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The flashcards below were created by user
julie_durst
on FreezingBlue Flashcards.
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According to Amaya, when is a business plan really needed?
When historical financial performance of the company is not sufficient to support the current request for financing.
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What are Amaya's 6 C's of Credit?
- Conditions - are the conditions right for the type of business
- Character - the general impression that the business and its owners make on the lender; education background and business experience of owners is reviewed.
- Capital - How much equity does the business have? A measure of the owners' personal investment into the business.
- Credit - ability to effectively manage debt repayment
- Capacity - plan and/or prior years' financials must show that the business can produce enough cash to repay the loan
- Collateral - secondary source of repayment
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What kind of documentation is needed to show that there is a market for a type of business?
- Industry trend reports
- Target market demographic studies
- Competitive Analysis
- Resumes
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What kind of documentation is needed to show that the business owners have character?
- Resume
- Personal financial statement
- Business and personal financial information
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What kind of documentation is needed to show how much equity the business has?
- Business tax returns
- Business balance sheet
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How does the bank measure capital (equity in the business)?
- Debt / Equity ratio = Leverage (usually needs to be not more than 3)
- Current ratio
- Quick ratio
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What kind of documentation is needed to show that the business and its owners can effectively manage debt repayment?
- Business credit report
- Business balance sheet and/or tax returns
- Personal credit report
- Personal financial statement
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Explain what makes a good credit score.
- Personal credit scores should be at least 630.
- Scores above 700 are considered good.
- All types ofaccounts should be used: revolving, installment, credit cards, mortgage accounts.
- At least 60 months of credit experience, and at least 7 open accounts.
- Debt-to-limit ratios are considered on revolving accounts.
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What kind of documentation is needed to show that the business can produce enough cash to repay its loan?
- Business tax returns
- Business income statement
- Business cash flor statement
- Personal tax returns
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What kind of documentation is needed to prove the existence of collateral?
Remember: Generally loans need to be fully collateralized.
- Business tax returns
- Business balance sheet
- Accounts receivable aging
- Inventory report
- Depreciation schedule
- Appraisal of real estate
- Purchase order or invoice
- Personal financial statement
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