Well, Ebenezer Scrooge had visits from three Christmas ghosts in Charles Dickens’ classic tale. And Scrooge sure learned that the past and the present can affect the future. Lessons well learned. So, while he could, Scrooge took action in the present to help avoid an awful fate and ensure a better future. Same goes for you.

Every year about this time the ghost of risk rating visits your office, carrying with him your commercial clients’ year-end financial statements for last year. You’re haunted by the knowledge that you have to spread and analyze them so you can perform a timely risk rating for each.

What a dreary task that can be! You’d much rather be out marketing and developing new deals. You procrastinate as much as you can, justifying it by saying your portfolio attrition demands you spend more time on new loans. Meanwhile the 2021 year-end financial statements for your commercial borrowers pile up. And now you hear the clock ticking: Tick Tock. You know you have to spread the financial statements and risk rate your loans well before the clock strikes midnight on December 31.

At JRB we’ve assisted many lenders to take action in the present and get their loans properly risk rated. But what about those recalcitrant borrowers who just never get around to sending in their  financial statements? Ghosts hovering over your portfolio.

We help our clients banish those ghosts and have them include in their policy an alternate method for risk rating. Using that method the loan is rated on factors including loan performance, whether the loan is seasoned, compliance with paying taxes and keeping insurance current, what the prospects are for the industry, the condition of the neighborhood, and whether the business has an adequate SBSS score. All of these are factors that would be considered in a normal risk rating.

Yes, there are better things to do than sitting around waiting for year-end financial statements to come in. In fact, while you’re waiting, you can do quite a bit of the risk rating. And if you never receive the financial statements, well then, there’s still a mechanism to intelligently assess risk.

Richard Jeffrey
Senior Associate, CDC/504 Program
Head Underwriter
richard@jrbrunoassoc.com
www.jrbrunoassoc.com