• Shockproof! Training
  • 1.866.237.7228
  • Non-Member

    Membership Check

    Please enter your email address and we will check to see if a membership exists for your organization.

    Check Cancel
  • Account
    • Sign in

      If you have an account, please enter your login information.

      Sign-in

      Find Enrollments

      To quickly access links to materials or Session Access instructions, enter the email address used when enrollment was performed.

      Click "Find Now" to begin search.

      Find Now

      Forgot your password?

      Please provide your email address and we'll email you a reminder.

      Send it to me!

      Subscribe

      Please provide the information below to receive our mailings.

      Subscribe!
      Account Options
      1. Sign In... enter the resource center
      2. Access Materials... find my enrollments
      3. Forgot password?... memories fade
      4. Subscribe... to receive our mailings
      5. Contact us... if you have any questions, just ask
      6. Create a User Account* requires membership
  • Sign-in
  • Home
  • Products
  • Learning Paths
  • Calendar
  • Pricing
  • Communications
  • Contact Us
  • Help
  • About Us
  • Membership Check
  • Account

Instructor Blog - Global Cash Flow

  1. Home
  2. Communications
  3. Instructor Blog
  4. Global Cash Flow

Questions: Global Cash Flow


  • admin

  • 4/16/2019 3:45:55 PM

  • 34

  • Global Cash Flow
  • Copy / Share Link

Q: How would you estimate a guarantor's personal living expenses?

A: A guarantor will often provide rough estimates of his or her living expenses, which we always accept with a healthy dose of skepticism since the expense estimates are never supported with underlying documentation. In the face of this uncertainty, it becomes important to know the guarantor’s life style and be able to characterize that lifestyle as extravagant, conservative, or somewhere between the two. Your lifestyle assessment becomes an important influencing factor in estimate living expenses.

Moving forward with this basic degree of uncertainty, we can first identify the individual’s personal cash flow using information presented on the Form 1040 personal tax return. We then reduce that amount by our estimate of taxes, medical expenses, charitable contributions, and other expenditures we witness or can extract from the tax return. We might describe the result as adjusted personal cash flow available. We can further adjust this amount by required debt service plus estimated savings and investment (2018 average savings rate was 6%). The residual amount can be considered cash flow available for personal living expense.

The list can become quite extensive and calls on us to “Know Our Customer” beyond the regulatory sense through observation and conversation. That kind of familiarity is a strong source of information in determine what expenses go on the “cash flow adjustments” list. There are no tried and true databases or formulas to define personal living expenses. Personal living expenses are driven by personal financial priorities and discipline that we must come to know.

Q: Do you take into consideration a guarantor’s marital status as well as how many dependents are reported on their Form 1040 in defining personal living expense?

A: Consider the marital and dependent headcount as criteria in determining personal living expenses. Each person becomes another financial reduction to personal cash flow based on what you’ve observed in the family’s lifestyle. Your familiarity with the individual and your assessment of their lifestyle will be valuable in determining an actual amount.

Q: With Luis Castillo having 50% ownership of Fresno Properties, shouldn’t Castillo’s cash flow be included in the Global cash flow calculation?

A: Yes, if Mr. Castillo stands as a guarantor of LLC debt. We have no indication that he has taken on that role and have therefore not included his surplus personal cash flow or liquid assets in constructing Fresno Properties’ global cash flow.  

Q: If Mr. Castillo does not guarantee the loan, would Sequoia Properties’ cash flow and debt be adjusted to 50% given that Schumacher has only a 50% ownership interest?

A: No. Mr. Schumacher has signed an unlimited personal guarantee and is therefore responsible for all of Fresno Properties’ debt. Note also that if Mr. Castillo signs an unlimited personal guarantee, he is also responsible for all of Fresno Properties’ debt. The net effect is that an unlimited guarantee better protects the lender in the event the borrower is unable to satisfy its indebtedness.

Categories
  • Accounting Essentials(106)
  • Business Income Tax Returns(118)
  • Commercial Real Estate(32)
  • Communications(10)
  • Contractors(48)
  • Courses(1)
  • Covenants(9)
  • Credit Basics(89)
  • Credit College - Cash Flow(12)
  • Credit College - Commercial Business(203)
  • Credit College - CRE(213)
  • Credit College - Taxes(82)
  • Credit Curriculum(1)
  • Credit Write Up(31)
  • Debt Capacity(9)
  • EBITDA(25)
  • FASB95(10)
  • Financial Analysis(51)
  • Five Cs of Credit(10)
  • Fund Accounting(51)
  • General(0)
  • Global Cash Flow(49)
  • Healthcare(18)
  • Loan Documentation(50)
  • Minimum Financial Data(14)
  • Not for Profit Analysis(22)
  • Personal Income Tax Returns and Cash Flow(65)
  • Problem Loans - Loan Classification(2)
  • Projections(22)
  • Statement Spreading(6)
  • Stress Testing(1)
  • Technical Issues(8)
  • Testing(1)
  • Tools(1)
  • Trusts(3)
  • UCA Cash Flow(57)
  • User Community(6)
  • Working Capital and Cash Flow(27)
Shockproof! Training

PO Box 30304 Walnut Creek, CA 94598
1.866.237.7228 support@shockproof.com

  • About
  • Career Opportunities

© Copyright 2001-2023 Shockproof! Training