1. Actual - Tax Returns
Adjust to Calculate Future
Recurring Cash Flow Comments
Sources of Cash Flow/Income
Salaries/Wages $647,500 $647,500
Salary is derived from DL PA Inc $345M (Dora) + $302M (Brock.) Most banks request
3 years of tax returns and they adjust the cash flow to the 3-year average.
Schedule B- Interest and Dividends
Interest $19,000 $19,000 Has their liquidity increase since the last PFS?
Dividends $3,000 $3,000 What is the current income they receive from this assets?
Less K -1 Interest and Dividends ($5,000) ($5,000) Can you verify via statements?/ Then, you can project
Total Cash Flow from Interest and Dividends $17,000 $17,000
Schedule C - Business Cash Flow
Gross Income - Expenses ($2,000) $0 They sold this business
Add back - non cash expenses (depreciation, amortization) $15,000 $0
Add back - interest $11,000 $0
Add back - any one time expense $0 $0
Total Schedule C - Business Cash Flow $24,000 $0
Schedule D - Capital Gains
Short Term Capital Gain - Sales Price $0 $0
Less Short Term Capital Gain - Cost $0 $0
Long Term Capital Gain - Sales Price $1,280,000 $0
Total Cash Flow from Capital Gains $1,280,000 $0
Form 4797 - Sales of Business Property
Sales Price $45,000 $0 Not recurring / one time event
Schedule E - Rental Income
Rental Income - Office Building $230,000 $230,000
Remember that they occupy 9,000 sf of the 12,000 sf / income of this real estate
property primarily depends on their practice
Less - expenses ($261,000) ($261,000)
Add back - depreciation $45,000 $45,000 This is a non-cash item
Add back - interest expense $80,800 $80,800 This will be reflected in the debt service section/do not double count
Total Schedule E - Rental Income $94,800 $94,800
Schedule K-1 Are the contributions/distributions required or discretionary?
K-2 Shopping Center ltd - contributions ($10,000) ($10,000) How much more the client needs to contribute on the following years?
K-2 Shopping Center ltd - distributions $4,000 $4,000
Mt. Vison Shopping Center - contributions ($20,000) ($20,000) How much more the client needs to contribute on the following years?
Mt. Vison Shopping Center - distributions $1,600 $1,600
DL PA Inc (Brock Logan's practice) - distribution $15,000 $15,000 These depend on how well the client is doing in there practices
BL PA Inc (Dora Logan's practice) - distribution $9,000 $9,000
Total Cash Flow - Schedule K -1 ($400) ($400)
Total Cash Flow $2,083,900 $758,900
Uses of Cash Flow
Taxes (estimated at 35% of taxable income/projected income) $416,675 $265,615 lower taxes on the following year/no capital gains
Personal Expenses (estimated at 15% of taxable income/projected income) $178,575 $113,835 each bank has its policy regarding personal expenses
Debt Service - Current Loans
Line of Credit $300,000 $0 $0 refinanced - $600M unsecured LOC
Other Note Payable (7) $0
Auto loans $70,000 $25,000 $25,000 via credit bureau
Boat loan $190,000 $15,000 $15,000 via credit bureau
Mortgage Debt (8)
Residence $1,250,000 $0 $0 refinanced
Office Bldg $1,560,000 $0 $0 refinanced
Lots $200,000 $45,647 $45,647 ask client to provide the repayment terms
Requested Proposed
Prime Bank - $1.5MM loan (Office Building) $1,425,000 $103,208 $103,208
What happened to the $160M sellers note/ we need to add that to the refi/LTV needs
to be 75%
Unsecured $600M Loc at Prime Bank (interest only) $600,000 $176,931 $176,931 assumes 4 year amo/2% above proposed rate
Residential mortgage - $1,750M $1,540,000 $80,426 $80,426 even if it is an arm used 30 year DS/ what happens after the 7 years?
RE taxes and insurance are considered DS $54,000
*also consider property taxes & insurance (Get this from - Public records/Mortgage
area/client)
Not diclosed debt
Sellers note - $160M loan (Office Building) int only 3 years/then fully
amortized
Total Uses of Cash Flow $1,041,463 $879,663
Net Cash Flow $1,042,437 ($120,763)
Total DS $446,213 $446,213
DTI 21% 59% Normally the cut off is 50% DTI (DS to CF). What are your mitigants
Most cash flow derived from capital gains is not recurring. Therefore, this cash flow
will not be available to cover the client's expenses and cash flow needs. Note: some
banks allow some specific calculations for asset dissipation. If you do asset
dissipation, make sure you deduct the interest/dividends of the assets being
dissipated if you choose to use asset dissipation