Pub. 9 2020 Issue 6

Pub. 9 2020 Issue 6 21 with the lender at all times which would be sufficient to service the debt for some period of time. If the borrower slips below the minimum amount, additional penalties or interest charges could be imposed. Conversely, if the borrower maintains the minimum amount, the interest rate could be adjusted downward in the next quarter to reward the borrower for its compliant behavior. Establishing the Right Incentives and Practices Advanced data analytics can help resolve age-old quandaries. For example, do you simply calculate the cost of your loan and add margin, or do you wholly rely on market benchmarks? Both approaches have their own benefits and detriments, but which is better from one situation to another? Additionally, how do organizational incentives impact the data you are generating? How might loan portfolios change if incentives were different (rewarding, say, risk-adjusted return versus mere volume)? How Are Fees Used? Incentives are an important part of the external marketing of loans and not just a concern on the internal sales side. The wants and desires of borrowers, when aggregated, reveal important information about how to price and structure loans. Questionnaires should be optimized to capture that data and then be processed in such a way to aid analysis. Social media, too, can be analyzed to develop a better understanding of a borrower’s likely tendencies. Companies are already hard at work connecting social media activity to creditworthiness, with one executive touting that his company “has uncovered that social media has predictive value in assessing the credit risk of a business.” Conclusion Centralizing data and introducing powerful analytics give lenders an immediate high-quality assessment of a loan portfolio. By aggregating data, you can immediately spot trends among similarly situated borrowers, and this allows for a whole range of proactive steps that can be taken to monitor and manage potential problem loans. When truly integrated into the lending process, data analytics can transform the entire operational platform … not just when and to whom to lend, but how to service those loans and ramp up vigilance. Michael Fielding is a partner in the Food & Agribusiness Unit of the Kansas City office of Husch Blackwell where he represents lenders dealing with distressed loans. He is one of just a few Kansas attorneys that are board-certified in Business Bankruptcy by the American Board of Certification Michael Fielding, Partner michael.fielding@huschblackwell.com | 816.983.8353 Arizona | California | Colorado | Illinois | Missouri | Nebraska | Tennessee | Texas | Utah | Washington, DC | Wisconsin huschblackwell.com 4801 Main Street, Kansas City, MO 64112 | 816.983.8000 Business is no longer usual. Neither is our approach. Even before COVID-19, many businesses were experiencing declining financial metrics, a circumstance with which the pandemic has not helped. Husch Blackwell counsels commercial and agricultural lenders across numerous lines of business to tackle portfolios of troubled loans, bringing to bear decades of legal experience at all points of the credit cycle.