The need for "back to basics" information about credit risk has not disappeared; in fact, it has grown among lenders and investors who have no easy ways to learn about their clients. This short and readable book guides readers through core risk/performance issues. Readers learn the ways and means of running more efficient businesses, review bank and investor requirements as they evaluate funding requests, gain knowledge selling themselves, confidence in business plans, and their ability to make good on loans. They can download powerful tools such as banker’s cash flow models and forecast equations programmable into a cell or tablet. Readers can punch keys to ascertain financial needs, calculate sales growth rates calling for external financing, profits required to internally finance their firms, and ways to position revenue growth rates in equilibrium with their firm’s capital structure – a rock-solid selling point among smart lenders and investors.
The book’s "how-to," practical and systematical guide to credit and risk analysis draws upon case studies and online tools, such as videos, spreadsheets, and slides in providing a concise risk/return methodology.
Key Features
- Introduces ways to define and manage risk
- Uses case studies and online tools to extend and apply credit analysis and business management tools
- Surveys "hard" and "soft" data and ways they help lenders, other financiers, small-business owners, and entrepreneurs spot potential problems, write optimal business plans, and deliver effective loan or /investor geared presentations
- Dedication
- Foreword
- Chapter 1: Business Structures and Funding Sources
- Abstract
- Short review of business structures
- Selecting a financing source
- What to consider before you apply
- Documentation generally required for a small business loan application
- Chapter 2: How Banks Evaluate Your Loan Application
- Abstract
- Primary evaluation
- Analytic evaluation
- Perspective: how lenders put it all together
- Chapter 3: Is Your Financial Information Accurate and Reliable?
- Abstract
- The auditor’s role
- How accountants record transaction data
- The significance of footnotes
- Accounting for contingencies
- Financial instruments with off balance sheet risk
- Two significant auditing storm signals
- Chapter 4: Ratios Every Business Should Monitor
- Abstract
- What are ratios?
- Sources of comparative ratios
- Chapter 5: Financing Your Season
- Abstract
- Examples of seasonal businesses
- How a successful seasonal cycle works
- Unsuccessful seasonal cycles
- Examples of successful seasonal cycles
- Seasonal lending analysis
- Preparing a cash budget (refer to Acme’s cash budget)
- Exercise: preparing a cash budget
- Interim seasonal ratio analysis
- Defensive measures
- Working capital as a defensive measure
- Cash flow versus working capital analysis
- The mechanics of working capital
- Chapter 6: Exploring Your Business’s Nerve Center: Cash Flow
- Abstract
- Historical cash flow
- Conclusion
- Chapter 7: Interactive Business Forecasts Equations
- Abstract
- Sensitivity forecasting: the percentage of sales method
- Introduction to the F and E equations
- A simulations approach to financial forecasting
- Chapter 8: Assets You Can Pledge to Support Your Business Loan
- Abstract
- Accounts receivable, inventory, purchase order financing, and factoring
- Accounts receivable financing
- The accounts receivable audit: scope and details
- Factoring receivables
- Purchase order financing
- Advances secured by inventories
- Chapter 9: What Is Your Business Worth?
- Abstract
- How to appraise your small business: a comprehensive outline
- A Valuation appraisal template
- Executive summary
- Background
- Enterprise’s value drivers
- Choosing the length of the forecast horizon
- Continuing value
- Triangulating results: multiples and alternative valuation methods
- Bali et al. Investing in Hedge Funds: A Guide to Measuring Risk and Return Characteristics. 9780124047310. 2013. 152 pp., $39.95.
- Glantz. Multi-Asset Risk Modeling. December 2013. 9780124016903. 544 pp., $99.95.
- Savoiu. Econophysics: Background and Applications in Economics, Finance, and Sociophysics. 2012. 9780124046269. 178 pp., $39.95.
Its novel comparable, non-technical style make this book a welcome addition to any business library. Navigating the Business Loan serves undergraduate institutions offering courses in entrepreneurship and credit management, graduate students, professionals working in financial institutions, and venture capitalists and general investors. Finally to my community banker friends and to readers running their own shops: entrepreneurships, small to midsized businesses - , I have only this to add: this book was inspired and written especially for you.
