Our client was approached by a related entity for a loan in the form of a credit facility. The related entity was facing cash flow deficits due to unforeseen events. We were engaged to undertake pre-lending due diligence.
Our path of work included:
- Analysing the borrower’s financial position and recent financial performance;
- Meeting with the borrower to understand the requirement of the loan;
- Identifying the key challenges and risks the borrower will face that may impact on their ability to repay the loan;
- Estimating the borrower’s future financial performance;
- Identifying appropriate assets to secure the loan against.
Our review outlined the potential risks with advancing further funds and recommended the client not lend funds to the related party.