Inventory advance rates: Science fiction?

Developing a proper inventory advance rate requires several steps: 1. developing an exit strategy, 2. arriving at a Gross Recovery Amount (GRA) or orderly liquidation value, and 3. applying discounts to the GRA via the calculation of inventory advance rates. During the early stages of the evaluation...

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Bibliographic Details
Published in:The Secured lender 1997-11, Vol.53 (6), p.100
Main Author: O'Connell, J Brian
Format: Article
Language:English
Subjects:
Appraisers
Audits
Commercial credit
Inventory
Secured lenders
Sporting goods
Suppliers
Turnover
Valuation
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Summary:Developing a proper inventory advance rate requires several steps: 1. developing an exit strategy, 2. arriving at a Gross Recovery Amount (GRA) or orderly liquidation value, and 3. applying discounts to the GRA via the calculation of inventory advance rates. During the early stages of the evaluation, the lender needs to determine a Gross Recovery Value (GRV) for the subject inventory. Both Orderly Liquidation Values and GRVs represent the gross dollars received from the sale of collateral before liquidator fees, advertising, and other day-to-day business expenses. To determine liquidity, data from a variety of sources must be obtained, including the client, trade associations, and competitors. The advance rate should consider the merits of the particular inventory. Prior to establishing appropriate advance rates, the lender must have a reliable appraisal and solid audit.
ISSN:0888-255X