By Don Clarke


I am old enough to remember the meltdowns that we had in the 1990s when prime rate of interest hit double digits and the American economy cratered when companies folded up and went out of business. Of course, I also remember 2008-2009 when the housing crisis hit and a lot of companies went out of business and banks lost a lot of money, etc.

Here we go again.  We are now in the year 2020 and sitting on the brink of another emerging crisis.

The coronavirus situation is going to have a severe impact on the asset-based lending industry and how do we prepare for that when this is over?

Let’s stipulate the following:

  1. We know for sure that on the backside of this crisis collateral will have deteriorated, if not dissipated. 

  2. We also know that there is going to be an increase in overadvances, bankruptcies, winddowns, and workouts facing the ABL industry.

How do we manage this? It’s going to be a monumental task and those  who are not ready for this are going to be seriously challenged.

We need to plan now while some of us are at sequestered home. Start thinking about exit strategies, stay in touch with our borrowers, see where they are, and ramp up the reporting, so that once we emerge from the crisis we have a plan to implement to get us back to soundness.

This is going to take a while; it may take years to repair the damage of this virus making so we have to be ready, we have to think proactively, and we need to plan.

If you have time on March 31st at 1 p.m. EDT, I am going to be leading an SFNet-sponsored online panel discussion alongside Scott Michell of Redridge Diligence Services, and Foster Fegarsky of TD Bank, talking about conducting field examinations/desktop exams and other things during this process so that we don’t fall too far behind the curve and be ready to emerge on the other side of the coronavirus. Click here for more information.

Be well and we look forward to talking to you!

 

 


About the Author

Don Clarke - ABLC - Headshot

Don Clarke is president of Asset Based Lending Consultants.