Credit Analysis of a Borrower's Cash Flow, Collateral, and Guarantees
Dev Strischek Overview:
Credit analysts, underwriters, and lenders are expected to assess a borrower’s ability to repay from its operating cash flow, collateral, and guarantors, but are they making that assessment accurately and consistently?
Bankers hope that a borrower’s business generates enough cash flow to repay principal and interest, and the assets acquired with the borrowed funds usually are taken as collateral, e.g., inventory, equipment, real estate, etc. The owners of the business are also expected to guarantee the loan as additional support. Is there enough cash flow to repay, and if the borrower’s operations falter and the borrower defaults, is the collateral’s liquidation value and the guarantors’ adjusted net worth sufficient to pay off the loan?
This session offers guidance on how to estimate a reliable operating cash flow, collateral liquidation value, and guarantor adjusted net worth.
Areas Covered in the Session:
Upon completion of this webinar, the participant will know how to determine a borrower’s repayment ability from cash flow, collateral, and guarantors for repayment ability:
- Global Cash Flow Analysis Methodology utilizing financial statements, tax returns and credit reports of commercial borrowers and individuals
- Comparison of operating cash flow to the more inaccurate traditional cash flow (profits plus depreciation) and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) method of determining cash flow
- A free cash flow method which can convert EBITDA into operating cash flow
- Incorporation of guarantors’ cash flow and resources into global cash flow
- Evaluation of guarantor as a secondary repayment by adjusting guarantor’s book net worth
- Assessment of collateral liquidation value as secondary repayment source
Who Will Benefit:
- Commercial Bankers
- Commercial Real Estate Lenders
- Credit Analysts
- Credit Department Staff
- Loan Underwriters
- Loan Review Officers
- Credit Department Managers
- Senior Lenders
- Chief Credit Officers
Speaker Profile
Dev Strischek A frequent speaker, instructor, advisor, and writer on credit risk and commercial banking topics and issues, Dev is principal of Devon Risk Advisory Group and engages in consulting, speaking and training on a wide range of risk, credit, and lending topics. As former SVP and senior credit policy officer at SunTrust Bank, Atlanta, he was responsible for developing, implementing, and administering credit policies for SunTrust's wholesale lines of business--commercial, commercial real estate, corporate investment banking, capital markets, business banking, and private wealth management. He also spent three years as managing director and credit approver in SunTrust's Florida commercial lending and corporate investment banking areas, respectively. Prior to SunTrust, Dev was chief credit officer for Barnett Bank's Palm Beach market. Besides stints at other banks in Florida, Kansas City, and Ohio, Dev's experiences outside of banking include CFO of a Honolulu construction company, combat engineer officer in the U.S. Army, and college economics instructor in Hawaii, Missouri, and Florida. A graduate of Ohio State University and the ABA Stonier Graduate School of Banking, he earned his M.B.A. from the University of Hawaii.
Dev serves as an instructor in the ABA’s Stonier Graduate School of Banking, the Southwestern Graduate School of Banking, the Pacific Coast Banking School, and the American Bankers Association's (ABA) Commercial Lending. His school, conference, and workshop audiences have included participants drawn from the ABA, RMA, OCC, Federal Reserve, FDIC, FFIEC, SBA, the Institute of Management Accountants (IMA) and the AICPA.
Dev has written about credit risk management, financial analysis and related subjects for the ABA's Commercial Insights, the Risk Management Association's RMA Journal, and other business professional journals. He is the author of Analyzing Construction Contractors and its related RMA workshop. A past national chair of RMA and former Florida Chapter president, Dev serves as a member of the RMA Journal's advisory board, and an ex-officio board member of the Florida and Atlanta RMA chapters. He also serves on the advisory board of the Atlanta Chapter of the Professional Risk Managers' International Association (PRMIA), and he has consulted on credit risk issues with banks in Morocco, Egypt, and Angola through the US State Department's Financial Service Volunteer Corps (FSVC)