Access to capital is more critical than ever for business owners and startups. However, traditional financing methods can be cumbersome and often out of reach for many small businesses and entrepreneurs. This is where specialty finance steps in as a game-changer. Let's explore specialty finance, how you can leverage private debt to grow your business, and why Cascade is the ultimate solution for managing your private debt.
Specialty finance refers to non-traditional financing solutions that go beyond the scope of conventional banks. It involves a variety of financial products, including private debt, which provides capital to businesses through mechanisms like asset-based lending, revenue-based financing, and more.
Unlike traditional funding methods, specialty finance is often more flexible and can be tailored to fit the unique needs of each business. This makes it an invaluable resource for startups and small businesses looking to scale rapidly without the red tape typically associated with bank loans.
Private debt can be a powerful tool for entrepreneurs and small business owners. Here's how you can leverage it to fuel your growth:
One of the main advantages of private debt is the ability to access capital quickly. Unlike traditional bank loans, which can take months to secure, private debt funding is often available within weeks. This means you can take advantage of growth opportunities as they arise without delay.
Private debt agreements are typically more flexible than traditional loans. Lenders can tailor repayment schedules, interest rates, and covenants to fit your business's specific needs. This flexibility can be crucial for managing cash flow and ensuring you have the funds necessary to operate and grow.
Equity financing, while beneficial, often requires giving up a portion of ownership in your company. Private debt allows you to retain full control over your business while still accessing the capital you need. This is particularly important for entrepreneurs who want to maintain their vision and decision-making power.
Successfully managing and repaying private debt can enhance your business's credit profile. This can make it easier to secure additional financing in the future, whether through private debt, traditional loans, or other financial instruments.
Managing private debt can be complex and time-consuming, but it doesn't have to be. Cascade simplifies the process, allowing you to focus on what matters most—growing your business.
Cascade's platform automates the operational aspects of loan management, reducing the need for manual intervention. This means you can scale your debt without scaling your headcount, freeing up valuable resources to focus on core business activities.
With direct data integrations, Cascade provides real-time reporting that helps you better manage risk. You'll have access to up-to-date information on your financial health, enabling you to make informed decisions quickly.
Cascade also offers an investor portal where you can choose what data to share with stakeholders. This improves communication and transparency, making it easier to build and maintain trust with investors.
Whether you're dealing with consumer loans, auto loans/leases, small business loans, or esoteric finance, Cascade is designed to handle it all. The platform supports various financing structures, including warehouse lines, forward flow agreements, corporate ABL, and multi-class debt facilities.
Innovative startups and institutional investors worldwide trust Cascade. Our platform democratizes the process, making it easier and more efficient for businesses of all sizes to scale their debt capital.
Learn more through our case studies here.
“My lender needs to know what is going on and this gives them the transparency they need without an added operational burden on my team. Our ability to monitor our borrowing base daily and expedite the fundraising process with lenders in the future enables us to expand faster.” - Boris Kalendarev, CEO, Specialty Capital
Specialty finance, particularly private debt, offers a plethora of opportunities for entrepreneurs and small business owners. By providing flexible, accessible, and tailored financing solutions, it enables businesses to grow and scale efficiently.
However, managing private debt can be daunting. This is where Cascade comes in. Our platform automates loan operations, provides real-time reporting, and enhances transparency with investors—all while supporting various asset-based financing structures.
Ready to take control of your financial future? Schedule a strategy call today and discover how you can leverage private debt to achieve your business growth goals.
Default rates are one of the most important metrics in loan analysis, and it's important to understand the various methods used to calculate default rates. At Cascade, we use four different primary methodologies to measure default: Rolling DPD, Strict DPD, Number of Installments, and Percent of Payment in the last [x] days. The standard methodology is Rolling DPD, but new methodologies can be computed to provide more accurate results. Loan analysis is a complex process, but understanding the way default rates are calculated is an essential part of the process. By understanding the different methodologies used to calculate default rates, you can make more informed decisions when analyzing loans.
Strict DPD measures the number of days a client has a negative outstanding balance, starting from the missed payment date until they fully repay the negative balance. Rolling DPD, on the other hand, takes into account the client's ongoing payments, reducing the negative balance as they make payments and resetting the default date to the last missed payment. The Number of Installments method calculates the count of missed installments based on the average scheduled installment over negative outstanding balance. Lastly, Percent of Payment in the last [x] days calculates the ratio of actual payments received to expected payments within a specified time frame.
Different methodologies are used to calculate default rates in loan analysis for a variety of reasons. One important factor is regulation. Central banks often require lenders to report default rates using specific methodologies, ensuring consistency and transparency in the industry. For example, Basel II, a global regulatory framework for banks, provides guidelines for calculating default rates. Additionally, loan products with different payment frequencies may require different methodologies. Institutional Debt investors also have specific ways of looking at portfolio companies through a standard methodology.
Walking through an example is the best way to understand the different methodologies - let’s assume the following scenario:
To help view the Real Payment Schedule - we align the payments
By comparing and contrasting the methodologies, loan analysts can determine which method suits their needs and objectives best. It's important to remember that the choice of methodology can impact the accuracy of default rates and the overall risk assessment of the loan. Ultimately, understanding the nuances of these methodologies allows for better decision-making in loan analysis and mitigates potential risks in Asset Backed Lending, Loan Tape Analysis, and computing Borrowing Bases.
It’s 2024 so at the very least you should be looking to retire any remaining practices of sharing variably formatted excels and documents via email. Your investors need something better.
So let's talk about a classic dilemma: building your own deal monitoring and management system from scratch or buying a pre-built solution. Both options have their merits, and the "right" choice depends on your specific needs and resources.
There's a certain allure to crafting your own system, especially if you have an internal tech team who can. You get complete control; you can tailor features to your exact workflow.
Here are some potential benefits of building your own system:
But hold on a sec, there's a flip side to the DIY coin. Building a system from scratch requires some serious resources:
Let's face it, building a car from scratch takes a lot of effort. Sometimes, you just want to hop in a pre-tuned machine and hit the road. That's where pre-built deal management systems come in. These solutions offer a streamlined approach, allowing you to focus on what you do best – finding and closing deals.
Here are some reasons why buying a pre-built system might be a good call:
However, pre-built solutions come with some limitations:
So in short, build when:
Otherwise, it’s probably better to just buy off the shelf.
Ultimately, the best choice depends on your unique circumstances, but beware of the “just because” trap. Just because you can build something doesn’t necessarily mean you should.
In the world of asset back lending, maintaining the quality of assets is paramount. One way to ensure that asset quality is upheld is through completing thorough audits often called field examines. Audits play a crucial role in asset back lending by providing insight into the condition and value of the assets being used as collateral.
In this blog post, we will explore the importance of audits in asset back lending and how they can help lenders mitigate risk and protect their investments.
In the intricate world of asset back lending, the function of audits transcends mere procedural formality. It embodies a critical mechanism for ensuring the integrity and viability of the assets at the heart of lending agreements. Through meticulous audits, lenders embark on a detailed examination of the collateral pledged, dissecting its authenticity, current state, and true value. This process not only affirms the asset's eligibility as collateral but also safeguards the lender by providing a clear picture of the asset's capacity to cover the loan in situations of default.
The essence of conducting audits lies in the power to uncover the layers of information about the assets that are not immediately visible or apparent. It's a proactive step that allows lenders to delve into the finer details, scrutinizing every aspect of the collateral to ensure it meets the stringent criteria required for securing the loan. The verification process that audits facilitate helps in establishing the legitimacy of the asset documentation, a vital step in confirming that the collateral is free from encumbrances or disputes that could jeopardize the lender's interest.
Moreover, audits act as a strategic tool in the identification of potential risks or inaccuracies within the asset documentation. This level of scrutiny enables lenders to navigate the complexities of asset back lending with informed confidence, crafting loan terms and conditions that reflect a comprehensive understanding of the collateral's true standing. It’s through this lens that audits are seen not just as a formality, but as a cornerstone practice in asset back lending, integral to maintaining the equilibrium between risk and reward. In navigating these waters, lenders are better equipped to make decisions that uphold the quality of their asset portfolio, ensuring a foundation of trust and reliability in their lending practices.
Navigating the complex terrain of asset back lending without the compass of thorough audits can lead lenders into murky waters, compromising the integrity of their asset portfolio. Inadequate audits—those lacking in depth, precision, and comprehensive scrutiny—serve as a weak link in the chain of financial security and risk management. The absence of diligent audits opens the floodgates to a myriad of risks that can diminish the quality of assets, casting long shadows on their value and reliability as collateral.
The ramifications of insufficient audits stretch beyond the immediate horizon of undetected issues; they erode the foundation of trust upon which the lender-borrower relationship is built. Assets that have not been thoroughly vetted may carry hidden liabilities or encumbrances, making them less capable of securing the loan than initially perceived. Such oversight can escalate into scenarios where the asset fails to cover the outstanding loan amount in the event of a default, thrusting lenders into precarious financial positions.
Furthermore, the landscape of asset back lending is littered with potential pitfalls that only rigorous audits can unveil. Inadequate audits may overlook discrepancies in asset documentation or fail to identify assets that are overvalued, creating a false sense of security around the loan’s coverage ratio. This oversight can lead to inflated lending against assets that are unable to sustain their purported value, increasing the vulnerability of lenders to market fluctuations and asset depreciation.
The essence of thorough audits lies in their ability to illuminate the true state and potential of assets, ensuring they are not only suitable but also resilient forms of collateral. Without this critical examination, lenders expose themselves to increased risk of loss, undermining the stability and profitability of their asset back lending ventures. Thus, the role of audits is not just a procedural checkpoint but a strategic imperative in preserving asset quality and fortifying the financial safeguards that underpin asset back lending.
Elevating the effectiveness of audits within the realm of asset back lending necessitates a strategic pivot towards oversampling high-risk targets. This nuanced approach is not merely about adding more checks into the process but tailoring the audit’s focus towards those assets that inherently carry a higher potential for discrepancies or valuation challenges. By adopting this method, lenders can delve deeper into the subsets of their asset portfolio that are most susceptible to fluctuations in value or integrity, thereby preemptively identifying vulnerabilities that could compromise the loan’s security.
This strategy of targeted scrutiny allows for a more dynamic and informed audit process. It acknowledges that not all assets carry the same level of risk and, therefore, should not be audited with the same intensity or frequency. High-risk targets may include assets that are highly volatile in value, possess a higher likelihood of legal encumbrances, or are situated within markets that are subject to rapid changes. The act of oversampling these categories enables lenders to apply a magnifying lens to the areas of greatest concern, ensuring that the depth of the audit matches the degree of risk posed.
In practice, this approach can involve deploying a variety of specialized audit techniques tailored to the specific nature of high-risk assets. These might include more frequent asset inspections, deeper dives into the documentation and legal background of the assets, or employing advanced analytical tools to predict potential future value shifts. The goal is to move beyond the surface level, crafting an audit process that is as dynamic and multifaceted as the assets themselves.
Adopting a strategy of oversampling high-risk targets within audits signals a proactive stance in asset management, one that prioritizes the early detection of issues and underscores a commitment to maintaining the highest standards of asset quality in lending practices. This method not only fortifies the lender’s position but also enhances the overall stability and reliability of asset back lending as a financial instrument.
To elevate the efficacy of audits within the asset back lending landscape, practitioners must adhere to a suite of best practices that refine the process beyond mere compliance. Key among these is the integration of both payment and underwriting audits, each serving a unique role in dissecting the financial health and viability of the assets under scrutiny. Payment audits scrutinize the consistency and reliability of cash flows associated with the asset, while underwriting audits delve into the initial evaluation processes, ensuring that the underwriting standards were met and remain relevant.
An indispensable practice involves the meticulous verification of asset documentation. This step is critical in ascertaining the legitimacy and legal standing of the assets in question. It involves a thorough review of titles, valuations, and any encumbrances that may impact the asset's status as collateral. Ensuring the authenticity of these documents can shield lenders from unforeseen legal complexities and financial discrepancies.
Moreover, comprehensive due diligence forms the backbone of effective audit practices. This encompasses a broad spectrum of evaluations, from the physical inspection of tangible assets to the detailed analysis of financial records and market conditions influencing asset values. Such exhaustive due diligence ensures that lenders have a holistic understanding of the assets, empowering them to make informed decisions.
Embracing these best practices in audits does not merely fulfill a regulatory requirement; it signifies a commitment to maintaining the integrity and quality of the asset portfolio. Through meticulous implementation, lenders can fortify their positions, mitigate risks, and sustain the trustworthiness of asset back lending mechanisms.
Cascade's proprietary technology stands at the forefront of revolutionizing how audits are conducted in asset-back lending. By harnessing advanced algorithms, Cascade meticulously flags high-risk assets for deeper scrutiny in both underwriting and payment audits. This innovative approach ensures that before a deal closes and throughout the loan's lifecycle, lenders can maintain a vigilant eye on the assets that underpin their financial transactions. Embracing the agility and precision of Cascade's technology allows lenders to perform targeted audits with unprecedented ease. Before a deal concludes, a sample ranging from 25 to 50 assets undergoes a thorough examination, setting a robust foundation of trust and transparency from the outset. The vigilance continues post-deal with monthly or quarterly samples of 5 or more, ensuring consistent oversight and adaptability to any shifts in asset quality or value. This seamless integration of Cascade's technology into the audit process eliminates much of the friction traditionally found in the lender-borrower dynamic during high priced and time-consuming audits. By simplifying and streamlining audit activities, lenders can focus on what matters most—safeguarding the quality of their asset portfolio and nurturing a relationship built on reliability and mutual respect with their borrowers.
In the world of Asset Backed Lending, the management of collection accounts is crucial for ensuring the success and profitability of a portfolio. One key aspect of this management is cash reconciliation, a process that allows lenders to track and monitor the flow of funds within their collection accounts. By implementing effective cash reconciliation practices, lenders can not only improve their risk management strategies but also optimize their asset management efforts.
In this blog post, we will explore the importance of cash reconciliation in asset-backed lending, the step-by-step process of conducting cash reconciliation for collection accounts, and best practices for monitoring collection accounts efficiently.
In the nuanced landscape of Asset Backed Lending, the axiom "Cash is King" is not just a cliché but a foundational principle guiding the orchestration of financial symphonies. At the heart of this intricate process lies cash reconciliation, an indispensable mechanism that ensures the veracity and reliability of a lender's financial narrative. Through meticulous reconciliation of cash flows within collection accounts, lenders embark on a critical journey to unveil discrepancies, thwart potential fraudulent activities, and methodically chart the trajectory of their loan portfolios.
This diligent practice is more than a mere financial chore; it is a strategic vantage point from which lenders can sharpen their risk management tactics, refine their decision-making process, and steadfastly adhere to the stringent tapestry of regulatory frameworks. In an ecosystem where precision and accuracy are paramount, cash reconciliation emerges as the beacon that illuminates the path to financial integrity and robustness.
The process transcends the routine matching of transactional data, evolving into a comprehensive audit that spans deposits, withdrawals, and the minutiae of financial interactions. In the realm of Asset Backed Lending, where the stakes are perpetually high, cash reconciliation is the bulwark that guards against the specters of financial inaccuracies and the pitfalls of non-compliance.
As lenders navigate through the complex corridors of collection account management, embracing cash reconciliation equips them with the tools to not only safeguard their assets but also to propel their portfolios towards optimized performance and unparalleled financial excellence.
Collection accounts stand as the linchpin in the intricate ballet of Asset Backed Lending, orchestrating a symphony of financial transactions with precision and grace. These bespoke financial conduits are designed with the singular purpose of facilitating the seamless flow of payments from borrowers to lenders, embodying the essence of efficiency and control in the management of loan remittances. As vital cogs in the machinery of asset management, collection accounts not only accumulate payments but also serve as watchdogs, monitoring the health and liquidity of loan portfolios with unwavering vigilance.
In the realm of Asset Backed Lending, the strategic utilization of collection accounts transcends mere transactional processing. It encapsulates a broader vision of financial stewardship, wherein every payment received is a testament to the robustness of the lending framework and every disbursement to investors a reaffirmation of trust and reliability. By centralizing the cash flows inherent in loan servicing, these accounts offer a panoramic view of the financial landscape, allowing lenders to harness critical insights into borrower behavior, payment trends, and overall portfolio performance.
The orchestration of collection accounts demands not only an acute understanding of financial mechanics but also a deep appreciation for the nuances of risk and reward in asset management. By leveraging these specialized accounts, lenders embolden their strategies with a layer of financial acumen that is both comprehensive and nuanced, ensuring that every decision is informed by real-time data and every investment move is calibrated for optimum returns. In this sophisticated dance of numbers and narratives, collection accounts emerge not just as tools of transactional necessity but as beacons of strategic foresight in the ever-evolving tableau of Asset Backed Lending.
Embarking on the journey of cash reconciliation for collection accounts is akin to navigating through a meticulously crafted maze, where every turn unveils critical insights, and every step taken is a move towards financial clarity and control. The initiation of this process begins with the gathering of financial records from both the lender's ledger and the associated bank statements. This preparatory phase sets the stage for a comprehensive comparison, where each transaction is meticulously matched against its counterpart to ensure consistency across the board.
The journey progresses with the careful examination of deposits, pinpointing the exact match in the vast sea of transactions. This is followed by a detailed scrutiny of withdrawals, interest payments, and fees, each requiring a keen eye to detect discrepancies that could potentially skew the financial narrative. The reconciliation process is not merely about identifying errors but understanding their origins and implications, transforming this exercise into an insightful exploration of financial health.
As the process unfolds, irregularities that emerge are carefully documented, providing a clear trail of evidence for subsequent investigation and resolution. This rigorous documentation is crucial for maintaining the integrity of financial records and fostering accountability within the financial ecosystem.
The final phase involves the reconciliation of the ending balances, a critical step that confirms the alignment of the lender's ledger with the bank's records. This confirmation is not the conclusion of the journey but a pivotal checkpoint that validates the accuracy and reliability of the financial data, ensuring that the lender's financial landscape is portrayed with precision and truthfulness.
In an era where digital innovation reshapes the contours of Asset Backed Lending, leveraging technology becomes not just an option but a strategic imperative for efficient cash reconciliation. The introduction of sophisticated, automated reconciliation platforms heralds a new dawn of operational efficiency, enabling lenders to navigate the complexities of collection account management with unparalleled ease and precision.
These cutting-edge technologies serve as the cornerstone for a transformative approach to reconciliation, meticulously sifting through vast data landscapes to unearth discrepancies with surgical accuracy. They offer a real-time lens into account activities, shedding light on the intricacies of financial transactions and ensuring every penny is accounted for, without the traditional burden of manual oversight.
By harnessing the power of automation, lenders are equipped to elevate their risk management frameworks, seamlessly integrating robust checks and balances that safeguard against the specter of financial anomalies. The ripple effect of this technological infusion extends beyond the immediate benefits of time and resource optimization; it fosters a culture of accountability and transparency that is vital in the highly scrutinized environment of Asset Backed Lending.
Moreover, these digital tools pave the way for actionable insights, transforming raw data into a strategic asset. This empowers lenders to make informed decisions, tailoring their strategies to the evolving dynamics of borrower behavior and market trends, thus ensuring that their asset management practices remain at the forefront of excellence and innovation.
At the forefront of innovation in cash reconciliation, Cascade's proprietary technology redefines the paradigm of collection account management within the sphere of Asset Backed Lending. This transformative platform is designed to harness the power of automation and sophisticated analytics, providing an unrivaled edge in navigating the complexities of financial transactions. Cascade’s solution seamlessly integrates into the lender’s operational fabric, offering a streamlined, user-friendly interface that dramatically reduces the time and effort required for reconciliation processes. Its real-time reporting capabilities ensure that lenders are always equipped with the most current data, enabling proactive management of collection accounts and enhancing decision-making precision. Moreover, Cascade’s technology is built with the highest standards of security and compliance in mind, offering peace of mind in an environment where these aspects are non-negotiable. By adopting Cascade’s cutting-edge reconciliation technology, lenders are not just optimizing their operational efficiency; they are embracing a future where asset management and risk mitigation are synchronized, driving toward financial success with confidence and clarity.
One of the facts of life is when doing a private debt deal, getting the deal done is often the beginning, not the end of the work. Following the deal closing, every debt investor wants to have access to information about their borrower, but every borrower wants to get back to their day job; growing their business.
With these competing forces at play, it’s sensible for investors and borrowers to appoint third-party agents to handle their data and reporting. Here we explore the 3 main advantages of doing so:
Managing investor relations in private debt can be complex. By leveraging a third-party agent, you can streamline investor reporting, improve accuracy, enhance security, and free up valuable internal resources.
In today's competitive private debt market, efficient and insightful investor reporting is crucial for building trust and attracting new capital. Partnering with a third-party agent can give you the tools and expertise needed to deliver exceptional reporting that keeps your investors informed, engaged, and confident in your investment strategies.
Roll Rates, Markov Chains, Flow Rates, or whatever you call them in your part of the world, are metrics which measure the transition of loans in a portfolio from one DPD bucket to another. Roll rates can offer a dynamic picture of a portfolio's health beyond static snapshots like delinquency rates (DPD/NPL). Here's a deeper dive into their potential meanings and significance:
Analyzing historical roll rates allows lenders to not only estimate defaults but also understand the velocity of deterioration. A high roll rate from"Current" to "60+ Days Past Due" suggests borrowers are rapidly falling behind, prompting swifter action compared to a gradual increase.
Beyond just increases, roll rates can reveal specific patterns. For instance, a consistently high roll rate from "30 Days DPD" to "Current"might indicate aggressive collections efforts that push short-term payments but don't address underlying issues. This may lead to an increase in future defaults.
When comparing roll rates, consider factors like:
While roll rates offer valuable insights, it's important to acknowledge their limitations.
Roll rates rely on historical data, assuming future behavior will mirror past trends. This might not hold true during:
Roll rates are heavily influenced by the makeup of a portfolio. Here's why:
These limitations can largely be mitigated by combining Roll Rates with other credit quality indicators like credit scores, loan-to-value ratios, and economic forecasts for a more comprehensive picture.
By incorporating roll rates into their analysis, private credit investors and lenders gain a more nuanced understanding of portfolio risk and can make data-driven decisions for:
While limitations exist, roll rates, when used thoughtfully, are a powerful tool for navigating the complexities of private credit investing and lending.
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On this episode of ATLalts, Mike Shum, Co-Founder and CEO of Cascade, shares his journey and the mission of the company. Mike discusses the challenges in the private debt market and how Cascade is building solutions to simplify and streamline the process. Mike also provides insights on preparing for accessing institutional debt and the importance of the structuring phase in the debt raise process. In this conversation with ATLalts host Andres Sandate Mike discusses the importance of valuation and terms in debt financing. Mike emphasizes that price and size are not the primary concerns for early-stage founders, but rather factors such as leverage and flexibility should get more attention. Mike explains that interest rate is just one component of a term sheet and that founders should consider other factors like upfront fees and unused capital fees. Mike highlights the significance of eligibility criteria and concentration limits. Mike discusses the monitoring and compliance aspect of debt deals, emphasizing the need for accurate and real-time reporting. Mike concludes by explaining how Cascade provides solutions for asset managers in the private credit space and shares the company's vision for the future.
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Our CEO, Michael Shum, joins the Fintrepreneur Podcast where he discusses "Democratizing Private Debt Markets" with hosts David Gens and Elias Beaino. They explored Michael's experiences, the profound Digital Transformation of Private Debt Markets, and the latest in Fintech solutions driving innovation.
Discover how these technological advancements are not just reshaping finance but also fostering unprecedented opportunities for businesses to thrive.
Join the conversation as we shed light on the crucial role of sustainability in the private debt sector. Don't miss out on this dynamic discussion that promises valuable insights for entrepreneurs and finance enthusiasts alike.
Tune in to Fintrepreneur for an engaging blend of expertise, innovation, and the ever-evolving intersection of finance and entrepreneurship!
Any diligence process is challenging. Borrowers are usually juggling their ‘day job’ of running their business whilst simultaneously catering to investor needs for data and information. Investors on the other hand are fully focused on the borrower at this phase, ensuring their potential investment will be a safe and profitable one. Whilst we could discuss the metrics Investors typically use in their assessment, today I’d like to discuss red flags they look for, and how borrowers could potentially negate these if they are aware of them ahead of time.
Some aspects of fintechs are proprietary meaning the fintechs understandably will want to keep them secret. From a commercial point of view, if the fintech’s founders have discovered a new, better way to do things i.e. process some form of information into better decisions, then it is only natural to not publish this openly as they could give away their competitive advantage. On the contrary, there are aspects that should be openly and willingly shared with potential investors. If the fintech company is under an NDA and you are asking for millions of dollars from a potential investor, it is only fair that certain information i.e. finances, bank balances, default rates (more on this later), collections practices etc etc are shared. A legitimate company wants to tell its story, attract investors, and build trust.
Counter: If you as a borrower have legitimate concerns about sharing a particular type of information, share your concern openly with the potential investor. Usually there is a work around and by being transparent you build rapport.
Defaults and non-performing loans (NPLs) are inevitable in lending, but their numbers tell a tale. Consistently high NPLs, particularly if accompanied by weak explanations for improvement, point to a flawed business model or poor risk management. Conversely, beware of suspiciously perfect NPL rates. If NPL is zero, either you are not taking enough risk, or you are lying. Either way is a net negative.
Counter: Be transparent about your NPLs. If they are too high, have a thorough explanation as to why and what steps have been taken to ensure this doesn’t happen in the future. Early stage lending businesses can have high NPLs as they try certain segments or policies and this can be easily explained.
A company touting itself as an ethical, green lender with a portfolio stuffed with fossil fuel investments? Do you state you have 16 types of collateral but in reality only have 3? Alarm bells should be ringing. Such inconsistencies expose a disconnect between slogans and reality. Investors will be looking for the data to align with the statements in the pitch deck. If they don’t, they will walk away.
Counter: Ensure you can backup any marketing material during diligence. If you are not a green lender, then say so. There are investors available for myriad types of loans and industries. Misspeaking in your marketing to them will only ensure you waste time with the wrong ones.
Lofty projections are seductive, but base your decisions on grounded realism. Can a company realistically double its user base in a saturated market? Does their expansion plan defy industry logic? Is the user base going to outgrow the entire population of the country in which they operate? Note - I’ve seen this last point!
Counter: Make sure your projections are backed by some form of data and reason. Have expected clients/users and market penetration rates mapped out. I have witnessed fintech’s grow exponentially so lofty projections are not an issue if they can be backed by solid rationale.
Fintech may be tech-driven, but the core remains finance. Knowledge of lending practices, from underwriting to collections is a key driver of success for these businesses in their markets. Investors will always look for Borrowers who have a solid experience of doing their particular type of lending.
Counter: Is your management team lacking lending experience but you cannot afford to hire experienced former bankers? Several fintechs have solved this issue in their early stages by hiring strong part-time advisors who can help establish policies and procedures to get the business running. The added bonus is usually once you are ready to hire senior management, your advisor will likely have strong candidates from their network for you to choose from.
The goal for investors is to understand the rationale behind the red flags and assess their long-term implications. The quicker you can do this, the better your diligence process will be.
Lastly, whilst you will never see this written in an investment memorandum, a red flag you should be wary about is the investors gut feeling. The individual who proposes the deal to their internal investment committee is oftentimes taking some form of career risk in doing so. If a deal turns out to be a complete scam, the investment officer can have their employment terminated. And so, for an investment officer to commit to go through the weeks of work; interviewing, analyzing, modeling, writing reports and recommendations, they usually need to have a good feeling about the fintech. If you were in their shoes, would you waste your time with a borrower who gave you the heebie jeebies?
As a founder or executive at a startup, you’re likely well aware of the key role that debt financing can play in meeting your long-term capital needs. What you may not have considered, is leveraging a Development Finance Institutions (DFI) for your financing.
DFI’s are organizations established to directly enable economies to grow and support businesses through investing and providing planning assistance. As such, it pays to know who some of the most active DFIs in debt investing around the world are so that your startup venture can access this form of financing if you qualify. In this blog post, we will provide an a list of the most active DFIs extending debt financing to startups across the globe.
In conclusion, DFIs have provided invaluable assistance to many businesses around the globe and are an important resource for financing innovation and economic development. Whether you are just getting started on your entrepreneurial journey or in the more advanced stages of running a startup, it pays to be aware of the financing opportunities that DFIs present. If you believe your venture might be a fit for DFI financing, then reach out and put those resources to work for you.
Whilst we know our list isn’t exhaustive, we wanted to give a high level overview of the most active by region from our global experience.
You can download the full market map of the the most active emerging market debt investors below.
Navigating the world of private debt can be a daunting task, especially for first-time entrepreneurs. One of the steps in this journey is negotiating a term sheet, an agreement that outlines the key terms, pricing, and structure of a private debt deal.
While the term sheet may seem non-committal (it could be either), it's essential to approach the negotiation process with caution and a clear understanding of your company's needs and goals. Here I present 5 tips for negotiating a Term Sheet.
Remember, a successful investment deal should be mutually beneficial for both parties involved. Avoid striving for a one-sided victory, as this can set the stage for future conflicts and ultimately lead to the failure of the transaction. Approach the negotiation as a collaborative process, not an adversarial battle.
Building trust and rapport with the investor is crucial for a successful deal. Being open about the rationale behind things you push back on can help you avoid acrimonious discussions and focus instead on finding the common ground. Remember, private debt investors have their own limitations and restrictions on how they can price and structure a deal so the sooner you find the common ground, if it is to be found, then the better for everyone.
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Before entering negotiations, clearly define your company's non-negotiable terms, also known as "drop-dead points." These are the essential elements that you cannot compromise on, such as valuation, pricing, control rights, or intellectual property protection. It’s best to know these upfront so as you don’t spend weeks and months chasing a deal for it to fall over later due to a non-negotiable.
In addition, Sign the term sheet only if you are fully committed to executing the investment deal promptly and are prepared to receive the funding. Avoid entering into agreements without a clear plan for implementation.
Carefully scrutinize the covenants outlined in the term sheet. These are conditions that the company must adhere to, such as financial reporting requirements or limitations on certain business activities. Try and model them out in excel and, if possible, perform backtesting to ensure the covenants are realistic and achievable. You don’t want to have an angry investor breathing down your neck from day one because a covenant was unrealistically entered into.
A detailed term sheet serves as a solid foundation for the subsequent negotiation process. The more comprehensive the initial agreement, the fewer surprises and disagreements that arise later. This also has the added benefit of ensuring the use of lawyers down the line is limited when the final agreements are eventually drafted.
Don't limit your cost assessment to the stated interest rate. Factor in all associated expenses, such as upfront fees, legal costs, data agent, corporate registration and compliance requirements, and any hedging or transaction fees.
Remember, whilst negotiation is an art and not a science, there are clear processes you should follow when negotiating for business. Approach the process with a clear understanding of your company's needs, a willingness to compromise, and a focus on building long-lasting relationships.
Finally, by the time a term sheet has landed on your desk, the private debt investor you are working with has already championed your deal within their organization, usually in the form of a screening memo. At this stage, they are as eager as you for the transaction to proceed.
As a small business owner or startup founder, you probably know how challenging it can be to secure the necessary funding to keep your enterprise running smoothly. With the market constantly shifting and demands increasing, finding ways to maintain liquidity can feel like an uphill battle. But what if there was a way to leverage your existing assets to access the capital you need? Enter asset-based lending—a financial tool that could be the game-changer your business has been waiting for.
In this blog post, we'll explore asset-based lending, how it can benefit your business, and the tell-tale signs that suggest it might be the right fit for you. By the end, you'll see why this financing option could be the key to unlocking new growth opportunities for your startup or small business.
Asset-based lending (ABL) is a financing method that allows businesses to secure loans by using their assets as collateral. These assets can include accounts receivable, loan portfolios, inventory, equipment, and real estate. Unlike traditional loans that depend heavily on credit scores and financial statements, ABL focuses on the value of your tangible assets.
This form of lending is particularly suited for businesses with significant assets but may face challenges in obtaining traditional financing. The primary difference between ABL and conventional loans lies in its flexibility. While traditional loans rely on creditworthiness, ABL lets companies with weaker credit profiles access funds by leveraging their existing assets.
Wondering if asset-based lending is right for you? Here are five signs that your business might be a prime candidate for this type of financing:
Keeping cash flow steady is critical for any business, particularly small ones. If you're finding it hard to manage your cash flow, or if you're constantly waiting on delayed payments from customers, ABL can help bridge the gap. By borrowing against your receivables or inventory, you can maintain liquidity while waiting for customer payments.
Experiencing rapid growth is exciting, but it can also strain your resources. Asset-based lending can provide the quick capital injection needed to scale your operations effectively. Whether expanding your inventory or adding new equipment, ABL can support your growth ambitions without the delays typically associated with conventional finance.
For many businesses, income can vary significantly with the seasons. Asset-based lending offers the flexibility you need to manage these fluctuations. By borrowing against your assets when cash is tight, you can ensure your business keeps running smoothly, regardless of seasonal downturns.
Securing a traditional loan can be difficult if your business has a less-than-perfect or newly established credit history. Fortunately, ABL is less reliant on credit scores, making it a viable option for businesses with credit challenges. By leveraging your assets, you can gain access to the funds you need to move forward.
Every business needs working capital to fund operations, pay employees, and cover unexpected expenses. If you're struggling to maintain adequate working capital, asset-based lending can provide the financial lifeline you need. By using your assets as collateral, you can access the funds required to keep your business running smoothly.
Asset-based lending offers several advantages that can be especially beneficial for small business owners:
With ABL, you can convert the value of your assets into working capital. This increased liquidity can help you address immediate financial needs and seize new opportunities without delay.
Unlike traditional loans with strict terms, ABL offers more flexibility. You can adjust your borrowing based on the current value of your assets, allowing you to access funds as needed without over-committing.
If your business has significant assets, you can leverage them to secure the financing you need. This opens up additional non-traditional capital sources for your business growth.
Potential for Growth without Diluting Equity
One of the biggest advantages of ABL is that it allows you to grow your business without sacrificing ownership. By using your assets as collateral, you can access the capital needed for expansion without diluting your equity or giving up valuable shares.
When it comes to securing and managing debt facilities, Cascade offers a truly innovative solution for borrowers. Cascade's platform accelerates fundraising by allowing you to seamlessly share diligence data with multiple investors and reduces the operational burden of debt facility management and compliance post-close.
Cascade’s platform streamlines your loan operations data, allowing you to scale your debt capital without increasing headcount. This reduces operational overhead and ensures you stay compliant with lender requirements.
With direct data integrations, Cascade enables real-time reporting to help you manage your risk effectively. This transparency ensures your lender is always informed, reducing the need for manual updates.
Cascade's investor portal lets you choose what data to share with stakeholders, improving communication and maintaining strong relationships with your investors.
“My lender needs to know what is going on, and this gives them the transparency they need without adding operational burden on my team. Our ability to monitor our borrowing base daily and expedite the fundraising process with lenders in the future enables us to expand faster.” - Boris Kalendarev, CEO, Specialty Capital
In conclusion, asset-based lending can be a powerful tool for small business owners and entrepreneurs looking to secure the funding they need. Whether you're facing cash flow challenges, experiencing rapid growth, or struggling with a poor or new credit history, ABL offers a flexible, reliable solution.
If you think asset-based lending might be the right fit for your business, consider exploring Cascade's platform to streamline your fundraising and debt management efforts. Cascade's innovative approach can help you focus on your business mission while maintaining transparency and compliance with your lenders.
To learn more about how Cascade can support your debt capital needs, schedule a strategy call with our team today.
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Have you ever wondered what makes a small business thrive in a competitive market? It's often about having the right resources at the right time. Asset-based finance can be a game-changer for small businesses and startups, providing the capital needed to seize opportunities or weather tough times. But what exactly does it take to secure this kind of financing? At its core, asset-based lending is about collateral. Let's unravel the mystery of what lenders are looking for.
Collateral is the backbone of asset-based lending. It refers to assets that a borrower pledges to a lender as security for a loan. In the event of a default, the lender can seize and sell these assets to recover their funds. But not all assets are created equal. Lenders prefer certain types of collateral that offer more stability and value.
Valuation is a critical aspect of the collateral process. Lenders want to know they can recover their funds if necessary. Here's how they typically evaluate:
Why do lenders place so much emphasis on collateral? It's simple—collateral reduces risk. Lenders can offer more favorable terms and interest rates by having assets to fall back on. This means access to larger amounts of capital with potentially less stringent repayment conditions for businesses.
Understanding collateral's role in asset-based lending is essential, but managing your facilities efficiently requires technology and expertise. That's where Cascade comes in. Our platform automates the operational complexities of debt facility management, giving you real-time insights into your loan portfolio.
Cascade allows businesses to automate loan operations, reducing overhead and freeing up resources to focus on growth. With our real-time reporting and investor portal, you can manage risk effortlessly while maintaining transparent communications with key stakeholders.
Our platform supports various asset types and financing structures, ensuring your unique business needs are met at every growth stage.
Navigating the world of asset-based finance can be daunting, but understanding the fundamentals of debt capital and collateral can give you the confidence to leverage your assets to accelerate your growth. With solutions like Cascade, small business owners and startups can efficiently manage their loan portfolios, enabling faster growth and capital expansion.
Are you ready to take the next step in financing your business's future? Explore how Cascade can simplify your asset-based lending operations today.
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In today's fast-evolving financial markets, startups, venture capitalists, and private credit professionals need more than just a one-size-fits-all solution. They need a platform that understands the intricacies of asset-based finance and can offer global coverage, transparency, and flexibility. Enter Cascade—your ultimate partner in asset-based lending and private credit transactions.
Cascade was founded by two former private credit fund managers. They are true subject matter experts who have experienced firsthand the challenges of scaling AUM without simultaneously scaling your headcount. They also witnessed the severe operational burden that the companies they would evaluate and invest in experienced. They built Cascade to solve the challenges they know exist in the market to democratize and accelerate access to private credit. Their mission is to make private credit simpler, less risky, and less operationally intensive for all counterparties involved in the transaction.
Cascade is explicitly designed for asset-based finance and complex private credit transactions. Unlike many competitors that only support simple debt structures, our platform excels in handling the most complex deals. Whether you're dealing with warehouse lines, forward flow agreements, or multi-class debt facilities, Cascade has the tools and flexibility to meet your needs.
One of the most significant differentiators of Cascade is our approach to data. We don’t just show investors self-reported portfolio company data. Instead, we recalculate all critical data from the ground up. Serving as a neutral third-party data agent, we enhance transparency and trust among all parties involved in a transaction. This objectivity is crucial for investors and borrowers, ensuring everyone works with accurate and reliable information.
Most platforms limit their support to the US or a single region, leaving businesses with international interests in a lurch. Cascade offers global coverage, ensuring that our platform can support your lending activities no matter where your business operates or where your investors are located. This global reach means you can seamlessly manage facilities across multiple countries, making international expansion and investment in emerging markets possible and straightforward.
Cascade's platform is built to automate loan operations end-to-end, significantly reducing the time and effort required to raise and manage complex debt facilities. Our users report spending up to 90% less time on reporting and experiencing 75% faster transaction closings. This operational efficiency allows you to focus on what truly matters—growing your business.
Direct data integrations provide real-time reporting, offering institutional-grade risk analytics that you can trust. This feature enables better risk management and decision-making, giving you a clear view of your financial landscape at any moment.
Cascade's extensive contract library, back-testing, and agreement reconciliation tools allow you to structure deals with more confidence. Whether you're managing consumer loans, auto leases, or revenue-based financing, our platform can support your unique requirements.
With Cascade, you can increase investor confidence by providing timely, transparent, and accurate data. Our investor portal lets you choose what information to share, improving communication and fostering stronger stakeholder relationships.
Streamline your fundraising efforts with our end-to-end platform to make the process easier and more efficient. Our tools simplify the due diligence process, offering the metrics, analytics, and data sharing needed to make informed decisions.
Utilize our extensive contract library and back-testing capabilities to structure your deals and term sheets with confidence.
Automate monitoring, reporting, payment scheduling, and capital draw requests, minimizing the operational burden on your team.
Don't just take our word for it. Here’s what some of our satisfied clients have to say:
“Cascade's ability to stay independent and neutral for both parties is extremely important because some of the metrics we track and rely on for decision-making are not always clear-cut.”—Tufuantsi Daniel, Senior VP at Cordiant Capital
“The credit facility monitoring tools allow us to have fantastic real-time insights into our investments, which has a massive impact on our risk management capabilities.”—AJ Davidson, CEO, SixPoint Capital
“Their platform is user-friendly, and their customer support is top-notch. Highly recommended for anyone in need of debt management solutions.”—Christophe Javelly, CFO at Baubap
Ready to elevate your private credit operations? Get started today.
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In today’s fast-paced startup ecosystem, securing funding is crucial for scaling operations and accelerating growth. Traditional funding models like venture capital and bank loans often come with strings attached, leading many startups to explore alternative finance options. One such promising alternative is Revenue Based Financing (RBF). But what exactly is RBF, and how can it benefit your startup?
Revenue-based financing is a specialized form of funding in which a company receives capital in exchange for a percentage of its future revenue. This means repayments are directly tied to the company's revenue, which can provide much-needed flexibility for startups.
Types of RBF include:
The startup funding landscape constantly evolves, and RBF is poised to play an increasingly important role. With the rise of subscription-based models and predictable revenue streams, more startups are turning to RBF as a viable financing option. Additionally, technological advancements and data analytics are making it easier for lenders to assess risk and structure flexible repayment terms.
Revenue-based financing offers a compelling alternative to traditional funding models, providing startups with non-dilutive, flexible capital that aligns with their revenue. By understanding how RBF works and weighing its pros and cons, startups can make informed decisions about their funding strategies.
Ready to explore how Revenue-based Financing can fuel your startup’s growth? Schedule a strategy call with our team today.
Securing funding is pivotal for scaling operations and driving growth in the world of startups. However, navigating the funding landscape can be daunting, especially when trying to balance ownership dilution and borrowing costs. Enter asset-based finance—a flexible and often cost-effective funding solution that can help startups leverage their existing assets to fuel their ambitions.
Asset-based finance, often called asset-based lending (ABL), involves using a company's income-generating assets as collateral to secure a loan. These assets include equipment and inventory to accounts receivable and intellectual property. Essentially, it's a way for businesses to unlock the value of their assets to access much-needed capital without sacrificing equity.
For example, imagine your startup owns a fleet of vehicles used for delivery services. To expand your operations, you need additional funds to purchase more vehicles. Instead of selling equity and diluting your ownership, you can use the future lease payments from your existing fleet as collateral to secure a line of credit.
Choosing asset-based finance over other funding options comes with several advantages:
Navigating the asset-based finance process involves several key players and steps:
After the agreement is signed, the capital provider may acquire the borrower's assets or invest in a platform (such as a special purpose vehicle) that owns the borrower's originations and associated payments. Throughout the loan term, the capital provider will regularly monitor the borrower's compliance with covenants and key performance indicators (KPIs).
Identify the assets in your business that generate consistent cash flow. These can include accounts receivable, inventory, equipment, and intellectual property.
Research and approach lenders who specialize in asset-based lending. Look for those with experience in your industry, who understand your product, and a track record of successful deals.
Gather comprehensive loan tapes, historical transaction data, and financial documentation, including balance sheets, income statements, and cash flow projections. Be prepared to demonstrate the value and performance of your assets.
Work with the lender to negotiate the loan terms, including interest rates, repayment schedules, and covenants. Ensure that the terms align with your business goals and cash flow capabilities.
Expect the lender to conduct thorough due diligence on your financial health, asset performance, and compliance procedures. Be transparent and responsive to their inquiries.
Once due diligence is complete and both parties are satisfied, finalize the credit agreement and secure the loan. Ensure that you fully understand the terms and obligations outlined in the agreement.
Traditionally, the asset-based finance process has been manual and time-consuming, relying heavily on email, spreadsheets, and Word documents. However, modern software solutions like Cascade are transforming the landscape by automating and streamlining all key aspects of the process end-to-end.
Investing in debt capital management software can help startups maximize their credit facilities, ensure compliance in the short term, and create a solid foundation for future funding diversification.
Asset-based finance offers a powerful funding solution for startups looking to scale without sacrificing ownership. By leveraging existing assets, businesses can access the capital they need to grow while keeping borrowing costs low. With the right preparation and technology, navigating the asset-based finance landscape can be smooth and painless.
Ready to explore how asset-based finance can fuel your startup's growth? Schedule a demo with Cascade today and discover how our innovative platform can streamline your fundraising and loan operations.
If you’re a private credit fund or a small business owner looking to understand what types of assets or loans Cascade supports, you've come to the right place. Cascade is your trusted end-to-end solution for all asset-based financing and private credit. In this article, we’ll detail all of the assets and loan types we can support - globally.
Cascade’s strength lies in its versatility. If there’s a stream of cash flows, Cascade can support it. Here are some common asset types we support:
For any small business, having access to additional capital can be crucial. Whether it’s for expansion, inventory purchase, or managing cash flow, Cascade supports small business loans, ensuring you get the funding you need without unnecessary hassle.
Consumer loans are a common component of many businesses. Cascade’s platform simplifies the process of managing these loans, providing real-time reporting and analytics to keep you informed and compliant.
The automotive industry thrives on financing. Cascade supports auto loans and leases, offering tools that help lenders manage their portfolios efficiently.
For businesses with fluctuating income, revenue-based financing offers a flexible solution. Cascade supports this financing structure, helping businesses align their repayment schedules with their revenue cycles.
Cash flow is the lifeblood of any business. With invoice financing, businesses can get immediate access to funds tied up in unpaid invoices. Cascade’s platform facilitates this process, ensuring you maintain healthy cash flow.
Merchant cash advances provide businesses with a lump sum in exchange for a percentage of future sales. Cascade supports this type of financing, offering a seamless way to manage repayments and cash flow.
For businesses looking to support their employees with earned wage access, Cascade offers a platform that simplifies the process, ensuring funds are available when needed.
Income share agreements (ISAs) are increasingly popular, especially in education and training sectors. Cascade supports ISAs, providing the necessary tools to manage and track agreements efficiently.
For businesses dealing with unconventional assets, Cascade’s platform is flexible enough to support esoteric finance. Whether it’s intellectual property, royalties, or other unique assets, we’ve got you covered.
Our platform offers institutional-grade risk analytics, providing the metrics and data you need to manage all your facilities confidently.
With an extensive contract library and back-testing capabilities, Cascade allows you to structure your deals with confidence, ensuring they meet your unique needs.
Stay on top of your facilities with real-time monitoring. Our platform offers aggregated cash flow, covenant, and collateral pool monitoring, simplifying your oversight processes.
Cascade automates your debt operations, from reporting to payment schedule generation, reducing operational overhead and allowing you to focus on what matters most—growing your business.
Integrate with over 20 database types, including Postgres, MySQL, Snowflake, and BigQuery, without consulting any API docs. Our platform ensures you get connected in less than 30 minutes.
Asset-based financing is a powerful tool for businesses of all sizes. Cascade’s innovative platform makes it easier than ever to access and manage this type of financing. Whether you’re a small business owner or private credit investor, understanding the types of assets and loans Cascade supports can help you make informed decisions that drive your business forward.
Navigating the choppy waters of entrepreneurship is never easy, and one of the biggest challenges is ensuring your startup has the financial backing it needs to thrive. While product innovation often takes center stage, a robust capital strategy can be just as crucial. In fact, knowing how to build your capital strategy can be the difference between scaling successfully and struggling to stay afloat.
A solid capital strategy ensures you have the resources to fuel your startup's growth. It involves planning how to fund your operations, whether through equity, debt, or a combination of both. This strategy can help you avoid financial pitfalls, attract investors, and sustain long-term growth.
Capital strategy is the plan you develop to fund your company's growth. It outlines how much capital you need, where you will get it, and how you will use it. This strategy is essential for aligning your financial needs with your business objectives.
Having a well-thought-out capital strategy can provide several advantages:
The first step in building your capital strategy is to assess your capital needs. This involves understanding how much money you need to achieve your business goals and identifying when you'll need it.
Calculate the initial expenses required to start your business, including equipment, inventory, office space, and initial marketing efforts. These costs will form the baseline of your capital requirements.
Look ahead and estimate future expenses related to expansion, such as hiring new employees, entering new markets, or developing new products. This projection will help you understand your long-term capital needs.
Compare your projected expenses with your current financial resources. Any shortfall represents a funding gap that you'll need to address through your capital strategy.
Once you know your capital needs, the next step is to explore various funding options. Each option has advantages and disadvantages, so choosing the one that best aligns with your business goals is essential.
Equity financing involves selling a portion of your business to investors in exchange for capital. This option is ideal for startups with high growth potential that may not have substantial assets or revenue streams yet.
Debt financing involves borrowing money that you must repay with interest within a specific timeframe. This option is suitable for startups with steady cash flows and assets to offer as collateral.
Consider exploring alternative financing options such as crowdfunding, grants, or revenue-based financing. These options can provide additional flexibility and may be less risky than traditional equity or debt financing.
A funding timeline outlines when you'll need capital and how you'll obtain it. This timeline should align with your business milestones and growth projections.
Identify immediate funding needs, such as launching your product or covering initial operating expenses. Secure short-term financing through personal savings, family and friends, or angel investors.
Plan for medium-term funding needs, such as scaling operations or expanding into new markets. Seek venture capital or bank loans once you have a proven business model and some traction.
Address long-term funding needs related to sustained growth and market expansion. Consider strategic partnerships, private equity, or public offerings to secure substantial capital for significant initiatives.
Building strong relationships with investors is crucial for securing funding. Investors want to see that you have a clear vision, a solid business plan, and the ability to execute your strategy.
Attend industry events, join startup incubators, and connect with potential investors through online platforms. Building a robust network can increase your chances of finding the right investors for your business.
Develop a compelling pitch that highlights your business's unique value proposition, market opportunity, and growth potential. Practice your pitch to ensure you can confidently present it to investors.
Maintain open and transparent communication with your investors. Provide regular updates on your business's progress, financial performance, and any challenges you face. Building trust with investors can lead to long-term partnerships and additional funding opportunities.
Optimizing your capital structure involves finding the right balance between equity and debt financing. This balance can impact your business's financial health, cost of capital, and overall risk profile.
Consider your risk tolerance and business model when determining the right mix of equity and debt. High-growth startups may prefer equity financing, while established businesses with steady cash flows may benefit from debt financing.
Compare the costs associated with equity and debt financing, including interest rates, dilution of ownership, and potential impact on cash flow. Choose the option that minimizes your cost of capital while supporting your growth objectives.
Regularly monitor your capital structure and make adjustments as needed. Market conditions, business performance, and funding needs can change over time, so staying flexible and adapting your strategy is essential.
Modern technology can streamline capital management processes, providing real-time insights and reducing administrative burdens.
Utilize financial planning tools and software to create detailed financial models, track expenses, and forecast cash flow. These tools can help you make informed decisions about your capital strategy.
Consider implementing capital management platforms like Cascade and Carta. These platforms offer features such as automated reporting, real-time data integration, and risk analytics, making it easier to manage your capital structure and accelerate your fundraising efforts.
Stay informed about the latest developments in capital management technology and best practices. Regularly review industry publications, attend webinars, and network with other entrepreneurs to stay ahead of the curve.
Building a robust capital strategy is essential for any entrepreneur or startup founder. By assessing your capital needs, exploring funding options, developing a funding timeline, building relationships with investors, optimizing your capital structure, and leveraging technology, you can ensure that your business has the financial resources it needs to thrive.
Remember, a well-designed capital strategy can provide financial stability, attract investors, and give you the operational flexibility to adapt to changing market conditions. Start building your capital strategy today and set your business on the path to success.
Consider retaining a fractional CFO or Capital Markets advisory professional for personalized guidance and expert support in developing your capital strategy. Need a recommendation? Contact our team today.
Navigating the world of debt capital can be daunting, especially for small business owners and fintech founders. With various strategies available, it's crucial to understand which option aligns best with your business goals and operational needs. In this comprehensive guide, we’ll explore two prominent strategies—forward flow and warehouse facilities—and help you decide which is best for your business.
Forward flow is a financial strategy that allows businesses to sell their receivables upfront, quickly converting them into immediate cash. This approach is particularly beneficial for companies needing steady cash flow to support ongoing originations.
In a forward flow arrangement, receivables are sold to an investor or financial institution at a negotiated price through a forward contract. This contract stipulates the terms and price of the asset sale and is designed to facilitate regular transactions, such as monthly sales.
Consider the automotive lending industry. Car loans, which typically require monthly payments over several years, can tie up capital that businesses need to issue new loans. By selling these loans through a forward flow agreement, businesses receive immediate cash, allowing them to originate new loans without waiting for long-term repayments.
Warehouse facilities offer a different financial approach, allowing businesses to borrow against their receivables while retaining ownership and potential future gains. This structured loan arrangement is appealing to companies confident in their credit underwriting and looking to capitalize on the potential upside of their assets.
In a warehouse facility, businesses pledge their receivables as collateral to secure a line of credit from a lender. The lender provides funds based on the collateral's value, which can be drawn upon as needed to support ongoing operations or new initiatives.
A company with a portfolio of car loans might use a warehouse facility to borrow against these loans. This allows the business to generate cash flow while benefiting from the loans' long-term repayments and potential profitability.
Deciding between forward flow and warehouse facilities requires careful consideration of your business's financial needs and strategic goals. Here are some questions to guide your decision:
Some companies combine forward flow and warehouse strategies to maximize flexibility and optimize cash flow. This approach allows businesses to allocate assets to the best option based on current needs and market conditions.
For instance, a forward flow buyer might handle a smaller amount of receivables (e.g., $10M a month), while a warehouse can handle much more. If you generate more assets than the forward flow can handle, say $15M, you need a place to store the extra assets, which is where the warehouse comes in. This balance helps manage risk and optimize financial outcomes, providing a blend of immediate liquidity and potential long-term rewards.
By understanding the nuances of forward flow and warehouse facilities, you can make informed decisions that align with your business growth goals. Whether you seek immediate liquidity or long-term gains, Cascade provides the tools and insights needed to optimize your debt capital management strategy while streamlining your fundraising and loan operations.
Managing both forward flow and warehouse facilities can be complex, but tools like Cascade make it easier. Cascade's platform automates routine debt capital management tasks like borrowing base reporting, verification, and alerting. This ensures accurate data reporting, maintains compliance with lender requirements, and supports strategic decision-making.
Cascade simplifies the entire debt capital management process:
Trusted by leading investors and originators globally, Cascade helps companies with asset-backed loans save time and money, allowing them to focus on mission-critical initiatives.
If you’re ready to get started, schedule a strategy call with our team today.
When it comes to financing a business, understanding the difference between debt capital and equity capital is crucial. Both have their unique advantages and considerations, and the right choice can significantly impact your business's growth and scalability. This comprehensive guide will help you understand the intricacies of debt and equity financing, enabling you to make an informed decision that aligns with your company's goals and growth objectives.
Equity capital refers to funds raised by a business in exchange for a share of ownership in the company. This form of capital is typically acquired through issuing common or preferred stock to investors. Equity capital is often used to fuel growth, expand operations, or innovate new products and services without the immediate obligation to repay investors.
1. Dilution of Ownership: Issuing new shares dilutes the ownership percentage of existing shareholders, potentially reducing control over the company.
2. Profit Sharing: Equity investors are entitled to a share of the company's profits, which can be substantial if the business is successful.
3. Investor Expectations: Equity investors may have high expectations for growth and returns, which can add pressure on the management team.
Debt capital involves borrowing funds that must be repaid over time, usually with interest. This can be in the form of loans, bonds, or lines of credit from banks and other financial institutions. Debt capital is often used for short-term needs, such as working capital, or for long-term investments in infrastructure and expansion.
1. Retention of Ownership: Unlike equity financing, debt does not dilute the company's ownership, allowing founders to retain control.
2. Tax Benefits: Interest payments on debt are typically tax-deductible, reducing the company's overall tax burden.
3. Predictable Repayment Schedule: Debt agreements come with a clear repayment schedule, making financial planning straightforward.
4. Fixed Obligation: The lender's relationship ends once the debt is repaid, unlike equity investors, who remain part of the company until their shares are sold.
1. Repayment Obligation: Debt must be repaid regardless of the company's financial performance, which can strain cash flow during downturns.
2. Collateral Requirements: Lenders often require collateral, which can put company assets at risk if the business defaults on the loan.
3. Creditworthiness: Access to debt capital depends heavily on the company's creditworthiness, which can be a barrier for new or struggling businesses.
4. Reporting requirements: Rigorous and detailed reporting requirements, substantially more operationally intensive relative to equity capital.
Understanding the key differences between equity and debt capital is essential for making informed financing decisions:
Choosing between debt capital and equity capital is a pivotal decision for any business, and many businesses raise both to meet their growth objectives. By understanding the nuances and implications of each financing option, you can align your choice with your company's strategic goals, risk tolerance, and growth trajectory. Whether you opt for equity to leverage expertise and share risks, or debt to retain control and benefit from tax deductions, a well-informed decision will pave the way for sustainable success.
Cascade provides a platform for companies raising private debt to manage both the fundraising and ongoing loan operations process. We enable you to scale your debt capital faster, with less operational burden. Our platform helps you improve investor confidence, streamline investor reporting, and simplify your loan operations. If you’d like to learn more, we invite you to schedule a strategy call with our team.
Access to capital is more critical than ever for business owners and startups. However, traditional financing methods can be cumbersome and often out of reach for many small businesses and entrepreneurs. This is where specialty finance steps in as a game-changer. Let's explore specialty finance, how you can leverage private debt to grow your business, and why Cascade is the ultimate solution for managing your private debt.
Specialty finance refers to non-traditional financing solutions that go beyond the scope of conventional banks. It involves a variety of financial products, including private debt, which provides capital to businesses through mechanisms like asset-based lending, revenue-based financing, and more.
Unlike traditional funding methods, specialty finance is often more flexible and can be tailored to fit the unique needs of each business. This makes it an invaluable resource for startups and small businesses looking to scale rapidly without the red tape typically associated with bank loans.
Private debt can be a powerful tool for entrepreneurs and small business owners. Here's how you can leverage it to fuel your growth:
One of the main advantages of private debt is the ability to access capital quickly. Unlike traditional bank loans, which can take months to secure, private debt funding is often available within weeks. This means you can take advantage of growth opportunities as they arise without delay.
Private debt agreements are typically more flexible than traditional loans. Lenders can tailor repayment schedules, interest rates, and covenants to fit your business's specific needs. This flexibility can be crucial for managing cash flow and ensuring you have the funds necessary to operate and grow.
Equity financing, while beneficial, often requires giving up a portion of ownership in your company. Private debt allows you to retain full control over your business while still accessing the capital you need. This is particularly important for entrepreneurs who want to maintain their vision and decision-making power.
Successfully managing and repaying private debt can enhance your business's credit profile. This can make it easier to secure additional financing in the future, whether through private debt, traditional loans, or other financial instruments.
Managing private debt can be complex and time-consuming, but it doesn't have to be. Cascade simplifies the process, allowing you to focus on what matters most—growing your business.
Cascade's platform automates the operational aspects of loan management, reducing the need for manual intervention. This means you can scale your debt without scaling your headcount, freeing up valuable resources to focus on core business activities.
With direct data integrations, Cascade provides real-time reporting that helps you better manage risk. You'll have access to up-to-date information on your financial health, enabling you to make informed decisions quickly.
Cascade also offers an investor portal where you can choose what data to share with stakeholders. This improves communication and transparency, making it easier to build and maintain trust with investors.
Whether you're dealing with consumer loans, auto loans/leases, small business loans, or esoteric finance, Cascade is designed to handle it all. The platform supports various financing structures, including warehouse lines, forward flow agreements, corporate ABL, and multi-class debt facilities.
Innovative startups and institutional investors worldwide trust Cascade. Our platform democratizes the process, making it easier and more efficient for businesses of all sizes to scale their debt capital.
Learn more through our case studies here.
“My lender needs to know what is going on and this gives them the transparency they need without an added operational burden on my team. Our ability to monitor our borrowing base daily and expedite the fundraising process with lenders in the future enables us to expand faster.” - Boris Kalendarev, CEO, Specialty Capital
Specialty finance, particularly private debt, offers a plethora of opportunities for entrepreneurs and small business owners. By providing flexible, accessible, and tailored financing solutions, it enables businesses to grow and scale efficiently.
However, managing private debt can be daunting. This is where Cascade comes in. Our platform automates loan operations, provides real-time reporting, and enhances transparency with investors—all while supporting various asset-based financing structures.
Ready to take control of your financial future? Schedule a strategy call today and discover how you can leverage private debt to achieve your business growth goals.
Default rates are one of the most important metrics in loan analysis, and it's important to understand the various methods used to calculate default rates. At Cascade, we use four different primary methodologies to measure default: Rolling DPD, Strict DPD, Number of Installments, and Percent of Payment in the last [x] days. The standard methodology is Rolling DPD, but new methodologies can be computed to provide more accurate results. Loan analysis is a complex process, but understanding the way default rates are calculated is an essential part of the process. By understanding the different methodologies used to calculate default rates, you can make more informed decisions when analyzing loans.
Strict DPD measures the number of days a client has a negative outstanding balance, starting from the missed payment date until they fully repay the negative balance. Rolling DPD, on the other hand, takes into account the client's ongoing payments, reducing the negative balance as they make payments and resetting the default date to the last missed payment. The Number of Installments method calculates the count of missed installments based on the average scheduled installment over negative outstanding balance. Lastly, Percent of Payment in the last [x] days calculates the ratio of actual payments received to expected payments within a specified time frame.
Different methodologies are used to calculate default rates in loan analysis for a variety of reasons. One important factor is regulation. Central banks often require lenders to report default rates using specific methodologies, ensuring consistency and transparency in the industry. For example, Basel II, a global regulatory framework for banks, provides guidelines for calculating default rates. Additionally, loan products with different payment frequencies may require different methodologies. Institutional Debt investors also have specific ways of looking at portfolio companies through a standard methodology.
Walking through an example is the best way to understand the different methodologies - let’s assume the following scenario:
To help view the Real Payment Schedule - we align the payments
By comparing and contrasting the methodologies, loan analysts can determine which method suits their needs and objectives best. It's important to remember that the choice of methodology can impact the accuracy of default rates and the overall risk assessment of the loan. Ultimately, understanding the nuances of these methodologies allows for better decision-making in loan analysis and mitigates potential risks in Asset Backed Lending, Loan Tape Analysis, and computing Borrowing Bases.
Roll Rates, Markov Chains, Flow Rates, or whatever you call them in your part of the world, are metrics which measure the transition of loans in a portfolio from one DPD bucket to another. Roll rates can offer a dynamic picture of a portfolio's health beyond static snapshots like delinquency rates (DPD/NPL). Here's a deeper dive into their potential meanings and significance:
Analyzing historical roll rates allows lenders to not only estimate defaults but also understand the velocity of deterioration. A high roll rate from"Current" to "60+ Days Past Due" suggests borrowers are rapidly falling behind, prompting swifter action compared to a gradual increase.
Beyond just increases, roll rates can reveal specific patterns. For instance, a consistently high roll rate from "30 Days DPD" to "Current"might indicate aggressive collections efforts that push short-term payments but don't address underlying issues. This may lead to an increase in future defaults.
When comparing roll rates, consider factors like:
While roll rates offer valuable insights, it's important to acknowledge their limitations.
Roll rates rely on historical data, assuming future behavior will mirror past trends. This might not hold true during:
Roll rates are heavily influenced by the makeup of a portfolio. Here's why:
These limitations can largely be mitigated by combining Roll Rates with other credit quality indicators like credit scores, loan-to-value ratios, and economic forecasts for a more comprehensive picture.
By incorporating roll rates into their analysis, private credit investors and lenders gain a more nuanced understanding of portfolio risk and can make data-driven decisions for:
While limitations exist, roll rates, when used thoughtfully, are a powerful tool for navigating the complexities of private credit investing and lending.
Any diligence process is challenging. Borrowers are usually juggling their ‘day job’ of running their business whilst simultaneously catering to investor needs for data and information. Investors on the other hand are fully focused on the borrower at this phase, ensuring their potential investment will be a safe and profitable one. Whilst we could discuss the metrics Investors typically use in their assessment, today I’d like to discuss red flags they look for, and how borrowers could potentially negate these if they are aware of them ahead of time.
Some aspects of fintechs are proprietary meaning the fintechs understandably will want to keep them secret. From a commercial point of view, if the fintech’s founders have discovered a new, better way to do things i.e. process some form of information into better decisions, then it is only natural to not publish this openly as they could give away their competitive advantage. On the contrary, there are aspects that should be openly and willingly shared with potential investors. If the fintech company is under an NDA and you are asking for millions of dollars from a potential investor, it is only fair that certain information i.e. finances, bank balances, default rates (more on this later), collections practices etc etc are shared. A legitimate company wants to tell its story, attract investors, and build trust.
Counter: If you as a borrower have legitimate concerns about sharing a particular type of information, share your concern openly with the potential investor. Usually there is a work around and by being transparent you build rapport.
Defaults and non-performing loans (NPLs) are inevitable in lending, but their numbers tell a tale. Consistently high NPLs, particularly if accompanied by weak explanations for improvement, point to a flawed business model or poor risk management. Conversely, beware of suspiciously perfect NPL rates. If NPL is zero, either you are not taking enough risk, or you are lying. Either way is a net negative.
Counter: Be transparent about your NPLs. If they are too high, have a thorough explanation as to why and what steps have been taken to ensure this doesn’t happen in the future. Early stage lending businesses can have high NPLs as they try certain segments or policies and this can be easily explained.
A company touting itself as an ethical, green lender with a portfolio stuffed with fossil fuel investments? Do you state you have 16 types of collateral but in reality only have 3? Alarm bells should be ringing. Such inconsistencies expose a disconnect between slogans and reality. Investors will be looking for the data to align with the statements in the pitch deck. If they don’t, they will walk away.
Counter: Ensure you can backup any marketing material during diligence. If you are not a green lender, then say so. There are investors available for myriad types of loans and industries. Misspeaking in your marketing to them will only ensure you waste time with the wrong ones.
Lofty projections are seductive, but base your decisions on grounded realism. Can a company realistically double its user base in a saturated market? Does their expansion plan defy industry logic? Is the user base going to outgrow the entire population of the country in which they operate? Note - I’ve seen this last point!
Counter: Make sure your projections are backed by some form of data and reason. Have expected clients/users and market penetration rates mapped out. I have witnessed fintech’s grow exponentially so lofty projections are not an issue if they can be backed by solid rationale.
Fintech may be tech-driven, but the core remains finance. Knowledge of lending practices, from underwriting to collections is a key driver of success for these businesses in their markets. Investors will always look for Borrowers who have a solid experience of doing their particular type of lending.
Counter: Is your management team lacking lending experience but you cannot afford to hire experienced former bankers? Several fintechs have solved this issue in their early stages by hiring strong part-time advisors who can help establish policies and procedures to get the business running. The added bonus is usually once you are ready to hire senior management, your advisor will likely have strong candidates from their network for you to choose from.
The goal for investors is to understand the rationale behind the red flags and assess their long-term implications. The quicker you can do this, the better your diligence process will be.
Lastly, whilst you will never see this written in an investment memorandum, a red flag you should be wary about is the investors gut feeling. The individual who proposes the deal to their internal investment committee is oftentimes taking some form of career risk in doing so. If a deal turns out to be a complete scam, the investment officer can have their employment terminated. And so, for an investment officer to commit to go through the weeks of work; interviewing, analyzing, modeling, writing reports and recommendations, they usually need to have a good feeling about the fintech. If you were in their shoes, would you waste your time with a borrower who gave you the heebie jeebies?
Navigating the world of private debt can be a daunting task, especially for first-time entrepreneurs. One of the steps in this journey is negotiating a term sheet, an agreement that outlines the key terms, pricing, and structure of a private debt deal.
While the term sheet may seem non-committal (it could be either), it's essential to approach the negotiation process with caution and a clear understanding of your company's needs and goals. Here I present 5 tips for negotiating a Term Sheet.
Remember, a successful investment deal should be mutually beneficial for both parties involved. Avoid striving for a one-sided victory, as this can set the stage for future conflicts and ultimately lead to the failure of the transaction. Approach the negotiation as a collaborative process, not an adversarial battle.
Building trust and rapport with the investor is crucial for a successful deal. Being open about the rationale behind things you push back on can help you avoid acrimonious discussions and focus instead on finding the common ground. Remember, private debt investors have their own limitations and restrictions on how they can price and structure a deal so the sooner you find the common ground, if it is to be found, then the better for everyone.
Before entering negotiations, clearly define your company's non-negotiable terms, also known as "drop-dead points." These are the essential elements that you cannot compromise on, such as valuation, pricing, control rights, or intellectual property protection. It’s best to know these upfront so as you don’t spend weeks and months chasing a deal for it to fall over later due to a non-negotiable.
In addition, Sign the term sheet only if you are fully committed to executing the investment deal promptly and are prepared to receive the funding. Avoid entering into agreements without a clear plan for implementation.
Carefully scrutinize the covenants outlined in the term sheet. These are conditions that the company must adhere to, such as financial reporting requirements or limitations on certain business activities. Try and model them out in excel and, if possible, perform backtesting to ensure the covenants are realistic and achievable. You don’t want to have an angry investor breathing down your neck from day one because a covenant was unrealistically entered into.
A detailed term sheet serves as a solid foundation for the subsequent negotiation process. The more comprehensive the initial agreement, the fewer surprises and disagreements that arise later. This also has the added benefit of ensuring the use of lawyers down the line is limited when the final agreements are eventually drafted.
Don't limit your cost assessment to the stated interest rate. Factor in all associated expenses, such as upfront fees, legal costs, data agent, corporate registration and compliance requirements, and any hedging or transaction fees.
Remember, whilst negotiation is an art and not a science, there are clear processes you should follow when negotiating for business. Approach the process with a clear understanding of your company's needs, a willingness to compromise, and a focus on building long-lasting relationships.
Finally, by the time a term sheet has landed on your desk, the private debt investor you are working with has already championed your deal within their organization, usually in the form of a screening memo. At this stage, they are as eager as you for the transaction to proceed.
Have you ever heard of Development Finance Institutions (DFIs)? If not, you're not alone. While the term may not be a mainstream topic of conversation, DFIs play a vital role in financing economic development worldwide. In this blog post, we'll explore what DFIs are, how they work, and why they matter.
DFIs are organizations that provide financing to support economic development, usually in developing countries or economically disadvantaged regions. They aim to fill the funding gap that often exists for businesses, projects, or sectors considered too risky or unprofitable for conventional financial institutions like commercial banks. DFIs provide loans, grants, equity investments, and other financial instruments to stimulate sustainable economic growth, create jobs, and improve social outcomes.
There are dozens of DFIs around the globe, and they can generally be classified into the following categories:
By mobilizing both public and private resources, DFIs play a critical role in advancing economic and social development, particularly in regions that are underserved by traditional financial markets. Their key activities include;
DFIs play an essential role in promoting economic and social development worldwide. They provide vital funding to sectors considered too risky or unprofitable by traditional financial institutions, and they strive for financial sustainability while still achieving market-level returns on their investments. DFIs engage in various key activities, including infrastructure development, private sector development, environmental sustainability, poverty reduction, and capacity building. With dozens of major DFIs and hundreds of smaller and more specialized institutions worldwide, DFIs are essential to mobilizing both public and private resources to advance economic and social development, particularly in regions that are underserved by traditional financial markets.
For centuries, public markets have understood the crucial role of timely information. Since the Banc Brothers in Bordeaux cleverly exploited France's rudimentary signal-based communication system in the 1800s, investors have been relentless in their pursuit of information advantage.
Private market investors are now joining the fray, armed with modern technology that has democratized access to information. This has leveled the playing field, forcing traditional investors to adapt their strategies or risk falling behind.
But why exactly is access to timely information important? Here I list 10 reasons why receiving timely information is crucial for modern private debt investing:
With quick access to data, investors can better assess the creditworthiness of borrowers, identify potential risks, and make more informed investment decisions. This can lead to higher returns and lower losses.
By quickly and consistently verifying borrower data, investors can identify and mitigate potential fraud risks. This can save investors millions of dollars in losses.
Many private debt funds are subject to strict regulations. By having quick access to accurate borrower data, investors can more easily comply with these regulations and avoid costly fines and penalties.
In a competitive market, private debt investors need to be able to move quickly. By receiving data from borrowers quickly, investors can be the first to identify and close on attractive investment opportunities.
Borrowers appreciate investors who are responsive and efficient. By providing borrowers with quick feedback on their loan applications and by quickly processing their loan payments, investors can build stronger relationships with their borrowers.
Manual data entry and processing can be costly and time-consuming. By automating these tasks, investors can save money and improve their operational efficiency, allowing more resources for understanding the non-numeric aspects of the deal.
By quickly monitoring borrower data, investors can identify early warning signs of borrower distress, such as declining revenue or increasing debt levels. This allows investors to take corrective action before a borrower defaults on their loan.
By quickly identifying and assessing risks, investors can develop more effective risk management strategies. For example, data can allow for covenants to be back tested before implementation, helping optimize the structure of a deal. This can help investors to reduce their overall risk exposure and protect their capital.
Private debt investors often need to provide reports to their investors and regulators. By having quick access to data, investors can generate these reports more quickly and easily.
New technologies, such as artificial intelligence and machine learning, are being used to develop new ways to assess borrower creditworthiness and manage risk. By having quick access to data, private debt investors can adopt these new technologies more quickly and reap the benefits.
In summary, receiving data quickly is important for private debt investors because it can help investors to make quicker and better investment decisions, reduce risk, improve customer relationships, and even reduce costs. In this day and age, data access is mandatory to stay ahead of the curve.
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Venture debt and private credit financing in Latin America reached an all-time high in 2022, totaling $1.3 billion, according to an analysis by the Association for Private Equity Investment in Latin America (LAVCA). This growth is part of the broader expansion of the private credit market in the region.
The global financial crisis led to the rise of private debt in Latin America as traditional banks tightened their lending standards, creating opportunities for alternative lending sources.
Although debt financing in more advanced countries, like the United States, is fairly common, it’s still new to regions like Latin America. Private debt funds are on the rise, targeting the void left by more traditional international banks cutting back on lending. Debt has been particularly popular with Mexican startups holding unicorn status, such as Clara, Clip, Kavak, and Konfio.
“One of the reasons why they are looking for debt, rather than equity, is because it is currently very difficult to price a deal.” - Luis Felipe Trevino, Managing Director, Beamonte Investments
We’ve compiled a list of the most active debt investors currently operating across the continent. Knowing who these key players are and gaining access to their resources can be absolutely vital for any company that needs to meet its financial goals. With our research, you’ll have everything you need to connect with these lenders and walk away with reliable funding to benefit your business’s long-term growth. Read on to find out which investors should be on your radar.
The growth of private credit and infrastructure investments across Latin American markets is evident, with no signs of slowing down. This not only implies increased opportunities for cash-strapped businesses but also the provision of a much-needed lifeline from alternative debt lenders in challenging situations. Entrepreneurs should take note of the highlighted key players on our list, as they can offer vital capital to fuel growth and unlock further potential in the future. We are thrilled to be a part of the growth story for this market.
Know another fund who finances deals in LATAM that we missed? Let us know and we’ll get them included in our next feature.
You can download the full market map of the most active emerging market debt investors below.
So your fintech lending or payments company has proven its product-market fit and is now ready for hockey stick growth? Whilst finding debt capital investment is an essential part of the next phase of growth, navigating the private debt landscape can be a daunting task, especially for first-time borrowers.
Drawing from my experience as a former fintech CFO, I've compiled five essential tips to help fintech companies successfully raise private debt.
Private debt investors seek companies with a proven track record of success. This means demonstrating a healthy portfolio of loans with a low default rate.
Establishing a strong track record requires a consistent history of loan repayments. A minimum of 12 months of repayment iterations is generally considered a good starting point, however this is dependent on how many loan iterations, or repayment events, you have had. The shorter the tenor of your loans, the more iterations you will have over 12 months and the more confident private debt investors will be with your data as a predictor of future performance.
Additionally, having the right processes, procedures, and a competent team in place further strengthens your credibility.
Not all private debt investors are created equal. Some focus on specific industries, others focus on impact, while others have broader investment mandates.
Remember, just like your fintech business has criteria to make loans, private debt investors also have criteria so identifying investors who align with your company's stage, sector, and growth trajectory is crucial. If you're a relatively new company, consider targeting investors who specialize in early-stage fintechs.
Your existing VC investors can be an invaluable resource in this regard. They usually have networks of private debt investors who they connect you with and will be more attune to which investors would be more suitable for your company.
In addition, you can attend industry events and keep up to date with industry press. Conferences are a great way to meet potential investors and learn about their investment criteria, whilst you can learn the names of potential debt investors through deal announcements from other similar fintech companies in your region.
Also, don’t forget, the right debt investors will also be looking for you and you will be warmly received if you meet their investment criteria. So if you receive the cold shoulder from a private debt investor, it is likely you are not a fit for them so best to move on as a deal is unlikely to unfold.
Private debt investors are sophisticated and discerning. They can spot red flags from a mile away, so If you have any problems, be upfront about them. If you're open and honest with investors, they're more likely to be willing to work with you.
If there are any potential issues or challenges, address them proactively. Open and honest communication builds trust with investors and increases the likelihood of a successful partnership.
Besides, most early stage fintechs have the same issues so usually there is no need to worry.
Private debt investors want to see that your company is generating profits from its lending activities. This means demonstrating positive unit economics, where the revenue generated from loans exceeds the associated costs.
Positive unit economics indicate a sustainable business model and assure investors that their capital is being deployed effectively. This is even more important if your fintech is losing money on an accounting basis, as it shows the business will eventually be profitable once it scales.
Private debt investors value efficiency and appreciate companies that present their data in an organized and easily understandable manner. This streamlines the underwriting process and allows investors to make informed decisions promptly.
Private debt investors are not sitting around waiting for you to be ready, they usually have several active deals on the table at any given time. Like you, they are keen to make the best use of their time by transacting with those who are more likely to close. Taking 4-6 weeks to provide an incomplete data room will not impress any investor, conversely, having your information organized will usually move you to the front of the queue.
Raising private debt can be a challenging process, but it's worth it if you can get the right deal. In the dynamic world of fintech, access to capital is the lifeblood of growth so make sure the effort matches the importance.
Over the past decade, private credit in Asia has experienced unprecedented growth, expanding from US$320 billion in 2010 to US$875 billion in 2020 (measured in assets under management or AUM) as reported by Preqin. This makes private credit the third-largest asset class in the alternatives space, right behind private equity and real estate.
Asia's private credit markets are thriving as borrowers turn to alternative lending sources. Private lenders have liquidity that public lenders don’t right now. And it’s good business too with private lending yields producing a return of about 10% to 18%, typically for a three-year transaction.
We've compiled the definitive list of the most active debt investors currently operating across the continent. Knowing who these key players are and gaining access to their resources can be absolutely vital for any company that needs to meet its financial goals. With our research, you'll have everything you need to connect with these lenders and walk away with reliable funding that will benefit your business's long-term growth. Read on to find out which investors should be on your radar.
Despite the ongoing market volatility, the outlook for continued growth in Asia's debt and credit financing scene remains positive. Borrowers' increased awareness of private credit, along with the sophistication of private credit firms in strategies like direct lending, distressed debt, and derivative instruments, allows them to provide timely and tailored credit support to borrowers.
Know another fund who finances deals in Asia that we missed? Let us know and we’ll get them included in our next feature.
You can download the full market map of the the most active emerging market debt investors below.
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Understanding the borrowing base can be a challenging task for many businesses.
The truth is, when it’s time to secure funding and grow your business, this concept often becomes the #1 hurdle. Mastering the borrowing base is crucial for accessing various business financing options to scale up smoothly, including equipment refinancing, invoice factoring, and asset-based lending. It’s a fundamental requirement for any company seeking an asset-back lending facility, yet can be a challenge to comprehend. But don’t worry, we’re here to help you understand the borrowing base and how it works. At its heart, the borrowing base is how the loan-to-value (LTV) of the credit facility is calculated. Navigating the complexities of asset-based lending and maintaining an optimized borrowing base can feel overwhelming. But here’s some real talk… Without mastering this aspect of financial management, scaling up won’t happen as smoothly as you’d like.
The borrowing base, in essence, serves as an upper limit on how much capital lenders are willing to extend based on the collateral or value of the collateral, effectively acting as a credit limit. This method safeguards lenders from overexposure while still ensuring borrowers have access to necessary funds, by establishing a credit limit that reflects the value of eligible collateral and any outstanding loans. So yes, understanding its nuances can save startups from potential risks associated with taking on debt. The major question is what is the “collateral value”.
The calculation process for determining a borrowing base is akin to solving an intricate puzzle. It’s about meticulously evaluating different types of collateral, and determining the optimal discounting rates that should be applied. It also involves determining the optimal collateral composition by not overweighting specific assets. To start solving this intricate puzzle, you need to think about what amount eligible collateral is going be included and what is going be excluded. Additionally, the discount factor plays a pivotal role in this calculation process, as it is used to multiply the value of the company's collateral, thereby determining the borrowing base and representing the total amount of money a creditor will lend based on the value of the collateral.
The top of the equation (positive) is really about valuing the collateral - we have two great blogs that go deep into these two items in a lot of detail. The bottom part of the equation (negative) is really determining which things shouldn't be included in the calculation.
Here are some other common items that get added to the borrowing base:
The borrowing base supports trade finance by providing a solid foundation for working capital facilities, enabling businesses to leverage their assets for growth and operational needs.
One issue that does come up with borrowing base calculations is when there are two different currencies represented in the equation, or even there is just money in one currency but it needs to be translated to another currency for purposes of determine if there is a surplus or deficiency (over collateralization). The question is, what FX rate to make the conversion at.
Once the borrowing base has been calculated, you’ll need to multiply it by the advance rate. The advance rate essentially sets the maximum amount that can be borrowed, determined by multiplying the borrowing base by the advance rate, which reflects the loan-to-value (LTV) ratio of the facility. Advance rates come in all shapes and forms (fixed, dynamic, etc.) but for ease of understanding, if a lender gives an 80% advance rate, that means that if the borrowing base is $100, the maximum amount the borrower can actually borrow against that $100 is $80.
In some cases, the lender will include advance rates into the borrowing base calculation itself by further discounting items. If this is the case, the advance rate becomes 100%.
The borrowing amount depends in principle on the advance offered by the borrower. The advance rate represents the maximum share of the current loan amount available to a borrower as a loan.
To measure the collateralization percent or whether there is a deficiency or surplus of financing a debt facility, the equation is typically:
$$(Borrowing Base * Advance Rate) - Current Outstanding Principal$$
Where the current outstanding principal is what has been lent from the lenders to the borrower and hasn't been repaid. Essentially, if the Borrowing Base * Advance Rate is greater than the outstanding principal, your doing well and can borrow more funds. If there is a deficiency, it's important to understand what's driving it. It could be a case of concentration risk or something else that you can talk with your lender about and show how it will be resolved.
When getting a borrower base agreement for an asset, you are likely to need to update the borrower base certificate regularly. It is an important form of documentation that lists applicable property, a price, and shows an advance rate used by the borrower’s calculations. A credit card company might require the use of a certificate indicating the type or amount of collateral you have to borrow from. Collaterals have fluctuating values so it helps make sure your outstanding loans still exceed the limits specified in your original borrowing agreement. Additionally, the borrowing base agreement is a crucial document that outlines the terms for borrowing base monitoring and compliance, ensuring that the value of collateral is periodically reviewed and remains in alignment with the loan agreement.
Technology solutions such as Cascade, help both companies and lenders set borrowing base calculations before a deal is signed, so that the calculations can be tested on real data with real assumptions. This is critical for anyone raising debt that includes a borrowing base calculation, test it and run different scenarios before agreeing to the terms of loan agreement. This often drives legal fees down as many hours are wasted in negotiating borrowing bases through legal documents when they can be negotiated using real data before the lawyers become involved. Once a deal is signed and live, it’s critical for companies to constantly beware of the borrowing base to ensure a deficiency doesn’t occur and if one does occur that it’s resolved quickly. There is no reason the borrowing base cannot be calculated daily (you can read more about the importance of daily calculations here). Furthermore, technology solutions like Cascade facilitate the lending process by making borrowing base calculations more efficient and accurate, ensuring smoother monitoring and management throughout the lending lifecycle.
Private credit and infrastructure investments across African markets has been on the rise since 2021 with no signs of slowing down.
Domestic lenders are generally more risk averse and prefer to invest in safer assets like government bonds, so alternative financing for many businesses has been challenging. Alternative debt lenders offer these businesses a seriously needed source of capital to fuel growth.
We've compiled the definitive list of the most active debt investors currently operating across the continent. Knowing who these key players are and gaining access to their resources can be absolutely vital for any company that needs to meet its financial goals. With our research, you'll have everything you need to connect with these lenders and walk away with reliable funding that will benefit your business's long-term growth. Read on to find out which investors should be on your radar.
“The surge in private debt in Africa mirrors the broader development of the asset class across the world”
It's clear that private credit and infrastructure investments across African markets are growing stronger and the long-term outlook is very promising indeed. Not only does this mean there will be more opportunities available for businesses in need of cash, but those alternative debt lenders will give them a much needed lifeline in exhausting situations. All entrepreneurs should take note of the key players we've highlighted on our list - these important contacts can provide critically needed capital to fuel growth and open even more doors in the future. The potential of African markets is enormous and we’re excited to be a part of their story.
Know another fund who finances deals in Africa that we missed? Let us know and we’ll get them included in our next feature.
You can download the full market map of the the most active emerging market debt investors below.
One of the most heated discussions that play out in negotiating borrowing base calculations is whether or not cash should be added to the eligible pool balance (and thus multiplied by the advance rate) or whether it should be added after the eligible pool balance has been multiplied by the advance rate (giving it 100% value).
One side of the argument believes that cash should be multiplied by the advance rate because cash does not earn interest, whereas the underlying loans of the eligible pool balance do generate interest. This stems from the fact that the eligible pool balance is based on the outstanding principal balance. Meaning the expected cash flows generated from the non-principal payments are not part of the calculation and represent an additional buffer for the investor in the case of a wind-down, whereas cash does not provide any additional buffer for the investor.
The other side of the argument believes that cash should be multiplied by 100% because it can be liquidated immediately to pay down the principal balance. This side of the argument will also point out that multiplying by 100% doesn't put any unnecessary pressure on the borrower to originate new assets that might be riskier. This is because when multiplying by the advance rate, the borrower could decide to cure a borrowing base deficiency by originating new loans regardless of risk since even risky new loans are worth more than cash, which is ultimately harmful.
Some lenders will fall in between the two camps by adding additional terms to how the cash can be used. Such terms include:
Regardless of how the negotiations are settled between the borrower and lender, Cascade can support any variation of the borrowing base calculation. We've had experience with lots of different flavors of how cash is used and are happy to work with any form of the borrowing base calculation that both parties agree with.
Drafting mathematical formulas in asset-backed lending agreements is an art form. It requires an understanding of both the legal and financial aspects of such agreements. As discussed in other blog posts, calculations are becoming more complex to determine payments, covenants, and other financial considerations. Lawyers need to craft agreements that accurately reflect the business agreement between the investor and borrower. In this blog post, we will explore the various techniques used for drafting mathematical formulas in asset-backed lending agreements and discuss the importance of accurately reflecting these mathematical concepts.
As a result of lawyers turning relatively simple formulas into long-winded paragraphs that completely obscure the formula in the language, misinterpretations, and errors are common. Typically the misinterpretation/error is based on the arithmetic order of precedence (otherwise known as BEDMAS). Most people wouldn't be able to calculate equations without putting them in their typical mathematical notation, so why not do this in the legal agreement? They'd likely find the simplified formula quicker to read and easier to understand, with fewer mistakes and less time required there is no reason not to include mathematical formulas. It's also important that when writing out mathematical formulas the business team thoroughly reviews the formulas to ensure they make sense. The equations should be black and white with no areas of grey for misinterpretation.
At Cascade, we keep a library of legal definitions and covenants built on these definitions, the library is available for any party to use. When we onboard debt facilities, if a calculation is required, we first turn it into a mathematical formula broken down into easy-to-digest pieces. We've found that doing so eliminates all the guesswork out of how exactly the calculation is managed. Often times during the process it becomes clear that there is some level of grey in the legal formula that needs to be negotiated.
To help illustrate why Cascade believes mathematical formulas should be used whenever a calculation is entered into a loan agreement here is an excerpt of a legal text that got the formula wrong.
Borrowing Base means with respect to any Advance Date, the product of (a) the Advance Rate (b) the sum of the Eligible Pool Balance and (c) Cash.
As a formula this means:
Advance Rate * Eligible Pool Balance * Cash
Borrowing Base means with respect to any Advance Date, the product of (a) the Advance Rate and (b) the sum of the Eligible Pool Balance plus Cash
As a formula this means:
$$Advance Rate * (Eligible Pool Balance + Cash)
In the legal text the Borrower will probably never have a borrowing base deficiency as as they are multiplying the Eligible Pool Balance by Cash - so as long as they have some cash on hand the Eligible Pool Balance will be enormously inflated.
This mistake was so outrageous both parties knew it had to be amended, but in other cases when a simple mistake in order of precedence, the parties could end up in litigation over what the interpretation should be - which no one wants to do.
When it comes to portfolio performance covenants in loan agreements, there is an important distinction between ongoing and cohort covenants. Ongoing covenants are those that change with time and must be continually monitored and updated throughout the loan agreement, whereas cohort covenants are those that are specific to assets disbursed in a specific period. In this blog post, we will discuss the differences between ongoing and cohort portfolio performance covenants and their implications for lenders and borrowers.
Ongoing portfolio performance covenants are the most common type of portfolio performance covenants we see at Cascade. An example of an ongoing performance covenant is a delinquency test where the investor wants to ensure the portfolio does not go above a specific portfolio at risk (PAR) value. As the covenant uses the outstanding portfolio balance net of write-offs as the denominator, as long as the borrower keeps originating faster than defaults, the covenant will not be breached. However, if origination slows down the covenant can be breached. The main thing is the covenant calculation is constantly changing and does not settle until all loans are fully repaid or written off.
Instead of using an ongoing delinquency test, the investor might choose a cohort delinquency test whereby the denominator is fixed with only the original principal balance of loans disbursed in a given period (1 month, 1 quarter, etc). If the period is greater than 1 month, a common age definition might be included so that the delinquency rate is based on assets based on the maximum number of months all assets have on book - this is just a technique to normalize the data to a specific snapshot in time.
The critical difference between the two different covenants is the time period of the test. Both covenants in the above example are focused on delinquency and trying to ensure the overall delinquency rate of the portfolio doesn't breach a specific trigger. The ongoing test takes all loans that are outstanding into consideration, while the cohort covenant is just focused on loans disbursed in a particular period, such as a month. The other major difference is that written-off loans are typically excluded from the numerator in the ongoing calculation, whereas they remain in the calculation for the cohort test.
There are pros and cons for both types of covenants - here are the main things to consider:
At Cascade, we offer a comprehensive suite of portfolio performance covenant data management tools designed to borrowers and lenders keep track of their portfolio performance covenants. As data agents we continuously monitor the performance of your assets, ensuring that any potential risks or issues are identified and addressed quickly. Our tools allow users to back-test covenants so they can be refined to ensure they achieve their intended goal without causing unnecessary burden of requiring unnecessary waivers. Our powerful analytics platform also provides deep insights into your portfolio's performance, helping you make informed decisions when there is a breach. By leveraging Cascade as a data agent and our proprietary analytics platform, you can have peace of mind knowing that your portfolio is being monitored for performance and risk. Whether you’re using a cohort or ongoing covenant strategy, our team of experts is here to ensure that you have the data and insights necessary to make informed decisions.
The eligible pool balance is an important concept for any borrower who is borrowing through an asset-backed structure. It is directly linked to the borrowing base, which is the amount of money a lender will provide to a borrower as well as calculating the value of the collateral on an ongoing basis. In this blog post, we’ll explore the different components that make up the eligible pool balance, how they can affect your borrowing base, and why it's important for borrowers to understand the calculation before signing a loan agreement.
An eligible pool balance is ultimately the value assigned to the assets backing the loan. To calculate the value three main components are used: eligibility criteria, eligible pool discounting, and excess concentration. Eligibility criteria determine the types of assets that can be used for asset-backed lending, such as assets with a term of fewer than 12 months. Eligible pool discounting reduces the outstanding principal value of a loan based on the risk associated with the loan (ex: loans with a DPD of 90 are reduced to 0%). Finally, excess concentration measures how much of the collateral is grouped by different rules (ex: no more than 10% of the eligible pool balance can be related to one borrower).
When setting eligibility criteria for an eligible pool balance, it is important to consider the needs of both the lender and the borrower. It is critical to understand what types of assets the borrower can put in the pool, as well as will the borrower be able to generate enough assets to match the loan size. For lenders, this helps to assess the risk associated with the potential loan and determine the necessary loan terms. Some multilateral lenders like the IFC have exclusion lists that get factored into eligibility as well. The characteristics of a future portfolio should be clearly defined and agreed upon by both parties. It is important to make sure that the criteria do not create ineligible assets or eliminate opportunities for risk diversification.
When assessing an eligible pool balance, asset discounting is an important part of the process. Discounting helps lenders determine the value of the collateral based on changing conditions. This ensures that a company’s assets are being valued accurately and that lenders are protected in case of default or delinquency. When discounting an asset, the main variable used is the number of days past due (DPD). As loans increase in days past due, they become riskier and less likely to recover. To set the optimal discount rates, lenders and borrowers need to deep dive into vintage and roll rate analysis to help understand the likely recovery rate of assets at different DPDs. It's important that both lenders and borrowers run different analyses on the portfolio at different points in time to understand the impact of discounting. Discounting is the primary driver in reducing the borrowing base, both parties need to ensure they understand the impact of the discounts on the outstanding balance to prevent any unnecessary borrowing base deficiencies.
When considering eligible pool makeup borrowers and lenders need to be mindful of excess concentration limits. These restrictions refer to the amount of the total eligible pool balance that can be held by a single borrower, or in a single geography or other limits. An excessive concentration could put the lender at risk if a sudden economic downturn hits a sector. When determining excess concentration limits, lenders need to consider both their capital requirements and their risk management policies. In addition, lenders should also look at factors such as geographical trends, industry developments, borrower products, risk grades, and macroeconomic factors. This will allow them to effectively mitigate their risk and maximize their profitability.
At Cascade, we are proud to be at the forefront of fintech innovation in private debt and asset-backed lending. Our technology platform is designed to help lenders and borrowers alike in managing their eligible pool balance. We offer a range of services to help you make informed decisions when it comes to your borrowing base. At Cascade, we strive to provide our clients with the data and insights they need to stay ahead in this ever-changing world. Our powerful platform can help you easily manage and monitor your eligible pool balance, giving you greater control over your lending strategy.
Asset Back Lending (ABL) is a type of private debt lending that is becoming increasingly popular in the world of finance. Lenders often require clients to provide a borrowing base certificate to confirm that the amount drawn against the revolver is supported by an appropriate borrowing base of accounts receivable and inventory. It is a great way to access capital, but it comes with risk. A key tool for managing this risk is calculating borrowing bases daily. This blog post will discuss the importance of daily calculation of borrowing bases for risk monitoring in ABL.
The borrowing base is the value of the underlying collateral that acts as security for the loan. It’s an essential factor in risk monitoring because it ensures a loan is fully collateralized and helps determine the credit limit extended by a lender. While lenders have traditionally monitored borrowing bases manually and on a monthly or quarterly basis, fintech companies like Cascade use automated data feeds and analytics platforms to track borrowing bases quickly, accurately, and in nearly real-time. This allows lenders to analyze risk more efficiently, monitor changing economic trends more accurately, and make better decisions about credit exposure more frequently. In addition to helping lenders manage their portfolios more efficiently, daily borrowing base calculations also provide businesses with a more comprehensive picture of the current collateral value so they can rectify any deficiencies before they spiral out of control. Furthermore, as both parties have greater visibility of the underlying collateral, waterfalls can be run more frequently (daily), reducing cash drag, which doesn’t help either party. Daily calculation of borrowing bases has become an integral part of credit analysis and risk management, allowing businesses to quickly identify potential problems before they become major issues, ultimately protecting their bottom line.
A borrowing base is a calculation used to determine the value of the borrower’s collateral. A discount factor is often applied to the adjusted value of collateral to determine the credit limit. In most cases, the borrowing base calculation comprises three major components: eligible asset pool, cash in a collection account, and advance rate, as well as a few fringe components: interest reserve, accrued lender’s interest, and more. For the purposes of this article, we’re going to focus on the eligible asset pool and cash in the collection account. Calculating the borrowing base in real time depends on live data feeds from multiple sources.
To calculate the eligible asset pool, which includes accounts receivable, there are three key factors: 1) confirming assets are eligible based on predefined criteria; 2) sorting assets into predefined buckets based on its delinquency state (current Days Past Due aka DPD); and 3) eliminating any excess concentration amounts. All of these calculations change on a daily basis and being able to get updated calculations is critical to any risk monitoring program.
The borrowing base is also calculated using the most recent cash balance in the collection account(s). Having direct access to these accounts through APIs, SWIFT reporting, or other banking integrations provide lenders with security that cash is following any predetermined flow of funds agreement. It also provides the ability to confirm real payments on loan tapes as cash movements should match between the collection account and loan tape.
More and more advance rates are being set dynamically to update based on changing conditions of a deal instead of setting them once and forgetting about them. To ensure the borrowing base is being calculated accurately, it's important that all conditions that could change the advance rate are being monitored (portfolio covenants, financial covenants, reporting covenants, etc).
When there is a borrowing base deficiency, it’s important to act quickly to avoid a potential event of default. Borrowing base deficiencies can also impact corporate borrowers, affecting their ability to secure additional funding. A borrowing base deficiency can be caused by many different factors and being able to identify what is causing the deficiency is priority one. Once the cause is identified, it’s important to work with all parties involved to come up with a solution. Borrowing base deficiencies are typically resolved by either (i) assigning new receivables (ii) adding cash to the collection account (iii) providing a waiver for different criteria (eligibility criteria, excess concentration, etc). When the situation cannot be resolved, an event of default will typically occur, and the portfolio will enter a wind-down.
When a deficiency exists it's important for lenders to be at the front of the line, whether that's getting new receivables or cash top-ups having seniority or reacting quickly is key. By proactively performing borrowing base calculations on a daily basis, lenders are able to secure their position in the creditor line and protect their investors' interests before other creditors have even realized there is a problem.
Cascade Debt is pioneering daily borrowing base calculations, get in touch with us to find out how we can support your risk management program.
In today's fast-evolving financial markets, startups, venture capitalists, and private credit professionals need more than just a one-size-fits-all solution. They need a platform that understands the intricacies of asset-based finance and can offer global coverage, transparency, and flexibility. Enter Cascade—your ultimate partner in asset-based lending and private credit transactions.
Cascade was founded by two former private credit fund managers. They are true subject matter experts who have experienced firsthand the challenges of scaling AUM without simultaneously scaling your headcount. They also witnessed the severe operational burden that the companies they would evaluate and invest in experienced. They built Cascade to solve the challenges they know exist in the market to democratize and accelerate access to private credit. Their mission is to make private credit simpler, less risky, and less operationally intensive for all counterparties involved in the transaction.
Cascade is explicitly designed for asset-based finance and complex private credit transactions. Unlike many competitors that only support simple debt structures, our platform excels in handling the most complex deals. Whether you're dealing with warehouse lines, forward flow agreements, or multi-class debt facilities, Cascade has the tools and flexibility to meet your needs.
One of the most significant differentiators of Cascade is our approach to data. We don’t just show investors self-reported portfolio company data. Instead, we recalculate all critical data from the ground up. Serving as a neutral third-party data agent, we enhance transparency and trust among all parties involved in a transaction. This objectivity is crucial for investors and borrowers, ensuring everyone works with accurate and reliable information.
Most platforms limit their support to the US or a single region, leaving businesses with international interests in a lurch. Cascade offers global coverage, ensuring that our platform can support your lending activities no matter where your business operates or where your investors are located. This global reach means you can seamlessly manage facilities across multiple countries, making international expansion and investment in emerging markets possible and straightforward.
Cascade's platform is built to automate loan operations end-to-end, significantly reducing the time and effort required to raise and manage complex debt facilities. Our users report spending up to 90% less time on reporting and experiencing 75% faster transaction closings. This operational efficiency allows you to focus on what truly matters—growing your business.
Direct data integrations provide real-time reporting, offering institutional-grade risk analytics that you can trust. This feature enables better risk management and decision-making, giving you a clear view of your financial landscape at any moment.
Cascade's extensive contract library, back-testing, and agreement reconciliation tools allow you to structure deals with more confidence. Whether you're managing consumer loans, auto leases, or revenue-based financing, our platform can support your unique requirements.
With Cascade, you can increase investor confidence by providing timely, transparent, and accurate data. Our investor portal lets you choose what information to share, improving communication and fostering stronger stakeholder relationships.
Streamline your fundraising efforts with our end-to-end platform to make the process easier and more efficient. Our tools simplify the due diligence process, offering the metrics, analytics, and data sharing needed to make informed decisions.
Utilize our extensive contract library and back-testing capabilities to structure your deals and term sheets with confidence.
Automate monitoring, reporting, payment scheduling, and capital draw requests, minimizing the operational burden on your team.
Don't just take our word for it. Here’s what some of our satisfied clients have to say:
“Cascade's ability to stay independent and neutral for both parties is extremely important because some of the metrics we track and rely on for decision-making are not always clear-cut.”—Tufuantsi Daniel, Senior VP at Cordiant Capital
“The credit facility monitoring tools allow us to have fantastic real-time insights into our investments, which has a massive impact on our risk management capabilities.”—AJ Davidson, CEO, SixPoint Capital
“Their platform is user-friendly, and their customer support is top-notch. Highly recommended for anyone in need of debt management solutions.”—Christophe Javelly, CFO at Baubap
Ready to elevate your private credit operations? Get started today.
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As you explore our solution, one might ask, "Is Cascade built for originators or investors?" The short answer? Both. But let's unpack that a bit more.
Like you, private credit investors require reliable and efficient platforms to streamline their processes and better manage their risk. Whether you’re managing a large portfolio or just a few facilities, Cascade offers the analytics and monitoring tools to diligence, structure, and monitor your deals with ease. Cascade is the leading end-to-end solution designed to meet all your asset-based finance needs.
Originators play a pivotal role in the asset-based finance and private credit ecosystem. Cascade understands this and provides tools to help you manage your investor requests and assets efficiently and effectively.
Whether you're an investor looking for reliable risk analytics, deal structuring, and real-time monitoring or an originator seeking streamlined fundraising, investor reporting, and simplified loan operations, Cascade is designed to support your needs. Join the revolution and experience the power of Cascade. Don't just take our word for it—hear it directly from industry leaders who trust Cascade for their debt management solutions.
Ready to transform your private credit processes? Get started with Cascade today and see how our innovative platform can help you achieve your goals.
Default rates are one of the most important metrics in loan analysis, and it's important to understand the various methods used to calculate default rates. At Cascade, we use four different primary methodologies to measure default: Rolling DPD, Strict DPD, Number of Installments, and Percent of Payment in the last [x] days. The standard methodology is Rolling DPD, but new methodologies can be computed to provide more accurate results. Loan analysis is a complex process, but understanding the way default rates are calculated is an essential part of the process. By understanding the different methodologies used to calculate default rates, you can make more informed decisions when analyzing loans.
Strict DPD measures the number of days a client has a negative outstanding balance, starting from the missed payment date until they fully repay the negative balance. Rolling DPD, on the other hand, takes into account the client's ongoing payments, reducing the negative balance as they make payments and resetting the default date to the last missed payment. The Number of Installments method calculates the count of missed installments based on the average scheduled installment over negative outstanding balance. Lastly, Percent of Payment in the last [x] days calculates the ratio of actual payments received to expected payments within a specified time frame.
Different methodologies are used to calculate default rates in loan analysis for a variety of reasons. One important factor is regulation. Central banks often require lenders to report default rates using specific methodologies, ensuring consistency and transparency in the industry. For example, Basel II, a global regulatory framework for banks, provides guidelines for calculating default rates. Additionally, loan products with different payment frequencies may require different methodologies. Institutional Debt investors also have specific ways of looking at portfolio companies through a standard methodology.
Walking through an example is the best way to understand the different methodologies - let’s assume the following scenario:
To help view the Real Payment Schedule - we align the payments
By comparing and contrasting the methodologies, loan analysts can determine which method suits their needs and objectives best. It's important to remember that the choice of methodology can impact the accuracy of default rates and the overall risk assessment of the loan. Ultimately, understanding the nuances of these methodologies allows for better decision-making in loan analysis and mitigates potential risks in Asset Backed Lending, Loan Tape Analysis, and computing Borrowing Bases.
It’s 2024 so at the very least you should be looking to retire any remaining practices of sharing variably formatted excels and documents via email. Your investors need something better.
So let's talk about a classic dilemma: building your own deal monitoring and management system from scratch or buying a pre-built solution. Both options have their merits, and the "right" choice depends on your specific needs and resources.
There's a certain allure to crafting your own system, especially if you have an internal tech team who can. You get complete control; you can tailor features to your exact workflow.
Here are some potential benefits of building your own system:
But hold on a sec, there's a flip side to the DIY coin. Building a system from scratch requires some serious resources:
Let's face it, building a car from scratch takes a lot of effort. Sometimes, you just want to hop in a pre-tuned machine and hit the road. That's where pre-built deal management systems come in. These solutions offer a streamlined approach, allowing you to focus on what you do best – finding and closing deals.
Here are some reasons why buying a pre-built system might be a good call:
However, pre-built solutions come with some limitations:
So in short, build when:
Otherwise, it’s probably better to just buy off the shelf.
Ultimately, the best choice depends on your unique circumstances, but beware of the “just because” trap. Just because you can build something doesn’t necessarily mean you should.
In the world of asset back lending, maintaining the quality of assets is paramount. One way to ensure that asset quality is upheld is through completing thorough audits often called field examines. Audits play a crucial role in asset back lending by providing insight into the condition and value of the assets being used as collateral.
In this blog post, we will explore the importance of audits in asset back lending and how they can help lenders mitigate risk and protect their investments.
In the intricate world of asset back lending, the function of audits transcends mere procedural formality. It embodies a critical mechanism for ensuring the integrity and viability of the assets at the heart of lending agreements. Through meticulous audits, lenders embark on a detailed examination of the collateral pledged, dissecting its authenticity, current state, and true value. This process not only affirms the asset's eligibility as collateral but also safeguards the lender by providing a clear picture of the asset's capacity to cover the loan in situations of default.
The essence of conducting audits lies in the power to uncover the layers of information about the assets that are not immediately visible or apparent. It's a proactive step that allows lenders to delve into the finer details, scrutinizing every aspect of the collateral to ensure it meets the stringent criteria required for securing the loan. The verification process that audits facilitate helps in establishing the legitimacy of the asset documentation, a vital step in confirming that the collateral is free from encumbrances or disputes that could jeopardize the lender's interest.
Moreover, audits act as a strategic tool in the identification of potential risks or inaccuracies within the asset documentation. This level of scrutiny enables lenders to navigate the complexities of asset back lending with informed confidence, crafting loan terms and conditions that reflect a comprehensive understanding of the collateral's true standing. It’s through this lens that audits are seen not just as a formality, but as a cornerstone practice in asset back lending, integral to maintaining the equilibrium between risk and reward. In navigating these waters, lenders are better equipped to make decisions that uphold the quality of their asset portfolio, ensuring a foundation of trust and reliability in their lending practices.
Navigating the complex terrain of asset back lending without the compass of thorough audits can lead lenders into murky waters, compromising the integrity of their asset portfolio. Inadequate audits—those lacking in depth, precision, and comprehensive scrutiny—serve as a weak link in the chain of financial security and risk management. The absence of diligent audits opens the floodgates to a myriad of risks that can diminish the quality of assets, casting long shadows on their value and reliability as collateral.
The ramifications of insufficient audits stretch beyond the immediate horizon of undetected issues; they erode the foundation of trust upon which the lender-borrower relationship is built. Assets that have not been thoroughly vetted may carry hidden liabilities or encumbrances, making them less capable of securing the loan than initially perceived. Such oversight can escalate into scenarios where the asset fails to cover the outstanding loan amount in the event of a default, thrusting lenders into precarious financial positions.
Furthermore, the landscape of asset back lending is littered with potential pitfalls that only rigorous audits can unveil. Inadequate audits may overlook discrepancies in asset documentation or fail to identify assets that are overvalued, creating a false sense of security around the loan’s coverage ratio. This oversight can lead to inflated lending against assets that are unable to sustain their purported value, increasing the vulnerability of lenders to market fluctuations and asset depreciation.
The essence of thorough audits lies in their ability to illuminate the true state and potential of assets, ensuring they are not only suitable but also resilient forms of collateral. Without this critical examination, lenders expose themselves to increased risk of loss, undermining the stability and profitability of their asset back lending ventures. Thus, the role of audits is not just a procedural checkpoint but a strategic imperative in preserving asset quality and fortifying the financial safeguards that underpin asset back lending.
Elevating the effectiveness of audits within the realm of asset back lending necessitates a strategic pivot towards oversampling high-risk targets. This nuanced approach is not merely about adding more checks into the process but tailoring the audit’s focus towards those assets that inherently carry a higher potential for discrepancies or valuation challenges. By adopting this method, lenders can delve deeper into the subsets of their asset portfolio that are most susceptible to fluctuations in value or integrity, thereby preemptively identifying vulnerabilities that could compromise the loan’s security.
This strategy of targeted scrutiny allows for a more dynamic and informed audit process. It acknowledges that not all assets carry the same level of risk and, therefore, should not be audited with the same intensity or frequency. High-risk targets may include assets that are highly volatile in value, possess a higher likelihood of legal encumbrances, or are situated within markets that are subject to rapid changes. The act of oversampling these categories enables lenders to apply a magnifying lens to the areas of greatest concern, ensuring that the depth of the audit matches the degree of risk posed.
In practice, this approach can involve deploying a variety of specialized audit techniques tailored to the specific nature of high-risk assets. These might include more frequent asset inspections, deeper dives into the documentation and legal background of the assets, or employing advanced analytical tools to predict potential future value shifts. The goal is to move beyond the surface level, crafting an audit process that is as dynamic and multifaceted as the assets themselves.
Adopting a strategy of oversampling high-risk targets within audits signals a proactive stance in asset management, one that prioritizes the early detection of issues and underscores a commitment to maintaining the highest standards of asset quality in lending practices. This method not only fortifies the lender’s position but also enhances the overall stability and reliability of asset back lending as a financial instrument.
To elevate the efficacy of audits within the asset back lending landscape, practitioners must adhere to a suite of best practices that refine the process beyond mere compliance. Key among these is the integration of both payment and underwriting audits, each serving a unique role in dissecting the financial health and viability of the assets under scrutiny. Payment audits scrutinize the consistency and reliability of cash flows associated with the asset, while underwriting audits delve into the initial evaluation processes, ensuring that the underwriting standards were met and remain relevant.
An indispensable practice involves the meticulous verification of asset documentation. This step is critical in ascertaining the legitimacy and legal standing of the assets in question. It involves a thorough review of titles, valuations, and any encumbrances that may impact the asset's status as collateral. Ensuring the authenticity of these documents can shield lenders from unforeseen legal complexities and financial discrepancies.
Moreover, comprehensive due diligence forms the backbone of effective audit practices. This encompasses a broad spectrum of evaluations, from the physical inspection of tangible assets to the detailed analysis of financial records and market conditions influencing asset values. Such exhaustive due diligence ensures that lenders have a holistic understanding of the assets, empowering them to make informed decisions.
Embracing these best practices in audits does not merely fulfill a regulatory requirement; it signifies a commitment to maintaining the integrity and quality of the asset portfolio. Through meticulous implementation, lenders can fortify their positions, mitigate risks, and sustain the trustworthiness of asset back lending mechanisms.
Cascade's proprietary technology stands at the forefront of revolutionizing how audits are conducted in asset-back lending. By harnessing advanced algorithms, Cascade meticulously flags high-risk assets for deeper scrutiny in both underwriting and payment audits. This innovative approach ensures that before a deal closes and throughout the loan's lifecycle, lenders can maintain a vigilant eye on the assets that underpin their financial transactions. Embracing the agility and precision of Cascade's technology allows lenders to perform targeted audits with unprecedented ease. Before a deal concludes, a sample ranging from 25 to 50 assets undergoes a thorough examination, setting a robust foundation of trust and transparency from the outset. The vigilance continues post-deal with monthly or quarterly samples of 5 or more, ensuring consistent oversight and adaptability to any shifts in asset quality or value. This seamless integration of Cascade's technology into the audit process eliminates much of the friction traditionally found in the lender-borrower dynamic during high priced and time-consuming audits. By simplifying and streamlining audit activities, lenders can focus on what matters most—safeguarding the quality of their asset portfolio and nurturing a relationship built on reliability and mutual respect with their borrowers.
In the world of Asset Backed Lending, the management of collection accounts is crucial for ensuring the success and profitability of a portfolio. One key aspect of this management is cash reconciliation, a process that allows lenders to track and monitor the flow of funds within their collection accounts. By implementing effective cash reconciliation practices, lenders can not only improve their risk management strategies but also optimize their asset management efforts.
In this blog post, we will explore the importance of cash reconciliation in asset-backed lending, the step-by-step process of conducting cash reconciliation for collection accounts, and best practices for monitoring collection accounts efficiently.
In the nuanced landscape of Asset Backed Lending, the axiom "Cash is King" is not just a cliché but a foundational principle guiding the orchestration of financial symphonies. At the heart of this intricate process lies cash reconciliation, an indispensable mechanism that ensures the veracity and reliability of a lender's financial narrative. Through meticulous reconciliation of cash flows within collection accounts, lenders embark on a critical journey to unveil discrepancies, thwart potential fraudulent activities, and methodically chart the trajectory of their loan portfolios.
This diligent practice is more than a mere financial chore; it is a strategic vantage point from which lenders can sharpen their risk management tactics, refine their decision-making process, and steadfastly adhere to the stringent tapestry of regulatory frameworks. In an ecosystem where precision and accuracy are paramount, cash reconciliation emerges as the beacon that illuminates the path to financial integrity and robustness.
The process transcends the routine matching of transactional data, evolving into a comprehensive audit that spans deposits, withdrawals, and the minutiae of financial interactions. In the realm of Asset Backed Lending, where the stakes are perpetually high, cash reconciliation is the bulwark that guards against the specters of financial inaccuracies and the pitfalls of non-compliance.
As lenders navigate through the complex corridors of collection account management, embracing cash reconciliation equips them with the tools to not only safeguard their assets but also to propel their portfolios towards optimized performance and unparalleled financial excellence.
Collection accounts stand as the linchpin in the intricate ballet of Asset Backed Lending, orchestrating a symphony of financial transactions with precision and grace. These bespoke financial conduits are designed with the singular purpose of facilitating the seamless flow of payments from borrowers to lenders, embodying the essence of efficiency and control in the management of loan remittances. As vital cogs in the machinery of asset management, collection accounts not only accumulate payments but also serve as watchdogs, monitoring the health and liquidity of loan portfolios with unwavering vigilance.
In the realm of Asset Backed Lending, the strategic utilization of collection accounts transcends mere transactional processing. It encapsulates a broader vision of financial stewardship, wherein every payment received is a testament to the robustness of the lending framework and every disbursement to investors a reaffirmation of trust and reliability. By centralizing the cash flows inherent in loan servicing, these accounts offer a panoramic view of the financial landscape, allowing lenders to harness critical insights into borrower behavior, payment trends, and overall portfolio performance.
The orchestration of collection accounts demands not only an acute understanding of financial mechanics but also a deep appreciation for the nuances of risk and reward in asset management. By leveraging these specialized accounts, lenders embolden their strategies with a layer of financial acumen that is both comprehensive and nuanced, ensuring that every decision is informed by real-time data and every investment move is calibrated for optimum returns. In this sophisticated dance of numbers and narratives, collection accounts emerge not just as tools of transactional necessity but as beacons of strategic foresight in the ever-evolving tableau of Asset Backed Lending.
Embarking on the journey of cash reconciliation for collection accounts is akin to navigating through a meticulously crafted maze, where every turn unveils critical insights, and every step taken is a move towards financial clarity and control. The initiation of this process begins with the gathering of financial records from both the lender's ledger and the associated bank statements. This preparatory phase sets the stage for a comprehensive comparison, where each transaction is meticulously matched against its counterpart to ensure consistency across the board.
The journey progresses with the careful examination of deposits, pinpointing the exact match in the vast sea of transactions. This is followed by a detailed scrutiny of withdrawals, interest payments, and fees, each requiring a keen eye to detect discrepancies that could potentially skew the financial narrative. The reconciliation process is not merely about identifying errors but understanding their origins and implications, transforming this exercise into an insightful exploration of financial health.
As the process unfolds, irregularities that emerge are carefully documented, providing a clear trail of evidence for subsequent investigation and resolution. This rigorous documentation is crucial for maintaining the integrity of financial records and fostering accountability within the financial ecosystem.
The final phase involves the reconciliation of the ending balances, a critical step that confirms the alignment of the lender's ledger with the bank's records. This confirmation is not the conclusion of the journey but a pivotal checkpoint that validates the accuracy and reliability of the financial data, ensuring that the lender's financial landscape is portrayed with precision and truthfulness.
In an era where digital innovation reshapes the contours of Asset Backed Lending, leveraging technology becomes not just an option but a strategic imperative for efficient cash reconciliation. The introduction of sophisticated, automated reconciliation platforms heralds a new dawn of operational efficiency, enabling lenders to navigate the complexities of collection account management with unparalleled ease and precision.
These cutting-edge technologies serve as the cornerstone for a transformative approach to reconciliation, meticulously sifting through vast data landscapes to unearth discrepancies with surgical accuracy. They offer a real-time lens into account activities, shedding light on the intricacies of financial transactions and ensuring every penny is accounted for, without the traditional burden of manual oversight.
By harnessing the power of automation, lenders are equipped to elevate their risk management frameworks, seamlessly integrating robust checks and balances that safeguard against the specter of financial anomalies. The ripple effect of this technological infusion extends beyond the immediate benefits of time and resource optimization; it fosters a culture of accountability and transparency that is vital in the highly scrutinized environment of Asset Backed Lending.
Moreover, these digital tools pave the way for actionable insights, transforming raw data into a strategic asset. This empowers lenders to make informed decisions, tailoring their strategies to the evolving dynamics of borrower behavior and market trends, thus ensuring that their asset management practices remain at the forefront of excellence and innovation.
At the forefront of innovation in cash reconciliation, Cascade's proprietary technology redefines the paradigm of collection account management within the sphere of Asset Backed Lending. This transformative platform is designed to harness the power of automation and sophisticated analytics, providing an unrivaled edge in navigating the complexities of financial transactions. Cascade’s solution seamlessly integrates into the lender’s operational fabric, offering a streamlined, user-friendly interface that dramatically reduces the time and effort required for reconciliation processes. Its real-time reporting capabilities ensure that lenders are always equipped with the most current data, enabling proactive management of collection accounts and enhancing decision-making precision. Moreover, Cascade’s technology is built with the highest standards of security and compliance in mind, offering peace of mind in an environment where these aspects are non-negotiable. By adopting Cascade’s cutting-edge reconciliation technology, lenders are not just optimizing their operational efficiency; they are embracing a future where asset management and risk mitigation are synchronized, driving toward financial success with confidence and clarity.
One of the facts of life is when doing a private debt deal, getting the deal done is often the beginning, not the end of the work. Following the deal closing, every debt investor wants to have access to information about their borrower, but every borrower wants to get back to their day job; growing their business.
With these competing forces at play, it’s sensible for investors and borrowers to appoint third-party agents to handle their data and reporting. Here we explore the 3 main advantages of doing so:
Managing investor relations in private debt can be complex. By leveraging a third-party agent, you can streamline investor reporting, improve accuracy, enhance security, and free up valuable internal resources.
In today's competitive private debt market, efficient and insightful investor reporting is crucial for building trust and attracting new capital. Partnering with a third-party agent can give you the tools and expertise needed to deliver exceptional reporting that keeps your investors informed, engaged, and confident in your investment strategies.
Roll Rates, Markov Chains, Flow Rates, or whatever you call them in your part of the world, are metrics which measure the transition of loans in a portfolio from one DPD bucket to another. Roll rates can offer a dynamic picture of a portfolio's health beyond static snapshots like delinquency rates (DPD/NPL). Here's a deeper dive into their potential meanings and significance:
Analyzing historical roll rates allows lenders to not only estimate defaults but also understand the velocity of deterioration. A high roll rate from"Current" to "60+ Days Past Due" suggests borrowers are rapidly falling behind, prompting swifter action compared to a gradual increase.
Beyond just increases, roll rates can reveal specific patterns. For instance, a consistently high roll rate from "30 Days DPD" to "Current"might indicate aggressive collections efforts that push short-term payments but don't address underlying issues. This may lead to an increase in future defaults.
When comparing roll rates, consider factors like:
While roll rates offer valuable insights, it's important to acknowledge their limitations.
Roll rates rely on historical data, assuming future behavior will mirror past trends. This might not hold true during:
Roll rates are heavily influenced by the makeup of a portfolio. Here's why:
These limitations can largely be mitigated by combining Roll Rates with other credit quality indicators like credit scores, loan-to-value ratios, and economic forecasts for a more comprehensive picture.
By incorporating roll rates into their analysis, private credit investors and lenders gain a more nuanced understanding of portfolio risk and can make data-driven decisions for:
While limitations exist, roll rates, when used thoughtfully, are a powerful tool for navigating the complexities of private credit investing and lending.
For centuries, public markets have understood the crucial role of timely information. Since the Banc Brothers in Bordeaux cleverly exploited France's rudimentary signal-based communication system in the 1800s, investors have been relentless in their pursuit of information advantage.
Private market investors are now joining the fray, armed with modern technology that has democratized access to information. This has leveled the playing field, forcing traditional investors to adapt their strategies or risk falling behind.
But why exactly is access to timely information important? Here I list 10 reasons why receiving timely information is crucial for modern private debt investing:
With quick access to data, investors can better assess the creditworthiness of borrowers, identify potential risks, and make more informed investment decisions. This can lead to higher returns and lower losses.
By quickly and consistently verifying borrower data, investors can identify and mitigate potential fraud risks. This can save investors millions of dollars in losses.
Many private debt funds are subject to strict regulations. By having quick access to accurate borrower data, investors can more easily comply with these regulations and avoid costly fines and penalties.
In a competitive market, private debt investors need to be able to move quickly. By receiving data from borrowers quickly, investors can be the first to identify and close on attractive investment opportunities.
Borrowers appreciate investors who are responsive and efficient. By providing borrowers with quick feedback on their loan applications and by quickly processing their loan payments, investors can build stronger relationships with their borrowers.
Manual data entry and processing can be costly and time-consuming. By automating these tasks, investors can save money and improve their operational efficiency, allowing more resources for understanding the non-numeric aspects of the deal.
By quickly monitoring borrower data, investors can identify early warning signs of borrower distress, such as declining revenue or increasing debt levels. This allows investors to take corrective action before a borrower defaults on their loan.
By quickly identifying and assessing risks, investors can develop more effective risk management strategies. For example, data can allow for covenants to be back tested before implementation, helping optimize the structure of a deal. This can help investors to reduce their overall risk exposure and protect their capital.
Private debt investors often need to provide reports to their investors and regulators. By having quick access to data, investors can generate these reports more quickly and easily.
New technologies, such as artificial intelligence and machine learning, are being used to develop new ways to assess borrower creditworthiness and manage risk. By having quick access to data, private debt investors can adopt these new technologies more quickly and reap the benefits.
In summary, receiving data quickly is important for private debt investors because it can help investors to make quicker and better investment decisions, reduce risk, improve customer relationships, and even reduce costs. In this day and age, data access is mandatory to stay ahead of the curve.
Understanding the borrowing base can be a challenging task for many businesses.
The truth is, when it’s time to secure funding and grow your business, this concept often becomes the #1 hurdle. Mastering the borrowing base is crucial for accessing various business financing options to scale up smoothly, including equipment refinancing, invoice factoring, and asset-based lending. It’s a fundamental requirement for any company seeking an asset-back lending facility, yet can be a challenge to comprehend. But don’t worry, we’re here to help you understand the borrowing base and how it works. At its heart, the borrowing base is how the loan-to-value (LTV) of the credit facility is calculated. Navigating the complexities of asset-based lending and maintaining an optimized borrowing base can feel overwhelming. But here’s some real talk… Without mastering this aspect of financial management, scaling up won’t happen as smoothly as you’d like.
The borrowing base, in essence, serves as an upper limit on how much capital lenders are willing to extend based on the collateral or value of the collateral, effectively acting as a credit limit. This method safeguards lenders from overexposure while still ensuring borrowers have access to necessary funds, by establishing a credit limit that reflects the value of eligible collateral and any outstanding loans. So yes, understanding its nuances can save startups from potential risks associated with taking on debt. The major question is what is the “collateral value”.
The calculation process for determining a borrowing base is akin to solving an intricate puzzle. It’s about meticulously evaluating different types of collateral, and determining the optimal discounting rates that should be applied. It also involves determining the optimal collateral composition by not overweighting specific assets. To start solving this intricate puzzle, you need to think about what amount eligible collateral is going be included and what is going be excluded. Additionally, the discount factor plays a pivotal role in this calculation process, as it is used to multiply the value of the company's collateral, thereby determining the borrowing base and representing the total amount of money a creditor will lend based on the value of the collateral.
The top of the equation (positive) is really about valuing the collateral - we have two great blogs that go deep into these two items in a lot of detail. The bottom part of the equation (negative) is really determining which things shouldn't be included in the calculation.
Here are some other common items that get added to the borrowing base:
The borrowing base supports trade finance by providing a solid foundation for working capital facilities, enabling businesses to leverage their assets for growth and operational needs.
One issue that does come up with borrowing base calculations is when there are two different currencies represented in the equation, or even there is just money in one currency but it needs to be translated to another currency for purposes of determine if there is a surplus or deficiency (over collateralization). The question is, what FX rate to make the conversion at.
Once the borrowing base has been calculated, you’ll need to multiply it by the advance rate. The advance rate essentially sets the maximum amount that can be borrowed, determined by multiplying the borrowing base by the advance rate, which reflects the loan-to-value (LTV) ratio of the facility. Advance rates come in all shapes and forms (fixed, dynamic, etc.) but for ease of understanding, if a lender gives an 80% advance rate, that means that if the borrowing base is $100, the maximum amount the borrower can actually borrow against that $100 is $80.
In some cases, the lender will include advance rates into the borrowing base calculation itself by further discounting items. If this is the case, the advance rate becomes 100%.
The borrowing amount depends in principle on the advance offered by the borrower. The advance rate represents the maximum share of the current loan amount available to a borrower as a loan.
To measure the collateralization percent or whether there is a deficiency or surplus of financing a debt facility, the equation is typically:
$$(Borrowing Base * Advance Rate) - Current Outstanding Principal$$
Where the current outstanding principal is what has been lent from the lenders to the borrower and hasn't been repaid. Essentially, if the Borrowing Base * Advance Rate is greater than the outstanding principal, your doing well and can borrow more funds. If there is a deficiency, it's important to understand what's driving it. It could be a case of concentration risk or something else that you can talk with your lender about and show how it will be resolved.
When getting a borrower base agreement for an asset, you are likely to need to update the borrower base certificate regularly. It is an important form of documentation that lists applicable property, a price, and shows an advance rate used by the borrower’s calculations. A credit card company might require the use of a certificate indicating the type or amount of collateral you have to borrow from. Collaterals have fluctuating values so it helps make sure your outstanding loans still exceed the limits specified in your original borrowing agreement. Additionally, the borrowing base agreement is a crucial document that outlines the terms for borrowing base monitoring and compliance, ensuring that the value of collateral is periodically reviewed and remains in alignment with the loan agreement.
Technology solutions such as Cascade, help both companies and lenders set borrowing base calculations before a deal is signed, so that the calculations can be tested on real data with real assumptions. This is critical for anyone raising debt that includes a borrowing base calculation, test it and run different scenarios before agreeing to the terms of loan agreement. This often drives legal fees down as many hours are wasted in negotiating borrowing bases through legal documents when they can be negotiated using real data before the lawyers become involved. Once a deal is signed and live, it’s critical for companies to constantly beware of the borrowing base to ensure a deficiency doesn’t occur and if one does occur that it’s resolved quickly. There is no reason the borrowing base cannot be calculated daily (you can read more about the importance of daily calculations here). Furthermore, technology solutions like Cascade facilitate the lending process by making borrowing base calculations more efficient and accurate, ensuring smoother monitoring and management throughout the lending lifecycle.
One of the most heated discussions that play out in negotiating borrowing base calculations is whether or not cash should be added to the eligible pool balance (and thus multiplied by the advance rate) or whether it should be added after the eligible pool balance has been multiplied by the advance rate (giving it 100% value).
One side of the argument believes that cash should be multiplied by the advance rate because cash does not earn interest, whereas the underlying loans of the eligible pool balance do generate interest. This stems from the fact that the eligible pool balance is based on the outstanding principal balance. Meaning the expected cash flows generated from the non-principal payments are not part of the calculation and represent an additional buffer for the investor in the case of a wind-down, whereas cash does not provide any additional buffer for the investor.
The other side of the argument believes that cash should be multiplied by 100% because it can be liquidated immediately to pay down the principal balance. This side of the argument will also point out that multiplying by 100% doesn't put any unnecessary pressure on the borrower to originate new assets that might be riskier. This is because when multiplying by the advance rate, the borrower could decide to cure a borrowing base deficiency by originating new loans regardless of risk since even risky new loans are worth more than cash, which is ultimately harmful.
Some lenders will fall in between the two camps by adding additional terms to how the cash can be used. Such terms include:
Regardless of how the negotiations are settled between the borrower and lender, Cascade can support any variation of the borrowing base calculation. We've had experience with lots of different flavors of how cash is used and are happy to work with any form of the borrowing base calculation that both parties agree with.
Drafting mathematical formulas in asset-backed lending agreements is an art form. It requires an understanding of both the legal and financial aspects of such agreements. As discussed in other blog posts, calculations are becoming more complex to determine payments, covenants, and other financial considerations. Lawyers need to craft agreements that accurately reflect the business agreement between the investor and borrower. In this blog post, we will explore the various techniques used for drafting mathematical formulas in asset-backed lending agreements and discuss the importance of accurately reflecting these mathematical concepts.
As a result of lawyers turning relatively simple formulas into long-winded paragraphs that completely obscure the formula in the language, misinterpretations, and errors are common. Typically the misinterpretation/error is based on the arithmetic order of precedence (otherwise known as BEDMAS). Most people wouldn't be able to calculate equations without putting them in their typical mathematical notation, so why not do this in the legal agreement? They'd likely find the simplified formula quicker to read and easier to understand, with fewer mistakes and less time required there is no reason not to include mathematical formulas. It's also important that when writing out mathematical formulas the business team thoroughly reviews the formulas to ensure they make sense. The equations should be black and white with no areas of grey for misinterpretation.
At Cascade, we keep a library of legal definitions and covenants built on these definitions, the library is available for any party to use. When we onboard debt facilities, if a calculation is required, we first turn it into a mathematical formula broken down into easy-to-digest pieces. We've found that doing so eliminates all the guesswork out of how exactly the calculation is managed. Often times during the process it becomes clear that there is some level of grey in the legal formula that needs to be negotiated.
To help illustrate why Cascade believes mathematical formulas should be used whenever a calculation is entered into a loan agreement here is an excerpt of a legal text that got the formula wrong.
Borrowing Base means with respect to any Advance Date, the product of (a) the Advance Rate (b) the sum of the Eligible Pool Balance and (c) Cash.
As a formula this means:
Advance Rate * Eligible Pool Balance * Cash
Borrowing Base means with respect to any Advance Date, the product of (a) the Advance Rate and (b) the sum of the Eligible Pool Balance plus Cash
As a formula this means:
$$Advance Rate * (Eligible Pool Balance + Cash)
In the legal text the Borrower will probably never have a borrowing base deficiency as as they are multiplying the Eligible Pool Balance by Cash - so as long as they have some cash on hand the Eligible Pool Balance will be enormously inflated.
This mistake was so outrageous both parties knew it had to be amended, but in other cases when a simple mistake in order of precedence, the parties could end up in litigation over what the interpretation should be - which no one wants to do.
When it comes to portfolio performance covenants in loan agreements, there is an important distinction between ongoing and cohort covenants. Ongoing covenants are those that change with time and must be continually monitored and updated throughout the loan agreement, whereas cohort covenants are those that are specific to assets disbursed in a specific period. In this blog post, we will discuss the differences between ongoing and cohort portfolio performance covenants and their implications for lenders and borrowers.
Ongoing portfolio performance covenants are the most common type of portfolio performance covenants we see at Cascade. An example of an ongoing performance covenant is a delinquency test where the investor wants to ensure the portfolio does not go above a specific portfolio at risk (PAR) value. As the covenant uses the outstanding portfolio balance net of write-offs as the denominator, as long as the borrower keeps originating faster than defaults, the covenant will not be breached. However, if origination slows down the covenant can be breached. The main thing is the covenant calculation is constantly changing and does not settle until all loans are fully repaid or written off.
Instead of using an ongoing delinquency test, the investor might choose a cohort delinquency test whereby the denominator is fixed with only the original principal balance of loans disbursed in a given period (1 month, 1 quarter, etc). If the period is greater than 1 month, a common age definition might be included so that the delinquency rate is based on assets based on the maximum number of months all assets have on book - this is just a technique to normalize the data to a specific snapshot in time.
The critical difference between the two different covenants is the time period of the test. Both covenants in the above example are focused on delinquency and trying to ensure the overall delinquency rate of the portfolio doesn't breach a specific trigger. The ongoing test takes all loans that are outstanding into consideration, while the cohort covenant is just focused on loans disbursed in a particular period, such as a month. The other major difference is that written-off loans are typically excluded from the numerator in the ongoing calculation, whereas they remain in the calculation for the cohort test.
There are pros and cons for both types of covenants - here are the main things to consider:
At Cascade, we offer a comprehensive suite of portfolio performance covenant data management tools designed to borrowers and lenders keep track of their portfolio performance covenants. As data agents we continuously monitor the performance of your assets, ensuring that any potential risks or issues are identified and addressed quickly. Our tools allow users to back-test covenants so they can be refined to ensure they achieve their intended goal without causing unnecessary burden of requiring unnecessary waivers. Our powerful analytics platform also provides deep insights into your portfolio's performance, helping you make informed decisions when there is a breach. By leveraging Cascade as a data agent and our proprietary analytics platform, you can have peace of mind knowing that your portfolio is being monitored for performance and risk. Whether you’re using a cohort or ongoing covenant strategy, our team of experts is here to ensure that you have the data and insights necessary to make informed decisions.
The eligible pool balance is an important concept for any borrower who is borrowing through an asset-backed structure. It is directly linked to the borrowing base, which is the amount of money a lender will provide to a borrower as well as calculating the value of the collateral on an ongoing basis. In this blog post, we’ll explore the different components that make up the eligible pool balance, how they can affect your borrowing base, and why it's important for borrowers to understand the calculation before signing a loan agreement.
An eligible pool balance is ultimately the value assigned to the assets backing the loan. To calculate the value three main components are used: eligibility criteria, eligible pool discounting, and excess concentration. Eligibility criteria determine the types of assets that can be used for asset-backed lending, such as assets with a term of fewer than 12 months. Eligible pool discounting reduces the outstanding principal value of a loan based on the risk associated with the loan (ex: loans with a DPD of 90 are reduced to 0%). Finally, excess concentration measures how much of the collateral is grouped by different rules (ex: no more than 10% of the eligible pool balance can be related to one borrower).
When setting eligibility criteria for an eligible pool balance, it is important to consider the needs of both the lender and the borrower. It is critical to understand what types of assets the borrower can put in the pool, as well as will the borrower be able to generate enough assets to match the loan size. For lenders, this helps to assess the risk associated with the potential loan and determine the necessary loan terms. Some multilateral lenders like the IFC have exclusion lists that get factored into eligibility as well. The characteristics of a future portfolio should be clearly defined and agreed upon by both parties. It is important to make sure that the criteria do not create ineligible assets or eliminate opportunities for risk diversification.
When assessing an eligible pool balance, asset discounting is an important part of the process. Discounting helps lenders determine the value of the collateral based on changing conditions. This ensures that a company’s assets are being valued accurately and that lenders are protected in case of default or delinquency. When discounting an asset, the main variable used is the number of days past due (DPD). As loans increase in days past due, they become riskier and less likely to recover. To set the optimal discount rates, lenders and borrowers need to deep dive into vintage and roll rate analysis to help understand the likely recovery rate of assets at different DPDs. It's important that both lenders and borrowers run different analyses on the portfolio at different points in time to understand the impact of discounting. Discounting is the primary driver in reducing the borrowing base, both parties need to ensure they understand the impact of the discounts on the outstanding balance to prevent any unnecessary borrowing base deficiencies.
When considering eligible pool makeup borrowers and lenders need to be mindful of excess concentration limits. These restrictions refer to the amount of the total eligible pool balance that can be held by a single borrower, or in a single geography or other limits. An excessive concentration could put the lender at risk if a sudden economic downturn hits a sector. When determining excess concentration limits, lenders need to consider both their capital requirements and their risk management policies. In addition, lenders should also look at factors such as geographical trends, industry developments, borrower products, risk grades, and macroeconomic factors. This will allow them to effectively mitigate their risk and maximize their profitability.
At Cascade, we are proud to be at the forefront of fintech innovation in private debt and asset-backed lending. Our technology platform is designed to help lenders and borrowers alike in managing their eligible pool balance. We offer a range of services to help you make informed decisions when it comes to your borrowing base. At Cascade, we strive to provide our clients with the data and insights they need to stay ahead in this ever-changing world. Our powerful platform can help you easily manage and monitor your eligible pool balance, giving you greater control over your lending strategy.
Asset Back Lending (ABL) is a type of private debt lending that is becoming increasingly popular in the world of finance. Lenders often require clients to provide a borrowing base certificate to confirm that the amount drawn against the revolver is supported by an appropriate borrowing base of accounts receivable and inventory. It is a great way to access capital, but it comes with risk. A key tool for managing this risk is calculating borrowing bases daily. This blog post will discuss the importance of daily calculation of borrowing bases for risk monitoring in ABL.
The borrowing base is the value of the underlying collateral that acts as security for the loan. It’s an essential factor in risk monitoring because it ensures a loan is fully collateralized and helps determine the credit limit extended by a lender. While lenders have traditionally monitored borrowing bases manually and on a monthly or quarterly basis, fintech companies like Cascade use automated data feeds and analytics platforms to track borrowing bases quickly, accurately, and in nearly real-time. This allows lenders to analyze risk more efficiently, monitor changing economic trends more accurately, and make better decisions about credit exposure more frequently. In addition to helping lenders manage their portfolios more efficiently, daily borrowing base calculations also provide businesses with a more comprehensive picture of the current collateral value so they can rectify any deficiencies before they spiral out of control. Furthermore, as both parties have greater visibility of the underlying collateral, waterfalls can be run more frequently (daily), reducing cash drag, which doesn’t help either party. Daily calculation of borrowing bases has become an integral part of credit analysis and risk management, allowing businesses to quickly identify potential problems before they become major issues, ultimately protecting their bottom line.
A borrowing base is a calculation used to determine the value of the borrower’s collateral. A discount factor is often applied to the adjusted value of collateral to determine the credit limit. In most cases, the borrowing base calculation comprises three major components: eligible asset pool, cash in a collection account, and advance rate, as well as a few fringe components: interest reserve, accrued lender’s interest, and more. For the purposes of this article, we’re going to focus on the eligible asset pool and cash in the collection account. Calculating the borrowing base in real time depends on live data feeds from multiple sources.
To calculate the eligible asset pool, which includes accounts receivable, there are three key factors: 1) confirming assets are eligible based on predefined criteria; 2) sorting assets into predefined buckets based on its delinquency state (current Days Past Due aka DPD); and 3) eliminating any excess concentration amounts. All of these calculations change on a daily basis and being able to get updated calculations is critical to any risk monitoring program.
The borrowing base is also calculated using the most recent cash balance in the collection account(s). Having direct access to these accounts through APIs, SWIFT reporting, or other banking integrations provide lenders with security that cash is following any predetermined flow of funds agreement. It also provides the ability to confirm real payments on loan tapes as cash movements should match between the collection account and loan tape.
More and more advance rates are being set dynamically to update based on changing conditions of a deal instead of setting them once and forgetting about them. To ensure the borrowing base is being calculated accurately, it's important that all conditions that could change the advance rate are being monitored (portfolio covenants, financial covenants, reporting covenants, etc).
When there is a borrowing base deficiency, it’s important to act quickly to avoid a potential event of default. Borrowing base deficiencies can also impact corporate borrowers, affecting their ability to secure additional funding. A borrowing base deficiency can be caused by many different factors and being able to identify what is causing the deficiency is priority one. Once the cause is identified, it’s important to work with all parties involved to come up with a solution. Borrowing base deficiencies are typically resolved by either (i) assigning new receivables (ii) adding cash to the collection account (iii) providing a waiver for different criteria (eligibility criteria, excess concentration, etc). When the situation cannot be resolved, an event of default will typically occur, and the portfolio will enter a wind-down.
When a deficiency exists it's important for lenders to be at the front of the line, whether that's getting new receivables or cash top-ups having seniority or reacting quickly is key. By proactively performing borrowing base calculations on a daily basis, lenders are able to secure their position in the creditor line and protect their investors' interests before other creditors have even realized there is a problem.
Cascade Debt is pioneering daily borrowing base calculations, get in touch with us to find out how we can support your risk management program.
The world of private debt is rapidly changing, and one of the most important roles that is helping to drive this shift is the Data Agent. With the rise of asset-backed lending, it is becoming more and more important for investors to have a reliable source of data ingestion whether evaluating potential deals or monitoring portfolio companies. Data Agents help bridge the gap between investors and borrowers by putting into place the infrastructure required to automate data reporting in standardized ways between parties. The data agent ensures there is just one source of truth between all parties involved. In this blog post, we will explore the role of the Data Agent in the world of private debt and how it is helping to shape the future of finance.
A data agent is a service provider that utilizes purpose-built technology to streamline the due diligence and management of private debt investments. A data agent will gather any relevant data such as loan tapes, and financial statements from a borrower, and send them to an investor. Data agents accomplish this by connecting to companies' databases for up-to-date data, and sending the information to their investors at agreed intervals in the format required for the investor to keep track of his investments. In other words, data agents play a key role in the private debt market by making sure the accuracy and timeliness of the data is spot on, as well as helping to maintain healthy relationships between the investor and borrower.
By using a data agent, borrowers don’t have to build their own technologies to manage their lenders, and investors get access to standard data feeds that have been verified by a third party. Data agents also provide a one-source-of-truth for risk monitoring. By partnering with a data agent, investors can be sure that their portfolio is being monitored daily and accurately. This ensures that their investments are up to date and running smoothly. Data agents can also offer additional services such as covenant calculations, borrowing base calculations, compliance reporting, waterfall reporting, etc so the Borrower stays up to date with all requirements of the loan agreement. They are becoming increasingly popular for those investing in private debt, as they provide a level of security and convenience not found with traditional methods.
Choosing a data agent for private debt is an important decision for any service provider. It's important to take your time and do research to find the right one that fits the needs of your product. Here are a few factors to consider when selecting a data agent:
Using a reliable data agent can save you time, effort, and money, so be sure to take your time in selecting the right one.
Cascade Debt is a great option for anyone looking for an experienced data agent who knows private debt markets inside and out. Our team has years of experience helping borrowers and investors in this sector, so we're well-equipped to help you navigate the complex world of private debt.
We founded Cascade with a mission to streamline the private credit market for originators and investors without sacrificing attention to detail. My co-founder and I are former debt and ABL investors who saw firsthand how antiquated the industry was, therefore stalling growth for so many businesses that could benefit from the asset class. Our business has grown significantly in the last two years, with dozens of new clients, a global team of engineers and debt experts, and funding from top institutional investors like Bonfire, Founder Collective, Impression Ventures, New Stack Ventures, and Soma Capital.
Today, I am thrilled to share our new brand and the story behind it – a transformation that truly reflects and reinforces our vision and mission. This blog post will give you a peek into our next phase of growth and the story behind our new visual identity.
When we first launched Cascade, our primary goal was to simplify the cumbersome and lengthy lending processes that plague the asset-based lending industry. We set out to create an innovative platform that would make it easier to access institutional debt by providing verified data and increasing transparency for all parties involved. But as we grew, we realized that our brand identity no longer represented the dynamism and sophistication of our offerings. Our organization has matured substantially and we needed a visual identity that matches that growth and maturity.
We've evolved from a promising startup to a trusted partner for leading institutional investors and innovative startups worldwide. We've democratized the debt-raising process, making it accessible and efficient for businesses of all sizes. Whether you're new to the debt game or managing multiple facilities, Cascade has become the trusted solution to many. Our next phase of growth involves expanding our services, enhancing our platform, and reaching new markets. This rebrand reflects our commitment to continuous improvement and innovation.
Our new identity is more than just aesthetics; it's about improving your experience. With a more intuitive interface and enhanced features, managing your debt operations will be smoother and more efficient. You'll find it easier to access the information you need, collaborate with stakeholders, and make informed decisions. Our new brand is a promise of excellence and a commitment to helping you succeed.
The rebranding process was an exciting journey of self-discovery. We collaborated with top designers and branding experts to create an identity that truly represents who we are. We drew inspiration from our mission to simplify complex processes and our commitment to excellence. Every design element, from the typography to the color palette, was chosen carefully to convey our values and vision centered around these core brand attributes.
These brand attribute characteristics are present in every part of our visual identity, including our logo, color, typography, and art direction.
Our new visual identity is sleek, modern, and sophisticated – much like the solutions we offer. The logo has been redesigned to reflect our core values of trust, transparency, and collaboration. By acting as a neutral third party and trusted advisor, we’re able to independently verify all data and bring transparency and clarity to both borrowers and lenders. The color palette has both neutral and bold hues, symbolizing our neutrality and our innovative spirit.
Our mark serves as the central hub for interconnected clarity and empowering insight. Our logotype captures the essence of precision with engineered and structured fluidity. It reflects Cascade’s commitment to simplifying debt financing with repeatable, geometric curves that exist within each letterform.
Cascade’s visual language embodies the concept of “Insightful Depth,” signifying a profound and deliberate comprehension of growth opportunities for businesses. This theme is articulated through three layers of visual language: Micro Analysis, Calculated Transparency, and Cascading Depth.
While our appearance has changed, our core mission and values remain the same. We are still dedicated to simplifying the lending process, providing verified data, and fostering transparency and collaboration. Our commitment to helping you scale your AUM and debt capital faster, without the risk and headache, is as strong as ever.
One of the things our customers love about Cascade is our exceptional customer support. This will never change. We will continue to provide you with timely, personalized support to ensure you get the most out of our platform. Whether you have a question about a feature or need help troubleshooting an issue, our team is always here to assist you.
Innovation is in our DNA. We will continue to develop cutting-edge solutions that address the evolving needs of the private credit industry. From data analytics and automated reporting to seamless integrations with various database types, we are committed to staying ahead of the curve and providing you with the tools you need to succeed.
Our rebrand marks a significant milestone in Cascade's journey. It's a reflection of our growth, our commitment to innovation, and our dedication to serving you better. We are excited about the future and look forward to continuing to support you in achieving your financial goals.
Thank you for being part of the Cascade community. Whether you're a long-time customer, a trusted partner, or considering joining us, we invite you to explore our new identity and discover how we can help you streamline your debt operations and take control of your financial future.
Ready to experience the new Cascade? Schedule a strategy call with our team today to learn more.
On this episode of ATLalts, Mike Shum, Co-Founder and CEO of Cascade, shares his journey and the mission of the company. Mike discusses the challenges in the private debt market and how Cascade is building solutions to simplify and streamline the process. Mike also provides insights on preparing for accessing institutional debt and the importance of the structuring phase in the debt raise process. In this conversation with ATLalts host Andres Sandate Mike discusses the importance of valuation and terms in debt financing. Mike emphasizes that price and size are not the primary concerns for early-stage founders, but rather factors such as leverage and flexibility should get more attention. Mike explains that interest rate is just one component of a term sheet and that founders should consider other factors like upfront fees and unused capital fees. Mike highlights the significance of eligibility criteria and concentration limits. Mike discusses the monitoring and compliance aspect of debt deals, emphasizing the need for accurate and real-time reporting. Mike concludes by explaining how Cascade provides solutions for asset managers in the private credit space and shares the company's vision for the future.
Our CEO, Michael Shum, joins the Fintrepreneur Podcast where he discusses "Democratizing Private Debt Markets" with hosts David Gens and Elias Beaino. They explored Michael's experiences, the profound Digital Transformation of Private Debt Markets, and the latest in Fintech solutions driving innovation.
Discover how these technological advancements are not just reshaping finance but also fostering unprecedented opportunities for businesses to thrive.
Join the conversation as we shed light on the crucial role of sustainability in the private debt sector. Don't miss out on this dynamic discussion that promises valuable insights for entrepreneurs and finance enthusiasts alike.
Tune in to Fintrepreneur for an engaging blend of expertise, innovation, and the ever-evolving intersection of finance and entrepreneurship!
