Articles

Fraud ... An Ever Present Danger: Prevention, Detection & the Tools to Manage It by Jerome Oldham
This article is to address corporate fraud and malfeasance as a given in today’s business finance environment. Not that it is prevalent in every corporate financing transaction, or even in a majority or them. But when it is present in the company being financed or its management team, it is both costly and disruptive to the victim. The costs can be measured as real costs, opportunity costs and even brand dislocation or wasting. [Full Article]

A Time to Kill ... the Deal by Jerome Oldham
In this article, due diligence will be referred to broadly as a process because, much like the "Scientific Method" that we learned in high school chemistry as a process of proving or disproving a theory or set of assumptions, that is what due diligence is, or should be. At any point while performing due diligence, a lender may find that one of its key deal assumptions is flawed or wrong. If such a discovery is a deal killer, then there is great value in being expeditious about identifying the erroneous assumption and acting decisively upon it. [Full Article]

The ABL industry and background investigations... past, present and future by Jerome Oldham
I attended my first Annual Commercial Finance Association Convention in Toronto in 1992. I was doing my own due diligence on the commercial finance/asset based lending industry to determine how the industry approached the subject of evaluating the backgrounds of prospective management teams and companies. Since then much has changed in the United States and abroad regarding the use of background investigations as part of the due diligence process, with most of the change coming in the last few years. In the time and space provided here, I would like to focus on the events and circumstances that have had the largest impact on the business of performing background investigations in the ABL industry. These "happenings" have altered the frequency and the intensity by which background investigations are brought to bear on an investment decision. [Full Article]

Asset-Based Lending Roundtable
ABL is a hot topic in corporate finance today. This roundtable discussion will analyze ABL market growth and the increase in competition, which has important implications for both lenders and borrowers. Other issues include the mechanics of asset-based lending, how management teams impact the underwriting process, and the complexity of valuing intangible assets. Our panel lists will also discuss how the asset-based lending product will expand across geographic, economic and legal boundaries in the near future. [Full Article]

Background Investigations in the Asset-Based Lending Industry by Jerome Oldham
Since my first Annual Commercial Finance Association Convention in Toronto in 1992, much has changed regarding the usage of background investigations as part of the due-diligence process. Most of the change has occurred in the last seven years. Let's look at a few of the happenings that have had the largest impact on the business of performing background investigations in the asset-based lending industry. These events have altered the frequency and the intensity by which such investigations are brought to bear on an investment decision. First, a few statistics. The source: The Association of Certified Fraud Examiners' "Report to the Nation” and the "2002 Report to the Nation." [Full Article]

Then & Now ... Background Investigations in the ABL World by Jerome Oldham
"Then" for purposes of this article is fall of 1992, the first time I attended an annual Commercial Finance Association meeting, which was in Toronto. I was doing my own due diligence on the commercial finance/asset-based lending industry to determine how the industry approached the subject of evaluating the backgrounds of prospective management teams and companies. "Now" is… well, a day in June 2004, with sufficient time for me to complete this article before the print deadline. [Full Article]

The "Killer" Character Component by Jerome Oldham

How important is the character component of the investment decision? What kind of integrity deficiency should cause a lender to rule out or veto a deal? Here's a cautionary real-life tale. According to her resume, "Dr. Sharon Smith" had sterling credentials for playing the leadership role as creator of, and spokesperson for, a revolutionary line of nutritional supplement products. She had a doctorate in nutritional chemistry and a successful clinical nutrition practice for many years. Dr. Smith appeared as a regular guest on a major-market television show as a nutritionist and holistic health expert. She was extensively published, sat on the advisory board of an internationally respected healthcare company and was married for years to a world-renowned chemist. [Full Article]

The Lender's Plague - Contingent Liability Risk by Jerome Oldham

How many of your charged-off loans in the last three years were the result of an unforeseen risk resulting from events seemingly unrelated to the business or the investment your were financing? How many of your well underwritten credit decisions were sabotaged by a seemingly unrelated business or investment of your borrower or guarantor who got into trouble? How many of your borrowers simply understated their presumably passive liability in another business or investment because it wasn’t believed to be part of their relationship with you? How many of your borrowers were facing seemingly unrelated contract risk from an unrelated business venture and didn’t disclose it to you? How many of your borrowers or guarantors were involved in seemingly unrelated litigation at or subsequent to closing? How many of your borrowers or related parties are subject to judgments or other enforcement actions of which you are not aware? [Full Article]

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