Due Diligence Matters
Feb 01,2018
A company’s financial statements are important in assessing a potential borrower’s situation. But thorough due diligence requires looking closely and deeply at all aspects of the company’s operations, from applicable economic and industry conditions to sources of collateral and business operations — and beyond. Only then can you, as lender, accurately evaluate the borrower’s financial status and minimize your risks of delayed payments and default.Assess risk and review financialsBefore you review a borrower’s financial statements, research industry risks. This risk assessment identifies what’s most relevant and where your greatest exposure lies, what trends you expect in this year’s financials, and which bank products the customer might need. Risk assessments save time because you’re targeting due diligence on what matters most.Now tackle the financial statements. First evaluate the reliability of the financial information. If an in-house bookkeeper or accountant prepared it, consider his or her skill level and whether the statements...

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