Financial Due Diligence for Lenders Include:
Reviewing Previous Audits
-In addition to the necessity for property due diligence, Ipsen Management Services starts by reviewing the borrower's previous audits looking for opinions and the number of times an auditing firm has been replaced in the past 5 years. In addition, IMS checks to see if the borrower has followed the recommendations of auditors?
Analysis of Internal Controls and Financial Ratios
-IMS will perform an analysis of internal controls and financial ratios looking for red flags indicating the concealment of liabilities, fraudulent activity, fictitious sales or receivables, embezzlement or a sudden increase in debt to equity.
Examination of Financial Statements
-IMS employing Data Analytics examines Profit & Loss Statements looking for significant changes.
-Further due diligence calls for the examination of other financial and tax transactions that may signal unpaid obligations or pending litigation.
-IMS will review and compare Balance Sheets against mathematical models looking for possible earnings manipulations as well as determining the overall financial health of the borrowing entity.
-IMS examines the borrower’s income projections to determine the feasibility and correctness of the risk associated with the investment.
In addition, IMS asks "Who is the Seller?"
-IMS examines the seller to determine if the "seller" owns the property or has the legal authority to convey the property, etc.
-IMS answers questions as to; who has the authority to bind the seller and is the payoff sufficient to cover all liens?
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