how bankers look at your financial statements people. relationships. results
TRANSCRIPT
How Bankers Look at Your Financial Statements
People. Relationships. Results.
Which Statements?
Balance sheetBalance sheet Income statementIncome statement Statement of cash flowsStatement of cash flows NotesNotes
People. Relationships. Results.
Accountant …. Banker Accountant’s concernsAccountant’s concerns
Banker’s concernsBanker’s concerns Where’s Waldo?Where’s Waldo? TrendsTrends StoryStory Sources of repaymentSources of repayment
People. Relationships. Results.
Balance Sheet - Assets
Current Assets / Current LiabilitiesCurrent Assets / Current Liabilities Assets excludedAssets excluded Accounts ReceivableAccounts Receivable Inventory (COGS, A/P)Inventory (COGS, A/P) IntangiblesIntangibles Unusual accountsUnusual accounts
People. Relationships. Results.
Balance Sheet Assets
People. Relationships. Results.
Balance Sheet - Liabilities
Accounts payable (inventory)Accounts payable (inventory) Officer loans/debtOfficer loans/debt LeverageLeverage
= Liabilities/Tangible Net Worth= Liabilities/Tangible Net Worth Unusual accountsUnusual accounts
People. Relationships. Results.
Balance Sheet Liabilities, Net Worth
Income Statement
SalesSales
- COGS- COGS
= Gross Profits= Gross Profits
- Selling, General and Administrative Expenses- Selling, General and Administrative Expenses
= Operating Income= Operating Income
+ Other Income+ Other Income
- Other Expenses- Other Expenses
= Net Income= Net Income
People. Relationships. Results.
Income Statement
TrendsTrends MarginsMargins ProfitabilityProfitability Officer compensationOfficer compensation Legal expensesLegal expenses Bad debt expenseBad debt expense Unusual expensesUnusual expenses
People. Relationships. Results.
People. Relationships. Results.
Statement of Cash Flows
Indirect Method (SFAS No. 95)Indirect Method (SFAS No. 95)
Direct Method (SFAS No. 95)Direct Method (SFAS No. 95)
Lender’s Direct Method Lender’s Direct Method
People. Relationships. Results.
UCA Cash Flow - Lender’s Direct Method
Business componentsBusiness components Order of priority of claims on cash flowOrder of priority of claims on cash flow
People. Relationships. Results.
Ratios TrendsTrends Working Capital/LiquidityWorking Capital/Liquidity A/R turn/daysA/R turn/days Inventory turn/daysInventory turn/days A/P turn/daysA/P turn/days LeverageLeverage Operating, net marginsOperating, net margins DSCDSC
People. Relationships. Results.
Notes Business activityBusiness activity Accounting PoliciesAccounting Policies Revenue recognitionRevenue recognition Property and equipment – depreciationProperty and equipment – depreciation Cost of salesCost of sales Debt: Notes payable (leases)Debt: Notes payable (leases) Expense detailExpense detail LitigationLitigation
People. Relationships. Results.
Additional information
Business plan/projectionsBusiness plan/projections Accounts receivable and payable agingsAccounts receivable and payable agings Company tax returnsCompany tax returns Asset listingsAsset listings Personal statementPersonal statement Personal tax returns (complete)Personal tax returns (complete)
People. Relationships. Results.
Is your company bankable?
Cash flow, DSCCash flow, DSC CollateralCollateral Guarantor supportGuarantor support Red flagsRed flags Five C’sFive C’s
People. Relationships. Results.
Banker conversation History of companyHistory of company OwnershipOwnership Division of dutiesDivision of duties ManagementManagement Marketing/salesMarketing/sales CompetitionCompetition Differentiation/nicheDifferentiation/niche SuppliersSuppliers ChallengesChallenges
People. Relationships. Results.
Labor supplyLabor supply Key employeesKey employees Facilities/space Facilities/space
needsneeds Equipment needsEquipment needs Banking historyBanking history Plans for the futurePlans for the future
Other/Misc
Presentation issuesPresentation issues Current issues - appraisalsCurrent issues - appraisals LTVLTV DSCDSC Current banking environmentCurrent banking environment Cash management arrangementsCash management arrangements Establish a relationship nowEstablish a relationship now
People. Relationships. Results.
Leslie Mittanck, CPAVice PresidentCommercial Banking Officer1st Pacific Bank8889 Rio San Diego Drive, Suite 101San Diego, CA 92108(858) [email protected]