This seminar covers common versions of global cash flow (GCF) analysis being used by bankers, with a focus on GCF as part of the underwriting process in most medium- to smaller-sized businesses and self-employed lending situations. Beyond the basic calculations involved in combining business and personal cash flow, a major issue is how balance sheet changes affect business cash flow, and should business cash flow be broader than earnings before interest, depreciation and amortization (EBITDA)? What about personal balance sheet changes? We complete the cash flow part of the global analysis by reviewing an optional and simplified approach for integrating the cash flow effects of business and personal balance sheet changes.
Another issue is how to assess the borrower’s other business holdings, including commercial real estate (CRE). In many instances, the magnitude of guarantees (contingent liabilities) related to other businesses are much larger than the global cash flow that has been calculated. What are some best practices for moving beyond cash flow to making this global, “portfolio” assessment?
Topics to be covered include:
- Regulatory concept of global analysis
- Analytical and conceptual issues:
- Incorporating business balance sheet changes
- Effect of loss carryforwards in a business tax return
- GCF and the larger, global analysis of business and CRE owners/guarantors and related contingent liabilities
- Some tax return basics/issues along the way
- When to recognize that the business itself or a real estate project should stand on its own, and a global cash flow “can’t make a bad loan good.”
Target Audience: Branch managers, consumer lenders, mortgage bankers, private bankers, small business lenders, commercial lenders, credit analysts, loan review specialists, special assets officers, lending managers and credit officers