Five questions to ask in 2010 to make the loan!

I predict the 2009 tax returns will be filed earlier rather than later. Why? The congress has liberalized the rules for carrying back Net Operating Losses. If the business paid taxes in any of the prior 5 years, they can carry back the loss to any of those years. Tax refunds anyone?

If that is the case for some of your business borrowers, you will soon be including 2008 and 2009 in your analysis, the worst years of the recession. So here are your questions:

1. How do you (or will you) qualify a borrower for a business loan when the two or three most recent year's tax returns or financial statements do not support the loan request in terms of required debt coverage ratio and other financial requirements?
2. How do you distinguish a business that has done poorly from a business whose owner chose to forgo profits to keep their business recovery-ready?
3. If the business owner chose not to pay themselves during the downturn in order to keep their staff, continue to market in a downturn and otherwise keep the business as strong as possible, how will that impact your analysis of them as a guarantor? (They may not 'qualify' even if their business is now doing well and back to paying them.)
   
4. What compensating factors are going to make up for a recent two or three year's financial performance that is not sufficient to qualify for the loan?
5. Are loans to continuing businesses going to need to be assessed more like loans to start-ups?

What do you think?