Home > Uncategorized > Can you read a balance sheet?

Can you read a balance sheet?

balance-sheet-1024x682I do hope so because frankly it is a skill that many underwriters at both lenders and credit insurers appear to struggle with.

The biggest issue I come across and have just this week re-encountered is the underwriters desire to immediately dump “goodwill” or “intangibles”. Many will say this is fair enough but I will give an example

My client has goodwill valued at £1.7m. Against that they have lending of £1.5m. The goodwill relates to various professional services businesses they have paid for with the loans. These businesses have been generating around £300k net profit a year since purchase

The underwriter was happy to keep the liability (the loans) on the balance sheet but not the asset (goodwill)

In effect he was stating that various banks that lent against the assets had made a huge error and were lending against something of zero value. Zero value and generatimg £300k net profit a year.

I could slightly understand the point of view if this was relating to a volatile service business but this is entirely the opposite

A dated underwriting mentality and one that should be addressed urgently.

By finding the said underwriters something else to do

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