I am so glad that 2009 is over, so we can start fresh with 2010. … If only it were that easy. For 2009 will be with us for a while longer as annual financial statements, including global cash flow statements, are prepared to explain how results will impact 2010 projections.
The reason I specifically mention global cash flows is that all bankers are mentioning the need for these statements. And it is not just to have the information in the file: You really have to know the information and be able to explain it.
At the beginning of 2009, I noticed bankers becoming more aware of the importance of requiring these cash flows, but detailed explanations were not necessarily a part of the process.
Not so anymore. By the end of the year, bankers were asking for details on all deals, focusing on how a borrower would handle non-cash flowing loans secured by land or for-sale inventory, even if his or her particular loans were well secured and adequately cash flowing. And I expect this high level of inquiry to continue.
So if you have not been through the process of preparing a detailed global cash flow, or if your banker did not ask questions previously, get ready for some new procedures. My suggestion is that borrowers contact their bankers early to ask for global cash flow requirements and guidelines for what is expected.
(Brian Andrews is a certified mortgage banker specializing in the financing of commercial real estate. His business is Andrews Commercial Mortgage and he can be reached at brian.andrews@acmla.com.)
