Commercial Lending Fraud: A Question and Answer Session with Underwriter Kimberly Winters Published April 7, 2019
To wrap up our blog series on commercial lending fraud, we’ve invited one of our clients, Kimberly Winters, VP, Underwriting at Triumph Business Capital, to participate in a Q&A session with us to weigh in from the other side of the underwriting desk and offer some real-world expertise.
Kimberly manages all of Triumph’s underwriting activities, including credit analysis of new business opportunities, portfolio risk analysis, client compliance and legal administration. She’s obtained a Certified Factoring Account Executive (CFAE) designation and Certificate of Completions for the Law and Business of Factoring, the Advanced Factoring Symposium and Predictive Index Analyst.
QUESTION AND ANSWER SESSION WITH UNDERWRITER, KIMBERLY WINTERS
What processes does Triumph Business Capital employ to verify client provided information?
Our credit packages vary depending on the industry, however, the following items are always required:
- Application, valid driver’s license of all principals, and company formation documents. My team runs a series of searches, including address verification. This search confirms property ownership, residence reported at that location, whether the property is vacant or is a mail receiving agency.
- My team uses LexisNexis comprehensive reports to review the background of the business and principal(s) which provides full address history, bankruptcy records, criminal records, judgments, liens, driver licenses, name variations, associated business, relatives, etc.
- Equifax is used to be sure the social security number provided is accurate and to review credibility of the principals.
- Check against the Federal Prison Bureau and PACER (Federal lawsuits)
- We run the typical secretary of state business searches, Tax Guard reports, and UCC lien searches on the business.
Do you have an example fraudulent information you have been provided in the past by a prospect?
A company applied for funding that sold apparel to boutiques. In all industries outside of transportation we request a sample invoice with back up documentation (PO, BOL, etc). We found a couple things that were not adding up: (1) The PO from the customer matched the design and look of the invoice. The logos were different but the product being purchased was identical to the listing on the invoices. The website advertised prices were not comparable, so we made some calls to the debtors and the debtors had never placed these orders. In addition, researching Google we found this applicant was advertising marketing services and not apparel. Things were not adding up.
As an underwriter, how do you balance the art and science of making credit decisions?
Many times the credit decision comes from the review of all the data collected. Sometime it’s apparent the deal will come with issues or the company will fail. And, sometime it’s a gut feeling. If you don’t see any issues in the background and all paperwork looks good then you rely on your operations team to make solid verification calls on the invoices. Introducing a new client to the operations team is absolutely key. They should know if underwriting approved the deal but was uneasy; and explain why. Operations is the last line of defense.
What portion of the underwriting process is most susceptible to inaccuracy or potential fraud?
In the course of my career, I have experienced extravagant fraud. Frauds can be hidden by bogus companies (client and debtor), identity theft, but many times in factoring it’s the collateral.
How do Tax Guard reports enhance your underwriting process?
Tax Guard is helpful in that the tax filing history should make sense and align with the organizational dates of the entity. The reports can prove or disprove that they are a legitimate company. Beyond knowing if the company is legitimate, it helps eliminate the risk of the IRS priming our security interest.
Many thanks to Kimberly Winters for offering valuable insight to our readers regarding the world of a commercial lending underwriter. At Tax Guard, we are available to consult underwriters regarding their processes with respect to verifying client IRS information. Please contact us at anytime so that we can help you fund with confidence.