tag:blogger.com,1999:blog-89293302678216570762024-03-08T10:35:40.770-08:00Commercial Loan AnalysisPrinciples and Techniques for Credit Analysts, Lenders, and Loan Review Professionals by Ken PirokKen Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-8929330267821657076.post-71448685858037656392020-01-29T06:09:00.006-08:002023-03-29T11:15:16.475-07:00The Second Edition of Commercial Loan Analysis Has Been ReleasedBig news! The second edition of <i>Commercial Loan Analysis</i> is available.<br />
<br />
The new print copy is available at <a href="https://amzn.to/3bhVsOX" target="_blank">Amazon</a>.<br />
<br />I have made additions and improvements to every chapter and section. I've added new chapters as well, including an intro to financial statements as well as analysis of commercial real estate and global cash flow analysis.<br />
<br />
Let me know what you think about it...<br />
<br />
KenKen Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-89721032136919339682020-01-15T08:36:00.002-08:002020-01-15T10:25:16.381-08:00The Gambler’s Fallacy and How Credit Decisions are Affected by Human Bias<br />
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<span style="font-family: "arial" , "sans-serif";">Life
is complicated, and we are busy.<span style="mso-spacerun: yes;"> </span>People
just don’t have the time or the energy to analyze everything.<span style="mso-spacerun: yes;"> </span>So, we employ “heuristics” or “rules of
thumb” to help us make judgments.<span style="mso-spacerun: yes;"> </span>While
these rules of thumb are often helpful, they also cause systematic biases which
adversely affect our decisions.<span style="mso-spacerun: yes;"> </span>This
happens to all of us at home and at work.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif";">And
yes, if you work in any role related to credit underwriting, the chances are
that these heuristics affect your decisions and the decisions of your
coworkers.<span style="mso-spacerun: yes;"> </span>Here are a few of the most
common biases:<o:p></o:p></span></div>
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<ul>
<li><u><span style="font-family: "arial" , "sans-serif";">Availability</span></u><span style="font-family: "arial" , "sans-serif";">: Our judgments are affected by the
ease of remembering or retrieving events, and m</span><span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: +mn-ea;">ore vivid or more recent
events </span><span style="font-family: "arial" , "sans-serif";">tend to be</span><span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: +mn-ea;"> more
memorable.</span></li>
<li><u><span style="font-family: "arial" , "sans-serif";">Regression
to the Mean</span></u><span style="font-family: "arial" , "sans-serif";">: </span><span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: +mn-ea;">We
assume that </span><span style="font-family: "arial" , "sans-serif";">we can
predict the future from the past, that this year’s cash flow will be similar to
last year’s cash flow. </span><span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: +mn-ea;">However,
any extreme performance is likely to reg</span><span style="font-family: "arial" , "sans-serif";">ress
to the mean</span><span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: +mn-ea;">.</span></li>
<li><u><span style="font-family: "arial" , "sans-serif";">Confirmation
Bias</span></u><span style="font-family: "arial" , "sans-serif";">: We tend to
selectively search for information which supports the conclusion which we
desire to reach (or which is located wherever we have found the information
previously).<o:p></o:p></span></li>
<li><u><span style="font-family: "arial" , "sans-serif";">Overconfidence</span></u><span style="font-family: "arial" , "sans-serif";">: </span><span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: +mn-ea;">People tend to be
overconfident in the accuracy of their predictions.</span></li>
<li><u><span style="font-family: "arial" , "sans-serif";">Hindsight
Bias</span></u><span style="font-family: "arial" , "sans-serif";">: We assess the
quality of a decision based upon whether the outcome was good or bad, not by
whether the original decision-making process was sound.<o:p></o:p></span></li>
</ul>
<br />
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<span style="font-family: "arial" , "sans-serif";">The
<a href="https://www.washingtonpost.com/news/wonk/wp/2016/03/09/the-dumb-mistake-that-gamblers-judges-and-baseball-umpires-make/" target="_blank">Gambler’s Fallacy</a> is another bias, and this one has been shown by <a href="https://academic.oup.com/qje/article/131/3/1181/2590011/" target="_blank">academic research </a>to impact credit decisions.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif";">People
underestimate the likelihood of sequential streaks occurring by chance.<span style="mso-spacerun: yes;"> </span>We tend to believe that things will even
out.<span style="mso-spacerun: yes;"> </span>This is the Gambler’s Fallacy.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif";">For
example, in roulette, if red has come up four times in a row, then people are
more likely to bet on black.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif";">If
a Major League umpire has just called a strike, then he is slightly less likely
to call a strike on the next pitch (after controlling for the actual position
of the ball).<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif";">And,
a <a href="https://academic.oup.com/qje/article/131/3/1181/2590011/" target="_blank">study</a> of lenders in India found that when an officer approved a loan, he or
she was 8% more likely to decline the next loan application.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif";">How
can you combat this bias? First, learn
about it. For an important decision,
develop an algorithm that helps you decide, and have another set of eyes
examine the outcome. The right types of
incentives can help too. In fact, the lending
study found that a</span><span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: Calibri;">dverse effects were reduced when stronger
incentives for accuracy (versus the number of approvals) were implemented.<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: Calibri;">If you are interested in learning more, then please
contact me <a href="mailto:info@commercialloananalysis.com" target="_blank">here</a>.<span style="mso-spacerun: yes;"> </span>I have been researching
behavioral science for a few years along with reviewing actual loan approval
processes and decisions.<span style="mso-spacerun: yes;"> </span>I have lots of
interesting examples and solutions (with a focus on commercial loans).<o:p></o:p></span></div>
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<span style="font-family: "arial" , "sans-serif"; mso-fareast-font-family: Calibri;">I will begin formally presenting this
information later in the year, but in the meantime, I’d like to perform a
couple of free trial presentations.<span style="mso-spacerun: yes;"> </span>If your
institution is interested, then please contact <a href="mailto:info@commercialloananalysis.com" target="_blank">me</a>.<o:p></o:p></span></div>
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<u><span style="font-family: "arial" , "sans-serif";">Links:<o:p></o:p></span></u></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 11.0pt;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><a href="https://www.washingtonpost.com/news/wonk/wp/2016/03/09/the-dumb-mistake-that-gamblers-judges-and-baseball-umpires-make/"><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;">https://www.washingtonpost.com/news/wonk/wp/2016/03/09/the-dumb-mistake-that-gamblers-judges-and-baseball-umpires-make/</span></a><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;"> </span><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 11.0pt;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><a href="https://academic.oup.com/qje/article/131/3/1181/2590011/"><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;">https://academic.oup.com/qje/article/131/3/1181/2590011/</span></a><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 11.0pt;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><a href="https://csbcorrespondent.com/blog/bias-your-loan-approval-process-part-i"><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;">https://csbcorrespondent.com/blog/bias-your-loan-approval-process-part-i</span></a><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo2; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 11.0pt;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><a href="https://csbcorrespondent.com/blog/bias-your-loan-approval-process-part-ii"><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;">https://csbcorrespondent.com/blog/bias-your-loan-approval-process-part-ii</span></a><span style="font-family: "arial" , "sans-serif"; font-size: 11.0pt;"><o:p></o:p></span></div>
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Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com1tag:blogger.com,1999:blog-8929330267821657076.post-32885551437567285762018-09-28T11:37:00.003-07:002018-09-28T11:37:36.263-07:00This website has a new section! Check out the financial statement and ratio analysis information here...<a href="http://www.financialstatements.commercialloananalysis.com/">http://www.financialstatements.commercialloananalysis.com/</a>Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-66125020342996348172018-09-28T11:20:00.000-07:002020-01-15T08:38:15.164-08:00Credit Decisions and Behavioral ScienceThe RMA recently passed along this very interesting <a href="https://www.rmahq.org/decision-making-and-corporate-culture-insider/" target="_blank">article</a> about credit decision-making and the behavioral biases exhibited by humans.<br />
<br />
This is a topic that I have been researching myself. In the future, I plan to consult with banks about improving credit decision-making processes in light of the biases and errors that are often unavoidable due to human nature. It's a very interesting intersection between finance, credit, and psychology. If you are interested in helping out, providing ideas, or learning about how your bank can benefit from the research in this field, then please contact me.<br />
<br />
Here's the entire link to the RMA article:<br />
<a href="https://www.rmahq.org/decision-making-and-corporate-culture-insider/">https://www.rmahq.org/decision-making-and-corporate-culture-insider/</a>Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-35303827420930556542018-06-15T09:43:00.005-07:002023-03-29T11:16:18.725-07:00How to Order Commercial Loan Analysis: Principles and Techniques for Credit Analysts and LendersThere are a couple of ways to obtain my book, <i>Commercial Loan Analysis: Principles and Techniques for Credit Analysts and Lenders</i>.<br />
<br />You may order on <a href="https://amzn.to/3bhVsOX" target="_blank">Amazon</a>.<br />
<br />Or, you can check out the Financial Statement Analysis <a href="http://www.financialstatements.commercialloananalysis.com/">section</a> of this website. You will find that selected sections of the book (particularly financial ratios) are presented there.<br />
<br />
Thanks for reading!<br />
<br />
Ken PirokKen Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-39736534692289848542018-06-15T09:34:00.001-07:002018-06-24T07:03:00.627-07:00How Does Your Bank Calculate NOI?<span style="letter-spacing: -0.1pt;"><span style="font-family: "arial" , "helvetica" , sans-serif;">When analyzing commercial real estate, most banks present columns with NOI listed for historical periods along with a column of pro forma or "underwriting" NOI. Pro forma NOI is often
calculated using “Potential Gross Income” (representing gross rents as if the
property were 100% leased) less a vacancy factor.</span></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="letter-spacing: -0.1pt;"><span style="font-family: inherit;"><br /></span></span>
<span style="letter-spacing: -0.1pt;"><span style="font-family: inherit;">In pro forma analyses, appraisers and banks
often apply replacement reserve factors as well. Recent appraisals may contain an appropriate
vacancy factors, management fees, and replacement reserve assumptions to use in your analysis.</span></span></span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;"><span style="letter-spacing: -0.1pt;"><span style="font-family: inherit;"><br /></span></span>
<span style="letter-spacing: -0.1pt;">Your bank’s loan policy may also dictate standard
amounts to use for vacancy, bad debt, replacement reserves, and management fees
in the pro forma analyses. If your bank has a policy on how to calculate pro forma or "underwriting" NOI, then I'd like to hear about it. Feel free to leave a comment about how you make the calculation and which expenses are included and excluded.</span></span>Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-19811195032789223692018-06-07T12:43:00.001-07:002018-06-24T07:02:43.736-07:00Current and Non-Current Assets and Liabilities<br />
<div class="MsoNormal">
<span style="font-family: inherit;">There are
two types of assets and liabilities, “current” and “non-current.” Current assets are those that are expected to
be converted to cash in one year or less, and current liabilities are those
that will come due in one year or less.
So, cash, marketable securities, accounts receivable, and inventory are all
considered current assets, while accounts payable and the principal amounts of
loans due within a year are considered current liabilities.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: inherit;">Non-current
assets and non-current liabilities are due or converted to cash in more than a
year.<span style="mso-spacerun: yes;"> </span>Fixed assets and intangible assets
are considered non-current, and loan amounts which are due in more than a year
are also considered non-current.<o:p></o:p></span></div>
<br />Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com1tag:blogger.com,1999:blog-8929330267821657076.post-49342076523015544792018-06-07T12:30:00.000-07:002018-06-24T07:02:27.128-07:00Updated: OCC: Semiannual Risk PerspectiveThe OCC just released another Semiannual Risk Perspective. The link below will take you right to the report. Their page is always updated with the most recent report at the top and with previous reports available below.<br />
<br />
<a href="https://www.occ.gov/publications/publications-by-type/other-publications-reports/index-semiannual-risk-perspective.html">https://www.occ.gov/publications/publications-by-type/other-publications-reports/index-semiannual-risk-perspective.html</a>Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-19475356005615821152017-01-12T13:33:00.001-08:002018-06-24T07:02:11.352-07:00OCC: Semiannual Risk PerspectiveThe OCC has just recently released a new Risk Perspective report (covering the Fall of 2016). You may find it <a href="https://www.occ.gov/publications/publications-by-type/other-publications-reports/index-semiannual-risk-perspective.html" target="_blank">here</a>.Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-57864597970047255702017-01-03T09:28:00.002-08:002018-06-24T07:01:34.221-07:00Days Receivables Outstanding<!--[if gte mso 9]><xml>
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<br />
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<span style="font-family: inherit;">Another
way to look at accounts receivable turnover is in days:</span></div>
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<span style="font-family: inherit;"><br /></span></div>
<div class="MsoNormal" style="mso-hyphenate: none; tab-stops: -.5in;">
<span style="font-family: inherit;"><b style="mso-bidi-font-weight: normal;"><span style="letter-spacing: -0.1pt;">Days Receivables Outstanding</span></b><span style="letter-spacing: -0.1pt;">= <u><span style="mso-spacerun: yes;"> </span>365<span style="mso-tab-count: 2;"> </span></u></span></span></div>
<div class="MsoNormal" style="mso-hyphenate: none; tab-stops: -.5in;">
<span style="font-family: inherit; letter-spacing: -0.1pt;"><span style="mso-tab-count: 4;"> </span><span style="mso-spacerun: yes;"> </span>accounts receivable turnover</span><br />
<span style="text-indent: 0.5in;"><span style="font-family: inherit;"><br /></span></span>
<span style="font-family: inherit;"><span style="text-indent: 0.5in;">This
ratio expresses the average length of time in number of days between sales and
the cash collection of receivables.</span><span style="text-indent: 0.5in;"> </span><span style="text-indent: 0.5in;">The
average number of days that receivables are outstanding can seem like a more
intuitive measure than turnover expressed in number of times per year.</span><span style="text-indent: 0.5in;"> </span><span style="text-indent: 0.5in;">In this case, a lower value (or fewer days)
is favorable because it represents more rapid turnover.</span></span></div>
Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-90552586101352421122017-01-03T09:24:00.001-08:002018-06-24T07:01:14.171-07:00Accounts Receivable Turnover<span style="font-family: inherit;"><b style="mso-bidi-font-weight: normal;"><span style="letter-spacing: -0.1pt;">Accounts Receivable Turnover</span></b><span style="letter-spacing: -0.1pt;">=<span style="mso-tab-count: 1;"> </span><u>annual net revenue</u></span></span><br />
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<span style="font-family: inherit; letter-spacing: -0.1pt;"><span style="mso-tab-count: 4;"> </span><span style="mso-tab-count: 1;"> </span>accounts receivable</span><br />
<span style="text-indent: 0.5in;"><span style="font-family: inherit;"><br /></span></span>
<span style="font-family: inherit;"><span style="text-indent: 0.5in;">Accounts
receivable turnover represents the average number of times per year that trade
receivables "turn over" or are converted to cash.</span><span style="text-indent: 0.5in;"> </span><span style="text-indent: 0.5in;">Higher, more rapid turnover is favorable,
since sales on credit are being converted to cash more quickly.</span><span style="text-indent: 0.5in;"> </span><span style="text-indent: 0.5in;">Lower, less rapid turnover is unfavorable
since default becomes more likely as receivables remain uncollected, and since
conversion to cash is necessary to service obligations or to earn interest.</span></span><br />
<span style="text-indent: 0.5in;"><span style="font-family: inherit;"><br /></span></span>
<span style="font-family: inherit;"><span style="text-indent: 0.5in;">A
problem with this ratio is the fact that it compares accounts receivable at a
single point in time to an entire year of sales. </span><span style="text-indent: 0.5in;"> </span><span style="text-indent: 0.5in;">If the accounts receivable balance is
unusually high or low on the date of the financial statements due to seasonal
variations or other factors, then this measurement may not provide an accurate
picture.</span><span style="text-indent: 0.5in;"> </span><span style="text-indent: 0.5in;">Substituting average receivable
balances over the year in the denominator, may help correct this.</span></span></div>
Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com2tag:blogger.com,1999:blog-8929330267821657076.post-20997034785206235712016-01-09T14:16:00.003-08:002018-06-24T07:00:44.094-07:00OCC Bulletin on Real Estate Lending<span style="font-family: inherit;">A few weeks ago, the OCC posted an</span><span style="font-family: inherit;"> <a href="http://www.occ.treas.gov/news-issuances/bulletins/2015/bulletin-2015-51.html">Interagency Statement on Prudent Risk Management for Commercial Real Estate Lending</a>.</span><br />
<br />
<span style="font-family: inherit;">The agencies seem to be noting increased concentrations and risk in commercial real estate lending activities. This probably does not come as a surprise to most of you. The bulletin includes a handy PDF document with explanations and additional references to regulatory guidance.</span><br />
<span style="font-family: inherit;"><br /></span>
<span style="font-family: inherit;">For your reference, the OCC also has a specific page for <a href="http://www.occ.treas.gov/topics/credit/commercial-credit/commercial-real-estate.html">Commercial Real Estate</a>, which includes additional links.</span><br />
<span style="font-family: inherit;"><br /></span>Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0tag:blogger.com,1999:blog-8929330267821657076.post-6647386460342073802016-01-09T11:52:00.003-08:002018-06-24T07:01:51.752-07:00Adding back Rent in the Debt Service Coverage Ratio<!--[if gte mso 9]><xml>
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<span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;"><span style="mso-spacerun: yes;">O</span></span><span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;">ften, the building where a business operates is
owned separately from the business, itself. The company-owner will typically own the building individually or through an LLC and lease it to the business.</span></div>
<div align="left" class="MsoNormal" style="mso-hyphenate: none; tab-stops: -.5in 0in; text-align: left;">
<br />
<span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;">In such an instance, the rent paid to company-owners (either directly or via LLC or other organization) is typically added back to the numerator of the debt service coverage ratio, while the debt service on the property is included in the denominator.<span style="mso-spacerun: yes;"> </span></span></div>
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<br /></div>
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<span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;"><span style="mso-spacerun: yes;"></span>The cash flows of the
company are effectively paying the debt service on the property, regardless of
the paper trail.<span style="mso-spacerun: yes;"> </span>To perform a full and proper
debt service coverage analysis, you include the debt service on the mortgage in
the denominator and, correspondingly, add back related rent to the numerator.<span style="mso-spacerun: yes;"> </span>(Remember, if you include either rent in the
numerator or mortgage debt service in the denominator, then you must include
the other as well.)</span></div>
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<br /></div>
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<span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;">Sometimes it is only appropriate to add back a portion of
the total rent:</span></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;">Example 1:</span></b><span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;"> If the
total rent is comprised of rents for various properties, you will only add back
the rent portion for the properties also owned by the owner of the company,
since only that portion is included as debt service.</span></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;">Example 2:</span></b><span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;"> The owner
may effectively be distributing income to himself from the company through
excessive rent.<span style="mso-spacerun: yes;"> </span>If the rent paid by the
company is significantly more than the debt service for the given property,
then it may be appropriate to add back only the amount of rent necessary for
debt service for the property.</span></div>
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<br /></div>
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<b style="mso-bidi-font-weight: normal;"><span style="font-family: "times new roman" , "serif"; mso-bidi-font-size: 12.0pt;">Example
3:</span></b><span style="font-family: "times new roman" , "serif"; mso-bidi-font-size: 12.0pt;">
If a portion<span style="letter-spacing: -.1pt;"> of the rent includes cash
expenses such as taxes or insurance, then the amounts of each of these expenses
should not be added back.<span style="mso-spacerun: yes;"> </span>Do not add
back rent unless you obtain a financial statement or lease or verify that the
rent added back does not include such expenses.</span></span></div>
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<br /></div>
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<span style="font-family: "times new roman" , "serif"; letter-spacing: -0.1pt;">Note also that you should add back rent paid to owners
and consider the corresponding debt service even if the loan is from a
different bank.<span style="mso-spacerun: yes;"> </span>You also add back rent
when the company had been renting but is now buying a facility.</span></div>
Ken Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com2tag:blogger.com,1999:blog-8929330267821657076.post-43436596942483035182016-01-09T11:36:00.002-08:002023-03-29T11:17:01.874-07:00Welcome!Welcome to the new Commercial Loan Analysis website! We've been away for a bit, but now we're back!<br />
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Ken PirokKen Pirokhttp://www.blogger.com/profile/14475177526121551514noreply@blogger.com0