Minimizing risk while maximizing returns requires asset-based lenders to consider a multitude of factors, but there are consistent, low-risk strategies that best protect their financial interests.
Asset Compliant Solutions has gathered these insights through over 25 years of working with lenders serving various industries. As a leading resource for lenders nationwide, we take our duty to our clients and the industry seriously and offer lessons we have learned so we can all move ahead more confidently while managing portfolios more successfully and avoiding unnecessary risks.
Let’s explore some fundamental practices and successful strategies proven to protect your bottom line.
1. Establish a Strong Foundation with Accurate Credit Assessment
Of course, lenders must be able to assess a client’s likelihood to uphold their financial obligations. Still, a strong foundation with an initial accurate credit assessment is merely the first step for comprehensive portfolio protection. By honing in on your early-stage collection processes, detrimental downstream effects can be caught and eliminated early before they damage your bottom line.
An approach to credit assessment that incorporates more elements is ultimately more reliable, and we encourage considering factors and introducing systems like:
- Robust credit assessment techniques based on alternative data sources and algorithms that identify industry-specific subtle portfolio risks
- Continuous credit monitoring that flags early warning signs sets regular portfolio reviews and provides consistent lines of open communication between lenders and borrowers.
A lender’s portfolio becomes better positioned and protected by creating this strong foundation for recurring assessment and communication.
2. Manage and Monitor Account Performance Proactively
The earlier intervention can be made to help struggling accounts, the better. Studies indicate that accounts less than 30 days past due have a recovery rate of around 90%, compared to just 20% for accounts over 180 days past due.
Immediate, effective action is critical to curing accounts. Here are some early tactics with proven performance:
- Early strategies include a tiered outreach strategy that escalates appropriately, and the team trained to handle these conversations with appropriate empathy
- Allow borrowers multiple avenues to get back on track with flexible repayment options or temporary modifications.
- Empower your collections team with practical training in negotiation skills, authority to act in real-time, and accessible performance metrics upon which to base their decision.
These essential functions require a skilled staff, and outsourcing these duties to trusted partners like ACS allows your business to have all the benefits without worrying about labor availability and costly training processes.
Proactive management and monitoring resolve issues early so accounts avoid falling deeper into non-payment and defaulting cycles that drag portfolio performance down.
3. Streamline Operations at Every Opportunity
Operational risks and inefficiencies can derail any otherwise healthy portfolio’s performance. Having the right people, processes, and performance standards is the best means to fortify your financial bottom line against risk.
At ACS, we work with lenders to assess and recommend practices that can untie operational knots so accounts stay steady and smooth with their processes. Consider the following when evaluating your operating systems:
- Implement new technological solutions like automated workflow systems to reduce manual errors, utilizing secure, cloud-based platforms, and investment in robust cybersecurity measures to protect client and financial data
- Prioritize documentation with standardized templates and checklists for critical processes, all stored in a centralized system
- Consider SOC-2 compliance to send a strong message to potential borrowers about your company’s commitment to data security and personal privacy
With the right technology, personnel, and processes, a lender can protect what they already possess and grow at a faster, safer, and more sustainable speed.
While all these solutions are a good starting point for protecting your portfolio against risk, they are just the tip of the iceberg.
At Asset Compliant Solutions, we have a vast wealth of expertise to share so you can sidestep the common pitfalls and position your organization for further success and steady profitability. Whatever your portfolio challenges may be, we stand ready to help you overcome them.