What is Underwriting?

When any business applies for a loan, the lender has to evaluate the loan capacity, credit history, and indemnity of the business/applicant. The information gathered is then used to make a lending decision.

What is the significance of Underwriting?

The loan decision leans greatly towards the underwriting guidelines that need to be followed. These underwriting guidelines are formed keeping in mind various factors that will restrict the lending decision made by the lender. The information gathered is thus used to determine the following if the loan is to be approved:

• Loan amount
• Credit terms
• Interest rates
• Repayment Obligations, etc.

What are some standard Underwriting Guidelines?

The majority of lenders use underwriting guidelines established by the Federal Reserve for Small Business Administration (SBA) loans. However, every lender may make an individual decision based on the findings after completing their underwriting process.
Significant attention is paid to the capacity of the applicant/ business to repay the lent amount. Therefore, the lender considers the current and anticipated future cash flow subject to a diverse set of economic conditions.
This can also be achieved by performing an extensive feasibility study by the lender from the applicant. However, again, only an expert generally conducts these feasibility studies.

Basic underwriting guidelines are based on the following:

• Regularity in income, adequate enough to meet the debt obligation
• The value and quality of the collateral
• Applicant’s credit history
• Applicant’s equity in the business
• Additional collateral or assets
• Business owner’s creditworthiness & credit history

What is the typical Business Loan Application Process?

Once the business decides the lender through which they wish to apply for the loan, there is usually a set process that they will go through with the loan.

1. Filling out the application form
2. Submitting required documentation
3. Loan Underwriting
4. Underwriting Review
5. Lending Decision based on the review
6. Disbursement

What are the standard Documents required for a Business Loan?

Different lenders may request a myriad list of documents dependent upon the borrower’s request for

• The kind of loan applied for
• The loan amount applied for
• The motive behind the loan application

Most common documentation that lenders require:

• Company’s Business Plan
• Business Financial Statements
• Business Owner’s Financial Statements
• Business Tax Returns
• Business Owner’s Tax Returns
• Business License
• Outstanding Financial Obligations
• Credit Score/ History
• Collateral, if need be

We’ll talk more about the business documents in our next blog, stay connected.

Underwriting at August Brown

August Brown is a boutique agency dedicated to accelerating our client’s growth by providing niche consulting services. We provide unmatched depth, unparalleled insight, and exceptional service with the singular focus of exceeding our client’s expectations. We understand that risks accompany every transaction. We acknowledge that our paramount responsibility to our clients is to minimize that risk. As such, August Brown aims to conduct underwriting services at an exemplary standard. Each transaction is assessed thoroughly, with each aspect analyzed in-depth before submitting our results. With August Brown, you can rest assured that the underwriting service you receive will be unparalleled.

We pride ourselves on delivering the highest quality services and returning results in the shortest possible turnaround time, enabling our clients to make confident decisions and swiftly move forward with their business.

After completing the underwriting process, we offer a full suite of consulting services to support our clients. For example, should you require a feasibility study, management consulting, market analysis, or strategic guidance, we can help your business achieve its goals and reach inimitable heights.

Schedule a Meeting: www.augustbrown.com/contact
Please send us an email: Office@augustbrown.com
Give us a call: (414) 704-6755

 

If you work in a bank, private equity, or investment firm, you are likely already familiar with feasibility studies and their use in properly supporting the evaluation of a proposal. However, a feasibility study is often an unfamiliar tool to business owners and is one that could have a dramatic impact the success of their initiatives. It is important to talk to your clients about what a feasibility study is, how it can benefit them, and how to choose a qualified firm to conduct it.

When done correctly, a feasibility study will clearly lay out the technical and economic feasibility of the business as a whole, or of a project under consideration. The well-executed feasibility study will also include market analysis, management evaluation, and a financial viability assessment that enables your leadership team to more accurately measure the probability of successful outcomes for the business or project. Further, a feasibility study has the potential to provide a business with a roadmap for successfully navigating potential challenges. In short, a feasibility study is an excellent way to identify opportunities while simultaneously mitigating risk. 

Read on to see how to talk to your clients about how a feasibility study can benefit their business initiatives and feel free to share it with colleagues!

Why Do You Need a Feasibility Study Expert?

A feasibility study is required for businesses seeking to raise funds or apply for loans over a certain amount (i.e., $5 million for the USDA). It will be used by potential equity and/or debt investors to answer basic questions about your business and to give them an indicator as to the likelihood of its success. So, the short answer is, if the business is seeking a USDA loan then they have to have one!

That said, these studies are not just for loan purposes and can be an excellent resource for internal planning purposes, identifying obstacles and opportunities that may not have been initially foreseen. This is an invaluable asset as the feasibility study helps you unveil the different ways your business can grow and identify the risks that must be mitigated. It illuminates the likelihood of your project’s success while considering relevant factors, including economic, market, technical, financial, and management constraints.

The study further helps you convince investors and /or banks that your project is worth investing in, as it enables you to address how and where a project can be done, with detailed assessments of viability.  Additionally, as mentioned before, should you be applying for a USDA Business and Industry loan and grant, a feasibility study conducted by a qualified firm will be required for your application. It can provide a detailed analysis of the technical capabilities, financial viability, which supports your business in identifying market growth opportunities for the specific product you will be developing, as well as assisting in the exact target market selection process, including market segmentation and positioning. A feasibility study is a great way to refine your outcome-driven innovation, as it helps you to examine your project with tremendous depth and insight prior to initiating the endeavor. 

It is also important to note that who you choose to conduct the feasibility study is critical. The USDA, in particular, has requirements that feasibility study analysts must meet. Should you choose an unqualified provider, the study may be rejected. Further, it is important to understand the level of depth provided in each firm’s feasibility study. Some firms will provide the basics needed and nothing further. While this may be sufficient to obtain funding, the study will give little insights to further assist your business.   

Why to choose August Brown for Feasibility Study?

At August Brown, we pride ourselves on the depth and quality of our feasibility studies. We have assembled a team with decades of experience across a variety of industries in order to best support our clients. This also allows us to conduct our feasibility analyses with unmatched analytical rigor. In addition to the core analysis mentioned above, we build compelling financial models with Monte Carlo simulations that display realistic outcomes, meticulously hone in on the risk factors, and offer risk mitigation insights that will smoothen the diligence process of investors before a funding or acquisition event. The depth and insight provided by our feasibility studies can offer a clear roadmap to any business looking to assess the viability of a project. With an August Brown feasibility study, you can be sure your clients are getting the highest quality analysis available. We further support this with our post-transaction services, which work to implement continuous improvement initiatives that will continue to enhance the value of the firm. To learn more, contact our offices today at office@augustbrown.com or just go ahead set up your free strategy session with our team.

 

FAQ’s

What is a feasibility study and why is it important for business owners?
A feasibility study assesses the technical and economic viability of a business or project, helping business owners identify opportunities and mitigate risks.

How can a feasibility study benefit a business initiative?
A well-executed feasibility study provides market analysis, management evaluation, and financial viability assessment, enabling accurate measurement of the project’s probability of success and offering a roadmap to navigate potential challenges.

Why is a feasibility study necessary for businesses seeking funds or loans?
Feasibility studies are required by potential equity and debt investors to evaluate the likelihood of a business’s success and answer basic questions about its operations. They are particularly necessary when applying for loans over a certain amount.

Can a feasibility study be useful for internal planning purposes?
Absolutely. Feasibility studies help businesses uncover unforeseen obstacles and opportunities, refine project outcomes, and identify risks that need to be mitigated. They provide valuable insights for internal planning and growth strategies.

Why is it important to choose a qualified firm to conduct a feasibility study?
A qualified firm ensures compliance with specific requirements, such as those imposed by the USDA. An unqualified provider may result in rejection of the study. Additionally, choosing a firm with depth and quality ensures a more thorough analysis and valuable insights beyond basic requirements.

What sets August Brown apart as a provider of feasibility studies?
August Brown offers depth and quality in their feasibility studies, backed by a team with extensive industry experience. Their rigorous analysis includes comprehensive financial models and risk mitigation insights. August Brown also provide post-transaction services to enhance the value of the firm.

Copyright 2021 August Brown, LLC.

Preparedness Assessment- a Path Towards the Business Resiliency Blueprint: 5 Steps to Strengthen Lon

Yes, your business will get through the COVID-19 crisis, but how does your forecasts look for next year? How prepared is your business for the next major crisis?

Whether your business has been directly affected by the global COVID-19 pandemic or you have been in the periphery, you are certainly not alone. The pandemic has galvanized an array of resources to help businesses recover.

• The Centers for Disease Control and Prevention (CDC) has stated a new weekly COVID-19 Surveillance Report to track the spread and impact of the disease. Access the weekly COVID-19 Surveillance Report here.
• The Small business Administration (SBA) now offers multiple funding options to provide relief to businesses. The available programs now include (1) The EIDL $10,000 Loan Advance; (2) Express Bridge Loans; (3) Paycheck Protection Program; and (4) Debt Relief. Access the SBA COVID-19 related funding options here.
• Each state have adopted independent programs apart from the federal initiatives. A comprehensive summary is provided by Forbes. Access the list of state programs here.

We would like to share the insights that we have recently gathered through client engagements focused on helping companies get through the crisis. We focus this article towards the future as many businesses who have been affected, are likely already inundated with resources for help.

 

We offer the 5 key criteria from the Preparedness Assessment Toolkit that will enable you to “self-diagnose” the resiliency of your business to withstand a future calamity.

Perform a Supply Chain Analysis.

Do you produce parts or products? Evaluate all incoming inputs for your company. This should include the raw material suppliers and THEIR supply chain! If you do not produce products, start with suppliers of your software vendors and understand their uptime and contingencies in place to protect YOUR business.

Evaluate your contractor management system (or companies from which you source your contractors).

Does your business model heavily rely on contractors? For companies with a high contractor work force, assess the contracting companies that you use and their health.

Determine the vulnerabilities with your customer acquisition strategies.

How concentrated are your customers (geographically or otherwise)? Determine your customer concentration (geographically and/or by type ie online vs foot retail), create uniformity in your sales tools, and transparently map out your customer engagement process.

Perform a cyber security audit. Recent news has suggested that certain video conferencing products are simply not secure.

Your staff is already working remotely, correct? Every company, especially those in the service sector, need to have a remote work policy. Review your remote work policy, review the tools and software to support the offsite work and stress test the cyber security protection.

Conduct a financial continuity appraisal of your lenders or investors.

This is the dreaded question- what does your rainy-day fund look like? Do you have the ability re-engage if times get bad? If you are an investment backed company, review your plan, create buy-in to your disaster preparation plans and get commitment on terms for continued financing, if needed.

We are in this together. To learn more or to start a Business Resiliency Blueprint for your organization, click below for the free Assessment Tool.

Free Assessment Tool

Copyright 2020 August Brown, LLC

Tech Translation, paths to achieve Transformative Growth

• Applying existing technology into products aligned in adjacent or emerging markets
• Applying new technology into products in existing markets or emerging markets

With respect to criteria 1, the degree of “transformative” growth is dependent on the capability of the team to pivot the technology into products that provide value beyond the original application of the technology. Companies regularly pursue Tech Translation but they might call it a different name or might not even have a name for it at all. Larger corporations typically set targets for revenue generation based on new product sales, which typically pressure the R&D or product development groups to deliver iterations to support the revenue goals of the company.

With this approach, incremental innovations are made, often however, transformative growth is not achieved.

Systematic Tech Translation allows technology companies to drive revenues towards transformative growth by pivoting existing technology and products into adjacent markets. Focusing on Tech Translation enables companies to lower total R&D spend and shorten their development cycle. Instead of the development staff working to develop new technology or incrementally forward products, they work to apply current state products into new applications outside of their existing market.

Yes, companies already do Tech Translation and do it well. Take 3M for example. They have found many uses for the Post-It® Note from the traditional product to whole planners and pens, all based on the original technology. The process for Tech Translation can be repeatable and quite profitable.

To learn more about Tech Translation, click here to schedule a free strategy session or complete the “Contact Us” form at AugustBrown.com.

Technology Innovation vs. Value Innovation

“Technology Innovation” has always stood at the core of value creation. The market has certainly awarded those companies that excel at innovation. Companies have established discreet processes to systematize and drive innovation throughout their organization. Ideation, stage gates, and launch plans, the essential building blocks for innovation, are commonplace across product development and R&D teams.

Companies that seek to grow beyond their current revenue trajectories need to look beyond technology innovation and develop the tools and systems to achieve “Value Innovation”. Value innovation aims to increase buyer value AND simultaneously reduce costs. August Brown has worked on a systematic framework that help companies define, develop, implement and systematize value innovation focused programs for specific products, business units or departments. The tools can also be implemented across an entire business.

August Brown has served technology focused companies since 2011. Contact us today for a free assessment and consultation.

The August Brown Team