In today’s Wall Street Journal, an article on Banks Reach Out to Small Firms caught my eye.
The recent economic struggles have left lenders with a challenge if you are relying on historical cashflow figures. The Tax Return Analysis training I present to business lenders focuses on calculating historical/recurring/projected cashflow and we are certainly talking about other indicators these days. So here are three indicators other than cashflow mentioned in the article:
- BB&T and J.P. Morgan Chase & Co.
say they are looking more closely at quarter-to-quarter comparisons
when they evaluate small-business loan applicants to see if there are
signs of a turnaround.
- Bank of America now gives more weight to orders
and anticipated revenues when weighing a company’s prospects.
- Loan officers at Webster Bank have been told to put more emphasis on
character. “We want to recognize those people who have made the
necessary changes in their business,” says John Guy, head of
I have three questions for you:
- What are you weighing more heavily to determine if the small business you are interested in has turned around?
- Are you finding the regulators focused too much on recent historical cashflow, not enough or about right? Are they on board with alternative ways of looking at credit-worthiness?
- If 10 is loose and 1 is the tightest it has ever been, where are your underwriting standards related to small business loans? Never mind. Don’t answer that just in case the regulators are reading. ‘-)