Tom Sampson, the controller for Ace Business Stuff, was in his office considering how to explain to John Wilson, the Company’s CEO, the issues related to the Company’s borrowing capacity and the weaknesses in the Company’s Balance Sheet.
Tom pulled together several schedules for his meeting with his CEO that afternoon, but was still struggling with how to get across some of the subtleties that he knew John would want to understand.
Tom knew that his CEO was absolutely committed to the Company’s success, although he became very frustrated when his convictions about future performance collided with the bank’s concerns about current performance.
What factors will the bank consider?
Tom knew that the bank considered many factors when judging an asset-based loan.
Having enough collateral to support the Company’s borrowing request was only part of it.
How do they measure the strength of the collateral?
One key ingredient is the quality of the collateral. (more…)