Certified Inventory Control

These services are used by companies who are desirous of availing financing from banks but not by pledging their stocks specifically for this financing. This service keeps the lender accurately informed on a periodic basis about the level of inventory so that the unsecured or the secured relationship can be reassessed as conditions change.

Under Certified Inventory Control, the borrower, ACE Global Depository and the bank enter into a tripartite arrangement in respect of the inventory to be monitored. Since no lease is taken under Certified Inventory Control (as compared with field warehousing), the agreement provides that ACE Global Depository shall have full right of ingress and egress to premises where inventory is stored, and that ACE Global Depository shall have access to any of the company's inventory records which are necessary to render its service. The banker has ACE Global Depository's certificate to the extent that its reports are accurate and that the assets being controlled will not fall below an agreed minimum level. ACE Global Depository will deliver to the Bank periodic reports and Collateral Control Certificates as and when required by the Bank.

ACE Global Depository `s objectives are therefore to control the withdrawal of the inventory and where possible to be able to prevent removal of the inventory or to immediately notify the bank when the limit specified by the Bank has been reached.

  • ADVANTAGES TO THE BANK
  • These services keep the bank accurately informed on a periodic basis about the level of trading assets forming the inventory are under monitoring so that the unsecured or the secured relationship can be reassessed as conditions change or levels drop.
  • The banker has ACE Global Depository's certification that its reports are accurate and that the assets being controlled have not fallen below an agreed minimum level for the time period represented in the certificate.
  • This regular flow of current and accurate information enables a banker to grant the maximum facility to its client consistent with good banking practices. Thus, the bank's income quality is enhanced and the customer is assured of a continuing facility within agreed limits but one which can fluctuate with changing conditions and requirements.
  • The Credit facility can be systematically reduced or controlled by putting it on a fluctuating basis arrived at by crediting the facility with say, 70% of the value of all stock received and debiting it with 80% of the stock delivered from the borrower's premises. This results in a gradual increase in the borrower's equity in his stocks.
  • ADVANTAGES TO THE BORROWER
  • The greatest advantage to a bank customer is a financing plan with the ACE Global Depository controls permit. In this way, the company spends a minimum amount of time worrying about finding new sources of short-term credit and maximum amount of time making a success of the business. To the extent that a company is able to rely on its relationship bank for its short term cash requirements its chances of success must be increased. The ACE Global Depository services enable the bank's customer to provide the necessary transparency in reporting and enables them to have a firm financing plan or to obtain enhanced credit limits based on the engagement of an independent third party acting on behalf of the bank in respect of the trading assets.
  • PRE LOAN CONSIDERATIONS FOR THE FINANCIER
  • In any loan application that is considered by the Bank, there are a number of pre-loan considerations which must be taken into account by the Bank prior to agreeing to grant a credit facility to its client. Know Your Client's Client (KYCC) due diligence has to be conducted and certain decisions have to be taken such as:
  • The maximum amount of credit to be made available against ACE Global Depository's certification as contained in collateral certificates and the percentage of the advance to be made against the value of the collateral.
  • The pricing system in valuing the inventory (i.e. Borrowers cost, sales price less percentage, etc.)
  • The frequency with which reporting on the inventory (constituting the borrowing base) would be required and the nature of the documentation to be presented by ACE Global Depository on a periodic basis.
  • The reporting mechanism in respect of the minimum levels to be maintained and the possible actions that can be taken in the event that the levels fall below the minimum.

For further assistance, information and templates with regard to our Services, or if you wish to subscribe to our premium E Learning service for a full legal appraisal and regular updates on developments within the field in various jurisdictions worldwide, Please contact us at info@ace-group.net.