How To Think Like A Lender- Getting To Yes

Scott Wait, CPA, AEPRich Wait, CPA, CVA, AEP

Welcome

The ideal relationshipCredit Worthiness – The Five C’s tests

Capacity and Capital Collateral and ConditionsCharacterLender Risks

A borrower’s image of lenders

The ideal relationship

• Ask when you don’t need it / identify financing purpose • Strategic supplier• Be transparent - your story is important• Get documents in order• Find lender who understands your industry• Communicate regularly• Know lender’s competitors• Optimize cash flow

Credit Worthiness – The Five C’s tests

Will you pay me backAnd

How?

Capacity & Capital

• The Capacity Test – $$$$$$

– Borrower’s viewpoint / Lenders viewpoint– The ability to pay, monthly

• Assets matching debt

• Cash flow coverage, definition and analysis

• The Capital Test – – Debt to Equity, personal and business

– Unrealistic values, net worth

Collateral & Conditions

Collateral Test- Loan-to-value ratio- What is green light ratio?

Conditions Test- Local / National economy- Borrower’s financial condition- Credit rating

Character

Character Test is a comprehensive test

- Integrity- Lifestyle

Top Lender Risks

Elements of risk

• Inexperienced Management Team• Lack of Management Depth• High employee turnover (Key employees not locked into a

contract)• Contingent Liabilities• Lack of Customer Diversification• Poorly Maintained Assets• High Operating Costs• Frequent Contract Renewals / Bidding• Lack of Succession Plan• Employee Fraud• Cyber Fraud

Advisors and lending process

CPA’s and trusted advisors in the lending process act as a critical advocates, liaisons, and educators to companies as well as to commercial lenders. The process can be arduous. The right advisor can make the process easier, improve the communication and the evaluation process for the lender, and help the client get to yes.

Scott Wait, CPA, AEP Rich Wait, CPA,CVA, AEP scott@rswait.com rich@rswait.com 775.825.7337

Contact Information