What is the Field Exam?

Your lender will appoint a third party to verify and analyze the information you’ve provided about your AR. This helps the lender gain greater confidence in the value of your AR and better understand the receivables’ performance. Lenders use these findings to determine the size of their commitment, the advance rate, and other key terms of the loan.

When does it occur?

Lenders can ask for a Field Exam prior to issuing the loan and often once per year thereafter.

What does it assess?

The Field Exam confirms the quality, validity, and amount of your AR and analyzes their eligibility and dilution.

• Eligibility determines the total amount of receivables that can be financed. The lender may not finance 100% of your AR and may therefore make deductions for certain kinds of receivables. Common deductions include receivables that are:
  • From entities outside the U.S.
  • From affiliated entities
  • Past due beyond a certain time limit
  • In excess of agreed concentration limits (e.g., >10% from a single customer)
  • From specific industries or customers that the lender is uncomfortable with
• Dilution is how much cash you ultimately receive relative to the receivable: if you receive $95 from a receivable of $100, the dilution is 5%. Dilution tends to vary by industry. For example, businesses that sell consumer products to retailers generally experience some dilution due to returns or quality issues. The Field Exam helps gauge the expected dilution of the AR portfolio going forward, which the lender uses to calibrate the advance rate.

What should I look for when seeking AR financing?

Traditional AR facilities from banks or other lenders can potentially reduce strategic freedom and operational flexibility. For example, depending on what limits or restrictions the loan agreement imposes on your receivables, your company may be prevented from entering new markets or growing certain customers or segments. Furthermore, reporting requirements may be onerous for businesses that don’t have the necessary infrastructure. Hiring incremental finance staff and building new financial systems to satisfy loan requirements can be time-consuming, expensive and detract from the core business.

About Thayer Street

Thayer Street provides flexible capital solutions that are tailored to our partners’ objectives and business needs, such as financing a wide range of financial assets. We provide both equity and debt and also help our partners obtain debt from third party lenders when optimal. Our debt solutions are different than traditional lending products – they are often customized to provide the flexibility needed to pursue the company’s specific growth strategy and more closely align with continued equity value creation.