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. A major issue is how to adjust or reduce the personal cash flow for income taxes and living expenses. Because of differences in how a personal debt-to-income (DTI) is derived versus a business debt service coverage (DSC), some type of adjustment must be made before combining personal and business data. This leads to a discussion of the advantages and disadvantages of adjusting for income taxes and living expenses, versus adjusting the required coverage factor. Another major issue is capital gains and other items within the broader recurring/non-recurring decision category. A case study is used to illustrate key points.
Topics to be covered include:
• Personal DTI versus business DSC
• Approaches to imputing a personal living expense factor
• Regulatory discussion of living expenses and capital gains (losses)
• Analytical and conceptual issues:
– Mixing two approaches to debt coverage
– Using averages for debt coverage ratios
– Recurring vs. non-recurring items
– Where is the cash flow (if any) when a capital gain is listed?
Target Audience:
Branch managers, commercial lenders, Consumer lenders, credit analysts, lending managers and credit officers, loan review specialists, mortgage bankers, private bankers, small business lenders, special assets officers