Asset-Backed Lenders
Audits of asset-based and specialty finance lenders, plus field exams and covenant testing on the borrowers in their portfolios.
Overview
Asset-based lenders and specialty finance companies lend against collateral: receivables, inventory, equipment, and other assets that have to be monitored continuously. Their own financial statements depend on how well that collateral holds up, and their funding sources expect audited results that reflect credit risk accurately. Pease Bell, a Top 200 U.S. CPA firm headquartered in Cleveland, Ohio, works with asset-based lenders on two fronts: auditing the lender itself, and performing field exams that help the lender understand the collateral behind its loans.
For the lender, we audit loan portfolios, the allowance for credit losses under CECL, and the reporting required by bank lines, warehouse facilities, or investors. For the lender’s borrowers, our field exam teams test borrowing base certificates, receivable aging, inventory, and covenant calculations, then report findings the credit team can act on. Keeping audit and field exam work coordinated can give lenders a clearer view of risk.
How We Help Asset-Based Lenders
Lender Financial Statement Audits
Audits of asset-based and specialty finance companies under U.S. GAAS, covering loan receivables, fees and interest income, the allowance for credit losses, and the disclosures funding sources rely on.
Borrower Field Exams
On-site and remote examinations of borrowers’ receivables, inventory, payables, and borrowing base certificates, designed to test collateral quality and identify issues before they affect availability or credit.
CECL and Loan Loss
Support for allowance for credit loss estimates under ASC 326, including segmentation of collateral-based loans, use of collateral values, historical loss data, and qualitative adjustments.
Covenant Compliance Testing
Independent testing of borrower financial covenants, such as fixed charge coverage or total debt to EBITDA, against loan agreement definitions, with clear reporting of calculations, adjustments, and exceptions.
Funding Facility Reporting
Help preparing and testing the reports lenders owe their own bank lines and warehouse facilities, including eligible collateral schedules, portfolio performance data, and compliance certificates.
Borrower Quality of Earnings
Quality of earnings analysis on prospective borrowers to support new loans, refinancings, or acquisition financing, focusing on sustainable cash flow and working capital that supports the collateral.
Challenges We Help You Address
- ✓Verifying that borrowing base certificates reflect real, eligible collateral
- ✓Estimating credit losses on collateral-dependent loans under CECL
- ✓Catching covenant definition differences before they become disputes
- ✓Meeting reporting requirements from your own bank lines and investors
- ✓Scheduling consistent field exams across a growing borrower portfolio
Frequently Asked Questions
What is a field exam in asset-based lending?
A field exam is a review of a borrower’s collateral and reporting performed for an asset-based lender. Examiners typically test accounts receivable aging, dilution, inventory records, payables, and the borrowing base certificate against the borrower’s books and supporting documents. The results help the lender confirm availability, identify ineligible collateral, and spot changes in risk early. Lenders often schedule field exams before closing and periodically afterward.
How does CECL apply to asset-based lenders?
Asset-based lenders that follow U.S. GAAP apply ASC 326, which requires estimating expected credit losses over the life of loans. For collateral-dependent loans, the standard allows measuring expected losses based on the fair value of the collateral in certain circumstances. Lenders need data, segmentation, and documentation that support their estimates, and auditors will test both the method and the key assumptions.
What is the difference between a field exam and an audit?
An audit results in an opinion on whether a company’s financial statements are fairly presented as a whole. A field exam is narrower and faster. It focuses on specific collateral and reporting items the lender relies on, such as receivables and the borrowing base, and reports findings to the lender rather than an opinion. Many lenders use both, for different purposes.
Why do specialty finance companies need audited financial statements?
Specialty finance companies usually fund their loans with bank lines, warehouse facilities, securitizations, or investor capital, and those funding sources commonly require audited financial statements. An audit gives them independent assurance over loan balances, income, and the allowance for credit losses. Audited statements can also support future capital raises or a sale of the business.
Related services & industries
Contact Us
Tell us about your organization and a member of our team will be in touch.