Guarantor Analysis and the Second Way Out
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In this 5th course of the Commercial & Industrial Business Underwriting Skill Series, participants will construct a personal cash flow statement, identify uncertainties in financial information, estimate personal cash flow for business debt support, and evaluate the benefits and limitations of global cash flow techniques for credit decisions.
Certificate
1 credit or $295
Cost
1.5 - 2 Hrs.
Duration
1 hr.
Prep Time
1
Quiz
Overview
In the fifth webinar session, participants construct a personal cash flow statement from personal financial statement and personal income tax return information. In so doing, they identify the areas of greatest uncertainty about the validity of financial information used in the construction process and assess the implications for the accuracy and validity of the completed personal cash flow statement. Based on the resulting cash flow statement, participants estimate the amount of personal cash flow available to support business debt service in good times and in a cash flow crisis. In addition, they estimate the amount of ready cash support from the guarantor in a business cash flow crisis and explore the benefits and limitations of applying global cash flow techniques in reaching a credit decision.
Who Should Take This Course
This Course is ideal for participants currently in or aspiring to enter the following job functions:
- Credit Management
- Commercial Credit Administration
- Commercial Loan Portfolio Management
- C & I Lending
- Loan Review
- Special Assets
- Credit Analysis
Prerequisites
Some familiarity with an accrual income statement and balance sheet for a commercial business, as well as completion of prior sessions in the Credit College.
Objectives
By the end of the webinar session, participants will be able to:
- Identify the cash and non-cash amounts of revenue and expenses recorded on personal income tax returns, including information on the Schedule K-1.
- Construct a personal cash flow statement using personal financial statement information and personal income tax return information.
- Determine from the resulting personal cash flow statement the likely amount of personal cash flow available to support business debt service in good times;
- Identify the amount of ready cash available to a guarantor from business-related cash flow and from the liquidation of personal assets in a cash flow crisis and evaluate the estimate of ready cash against the cash needed to support the guarantor's life style and personal living expenses.
- Determine whether the guarantor can offer any significant cash support to help service business interest-bearing debt in a cash flow crisis and, therefore, assess the financial value of the guarantee
- Identify the critical assumption underlying the concept of global cash flow and explore the benefits and limitations of applying global cash flow techniques in reaching a credit decision.
Materials(access provided with registration)
- Credit Refresher on Personal Cash Revenue
- Credit Refresher on Global Cash Flow vs. Global Cash Support
- Financial Statements for Total Coverage, Inc.
- Personal Financial Statements and Excerpts from Personal Income Tax Returns for Larry Crevin
- Exercise for the Session 5 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
- Webinar Poll Solutions
- Exercise Solutions
This is Course 5 of 8 in the Commercial & Industrial Business Underwriting Skill Series
Analytical Decision Tree and the Credit Write-Up
Financial Statement Review and Ratio Analysis
Cash Flow Analysis and Borrowing Causes
Projected Cash Flow, Management Assessment and the First Way Out
Guarantor Analysis and the Second Way Out
Non-Financial Red Flags and Performance Implications
Identifying and Mitigating Repayment Risks
The Credit Write-Up Again
