Structured Products for Collateral-free MSME Lending
While lending against movable assets such as inventories, receivables, movable plant and equipment and vehicles, banks insist upon additional collateral such as land, building and third party guarantees. This deprives many borrowers, especially the MSMEs in getting adequate bank finance, since they are not in a position of offer the additional collateral. Similarly, start ups and MSMEs with relatively weak financials find it difficult to get bank finance. In the services sector, a major part of the assets of the borrowers may consist of intangibles, such as patents, copyrights, franchises, etc. Banks are reluctant to finance the intangible assets. Movable assets based lending (MABL) is a technique through which banks can successfully lend against movable assets without insisting upon additional collateral. This is done through structured lending products that enable better control over the primary collateral and borrower’s cash flows. Supply chain financing, warehouse receipt financing, factoring are some examples of such products.
To enable participants to:
Understand and appreciate difference between traditional ‘Balance Sheet Based Lending’ and ‘Movable Assets Based Lending’ (MABL)
Identify business opportunities for MABL, especially to MSMEs
Ensure quality MABL portfolio through properly structured products, effective monitoring strategies, better cash flow control and other risk mitigation strategies
Needs of MSMEs for funding against movable assets
Key characteristics of MABL
How MABL is different from traditional balance sheet based lending
Circumstances under which MABL is preferred over balance sheet based lending
Use of MABL in financing start ups and borrowers with weak financials but steady business prospects
MABL products for working capital such as over draft, warehouse receipt financing, supply chain financing, factoring, reverse factoring, etc.
Other MABL products such as equipment finance, leasing, etc.
Lending against intangible assets
Underwriting practices for MABL: why managing collateral is central to MABL? Follow up and monitoring strategies, involving outside agencies, leveraging ‘Information and Communication Technology’
Risk mitigation strategies for MABL
Prevention of frauds through field examination, due diligence, etc.
Enabling environment for MABL
Above mentioned topics will be supported by exercises/case studies and experience sharing
Duration: 2 Days
Target Group – Those working in corporate, mid-corporate and SME lending with about two years’ experience in lending. Those working in ‘credit risk management’ and ‘internal audit’ would also find the program useful.
Trainer: Dr. Satish Shinde