Credit Evaluation School Instructor eBook - Oct 2023

People:

Borrowers ‐ The Fishery Restaurant, Guarantor ‐ John F Business operated as a local family ‐ style seafood restaurant

Purpose: Payment:

2 notes used to purchase land, construct a restaurant and purchase a new delivery truck. Repayment for both notes is cash flow from the restaurant. OS for the nine month period shows a net loss of $78M. Net cash flow from operations is ($23M). 1st RE Mtge on a lot and building, along with all ABA. Appraisal value equates to 80% LTV. Bank holds the title to the van. Loan (1) is 76 days past due and has been extended three times. Loan (2) is 75 days past due. The business is a new venture for Mr. F and has not been successful to date and some suppliers are demanding cash on delivery. Bank now estimates the value of the restaurant represents an LTV of 95%. Bank stated that the restaurant is gradually gaining in popularity and believes that the enterprise will be successful. Bank believes that the relatives who initially loaned funds will provide additional financing if necessary to finance daily operations.

Protection:

Problem:

Prospects: