3/31/2024 0 Comments Credit memo risks![]() ![]() The SBA 7(a) loan is a federal government guarantee of a small business loan. Has any collateral shortfall been clearly addressed? Has any derogatory credit been clarified? Has your need for working capital been fully addressed? Is any justification for refinance properly addressed? Have your notes to be refinanced been clearly identified? Is your "use of proceeds" explanation completely clear? Is a schedule of collateral both included and complete?ĭo your draft authorization and credit memorandum sync? Once your memo is complete, be sure to fully review your Lender’s Credit Memorandum for the most common reasons an SBA 7(a) gets denied during credit memo review:ĭid your lender verify and certify all financials against official IRS transcripts? If you need to include financial spreads for cash flow, collateral coverage or stress testing, add and label it in this section.ĭouble Check Your Credit Memo – Then Check Again The SBA may value management analysis over financial analysis, so the memorandum drafter must explain why your management is a key factor in reducing risk.įormal, detailed risk assessment and risk mitigation.Īppendix and supporting materials. Include cash flow, collateral, key ratios, trend analysis, and management analysis. Include pricing and terms and conditions.Ĭomprehensive credit analysis. Break it down into sections for readability, and include: The document can be structured however you like, but be sure it includes all of the following clearly and concisely. Once you’ve prepared by answering the questions above, the information needs to come together in a simple and consistent format. Has your lender explained how they estimated your projected cash flow? ![]() Have your historical financial statements been reviewed and analyzed by your lender? Is a change of business ownership involved? If so, can you show a business valuation explains how this change of ownership benefits your business?Ĭan you explain any relevant liens, judgments, and bankruptcies? Has your lender reconciled your business and personal financial data against IRS transcripts?Ĭan you provide an owner/guarantor analysis?Ĭan your lender confirm life insurance requirements?Ĭan you justify and specifically explain any refinancing?Īssuming your lender is recommending approval, have they documented how they made their decision? ![]() Who makes up your management team, and what are their industry and management credentials?Ĭompared to total Debt Service Coverage, is your net operating income ratio at least 1:1? You should be able to answer the following questions, which your SBA 7(a) Lender’s Credit Memorandum needs to address: Get Ready for Your Lender’s Credit Memorandum ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |