Product code:- Accounts-AW328
1. What do you see that needs further questioning? Examples would be great.
2. What do you feel the risks/weaknesses are?
3. What do you feel the strengths are?
4. With the limited information, do you feel the loan opportunity would be recommendable?
5. Also feel free to provide any other comments
Borrower is interested in purchasing an existing bakery. Borrower worked for large institutional bread company for 3 years followed by 3 more years at a small local bakery (NOT the one she is purchasing). The land with a building is included in the purchase price and has an approximate value of $300,000. She also needs to purchase equipment for $100,000, purchase other furniture and fixtures of $45,000 and have working capital of approximately $200,000 for inventory, other start-up costs and liquidity during the first 6-12 months of operations. The borrowers personal credit score is 700 and she was past due on her home mortgage one time in the past 12 months, all else is satisfactory. Borrower has saved cash of $50,000 that she is personally willing to put toward the project. Her business plan shows that the bakeries profitability will double in the first year under the new management.
Borrower is interested in starting his own personal training fitness facility. He has been a personal trainer for a chain fitness facility 18 months, prior to which he was in college. He has no personal cash to put into the start-up, but says he has some equity in his home that he can use as his cash injection. He will be leasing real estate space so he needs funds for some equipment and mostly working capital. He will be leaving his current personal trainer position to focus on this new business. He has average personal credit with monthly debt and rent obligations of $1,700/month. His tax return shows he made about $16,000 last year as a personal trainer.
The Bank has sent a loan request in for underwriting. The deal was prescreened and a “needs” list was provided to The Bank. All items were obtained so the loan opportunity advanced into underwriting. You have underwritten the loan and have come up with a list of questions based on the information provided and you send the list to The Bank. The Bank gets very frustrated and says that they already sent all the information requested and they didn’t see any need to make further requests or inquiries from the borrower. The Bank suggests we submit for SBA approval “as is” without the further answers/items requested. How do you think this situation should be handled?
• The relationship between credit score and loan interest rate should be given so that interest rate will be calculated. • The life of all the equipment should be given to calculate depreciation which will help in determining the cash flows to find out feasibility of the loan.
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