How Lender Finance Works – A Step-By-Step Guide

1. How Lender Finance Works – A Step-By-Step Guide

2. Introduction At Avon River Ventures, we specialize in helping specialty lenders scale faster and more efficiently through structured Lender Finance solutions. But for many new or emerging lenders, understanding exactly how Lender Finance works — and how it can fuel growth — isn’t always straightforward. In this presentation, we break it down step-by-step, and share a real-world case study to illustrate the process in action.

3. What is Lender Finance? Lender Finance is a specialized form of financing where a lender (like Avon River Ventures) provides capital to another lending business (the “Borrower Lender”), enabling them to fund more loans to their end-customers. Instead of raising expensive equity or slowly recycling capital, lenders can access larger pools of funding upfront, scale their portfolios rapidly, and improve their returns on equity. Simply put: We finance the lender, so they can finance their customers.

4. Why Lender Finance Matters • Lender Finance unlocks growth by: • Increasing available lending capital • Lowering overall cost of funds • Improving borrower-lender margins • Accelerating portfolio expansion • Enhancing credibility with institutional investors • For emerging lenders — whether in consumer finance, SME lending, real estate lending, equipment leasing, or niche specialty finance — having a reliable Lender Finance partner can be the difference between slow organic growth and exponential scaling.

5. How Lender Finance Works: Step-By-Step Here’s a typical journey: 1. Origination and Initial Discussion • It starts with a conversation. A lender (you) approaches a Lender Finance provider (us) seeking growth capital. We discuss your business model, loan portfolio, underwriting process, current performance, and growth targets. • Typical information requested: • Loan book details (current balances, yields, terms, delinquency) • Historical financials (P&L, Balance Sheet) • Business plan or growth forecast • Management bios

6. 2. Preliminary Assessment and Term Sheet • If the fundamentals align, Avon River Ventures issues a preliminary term sheet. This document outlines the key proposed terms: • Loan amount • Advance rate (typically 70–90% of eligible loans) • Interest rate / spread • Collateral structure • Covenants and reporting requirements • At this stage, it’s non-binding, allowing both sides to align expectations. 3. Due Diligence • Once the term sheet is accepted, formaldue diligence begins. • This includes: • Portfolio audits (loan tapes, stratifications) • Verification of underwriting standards • Review of servicing and collection practices • Legal due diligence on corporate structure and compliance • We may also perform stress testing on the loan portfolio to understand how it would perform under adverse scenarios.

7. 4. Facility Structuring • After a successful diligence process, we work with you to finalize the facility structure. Key structuring elements: • Advance Rate: % of portfolio value lent • Eligibility Criteria: which loans qualify as collateral • Collateral Management: whether via a borrowing base or static pool • Repayment Mechanics: how repayments and principal recycling works • Performance Covenants: ensuring portfolio quality (e.g., maximum delinquency thresholds) • We ensure the structure is flexible but protective — giving you room to grow while safeguarding the facility.

8. 5. Documentation • The legal agreements are drafted and negotiated, typically including: • Master Loan and Security Agreement (MLSA) • Intercreditor Agreement (if senior and subordinate tranches) • Servicing Agreement • Borrowing Base Certificate templates • At Avon River Ventures, we strive for clarity and collaboration at this stage to keep things moving smoothly. 6. Initial Funding Once documents are executed, initial funding is disbursed based on your eligible collateral pool. We usually structure facilities with revolvers — meaning as you fund new loans and your old loans are repaid, you can draw down, repay, and redraw within the facility size, subject to eligibility.

9. 7. Ongoing Monitoring and Growth • After funding, the journey doesn’t end. • We continue working with you by: • Reviewing monthly servicing reports • Monitoring loan performance • Adjusting the borrowing base as needed • Supporting expansion (upsizing the facility) • Strong performance often leads to facility upsizes or blended financing structures as you grow. Scaling a Specialty Lender Background: An emerging equipment leasing company in the Midwest had built a $5M portfolio lending to small businesses but was constrained by its limited balance sheet. It had a proven underwriting model, low loss history (<1%), and strong demand from customers.

10. Challenge: The company could not fund new lease contracts fast enough, causing delays in growth. Raising equity would have been expensive and dilutive. Solution: • They partnered with Avon River Ventures for a $7.5M revolving Lender Finance facility. • Advance Rate: 80% of eligible leases • Interest Rate: Prime + 4.50% • Covenants: Max 60-day delinquency of 4% • Repayment: Principal and interest monthly; recycled principal permitted Impact: • Lease originations grew by 2.5x within 12 months • Portfolio scaled from $5M to over $12M • EBITDA grew by 80% • Equity value of the company nearly doubled within 18 months • The facility was upsized to $15M the following year

11. Conclusion Lender Finance is a proven engine for scaling a lending business. Whether you’re an established player looking to accelerate or an emerging platform ready to make your mark, understanding and executing the right Lender Finance strategy can transform your growth trajectory. At Avon River Ventures, we don’t just lend capital — we partner with lenders to help them scale intelligently, sustainably, and successfully. If you’re ready to explore how Lender Finance can take your lending business to the next level, reach out to us today.

12. Contact Us 647-609-9086 connect@avonriverventures.com www.avonriverventures.com