Your Underwriters Will Love You: Increase Your Tax Due Diligence Efficiency Published October 18, 2012

For lenders, gathering and verifying tax compliance data can be a time-consuming and imperfect endeavor. Most importantly, this due diligence undertaking may not even produce a complete tax risk snapshot and can bog down the underwriting and credit decision process. For commercial factors in particular, time-sensitive collateral is aging all the while. Factors and asset-based lenders should reconsider the hidden costs of this inefficient process to underwriting operations.

Let’s consider the direct and indirect costs of due diligence performed by this method. Time spent reviewing and verifying clients’ 941 payments through payroll reports and bank statements represents a significant loss of production time. This time is also opportunity cost: the expertise and man-hours of underwriting personnel are more productive if allocated elsewhere. With Tax Guard, underwriters can focus on other business processes and ensure that the IRS, not the client, verifies this information.

It’s also worth considering the risks inherent in this process. The process of conducting independent verification of tax compliance via client records is not only inefficient, it also places the burden of proof upon your client and your underwriter. There is also the risk that incomplete information will be obtained if either the correct questions, or pertinent follow-up questions, are not asked, or if complete answers or documents are not provided. This, of course, is not to mention the pitfalls of simply filing a Form 8821 and expecting timely and reliable data by mail or fax from the IRS. In any such scenario, these laborious tasks are imperfect and may provide a false sense of security. The decision to fund is too important to be made with this level of variability.

If efficiency is indeed a ratio of A) the volume production to B) the energy it requires to produce, then the available methods of tax due diligence are by definition exercises in futility. Sorry for the Econ 101 lesson, but this is laid out to let you know that it doesn’t have to be this way. Getting the data you need to make the decision to fund should be fast and it should be simple. The loan underwriting process should be a streamlined one wherein lenders are positioned to make swift and/or recurring credit decisions with agility, without the costs, the losses, and on the basis of complete and reliable tax compliance data.

Tax Guard eliminates these costs and risks, offering efficiencies of saved production time and expense. Tax Guard ensures that your ongoing tax due diligence is a seamless process which enables you to fund and manage risk based on verified tax data, obtained and evaluated by tax experts directly from the IRS, and to efficiently assess real-time tax risk over the life of loans. See? I told you your underwriters will love you!

This is the difference between working harder and working smarter.

This is funding with confidence.

Posted By: David Bohrman

As the VP of Marketing, David is responsible for driving overall marketing strategy for Tax Guard including brand positioning, go-to-market execution, and lead generation programs. For the past 15 years, David has held senior positions in early growth and mature companies, leading marketing, operations, and business development teams. Prior to Tax Guard, David was the Director of Marketing of one of the largest tax consulting firms in the country. He holds a B.A. in English and Philosophy from the University of Vermont.