David Stauffacher and Joe Davis open the credit crypt for a second year of real lending stories that went wrong, and the warning signs that were there the whole time. Six stories, six lessons, each one ending with the practical takeaway for your next credit decision.
A viewer submitted a question that comes up regularly in commercial underwriting: if a pass-through entity is owned by a guarantor but the entity itself has no obligation on the loan, what financial reporting should you be asking for? Is the K-1 enough, or do you need the full tax returns?The answer involves judgment, and
You see interest income on your borrower’s Schedule B. Before you include it in personal cashflow, ask: did they actually receive that cash?In this installment of our K-1 & Pass-Through Series, Senior Credit Trainers David Stauffacher and Joe Davis tackle a question that came in through Ask the Experts: how should lenders handle pass-through interest
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
A viewer asked a question that gets more complicated the more you think about it: when a high net worth individual owns multiple pass-through entities, which K-1s do I actually need to collect?The honest answer is that it depends, and the right starting point is your institution’s guidelines. But guidelines are exactly that — guidelines.
A viewer asked a question that comes up more often than people expect: how should I factor in loans from owners, and what do I do with the repayment?It sounds like a minor detail. It is not. Owner loans show up in small business lending regularly, they are often informal, and they create cash flow
A question came in that we hear often, and usually from analysts who are in the middle of a deal: what is the difference between a 1065 K-1 and a 1120S K-1?The confusion makes sense. Both forms are called a K-1. Both attach to pass-through entities. Both show up in tax return analysis. But they
A question came in from an analyst that sounds like a fine detail but has real loan decision implications: should I treat cash distributions differently from property distributions on the K-1?The short answer is: it depends on the entity type, and on whether the difference is even visible to you. Senior Credit Trainer David Stauffacher
In our K-1 and Pass Through Entity Series, one of the most common questions sounds simple, but it sits right in the middle of good underwriting judgment.Ask the Experts: Should I use cash flow the latest K-1 if it appears to be recurring, or should I average the past three years?Many lenders were taught to
In our K-1 Pass Through Entity Series, we get questions that sound simple but are actually a big deal in underwriting.Here is one we hear more often than people admit:Ask the Experts: What should I do if I do not get a K-1?The short answer is not complicated.Ask again.If your request is a requirement, treat
In our K-1 & Pass-Through Entity Series, we keep hearing versions of the same question:A guarantor shows up on a K-1… but they aren’t taking distributions.So what do you do with them in global cash flow? Do they “count”… or not?Let’s dig into it.The questionAsk the Experts: “Should I give any credit to a guarantor
Too often, lenders accept third-party appraisals at face value—reviewed for completeness, filed away, and rarely questioned. But an appraisal is not a purely scientific document. It blends objective data with professional judgment, assumptions, and interpretation.That doesn’t make appraisals unreliable. It does mean lenders must apply independent rigor.This article focuses primarily on non-owner-occupied commercial real estate
A question came in recently that sounds simple on the surface: Where do I find capital contributed by a single owner, and what do I do with it? It is actually two questions: the where and the what. And the answers depend on what kind of entity you are looking at. Senior Credit Trainer David Stauffacher