Wednesday, Nov. 28, 2007, 07:00 PM UPDATED 11:59 AMBy Nick Zulovich
ALAMO, Calif. — Global Debt Exchange Automotive is preparing to go live in early January of next year.
What exactly does the site do? Well, it was created to offer a new marketplace where independent and buy-here, pay-here dealers can go to sell loan portfolios, officials indicated.
On the other side of the coin, the site also serves financial institutions and investors by offering them the opportunity to evaluate, bid on and close a portfolio purchase via the secure, Web-based platform, explained Mike Sheridan, founder and president of the company.
"Scott Walchek, our chairman and chief executive officer, and I have a depth of experience in the auto financial area, so we saw early on the critical need for a way to help auto dealers and lenders streamline the way they transact business," Sheridan told SubPrime Auto Finance News.
"We are what some people might call ‘serial enterpreneurs' because we've founded or have helped to found a number of successful start-ups and have managed a great deal of activity in the venture capital community as well," he continued.
"This background helped us to recognize the opportunity to bring high-value improvements and transparency to dealer and lender portfolio transactions," Sheridan pointed out.
According to Sheridan, GDEXAuto was designed to simplify the process of selling auto loans.
"Cash flow is a very real issue for many auto dealers, particularly when the market slows," he indicated. "GDEXAuto helps dealers improve their cash flow by providing a faster, more efficient venue where they can package and sell the auto loans they've originated any time they need cash to purchase inventory or operate their business."
He went on to say that the benefit of the new company is that while many dealers rely on just one or two institutions to purchase portfolios, GDEXAuto can open the door for them to sells loans to more.
"Dealers can offer any and all loans for sale through GDEXAuto. Investors, however, can specify what kind of loans and from what kind of borrowers they want to purchase. They key is that we can offer dealers access to a boarder range of investors, thus decreasing the chances they'll be left holding loans they don't want," Sheridan reported.
When Sheridan says all loans can be offered up for sale, that even includes subprime and BHPH loans.
"One of our goals at GDEXAuto is to connect dealers with a wide range of financial institutions so there is a healthy appetite for all types of loans, portfolio sizes and customer profiles," he pointed out.
Institutions may also find the new site helpful, Sheridan said, as it offers them the opportunity to access "a far greater number of loans from a larger roster of dealers; make an offer to purchase any size portfolio of loans; complete due diligence on those loans, write a contract; and close and fund a transaction — without ever setting foot in the dealership."
Company officials said they have been testing the site with several charter members in order to smooth out the kinks. The management team expects GDEXAuto to be ready for a full launch by early January.
How Does It Work?
The company begins by offering an Internet-based dashboard, which gives dealers the ability to manage their portfolios and the sales process.
"If you are a dealer, you probably track your loans on a spreadsheet and send that off to your lender once a quarter," Sheridan noted. "You're basically at the mercy of that lender to respond in a timely manner with an acceptable price. GEDXAuto allows you to import that spreadsheet and then manage and monitor the process from end-to-end online."
So basically, a dealer can elect to offer a portfolio for sale at any time and as often as he likes.
"You can set a minimum price and GEDXAuto will automatically evaluate how that price stands up compared with similar portfolios that have traded in the past," Sheridan said. "You can determine how long you want to accept offers, from as little as two days to two weeks.
"Once you've set a price and the timeline, the dashboard monitors bids as they come in so you always know the status and can respond accordingly," he explained.
On the investor or financial institution side, they can use the dashboard to select the types of loans they are interested in purchasing by indicating their parameters, including things such as the term of the loan, APR, amount financed and age of the vehicle, according to the company.
"Based on these pre-set guidelines, GDEXAuto identifies loan portfolios that match up," Sheridan stated. "If only a portion of the dealer's portfolio matches their preferences, investors can choose to make an offer only on the loans that meet the criteria. There is no more wasted time spent searching through spreadsheets, looking for the loans they want. GDEXAuto does it instantaneously."
When an investor or financial institution becomes interest in a portfolio or loan grouping, the dealer received notification of an offer.
To simplify the process for both sides, Sheridan said, "GDEXAuto manages the entire documentation process, from scheduling a FedEx pickup to scanning documents into the secure GDEXAuto document vault and returning the originals to the dealer within 72 hours.
"We even each contract on our proprietary server for easy future reference in the event there is recourse," he continued. "If documentation is missing, our system allows financial institutions to mark missing files and notify dealers about how they can rectify the issue. This helps speed the due diligence process and the completion of the sale."
Finally, once the due diligence is concluded, Sheridan said the dashboard records each step of the contracting and closing process and facilitates communication between both parties.
Once the contract is finalized, the proceeds from the proposed transaction are sent into an escrow account and handed out only once the investor receives the title.
"By putting the entire process online, we've condensed the amount of time and energy it takes to ensure compliance and complete a portfolio sale, and that benefits everyone," he highlighted.
Until the site goes live, dealers and financial institutions can visit for more information, or the company for a demonstration of how the marketplace works.