Underwriting Basics
a process in which a Native CDFI evaluates financial risk in making loans
What is Underwriting?
borrower credit report, personal financial statement, and income verification documents
What is required documentation for a consumer loan?
a business' ability to cover current liabilities with current assets
What is Liquidity?
Alimony, Social Security, and Retirement Income
What is considered Fixed Income?
type of financial statements that are not completed by a CPA
What are Internally Prepared Financial Statements?
mission driven lenders
What are Native CDFIs?
Total Monthly Debt Payments divided by Gross Monthly Income
What is the calculation for the debt-to-income ratio?
provides a snapshot of the business at one point in time
What is the Balance Sheet?
Liquidity, Leverage, & Profitability
What do key business financial ratios measure?
the value of an asset pledged as collateral less depreciation and collection costs
What is Discounted Collateral Value?
the thorough review and verification of information by a lender before entering into a loan agreement
What is Due Diligence?
One-on-One Coaching, Financial Education Courses and Workshops
What is technical assistance
tax return types that include a K-1 for owner distributions
What are Forms 1065 (Partnership) & 1120 (Corporation)?
The tax return analyzed for a sole proprietor
What is Schedule C (1040)?
Experian, Transunion, and Equifax
What are Credit Reporting agencies?
Responsibilities include initial client intake, application and document collection, financial analysis, and loan presentation
What is the Role of the Loan Officer?
a tool to measure the risk rating a consumer loan
What is a loan risk rating rubric?
business loan collateral that would require an appraisal
What is Commercial Real Estate & Heavy Equipment?
the "C" that could use an applicant's credit score
What is Character?
provides a guarantor's net worth and the borrower's assets
What is a personal financial statement?
includes specific loan product terms for every loan product offered by the Native CDFI
What is the Loan Policy?
an individual's debt-to-income ratio not including the new loan payment
What is Front-End DTI?
the measurement of how efficiently a business is converting sales into profit.
What is the Net Profit Margin?
The process a lender takes to minimize its risk exposure.
What is Risk Mitigation?
Acronym for Earnings Before Interest, Tax, Depreciation, and Amortization
What is EBITDA?