Debentures: Is There a DMS Versatile Enough to Help Raise Capital?

By Trey Latham - April 26, 2023

Whether you’re a brand-new start-up entering into the underserved BHPH market or you’ve been enjoying the excitement of the dynamic sub-prime arena for 40 years, raising capital is a necessary step.

This has become increasingly difficult.  Common ways to raise money would be to sell entire loans, sell portions of loans (PIPPs), taking on investors (giving up equity/voting rights), or borrowing from a bank.

But, did you know there’s a way to increase cash on hand without:

  1. Selling assets (loans/contracts, vehicles, equity in the company).
  2. Giving up voting rights.
  3. Paying portions of future profits.
  4. Paying higher interest rates & fees from banks.
  5. A fixed repayment schedule or final due date.

It’s called a debenture, and it sounds like a complicated financial term that will always end up costing you somehow, like derivative or defeasance.  But, debentures are fairly straight-forward and mutually beneficial for a borrower and lender when done properly and efficiently.

Debentures, of course, have drawbacks and challenges (i.e., accounting can be complex, restricts sale of the assets used as collateral, etc.), but due to their cost-effective nature and various repayment terms/options, they are a great way for dealerships and finance companies alike to borrow money.  And there’s one DMS that’s been at the forefront of debenture accounting for 5+ years: Deal Pack.

  1. Deal Pack accounts for non-compounding interest and compounding interest based on various compounding schedules (monthly, 6 months, annually). Interest rates can be fixed or variable.
  2. Deal Pack calculates and records your interest/finance charges and fees for you automatically, in real time. This allows you to pay early, make partial payments, payoff whenever you’d like; all with the confidence of knowing the interest and balance is accurate at any given stage of the contract. Like everything in Deal Pack, this is done with the click of a few buttons, without any double entry.
  3. You can change/extend your maturity date without creating an entirely new contract/payable.
  4. There are extra “fail-safes” before submitting any debenture payment. This helps minimize mistakes when paying debentures versus paying standard invoices. Your debentures are listed separately from your other payables. You are prompted with pop-ups to summarize the action before it’s submitted.
  5. All factors related to debentures can be customized for each lender and even each contract.

With Deal Pack’s team at your disposal, anything you can dream, Deal Pack can do.  Call or email to schedule a demo today.



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