1. Non Traditional Underwriting Approaches Tim Hatfield LFA Summit 11/15/2014

2. Traditional UW Bank statements Credit Reports Taxes Application Collateral Character Appropriate Risk Yes NO

3. Alternative UW Bank statements + Log(s) and interviews Credit Reports Little to nothing Taxes Not filed or not accurate Application Collateral Character AND context Alternative data sources Maybe

5. What is in a credit report? Personal Credit – FICO/ Vantage Scores – Public Records Lacks personal context – Not a perfect proxy for character Business Credit

6. Application Let the client guide Rough idea of sales Checks and a baseline Contact information

7. Collateral Leverage to talk Mission confusion Cost vs. Benefit Loan Term Alternatives: Traditional:

8. Why documents aren’t always correct Limit tax liability Difficult process to follow Cash based businesses Family nature of finances Different cultural views on money (ROSCAs) Remittances

9. Piecing together a cash flow Relationship and rapport – Fine line between information and advice Listening and reconciling Logs Receipts Margins Alternative Data Context

10. Questions ?

11. Determining Affordability How to find the right size of a loan Standard Products Ladder style

12. Case - Guessing Educated-ly Maria and Jose have a taco cart They sell on the corner of campus for lunch 5 days a week and Thursday, Friday, and Saturday nights Maria also runs a daycare during the day 1 bank account for the couple They asked for $10K for working capital to grow HOW MUCH CAN THEY AFFORD?

13. Potential Sources Bank Account Square statements Application Bottom up approach – Receipts and questions – Site Visit Contextual Margins Yelp, Facebook, Twitter

14. Example $2 per taco cost Number of customers – % paying with card? – Yelp reviews – Count and average (day and night) – Order Number – Number of tortillas used Total Sales

15. Take Home Total Sales Logs? Application stated number? Approximate shopping for business Fixed costs- propane, commissary, labor 10% net for restaurants Debts Sales Tax?

16. Additional HH Considerations Additional income – Bottom up from kids and per week Other family members Remittances in both directions ROSCAs

17. Total HH Capacity Debts- formal and informal DSCR vs. DTI Business Income + Personal Income Personal Debt Payments + Business Debt Payments + Proposed Payment

18. Decisioning Cash Flow: – Yearly DSCR- >1, >1.25 is bank standard Character: Qualitative Collateral: Most likely no Credit: FICO, adjusted Just enough to fail? Match timing

19. Questions ?

20. Tim Hatfield timphatfield@gmail.com