🤖Webinar - From Theory to Practice: Real-World Applications of AI in Asset-Based Finance - Register here

Trade Faith with Fact: Transaction Manager

Asset-based transactions require complex calculations to determine the borrowing base, which affects the amount that  can be drawn from existing facilities. In a standard scenario, a borrower must adhere to various asset-level eligibility criteria, enforce concentration limits (often around 50 for a typical US consumer loan transaction) on an aggregated level, and dynamically adjust advance rates based on asset characteristics.

This culminates in establishing a borrowing base from which drawdown requests can be issued. This process might pose significant challenges given the complexity of the calculation needed and the amount of data to be processed, and these difficulties are often compounded by a lack of transparency and the potential for calculation errors

Cardo AI’s enhanced Transaction Manager addresses these challenges by enabling a customized workflow to manage any drawdown request across various asset classes, in accordance with the provisions of the credit agreement.

What’s in it for you?

  • Set eligibility criteria to identify ineligible assets.
  • Configure concentration limits ranging from simple threshold to combined control across multiple dimensions.
  • Define asset-level advance rates based on performance status and FICO scores.
  • Configure the borrowing base at the tranche/facility level.
  • Centralize and streamline communication between borrowers and lenders on a unified platform.

Why does it matter?

In the funding process of an asset-based transaction, it can be particularly challenging for lenders to retrieve data on the collateral pool provided by the borrower, verifying its integrity,  review all calculations, and ultimately approving or rejecting the drawdown request. This process can be time-consuming, incurring additional costs and delays, especially when extensive data manipulation is required for accurate calculations.

With Cardo AI’s Transaction Manager, borrowers and lenders can rely on a common calculation engine that ensures transparency at every step, eliminating the need to re-perform calculations done by other parties, and reducing the risk of lengthy discussions about the interpretation of contractual provisions.

Setting up the entire process takes only a few hours, even for the most complex use cases. Thereafter, the process can be executed in seconds at the user’s discretion, facilitating monthly, weekly, or even daily borrowing base calculations.

In summary, by leveraging our tool, users can achieve:

  • Speed: Reduce processing time from days to seconds.
  • Efficiency: Avoid redundant tasks and controls.
  • Accuracy: Achieve bullet-proof results with full control over each datapoint.
  • Single Source of Truth: Ensure consistency and reliability in all calculations.

How does it work?

Our tool offers maximum flexibility to customize calculations for eligibility criteria and concentration limits at both the asset and aggregate levels, ensuring alignment with contractual provisions. It also allows for the customization of all steps needed to compute the borrowing base and manage drawdown requests, tailored to the specifics of each transaction.

For example, users can set eligibility criteria to identify ineligible assets, compute concentration limits, and then determine the borrowing base. Users have the flexibility to define borrowing base calculations for each tranche/facility and determine the calculation of each component that impacts the borrowing base, such as advance rates.

Asset Level Checks functionality under Eligibility Criteria - Cardo AI’s Transaction Manager feature

Image 1: Asset Level Checks functionality under Eligibility Criteria

Borrowing Base Calculation functionality under Eligibility Criteria - Cardo AI’s Transaction Manager feature

Image 2: Borrowing Base Calculation functionality under Eligibility Criteria

Finally, borrowers can define the drawdown request to be submitted to investors. Investors, in turn, can review all the calculations and make informed decisions on whether to approve or reject the requests.

View of Draw Request Submission - Cardo AI’s Transaction Manager feature

Image 3: View of Draw Request Submission

Use Case

Our client, a global investment firm, acts as a lender, extending funding to a consumer loan originator through an asset-based revolving facility.

Prior to implementing Cardo AI’s solution, the identification of eligible assets, as well as the computation of excess concentrations and advance rates, relied solely on Excel spreadsheets. This manual approach was prone to errors and posed challenges in validating the accuracy of borrower-provided data. As a result, accurately determining the borrowing base to establish appropriate funding levels often encountered delays.

With Cardo AI’s Transaction Manager tool, our client has fully automated these critical calculations, effectively eliminating potential errors. This automation has significantly enhanced the efficiency and speed of the approval process for new drawdowns, thereby strengthening our client’s relationship with the originator and ensuring smoother funding operations.


Ready to experience the next level of transaction management? Request a demo here to see the tool in action.