Extending Credit. Agenda Underwriting 5 C’s of credit Needed Materials Financials Items you might look at What an underwriter does 2.

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Presentation transcript:

Extending Credit

Agenda Underwriting 5 C’s of credit Needed Materials Financials Items you might look at What an underwriter does 2

Underwriting 3

What you should be Looking For 4 Character Capacity Capital Collateral Condition

Character Overall impression you make on the lender Individuals are forthright and honest 5

Capacity Ability to repay the loan Lenders usually look for $1.20 of income for every $1.00 of Principal and interest payments 6

Capital Owner or Management team’s personal investment in the business. “Skin in the game” 7

Conditions What are the current economic conditions What is the competitive landscape of the business 8

Collateral What will be pledged as security for the loan. Can the assets support payment of loan 9

Items you might look at Application Business Tax Returns Personal Tax returns Schedule of Outstanding loans Savings generated by project 10

Financials Compiled – putting together financial statements provided by the client Review – provides a reasonable basis of assurance Audited – a formal examination and endorsement of information 11

What an Underwriter does Trend Analysis – Spread Debt Service Coverage Ratio Cash Flow vs. Debt Service Leverage 12

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