A viewer submitted a question that does not get asked enough: when can I use a borrower's assets in addition to their income when deciding whether to make a loan to a high net worth individual?
It is a good question because the answer is not obvious, and because the stakes of getting it wrong run in both directions. Rely too heavily on assets and you may approve a loan that the borrower cannot actually service. Ignore assets entirely and you may decline a good loan to a creditworthy borrower. Senior Credit Trainers Joe Davis and David Stauffacher worked through the nuances in a recent livestream.
We Are Cash Flow Lenders First
That framing matters. Cash flow is what repays loans, and it should carry the most weight in your analysis. The question of assets comes up when the documented cash flow picture is lighter than you would like, but the borrower's overall financial strength suggests they can service the debt. A large personal financial statement, a significant investment portfolio, assets in or near retirement, these raise the question of whether there is something meaningful sitting alongside the income that belongs in the credit decision.
The short answer is yes, sometimes. But how you use it, and how much weight you place on it, depends on your institution's guidelines and your own analytical judgment.
When Assets Start to Matter
Think about the scenarios where this comes up most often.
A borrower in or near retirement may show modest income on their tax return but hold a substantial portfolio of stocks and bonds they are drawing down over time. Their historical cash flow from wages or business income looks thin. But their ability to service debt is real, because the portfolio is real and they are actively converting it to income.
A high net worth individual with multiple pass-through entities may show lower taxable income than their actual financial capacity would suggest. CPA-managed tax strategies are common among this borrower profile, and taxable income is not always the right proxy for repayment capacity.
In both cases, the question is not whether to abandon cash flow analysis. It is whether the liquid assets in the picture are meaningful enough to supplement it in a documentable, defensible way.
A Practical Approach to Factoring in Assets
One method that works in practice is treating liquid assets similarly to an asset-based lending approach. If a borrower holds a portfolio they can draw on, you can divide the value of that portfolio by 360 months, treating it as a 30-year amortizing income stream, to get a rough sense of what it could contribute monthly. That number is not income, but it gives you a framing for how much runway those assets represent relative to the debt service you are considering.
The key word is liquid. Assets that are readily convertible to cash belong in this conversation. Less liquid assets such as real estate do not.
The Ownership and Access Question
Before you place significant weight on any asset, answer two questions: what is it, and who actually owns it?
A personal financial statement will often list assets as belonging to the borrower. But upon closer review, those assets may be held in a retirement account, a trust, a joint account with a spouse, or in the name of one of their businesses. That matters because there is a real difference between assets the borrower can liquidate and assets the bank can reach.
Retirement accounts are the clearest example. The individual can sell them to repay the loan if they choose to. The bank cannot compel that. If you are relying on retirement assets as a meaningful part of your credit rationale, you need to understand that distinction and document it clearly.
Brokerage accounts and liquid securities are more straightforward, but still require verification. Ask for the statements. You want to see what is actually held, not just the total value. A portfolio of blue chip stocks and bonds is a different risk profile than one concentrated in a single asset class or in cryptocurrency.
How to Protect the Bank If You Are Leaning on Assets
If assets are a meaningful part of why you are approving the loan, consider whether you should be requiring them as collateral. That formalizes the relationship between the assets and the loan and gives the institution a real claim.
If the loan does not call for a pledge but you are still relying on those assets as a secondary repayment source, consider a loan covenant requiring the borrower to maintain a minimum level of liquid assets for the life of the loan. That keeps the dry powder available if you ever need it, without requiring a full pledge at origination.
Either way, document your reasoning in the file. Examiners want to see that you looked at the assets, verified them, and made a deliberate judgment about how much weight to put on them. Taking a PFS at face value and using a number without verification is not underwriting. Pulling the statements, identifying what is actually there, and documenting how it informed your decision is.
Judgment Will Always Be Part of This
Loan policy is written to cover roughly ninety percent of the situations you will see. The rest requires judgment, and high net worth borrowers with significant liquid assets are often in that other ten percent. The DSCR may not clear the threshold. The DTI may look tight. But the overall picture may tell a different story.
When that happens, the job is to understand the picture well enough to make a defensible call, document it clearly, and be prepared to explain your reasoning. That is what good credit analysis looks like in the gray areas.
