If there is a recurring theme in these posts (Capacity, Anomalies) it is that credit analysis requires you to ask more questions! Never is that more important than with regards to projections. If your credit decision depends on projected profitability, you need to understand the foundation of the projections. The credit decision maker needs to have a clear picture of how projections will be met and if they agree that the projections are attainable based on the information

In my last post I talked about recognizing Trends in your credit analysis of an SBA applicant business. This time we’ll talk about Anomalies. When analyzing a credit I’m looking for unusual entries as they relate to the historical numbers. Most business financial data is relatively consistent year over year as to the percentage of revenues. In my analysis I’m looking for significant increases and decreases in these expenses. Variances in Repairs and Maintenance or Legal E

The most important of the five C’s of Credit is Capacity. It is the one C that an SBA guaranty does not negate. If an applicant cannot show that they can repay the loan from the debt service of the business there is no loan. In reviewing historical financials of a business I look for two things Trends and Anomalies. It is more difficult now due to COVID for these to stand out, but they are still an important factor. Let’s start with Trends - Trends are especially importan