Analytical Failure Zones

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Analytical Failure Zones
where mistakes may be fatal

Target Audience

Credit Officers, Lending Officers, Credit Underwriters and Analysts who could benefit from a short and focused review of the analytical issues that must be addressed to reach credit decisions in tough times.

Delivery

The seminar is conducted at the client’s location by a Shockproof! Training instructor.

Testing

At the client’s option and included in the participant price, Shockproof! Training provides an online post test to determine participants’ degree of mastery of the material addressed in the seminar.

8 CEUs

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Seminar Objectives:

	Examine the necessity of properly estimating debt service capacity and prospects for a property’s occupant and owner rather than directing primary attention to an estimate of the property’s market value in the credit decision process for owner-occupied real estate;
	Explore the analytical deficiencies in the information content of cash based business income tax returns and understand the necessity of complementing business income tax returns with accrual financial statements.
	Review the importance of verifying and relying on an income producing property’s net operating income as the primary source of debt service rather than shifting focus to market value as the underlying rationale for the credit decision;
	Address the dangers inherent in combining business cash flow with personal cash flow in developing support for marginal credits, assessing debt service prospects, and attempting to properly assess risk;
	Explore the purpose and role of distributions and loans to shareholders and the necessary adjustments to reported profit in arriving at actual business profit and associated debt service prospects; and
	Examine the differences between three widely used measures of business cash flow – net income + depreciation, EBITDA, and UCA cash flow – in providing messages and signals about borrowing causes, financing requirements, cash sources of debt service, and shifts in a borrower’s risk profile.

Seminar Materials

	Credit Refresher on A Cash Flow Snapshot
	Credit Refresher on Accounting Profit and Business Profit
	Credit Refresher on Cap Rates and Lending Decisions
	Credit Refresher on Cap Rates and Risk
	Credit Refresher on Cash Based Income Tax Returns
	Credit Refresher on Distributions and Income Taxes
	Credit Refresher on Global Cash Flow
	Credit Refresher on Shareholder Loans and Cash Flow
	Credit Refresher on The Income Capitalization Approach
	Financial Statements for Total Coverage, Inc.
	Excerpts from Carter Park Mills Form 1065
	Excerpts from Adobe Plaza Appraisal Report
	Financial Statements for Solano Partners
	Excerpts from 1220 Harrison Street Appraisal Report
	Online Post Test

Upon Completion

Participants who successfully complete the seminar will be able to:

	Understand the purpose and role of distributions and loans to shareholders and the necessary adjustments to reported profit in arriving at actual business profit and associated debt service prospects;
	Understand the differences between net income + depreciation, EBITDA, and UCA cash flow in providing messages and signals about borrowing causes, financing requirements, cash sources of debt service, and shifts in a borrower’s risk profile;
	Understand the dangers inherent in combining business cash flow with personal cash flow in attempting to properly assess risk;
	Understand the analytical deficiencies in the information content of cash based business income tax returns and appreciate the necessity of using accrual financial statements along with business income tax returns in assessing risk;
	Understand the importance of verifying and relying on an income producing property’s actual net operating income as the primary source of debt service rather than relying on market value and proforma net operating income to support the credit decision; and
	Understand the necessity of properly estimating debt service capacity and prospects for a property’s business occupant and owner rather than focusing primary attention and analysis on an estimate of the property’s market value in reaching a credit decision for owner-occupied real estate.

How to Order

Seminars are conducted at the client’s location. The cost is the greater of a) a fixed fee that varies by client size or b) $300 per participant, plus instructor travel and lodging expenses. All materials and the online post test are included in the seminar cost.

Seminars
	Analytical Failure Zones
	Cash Flow