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Streamlining Asset-based Lending with Modern Technology

  • Post category:ABL

Asset-based lending (ABL) has been around for decades, but the ways it has been used has significantly changed over time. At one point, ABL was regarded as creative financing for companies riddled with turmoil, and used by private equity and investment banks to finance larger leveraged deals. When this happened, it changed the industry. Now more and more companies of varying sizes and industries are turning to ABL as a more flexible alternative to traditional business financing. 

What is ABL?

With traditional commercial loans, lenders primarily assess a business’s cash flow. With asset-based lending, lenders look at a broad range of a company’s assets – from accounts receivable to real estate and intellectual property. Assets are evaluated to determine their worth and suitability to serve as collateral. 

Businesses are drawn to ABL as an option for unlocking working capital to fund growth initiatives and acquisitions, manage cash flow, and restructure existing debt. Lenders turn to ABL over cash-flow financing because it offers them ​​more control via frequent reporting, cash dominion/lockbox and the ability to establish borrowing base reserves. 

How Technology Has Enhanced the ABL Process

The ABL lending process used to be extremely time-consuming, centered on manual processes and steps that had to be taken in person. Advancements in technology and AI have changed the game and now provide asset-based lenders the edge they need to operate in the most efficient manner to grow their portfolios. 

Below are some of the advantages of working with sophisticated, cutting-edge ABL technologies.

Connects Multiple Systems for All-in-one Access

As the requirement for quick and efficient data transfer has intensified in asset-based lending, adoption of SaaS solutions and APIs has also increased. Having systems be able to talk to each other in real-time to gather meaningful insights has proven critical. ABL systems with open APIs enable lenders to connect multiple core systems, CRMs, underwriting systems, operations systems, loan servicing, payments and a multitude of other services. Seamlessly connecting with multiple systems creates a complete, end-to-end solution for lenders.

Reduces the Need for Paperwork and Manual Data Entry

A big challenge for lenders has been the slow and inefficient back and forth of document collection. Some ABL products today can connect directly to borrower accounting systems and bank accounts at the point of origination or any other time and extract read-only data. This eliminates a lot of the hassle of paperwork. Where additional paperwork is required, systems can not only facilitate the process by enabling borrowers to securely upload any file type, but also send automatic requests for information to borrowers. Lenders no longer have to rely on manually checking what is still outstanding and experience delays in the process. Ticklers can be sent automatically and borrowers can quickly meet their reporting requirements. 

Builds Stronger Relationships Between Lenders and Borrowers

ABL software that offers borrowers a secure cloud-based portal and personalized dashboard that can be logged into from any device at any time yields a better borrower experience. Plus, a system that automates status updates and other news throughout the process keeps borrowers engaged and keeps them from going to other lenders. Having a seamless borrower experience from the beginning of the relationship is crucial to the life of the client relationship.

Improves Manual Credit Decisioning

The lending process used to involve time-consuming manual data review and analysis, slowing down the process. Advanced ABL technology can automatically assess the creditworthiness of borrowers using the ABL lender’s unique risk criteria via seamless integration with trusted credit bureaus, customizable scorecards, automated financial spreading, and more. Business and personal credit reports, background checks, liens search results, financial analysis and accounts receivable analysis can all be automatically cross referenced. Applicants can receive automated status updates, approvals and notifications to keep them engaged and informed. Streamlining decisioning provides lenders with the ability to make better credit decisions and helps build trust between them and businesses needing capital.

Reduces Lender Risk

Manual processes and lack of automation has been an issue for lenders since they lead to an increased risk of missing something during underwriting that can lead to approving riskier loans. The right ABL financing software can support lender risk criteria and automatically apply it to each deal to reduce manual work, speed up approval time and reveal red flags. It can also quickly shed light on critical areas of a prospect’s application, financial health and banking transaction outliers. 

As the world leans into technology to simplify otherwise complex processes, those who don’t get on board will be left behind. Automated lending systems reduce the need for paperwork and manual touch, leading to faster loan origination, better credit decisions, reduced risk, and a better experience for borrowers. They also save time for lenders, leaving them to focus on higher-level business initiatives. Decipher Credit offers highly configurable and robust asset-based lending software that automates the entire ABL process from start to funding. To request a demo, click here.