Three common debt capital risks for borrowers and lenders—and how to fix them

Three common debt capital risks for borrowers and lenders—and how to fix them

Effective risk management is crucial for finance teams, especially in uncertain environments. 

Missing deliverables, lack of collateral visibility, and dependency on key personnel are common but significant challenges that can disrupt operations and jeopardize financial stability. Here’s how to address these risks and ensure seamless and efficient processes. 

Risk: Missing deliverables

Meeting contractual obligations and deliverable deadlines is critical for maintaining trust and compliance and ensuring borrowers have access to their debt capital. For borrowers, it’s really important to foster good relationships with their lenders. That means turning things in on time, getting it right the first time, and limiting the friction of back-and-forth emailing as much as possible.

When deadlines aren’t hit, or deliverables are incorrect, it’s often because of two issues:

  • Manual tracking and submission errors
  • Communication breakdowns

Traditional methods of tracking deliverables often involve manual processes that are prone to errors and oversights. Without a centralized system, communication between borrowers and lenders can become fragmented, increasing the likelihood of missed or delayed deliverables.

How to fix it

Modern software helps borrowers and lenders identify key trends
Modern software helps borrowers and lenders identify key trends

Automate your deliverable tracking with a platform that provides real-time notifications and reminders to ensure deadlines are met. Anywhere you can reduce the reliance on manual processes and minimize the risk of oversights, do it. 

Finley generates alerts for upcoming deadlines and overdue items, allowing borrowers and lenders to stay proactive in managing deliverables. Finley also offers a centralized repository where all parties can access and monitor deliverable requirements and timelines. 

You also want to make sure that borrowers and lenders are speaking the same language. Sometimes, capital providers and borrowers aren’t on the same page when it comes to how terms are translated into calculations and don’t even realize it. 

Implementing technology like Finley standardizes procedures and calculations across the lifetime of financial agreements, ensuring consistency and compliance.

Risk: Not having a clear view of your data

Knowing the status and performance of collateral assets is essential for assessing risk and making informed decisions.

  • Disorganized data
  • No ability to see real-time insights
  • Difficulty digging deeper into data

Without a centralized system, data related to collateral can be scattered across various formats and locations, making it difficult to obtain a clear picture. Traditional methods of tracking asset performance often lack real-time capabilities, leading to delays in identifying and addressing issues. Finally, without granular tracking and analysis, it can be challenging to pinpoint specific assets that are underperforming or posing risks.

How to fix it

How Finley works with your existing systems
How Finley works with your existing systems

Make sure everyone has access to more reliable, completely automated data integrity checks. A centralized system for both borrowers and lenders can recognize issues and notify both parties immediately. 

Finley provides detailed tracking of every attribute for each asset. It's tough to get the level of granularity that platforms like Finley provide with just Excel while also providing a big-picture view of the portfolio. Users can zoom in to analyze individual asset performance or zoom out to view the performance of all assets within a transaction or across the entire portfolio. This flexibility helps identify trends and problem areas at different levels.

Risk: Overreliance on one individual

Many organizations face a key man risk—relying heavily on specific individuals who hold critical knowledge and manage essential processes. When crucial operational knowledge is concentrated with a few individuals, the entire process is vulnerable if those individuals leave or are unavailable.

The absence of key personnel can lead to significant delays and disruptions, which can impact the ability to manage financial operations effectively.

How to fix it

Make sure everyone who needs it has access to critical data and create robust process documentation. Democratize knowledge and operational capabilities across the team to reduce the risk of disruptions.

Platforms like Finley centralize all relevant data and processes in one accessible platform. This ensures that information is not siloed with individual employees but is available to the entire team. Having a single source of truth that multiple individuals can access and use rather than putting together Excel reporting is valuable in terms of continuity and accuracy. 

Learn More about Finley

Finley is private credit management software that helps private credit borrowers and asset managers streamline and monitor asset-backed loans. From tracking covenants and deliverables, to assembling funding requests and analyzing asset performance, Finley gives borrowers and lenders peace of mind when it comes to debt capital management. For more, check out our Product page.

If you want to learn more about software that can help you streamline your debt capital raise and management, just schedule a demo. We'd love to chat!