With COVID-19 cases continuing to surge in the United States and small business defaults rising sharply, U.S. commercial lenders can mitigate their risks through a range of loan portfolio risk management strategies to weather economic headwinds and promote long-term growth. That's according to Wolters Kluwer Lien Solutions in a new thought leadership article published in the American Bankers Association's (ABA) Banking Journal
While economic stimulus programs have been enacted, funding from some of those efforts is beginning to dry out, leaving small businesses in a precarious situation. But in spite of significant volatility in today's commercial lending space, there are ways for lenders to mitigate the risks, notes Raja Sengupta, Executive Vice President and General Manager, Lien Solutions, in this feature article, "Navigating a New Era in Commercial Lending."
"A thorough review of loan documents is necessary to determine to what extent borrowers may be, or are likely to become, in default of financial covenants or in breach of representations and warranties or other covenants, or are required to provide notice to their lenders of their current or anticipated circumstances," writes Sengupta. "Further emphasis should be placed upon secured loans, to ensure that liens are perfected and that the collateral can be secured."
Sengupta notes that for cash-strapped businesses facing a potentially prolonged period of reduced demand, bankruptcy "may be an attractive route to managing their debt burden. Lenders thus face a delicate balancing act between leniency and stringency for borrowers in distress."
He writes that strong rigor around workouts can benefit both borrower and lender as a valuable way to mitigate a wave of defaults. But not all circumstances necessitate a workout, and the practice should be employed only when necessary, such as when the borrower's prospects in the future look bright and they are receptive to negotiations.
"Lenders can build stronger relationships during volatile times by offering resources for borrowers to take advantage of, such as networking or federal loan assistance, Sengupta notes. "There are many ways to keep borrowers afloat until they recover. It's well worth their time to explore all of the available options."
First published in 1908, the ABA Banking Journal-the American Bankers Association's flagship magazine-provides insights that help banking leaders succeed in the competitive financial services market. It is read by more than 20,000 bank leaders nationwide.
Lien Solutions, which is part of Wolters Kluwer's Governance, Risk Compliance (GRC) division, provides award-winning solutions for lenders. Its flagship iLien offering gives lenders the ability to conduct public record searches, retrieve and view Uniform Commercial Code (UCC) and corporate records, create filings, and manage their entire lending portfolio. iLien Manageis a suite of award-winning, web-based solutions that enable lenders to manage and address risks in their entire UCC lien portfolio with analytics, visibility and automation. Its iLien Motor Vehicleoffering is an award-winning SaaS platform that transforms vehicle and equipment titling work, helping lenders maintain loan perfection, monitor and manage vehicle liens efficiently, and release titles effortlessly.
Wolters Kluwer's GRC division provides an array of expert solutions to help U.S. financial institutions manage regulatory and risk obligations, including customized offerings to address COVID-19 challenges. Lien Solutions' iLien for Main Street helps lenders optimize their due diligence and lien management efforts when securing loans for small and medium-sized businesses under the Main Street Lending Program. In addition, Wolters Kluwer Compliance Solutions' Paycheck Protection Program Supported by TSoftPlus helps lenders' customers access critical stimulus funding.
About Wolters Kluwer Governance, Risk Compliance
Governance, Risk Compliance is a division of Wolters Kluwer, which provides legal and banking professionals with solutions to help ensure compliance with ever-changing regulatory and legal obligations, manage risk, increase efficiency, and produce better business outcomes. GRC offers a portfolio of technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance.
Wolters Kluwer (AEX: WKL) is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. Wolters Kluwer reported 2019 annual revenues of €4.6 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide.
Director of Global Corporate Communications, Banking Regulatory Compliance
Governance, Risk Compliance
Office +44 20 3197 6586
Corporate Communications Manager, Banking Regulatory Compliance
Governance, Risk Compliance Division
Tel: +1 612-852-7966
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