Lenders have been showing an increased interest in asset-based lending as a way to weather economic uncertainty, rising interest rates, supply chain challenges and tightening credit markets. The arrangement allows for more flexibility in making future decisions not always available with other types of loans and for accessing additional borrowing power, making it suitable for a wide range of situations. As rising interest rates have made traditional bank loans more expensive, asset-based lending allows companies to unlock the value of their assets and provide an effective way to enhance liquidity. However, keeping track of these assets can be a challenge for lenders. From collateral valuation and operational risk to market and regulatory risk, lenders can mitigate these risks with the correct tools and strategies.
Collateral for asset-based lending can include anything from art collections to accounts receivable to real estate and more, and each carries its own set of risks and considerations. For example, with physical assets, it is important to keep track of location and the adequacy of asset coverage insurance. Real estate taxes can also be a major consideration. It is in the lender’s best interest to ensure that real estate taxes are paid on time. Failure to pay real estate taxes puts the lender at risk of foregoing possession of the property in case of a borrower default.
Jurisdictional differences (even those as simple as differences in state tax laws) must be tracked. It’s also important to know when an asset may be in the path of a natural disaster or conflict area. Assets like real estate are stationary, but others, like ships or art, can be moved. The value of assets can also change over time. As real estate markets shift, buildings deteriorate or art becomes more valuable, lenders need to have accurate valuation as a continual process. The valuation process is often performed by a third party.
SS&C Loan Solutions are designed to increase efficiency, improve profitability and control risk. Our solution gives you the confidence that your information is accurate, timely and consistent. By eliminating inefficient, disparate systems, our single solution approach addresses all aspects of the loan life cycle—configurable as a stand-alone loan origination system, a stand-alone loan servicing system or an integrated end-to-end loan management suite. With sophisticated tools for monitoring collateral and managing risk, as well as fast, accurate and flexible reporting to internal and external investors and a mapping function that allows you to plot your properties onto geographic maps using Google Maps, Precision LM meets the complex needs of commercial lenders and servicers worldwide.
To learn more about how a single integrated servicing platform can help you track assets and navigate the challenges of asset-based lending, download our "Comprehensive Loan Management Delivered in a Single Solution" brochure.
