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ComplianceFinanceDecember 18, 2020

Case study: Federal National Commercial Credit tightens security

Federal National Commercial Credit (FNCC) (formerly known as Federal National Payables) has financed government contractors and other small businesses for more than 20 years. FNCC provides funding during even the harshest economic periods, when conventional banks are loath to lend. Factoring companies such as FNCC secure loans by using the value of accounts receivables (A/R) as collateral. Because they extend revolving lines of credit — at times to high-risk borrowers — they must routinely monitor and respond in a timely manner to events during the lives of their loans to protect the health of their portfolios. At FNCC, this due diligence is performed and managed by Underwriting Manager Talmage Petty.

FNCC has always understood the importance of staying alerted to federal tax liens (FTL) filed on its clients. These ‘silent liens’ assume priority position over prior-secured liens 45 days after the FTL filing (or upon the date the secured party learns of the FTL, if earlier). This means that in the event of a collections dispute, the IRS would be entitled to claim its payment first and the prior secured party could be left unable to recoup its investment.

FNCC asked Lien Solutions to perform recurring FTL searches every 30 days for a select group of clients, those considered to be high risk. That way, whether or not the IRS provided notice, FNCC would always know if an FTL was filed on a client, and would have sufficient time to cure. Lien Solutions performed these searches manually at the state and county levels as necessary for full disclosure, since most counties aren’t online and in many jurisdictions, the county is the only location the FTL is required to be filed.

Lien Solutions developed recurring search based on a wish list of needs stated by FNCC and other factoring companies, to automate the process of scheduling and managing recurring searches and results.

Download our white paper to learn how automated recurring search can help you mitigate risk.