Evaluating the Client
In contrast to conventional lending, where the credit assessment is made on the client’s ability to repay the financier, the primary evaluation of the client on a structured trade and receivables finance facility is their capability to perform and fulfil the order. The relevance of financial statement assessment, the use of ratio analysis, and importance of debtor and creditor listings are discussed and how and where appraisal differs to balance-sheet assessment. The importance of ‘skin in the game’ is explored as a client incentive to remedy any transactional issues and achieve a self-liquidating facility for the financier. The need to evaluate the dependency, sufficiency, and availability of other lending facilities to fund overheads is also positioned as an integral part of the appraisal process.