Global cash flow has become a key component of business and commercial underwriting where personal guarantees of the owners are involved, or direct borrowing is by an individual for a sole proprietorship, rental property or farm. This program reviews most common approaches used by bankers, plus some of the analytical and conceptualize issues encountered. For instance, when comparing global cash flow to the combination of business and personal debt, how does your bank’s approach treat business debt service where the individual is a minority owner of the business? What changes when the minority owner guarantees at a higher percentage than his or her ownership percentage? Why do you need to have personal taxes and living expenses in the model (or adjust the debt-service-coverage target higher if no personal taxes and living expenses are being included)? How do you define the business cash flow? At what point should global cash flow cease being a primary underwriting tool and shift to a secondary role (become more of a global analysis)?
Specific subjects that will be covered during the seminar:
- Versions of GCF being used by bankers and regulatory comments on global analysis
- Analytical and conceptual issues:
- Mixing two approaches to debt coverage
- Giving credit for business earnings or amount distributed
- Using averages for debt coverage ratios
- Selecting a measure of business cash flow
- Incorporating business debt service
- When to recognize that the business itself or a real estate project should stand on its own, a global cash flow “can’t make a bad loan good,” and you should shift to more of a global analysis involving an assessment of contingent liabilities of the owner(s)
- Some tax return basics/issues along the way
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