BVL Vol. 23: Assessing Personal Financial Statements

Identifying areas of concern during personal financial statement analysis.


Script: John Reik, Jomar Productions L.L.P. Presenter: Bill Collins

Both consumer and business lenders often request personal financial statements in order to assess the backup repayment capacity of prospective borrowers and loan guarantors. In fact, Regulation B might even require that a lender receive such a statement. But too often, the analyses of these statements is cursory, simplistic, and misleading, leaving a level of due diligence that often goes unmet.

What, then, should lenders look for? What are the danger signals? What should they double-check? What should they do with a statement that meets their due-diligence requirement? In Assessing a Personal Financial Statement, participants follow a lender as he examines an impressive personal financial statement with a net worth figure of over $800,000.

Then, through a series of questions and answers exchanged between the lender and his manager, participants discover that the applicant's actual net worth is really much closer to zero, and that a long list of issues will need to be addressed with the applicant before any credit decision can be made. This program gives participants an opportunity to identify both the subtle and the not-so-subtle credit risks that are inherent in personal financial statements.

(Runs approximately 21 minutes.)

• Better credit decisions
• Reduced loan losses
• Improved communications
• Better decision making
• Reduced credit risk
• Increased sensitivity to credit issues