Fundamentals of Private Lending

Fresh out of college in 1983, I began my career as a credit analyst at a small commercial bank in New York City. As part of the training program, I learned the fundamentals of cash flow analysis with an emphasis on mastering key financial ratios, including the Current Ratio, Quick Ratio, and Debt-to-Worth Ratio, among others. The year that I spent in that program was an invaluable learning experience that laid the foundation for my forty-three-year career as a commercial lender.

Despite the excellent tutelage that I received as a credit trainee at that institution (which was sold to a much larger competitor many years ago), it wasn’t until I returned to Connecticut and began working for my father’s bank in New Haven that credit analysis truly came into focus for me. My father simplified the commercial loan underwriting process in a way that made perfect sense. When analyzing a loan request, he told me to always ask the borrower four simple but essential questions:

1. How much money do you want to borrow?
2. What is the purpose of the loan?
3. What collateral will you be pledging to secure the loan?
4. How do you plan on paying back the loan? (Exit strategy)

These four questions have guided my approach to lending ever since. As a private lender, I continue to incorporate the “KISS” method, Keep It Simple and Straightforward, when analyzing every new commercial loan request. Over the years, I have found that question number four (the exit strategy) is by far the most important. A borrower’s ability to clearly explain how a loan will be repaid is the key component to any well-structured transaction.

Even after more than four decades in the lending industry, I still rely on these same four questions when reviewing each new deal. They help ensure that every transaction I fund is based on sound reasoning, strong collateral, and a clear repayment plan. These fundamentals remain the cornerstone of private lending, and they continue to drive the success of Worth Avenue Capital today.

If you are seeking bridge financing, asset-based lending, or other private lending solutions, or if you are looking for investment opportunities in private credit, contact Worth Avenue Capital to learn more about how we can help you achieve your goals.