process, and thereafter, throughout the life of the facility granted. We provide specialized financial information; gathering, reporting, and collateral control services; for commercial lenders and credit managers on customer assets and /or liabilities.
Pre-Loan Surveys
Collateral Examinations, Continuous Information and Collateral Control
Problem Account Examination, Evaluation, Feasibility Studies, Analysis, and Asset Preservation
Liquidation and Interim Management of Troubled Assets
Why Collateral Risk Management Services?
Third-party experience and objectivity. Most of our personnel have extensive background in asset based financing, or collateral control. Each are trained in techniques of collateral management, examination and control.
You are interested in asset-based lending and financing, but lack in-house staff for administration and risk management.
You wish to establish an abundance of due diligence as a requirement of on-going asset-based lending programs and perhaps, to counter regulatory oversight.
You require support of existing audit staff: especially in difficult, muli-regional, deteriorating, or litigation prone credit situations.
You are reluctant to rely on your borrower or customer's financial data alone.
You want a greater degree of insurability for errors, omissions, negligence, fraud and wrong-doing, over broad based bank employee fidelity bonds.
You anticipate specialized collateral as the basis of a loan such as: agri-commodities, perishables, precious metals, or other difficult to quantify assets.
You require third parties to sort out multiple and complex lending facilities and maintain the overall collateral pool.
You require continuous controls; not merely auditing of trading assets.
You need broad geographic coverage, including international capability.
You need to evaluate viability of the account and the liquidation-values of your collateral or product.
You require management of troubled assets in workouts or liquidation.
Collateral Risk Management accounts receivable services provide information and control according to the lender's requirements. These services normally fall into two distinct categories. In the first, CRM activities are limited to information gathering and reporting. In the second, CRM gathers and reports information, controls receivables, and certifies as to their validity.
Since receivables usually result from the sale of inventory, which may also be used as collateral, accounts receivable services are often used in conjunction with inventory programs to obtain a complete collateral management system. Variations or combinations of the following accounts receivable services may be developed according to lender/borrower needs.
Information Reporting Services
In this service CRM provides a “snapshot” of the flow in-and-out of accounts receivable contained within the borrowing base.
Accounts Receivable Examination CRM will both quantify for accuracy, and qualify for value, aging reports, invoices, periodic statements, or other evidences of validly created customer obligations to your borrowers. Balances can be tested for accuracy and cash receipts analyzed. Special emphasis can be placed on customer credits, contra accounts, and possible subrogation of proceeds.
Accounts Receivable Verification CRM will anonymously verify any requested number of accounts receivable, and report any disparities between the borrower's records and the returned verifications. This can be on a one-time or on a regular basis.
Accounts Receivable Reporting Service CRM will report to the lender on a continuing basis all activity regarding new invoices generated, payments made, credits issued, and outstanding balances. Periodic agings and verifications are performed as requested. This monitoring system also includes regular examinations as well.
Information With Controls (Certification)
Accounts Receivable Management Service CRM trained and insured employees are assigned to provide “real-time” controls (controlled collections, or a blocked account) according to instructions. CRM has account coordinators that monitor and instruct the assigned “agents,” while maintaining continuous independent record-keeping. Periodically, CRM conducts audits, and can also issue a comprehensive monthly aging report on receivables to the lender. This may be accomplished by the use of an independently established postal box (controlled by CRM), or in conjunction with a bank lock box, or to establish control over the customer's existing postal box lock box(es). In any case, CRM may take full responsibility for collection and direction of the proceeds against outstanding loan balances, or to simply redirect them to another predetermined point.
The Document Management Service is designed for the lender and borrower which use a variety of documents or instruments such as notes, leases, titles, warehouse receipts, mortgages, bills of lading, conditional sales contracts, trading asset or letter of credit-backed securities, to collateralize a loan. It eliminates duplication of handling, posting, and storing such documents, and provides a means of channeling account debtor payments to the lender.
The procedures employed are basically the same as for the Accounts Receivable Management Service, except that the documents are not verified for authenticity, unless specifically requested and often, inventory evidenced by the document is included as well.
CRM, through its agents, takes physical possession of the instrument(s) at the borrower's place of business, and provides a concise detailed report to the lender itemizing the documents. In addition to daily recording of new documents, CRM records and remits to the lender all moneys received which are to be applied to the loan, or trust. At regular intervals, this service provides to the lender and borrower an aging report on the status of each item of collateral.
CRM inventory services provide information according to the lender's requirements. These services normally fall into two broad categories. In the first, CRM activities are limited to information gathering and reporting. In the second, CRM gathers and reports information and takes control of the storage facility and inventory, the degree of control depending on the requirements of the lender and borrower.
Since the sale of inventory usually results in receivables, which may also be used as collateral, inventory services are often used with accounts receivable programs to obtain a complete collateral management system.
Variations from or combinations of the following inventory services may be developed according to lender/borrower needs.
Information Reporting
In these programs, CRM charts perpetual movement of inventory before and /or during the actual financing and often couples the process with examinations at any given point in time.
Inventory Examination Services borrowers seeking financing, who wish to use inventory (finished goods or raw material) as primary collateral, or to augment an existing loan. CRM field auditors can report values on a one-time or on a periodic basis, verifying the accuracy of the report as of the time the audit or inspection was made. The auditors can also check the accuracy of the borrower's inventory records against the values shown at the time of the physical inventory. In addition, CRM can also indicate the care and custody given to those assets.
Inventory Reporting Services combined with third-party movement information, but physical control is neither feasible nor required, CRM will issue reports to the lender at any requested frequency showing the value of goods received or delivered, and the resulting balance for the period covered.
Information with Controls (Certification)
Inventory Management Services may not be sufficient to protect the lender's security interest. CRM assumes physical control of the borrower's storage facilities, giving its insured personnel and agents full access to and control of incoming and outgoing goods. Based on daily records of movement and CRM, assigned agents issue inventory certificates to the lender, which indicates certified levels of collateral that are subject to financing. This service eliminates the vast sea of paperwork that formerly made this type of collateral control impractical.
Commodity Management Service A variation of the Inventory Management Service for State or Federally licensed agriculture commodity storage facilities facing increased borrowing requirements. The service affords increased protection to the lender, while enabling the borrower to obtain levels of financing unavailable by using his own warehouse receipts as evidence of collateral.
In all control aspects, this unique proprietary product is similar to Inventory Management Services, except that CDS involves an extension of credit rather than a loan. This service is particularly useful to manufacturers and their distributors with fast-moving, or seasonal inventory who wish to stock goods in excess of credit limits. It is equally useful to manufacturers who can ship goods less frequently and more economically in quantities which exceed normal credit risks, because of the security of the insured nature of the CDS program. Moreover, it can also be used in workouts to constructively maintain credit, while recovering antecedent balances owed by troubled companies, or even to support non-credit oriented "just-in-time" stocking programs for large or important customers. In any case, the program reverses the notion that you bring a sale to a warehouse, but alternatively, bring the warehouse to the sale through hosts.
For further information on Collateral Risk Management, Inc., call us at (972) 231-6525, or E-mail c/o George A. Thorson, EVP at gthorson@collateralrisk.com.