“We’ve been very pleased with TLS’s service and high level of professionalism.”

M.F., Vice President, Citizens Business Credit

“We have been using Trump Lender Services for the last two years to perform field exams and the relationship has been good. The examiners are experienced, producing quality reports while maintaining excellent communication and turnaround time.”

K.P., Vice President & Manager Commercial Loan Examinations, Citizens Bank

Our borrower receives audited financial statements; why is a field examination also required?

While audited financial statements can be a critical information source, they are not designed to fully analyze collateral quality or liquidation values. Audited financial statements also present collateral values at year-end, rather than identifying collateral trends throughout the year and up-to-date lendable values. They also do not provide sufficient information to enable the lender to properly structure a borrowing certificate, identify categories of ineligible collateral, and establish appropriate advance rates. Finally, our independence is not in question, as we are engaged by the lending institution, not the borrower.

Our staff is uniquely qualified to assess the quality and quantity of the collateral. For example, some of the customary information provided in a field examination includes the turnover and dilution of accounts receivable, their concentration and collectibility. Is the AR advance rate appropriate relative to dilution levels and other criteria? Are invoices being manipulated or rolled in an effort to gain availability? Is the bank inadvertently lending on more aging categories than that specified in the loan agreement? Is prebilling or preassignment occurring? Is there bill and hold or consignment risk? The standard banking principles of “ineligible” or disqualified collateral are also identified. Our exams also include other areas of exposure including inventory analysis. Yes, it is true ABC Company may have $5,000M in inventory, but is it slow moving, off site custom made or subject to vendor offset? Furthermore, are inventory advances supported by the quantity actually on-hand and costing records of the borrower?

When is it most beneficial to have a collateral field examination?

Collateral field examinations are beneficial prior to the commitment of new or additional financing and on a recurring basis as warranted. Because the financing or working capital needs of your customer may change on a daily basis, the results of a field examination will aid in making informed decisions. These decisions may include increasing a line of credit, disqualifying a portion of the collateral, establishing caps or limitations, adjusting advance rates or interest rates. Remember, it is easier to incorporate guidelines before loan documentation has been completed. Recurring exams help to keep the lender informed concerning collateral trends, new ineligible categories and the accuracy of bank reporting. Field examinations also benefit the borrower, as the field examination results can provide the lender with the additional data and analysis necessary to support an increase in funds advanced or improve the borrowing certificate structure to both the borrower and lending institution’s mutual benefit.

What about field examination fees?

Field examination fees, depending on the lending institution, customarily are passed on to the customer. Our rates are competitive and our field examination program can be tailored to suit the needs of the engagement. We can offer our most competitive fees for preplanned and recurring work that enables us to maximize our efficiency in planning ahead and matching staff geography and skills to the job.

What areas does the typical collateral field examination scope include?

The normal collateral field examination scope includes analysis of cash, accounts receivable, inventory, accounts payable, payroll taxes and insurance. Financial statement and general ledger analysis are also part of the overall scope. Again, these individual areas may include an expanded or narrowed scope depending on the situation.

How long is the typical collateral field examination engagement?

The length of the collateral field examination depends greatly on the scope. Each situation varies depending on the size and location of the customer, accuracy of the records, number of divisions, and responsiveness of the borrower. Our staff is trained to work in the most time efficient manner without minimizing audit results. If desired by the lender, we will provide a list of required materials to the borrower in advance of the field examination to enable the borrower to be as prepared as possible and to assist in controlling the cost of the field examination. The borrower can also help to facilitate the examination by providing information electronically.

Is it permitted to provide the field examination report to the borrower?

From time to time, lenders are asked for a copy of the field examination report by the borrower. Standard industry guidelines do not permit the release of the field examination report, whether the field examination is performed by internal bank collateral examiners or outsourced to an external field examination service provider. The treatment is similar to that of the commercial or asset based lender's credit facility approval memo which is strictly considered an internal bank document. This policy is critical to the integrity of the field examination process as well as the maintenance of the field examiner's independence. However, it is often beneficial for the field examiner and lender to discuss field examination results and recommendations with the borrower to strengthen any weaknesses identified or to improve the structure of the borrowing arrangement.