Secured financing is lending against a borrowing-base formula with less rigorous collateral controls and monitoring than in ABL. Although collateral is primarily accounts receivable and inventory, other kinds of assets may also secure the loan. The lender’s controls generally consist of periodic accounts receivable agings, periodic inventory reports, and may conduct occasional field audits. The loan and security agreement normally require a properly authorized corporate officer to submit periodic certifications attesting to the accuracy of the borrowing base information. The borrower has greater control of the collateral than in ABL and usually has full access to the cash receipts. Borrowers are usually stronger financially than in ABL, enabling the lender to ease administrative controls.
For most small businesses, the most important element of the secured financing definition is the requirement for collateral. Secured financing solutions offer added protection for lenders in the form of a legal claim against properties held by the borrower. Those properties can take the form of real estate, vehicles or other assets held by the small business. Receivables, raw materials and inventory may also serve as collateral for obtaining secured financing. While these arrangements may seem to benefit the lender more than the borrower, they offer added opportunities for obtaining financing that might otherwise not be available to small business owners in the normal course of business operations. As a result, these secured financing solutions provide added investment opportunities for lenders while helping borrowers obtain the funding they need at terms they can afford.
CNF Exchange provides a convenient venue for borrowers to obtain secured financing online. By completing and uploading one application, small business owners can submit their funding request to a number of lenders at once and receive customized proposals designed specifically to meet their funding needs. This streamlined approach can ensure that borrowers can find the best solutions for secured financing online through the innovative CNF Exchange system.