Can you introduce yourself? What do you do at Finley?
My name is Mary, and I help manage business development and partnerships here at Finley.
What was your background prior to joining Finley?
Prior to joining Finley, I sat in Leveraged Finance at Citi. There, I helped the team originate debt transactions for leveraged buyouts, corporate acquisitions, and strategic refinancings for corporate and financial sponsor-backed clients.
How can technology help lenders spot and understand risks faster and more clearly?
Data often comes in from multiple borrowers with evolving asset classes and industries, and it’s housed in many different places. We hear from asset managers that it's often difficult to ingest this data, verify it, and then make sense of it.
Modern teams should be using technology to centralize and structure their vast amounts of data. That way, they’re empowered to implement faster and cleaner risk identification. That alone is incredibly valuable for teams who have largely been dealing with disparate systems and formatting.
To take it a step further, the latest technology, like Finley, can track every attribute for every asset at each loan tape submission. That allows teams to do two things.
First, everyone has access to more reliable, completely automated data integrity checks. A centralized system for both borrowers and lenders can recognize issues and notify both parties immediately. For example, if a field like "days in business" has gone down since the last loan tape submission, it is flagged programmatically rather than potentially picked up by an analyst spot check.
Second, technology can enable lenders to track trends across assets on the individual level and then zoom out on all the assets in a financing transaction, and then zoom out even further on the portfolio level. That’s massive. When teams log into a platform like Finley, they can see the problem areas with certain investments and then drill down into granular details to figure out what assets within the transaction are creating problems.
Historically, there’s been a significant reliance on analysts to do spot-checking and communicate with the borrowers. It's really hard to get the level of granularity that platforms like Finley provide with just Excel while also providing a big-picture view of the portfolio. A solution like Finley gives teams the details that they need while keeping a pulse on the whole portfolio. Then, teams can be more proactive with risk while reacting in real time to the most up-to-date data.
How should risk management solutions adapt as needs grow?
They have to be scalable. Many firms throw more people at the problem as they grow, and that fails to address the fact that the process is still manual and error-prone at its core. Modern solutions like Finley mitigate the need to hire additional people to do manual data entry while freeing up senior-level individuals who can do more strategic work for the company.
Plus, with more growth in the private credit sector, there's been a lot of creativity with credit agreements, which has led to operational challenges for many firms. It's one thing to put a reporting requirement in a debt contract, and another to operationalize it. Finley has a unique point of view because our capital markets team has seen quite a few transactions in the space, and we’ve helped our customers accommodate a number of unique requirements. Solutions now have to be incredibly configurable so that they can accommodate new terms and changing norms.
Now, onto borrowers. What actions can borrowers take to prepare for sudden market changes and reduce potential problems?
It’s actually really important for borrowers to negotiate flexibility into the credit agreement. I’d argue that the terms are even more important than the rate. When borrowers have more flexibility during a downturn, they can maintain access to their capital.
Besides that, it’s really important to foster good relationships with your lender. That means turning things in on time, getting it right the first time, and limiting the friction of back-and-forth emailing as much as possible. Platforms like Finley help quite a bit here. We facilitate communication, ensure the timely submission of deliverables, and help track collateral and compliance.
How does technology ensure compliance with rules and track important metrics?
Sometimes, capital providers and borrowers aren’t on the same page when it comes to how terms are translated into calculations and don’t even realize it.
Implementing technology like Finley standardizes procedures and calculations across different credit agreements or financing arrangements, ensuring consistency and compliance. When we implement our software, we translate compliance rules into software checks that will be used for the lifetime of the facility. This creates effective guardrails against misunderstandings on calculations. During implementation, the Finley team also sets up notifications for all required deliverables so that a due date is never missed.
When they use a holistic platform, borrowers can see trends over time. In Microsoft Excel, it’s hard to do time series analysis with millions of rows or gigabytes of origination data. With more robust technology, they can handle data of any size. Alerting features also help Finance teams see upcoming triggers and be proactive rather than reactive when there’s an issue.
What are some best practices for borrowers to manage risk effectively?
One of the invisible risks that many borrowers face is key man risk. For example, let's say Jim is the only person who knows how to run our borrowing base. And then Jim takes a vacation or he quits, and now we don’t know how to access our capital. Having a single source of truth that multiple individuals can access and use rather than putting together Excel reporting is valuable in terms of continuity and accuracy.
We also encourage finance teams and capital markets teams to be really aligned with the origination side of the business. If they’re able to see the data in such a granular way, then they can communicate with the originations team and provide strategic input on which asset attributes are performing best and optimizing cost of capital.
Want to learn more about Finley?
Finley is banking and private credit management software that helps banks streamline and monitor loan portfolios. From tracking covenants and deliverables, to assembling funding requests and analyzing asset performance, Finley gives banks peace of mind when it comes to debt capital management. For more, check out our Asset Manager Solutions page.
