The coronavirus pandemic has made understanding business relationships and credit quality increasingly difficult for financial institutions. Not only has the pandemic impacted businesses by shortening operating hours or closing businesses altogether, but it has introduced stimulus money that those same businesses have come to rely on as part of their cash flow, creating new challenges to testing the creditworthiness of prospective borrowers.
Global cash flow (GCF) analysis can help institutions better assess credit and lending decisions by considering the combined cash flow of a group of people or entities to get a holistic picture of their ability to service a proposed debt. The GCF analysis is performed during the initial loan underwriting or during an annual review. In a recent Abrigo webinar, Rob Newberry, Senior Advisor with Abrigo Advisory Services, stated that the purpose of using global cash flow analysis is to “uncover additional rocks that might be there trying to trip us up if we’re not careful” when determining an applicant’s creditworthiness.