Asset-Based Lending
Asset-Based Lending
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Asset-Based Lending

Last updated on 2017-11-19

About the Book

This new, third edition, has added many updates regarding critical asset-based collateral subjects and issues, including regulatory Uniform Commercial Code (UCC) changes and more.

Asset-based lending, or the extension of credit against company's balance sheet assets on a collateral margin basis, is a rapidly growing field in the lending arena - thanks to better controls and understanding as well as the intensification of non-bank competition in the field. Asset-Based Lending defines lending controls and policies, assessing collateral and borrower quality, loan pricing, collateral monitoring and much more, including:

- Cash collateral accounts, commingling funds and controlling payments and advances

- Completing notes, security agreements and other documents

- Accounts receivable and inventory lending

- Chattel paper, notes, machinery and equipment

- Direct and third party leasing

- Collateral field examinations

- Factoring

About the Author

Peter Clarke
Peter Clarke

Peter S. Clarke, is a former banker with over 30 years experience in commercial lending and loan/credit administration with multibillion dollar banking institutions staring with Citibank in New York, and then moving to the former Texas Commerce Bank in Houston now Chase, and then to the Great Western Bancorp now Wells Fargo, and finally to Frost Bank in Houston. He has also been with The WFA Group, headquartered in Houston, Texas, for over 20 years. This Group provides collateral field exams on all types and sizes of credits for banks and non banks around the country. Besides A/R, Inv., Notes, and Special Projects, the company does any type of collateral field exam involving a working capital loan secured by real estate or personal property assets. In addition, The WFA Group also provides all types of machinery and equipment appraisals involving any type business or industry including full inspections, limited scope inspections (with the balance completed on a desktop),including giving value for in place installed equipment, and full desktops from its office. Appraisal values include Fair Market, Orderly Liquidation, and For Sale Liquidation (private or auction), and in place values where applicable.

Table of Contents

  • About The Author
  • Preface
  • What This Book Will Do for You
    • WHO CAN BENEFIT FROM THIS GUIDE
  • CHAPTER 1 - Asset-Based Lending and Collateral Controls: An Overview
    • 1.1 INTRODUCTION
    • 1.2 ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE (UCC)
    • 1.3 ELIGIBLE RECEIVABLES
    • 1.4 INELIGIBLE RECEIVABLES
    • 1.5 ELIGIBLE EXECUTORY CONTRACTS
    • 1.6 INELIGIBLE EXECUTORY CONTRACTS
    • 1.7 ELIGIBLE NOTES
    • 1.8 INELIGIBLE NOTES
    • 1.9 ELIGIBLE CHATTEL PAPER
    • 1.10 INELIGIBLE CHATTEL PAPER
    • 1.11 ELIGIBLE DOCUMENTS
    • 1.12 INELIGIBLE DOCUMENTS
  • CHAPTER 2 - Investigating the Borrower
    • 2.1 MEASURING RISK
    • 2.2 OBTAINING PRELIMINARY INFORMATION ABOUT THE BORROWER
  • CHAPTER 3 - Setting the Amount and Price of the Loan
    • 3.1 QUALITY OF COLLATERAL AND BORROWER
    • 3.2 BORROWING BASE
    • 3.3 COLLATERAL MARGIN
    • 3.4 UNSECURED LOANS
    • 3.5 CROSS-COLLATERAL OR DRAGNET CLAUSES
    • 3.6 INTEREST RATES AND FEES
  • CHAPTER 4 - Cash Collateral Accounts, Commingling Funds, and Controlling Payments and Advances
    • 4.1 SETTING UP CASH COLLATERAL ACCOUNTS
    • 4.2 COMMINGLED FUNDS
    • 4.3 BLOCK ACCOUNTS
    • 4.4 CONTROLLING PAYMENTS
    • 4.5 METHODS OF HANDLING ADVANCES
  • CHAPTER 5 - Completing Notes, Security Agreements, and Other Documents
    • 5.1 PREPARING DOCUMENTS—AN OVERVIEW
    • 5.2 ASSUMED NAMES
    • 5.3 BORROWING RESOLUTIONS/AUTHORIZATIONS
    • 5.4 NOTE FORMS
    • 5.5 SECURITY AGREEMENTS
    • 5.6 ASSIGNMENT OF RELATED COMPANY ASSETS
    • 5.7 LETTER/LOAN AGREEMENT
    • 5.8 GUARANTY AGREEMENTS
    • 5.9 CORPORATE RESOLUTION OR PARTNERSHIP AUTHORITY/AFFIDAVIT FOR GUARANTIES AND COLLATERAL PLEDGES AND ASSIGNMENTS
    • 5.10 SUBORDINATION AGREEMENTS
    • 5.11 ASSIGNMENT OF LIFE INSURANCE POLICY
  • CHAPTER 6 - Perfecting the Security Interest
    • 6.1 THE SECURITY INTEREST—AN OVERVIEW
    • 6.2 FILING REQUIREMENTS FOR FINANCING STATEMENTS
    • 6.3 TAX LIENS JUDGMENTS
  • CHAPTER 7 - Accounts Receivable Lending
    • 7.1 INTRODUCTION
    • 7.2 NON-NOTIFICATION RECEIVABLE FINANCING
    • 7.3 COLLATERAL CONTROL PLANS FOR NON-NOTIFICATION FINANCING
    • 7.4 NOTIFICATION RECEIVABLE FINANCING
    • 7.2 USE OF AN INDEPENDENT THIRD- PARTY SERVICE COMPANY FOR MONITORING THE COLLATERAL
    • 7.6 COMPETING SECURITY INTERESTS
    • 7.7 MAINTAINING THE LOAN-TO-COLLATERAL RATIO
    • 7.8 THE BORROWING BASE CERTIFICATE (REPORT)
    • 7.9 MONTHLY AGINGS OF ACCOUNTS RECEIVABLE
    • 7.10 MONTHLY AGINGS OF ACCOUNTS PAYABLE
    • 7.11 ASSIGNMENT SCHEDULES
    • 7.12 COLLECTION SCHEDULES
    • 7.13 CHECKLIST OF BORROWER RESPONSIBILITY
    • 7.14 CHECKLIST OF NOTE OR SUPPORT DEPARTMENT STAFF RESPONSIBILITY
    • 7.15 CHECKLIST OF LOAN OFFICER S RESPONSIBILITY
    • 7.16 ASSIGNMENT SCHEDULE COMPLETION
    • 7.17 COLLECTION SCHEDULE COMPLETION
  • CHAPTER 8 - Executory Contract Lending
    • 8.1 EXECUTORY CONTRACT LOANS
    • 8.2 LENDING ON EXECUTORY CONTRACTS
    • 8.2 NOTIFICATION OF ASSIGNMENT
    • 8.4 TRADE CONTRACTOR FINANCING
    • 8.5 U.S. GOVERNMENT CONTRACTS FOR MILITARY GOODS AND SERVICES
    • 8.6 MUNICIPALITY CONTRACTS
  • CHAPTER 9 - Inventory Lending
    • 9.1 INTRODUCTION
    • 9.2 EVALUATING INVENTORY AS COLLATERAL
    • 9.3 INVENTORY LOANS
    • 9.4 FINANCIAL QUALIFICATIONS OF THE BORROWER
    • 9.5 SPECIAL FILING/CERTIFICATE REQUIREMENTS AND PROBLEMS
    • 9.6 CONTROLLING INVENTORY COLLATERAL
    • 9.7 QUALITY OF INVENTORY COLLATERAL
    • 9.8 PROTECTING INVENTORY COLLATERAL
    • 9.9 PROTECTING THE PRIORITY OF YOUR LIEN
    • 9.10 CONSIGNED INVENTORY
  • CHAPTER 10 - Chattel Paper, Notes, Machinery, and Equipment Financing
    • 10.1 CHATTEL PAPER
    • 10.2 PERFECTING COLLATERAL INTEREST IN CHATTEL PAPER
    • 10.3 NOTES
    • 10.4 ESTOPPEL (NOTIFICATION) LETTERS
    • 10.5 BASIC CONSIDERATIONS WHEN LENDING AGAINST CHATTEL PAPER AND NOTES
    • 10.6 LENDING AGAINST MACHINERY AND EQUIPMENT (M&E)
  • CHAPTER 11 - Third-Party Leasing
    • 11.1 INTRODUCTION
    • 11.2 FINANCIAL CONDITIONS OF LESSORS AND LESSEES
    • 11.3 FILING FINANCING STATEMENTS ONLY FOR NOTIFICATION PURPOSES
    • 11.4 ACCOUNTING METHODS
    • 11.5 THIRD-PARTY LEASES
  • CHAPTER 12 - Direct-Lease Financing
    • 12.1 INTRODUCTION
    • 12.2 DIRECT LEASES
  • CHAPTER 13 - Factoring
    • 13.1 INTRODUCTION
    • 13.2 FACTORING NEW CLIENTS
    • 13.3 FACTOR FINANCING
  • CHAPTER 14 - Outside Collateral Field Examinations
    • 14.1 AUDITS OF BORROWERS RECORDS
    • 14.2 AUDIT CONFIRMATIONS (VERIFICATIONS)
  • CHAPTER 15 - Loan Relationship Transfers, Liquidations, and Files
    • 15.1 LOAN RELATIONSHIP TRANSFERS
    • 15.2 LOAN LIQUIDATIONS
    • 15.3 FILES
    • (2) Record Retention
  • CHAPTER 16 - Dealing with Asset-Based Borrowers Under the Bankruptcy Code
    • 16.1 INITIATING A PETITION
    • 16.2 CREDITOR MEETINGS
    • 16.3 AUTOMATIC STAYS
    • 16.4 ADEQUATE PROTECTION
    • 16.5 VOIDABLE PREFERENCES
    • 16.6 CHAPTER 11
  • Appendix
    • Due Diligent Necessities Regarding ABL:
    • Borrowing Base Reports
    • Eligible Account Receivable for Borrowing Base Purposes
    • Ineligible Accounts Receivable for Borrowing Base Purposes
    • Ineligible Inventory for Borrowing Base Purposes
    • Pre-Loan Surveys and On-Going Collateral Field Examinations
    • A/R summary based on terms and reconciliation to financial statements
    • Recommendations
    • General
    • Accounts Receivable
    • Notes Payable
    • Taxes
    • Inventory
    • Types of Equipment Appraisals

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