Weights — Credit · Family Office App Demo

Section Weights

Borrower & Sponsor Quality

18%

Collateral & Security

18%

Repayment Capacity & Cash Flow

16%

Structure, Covenants & Controls

14%

Downside, Recovery & Exit

12%

Pricing & Risk-Adjusted Return

10%

Legal, Documentation & Tax

6%

Risk Assessment

6%

Total Section Weight 100%

Section weights are relative — they'll be normalized to 100% during scoring.

Borrower / operating company track record

%

How long in business? Through a full cycle? Prior deals of this size and type?

Credit and repayment history

%

Ever missed a payment, defaulted, restructured, or been foreclosed on? Ask prior lenders directly.

Sponsor / guarantor financial strength

%

Verified net worth and LIQUIDITY (a guarantee is only as good as the cash behind it). Tax returns? PFS?

Integrity, transparency, and quality of disclosure

%

Do they volunteer bad news? Consistent story? Did anything surface late that should have come first?

Skin in the game — real equity beneath our position

%

How much of their OWN cash is at risk below us? Is it cash or promoted/appraised value?

Management depth and operating capability

%

Can they execute the business plan our repayment depends on? Bench beyond the principal?

Reference checks with prior lenders, partners, and counsel

%

Would the last lender do it again? Any workout history? What do they say off the record?

Durability of the borrower's underlying business

%

Is the cash flow that services us structurally sound, or dependent on one contract/cycle?

Question weights are relative within the section.

Quality and marketability of the collateral

%

Is there a real, liquid market for it? How long to sell in a bad tape? Specialized/single-purpose?

Loan-to-value / advance rate cushion

%

LTV at our LAST dollar, not the first. Would 65% still be safe if value fell 25%?

Independence and credibility of the valuation

%

Third-party appraisal we ordered, or the borrower's number? As-is vs. as-stabilized? Comps support it?

Lien position and priority

%

First mortgage / first-lien UCC? Second? Mezz on the equity? Who is ahead of us and for how much?

Perfection and enforceability of the security interest

%

Recorded mortgage/deed of trust, UCC-1 filed, title policy, pledged equity certificates in hand?

Guarantees — personal, corporate, completion, bad-boy carve-outs

%

Full recourse or springing? Who signs? Are the guarantors collectible in their jurisdiction?

Ongoing collateral monitoring and reporting

%

Borrowing-base certificates? Field exams? Site inspections? Rent rolls? How often, and who checks?

Insurance and physical protection of the collateral

%

Lender loss-payee / mortgagee clause? Adequate limits? Flood/wind/liability? Evidence current?

Collateral concentration and diversification

%

One asset, one borrower, one geography — or a pool? Cross-collateralized and cross-defaulted?

Question weights are relative within the section.

Debt service coverage (DSCR / interest coverage)

%

1.25x+ is normal for stabilized RE; 2.0x+ interest coverage for corporate. Computed on ACTUALS or pro forma?

Source of repayment at maturity (the take-out)

%

Sale, refi, or free cash flow? Is it underwritten, committed, or hoped for? Two independent paths?

Stability and predictability of the cash flow

%

Contracted/recurring vs. transactional? Seasonality? How did it behave in 2020 and 2008?

Quality and verifiability of historical financials

%

Audited/reviewed? Reconciled to bank statements and tax returns? Or borrower-prepared spreadsheets?

Credibility of the borrower's projections

%

Does the plan require a step-change? Compare their last projection to what actually happened.

Total leverage and everything else in the capital stack

%

Other debt, seller notes, preferred, mezz, related-party loans, off-balance-sheet obligations?

Liquidity and working capital headroom

%

Cash on hand? Undrawn lines? Reserves funded at close? Can they absorb a bad quarter?

Sensitivity of coverage to stress

%

Where does DSCR break — rates +200bps? Revenue −20%? Vacancy +10pts? Model it, don't assume it.

Question weights are relative within the section.

Financial covenants and how they are tested

%

DSCR/LTV/leverage covenants? Tested quarterly on real numbers, or annual and easily cured?

Cash control — lockbox, sweeps, reserves, escrows

%

Do we touch the cash before they do? Interest reserve funded? Tax/insurance/CapEx escrows?

Default triggers and remedies

%

Clear events of default? Short cure periods? Can we accelerate, take control, replace the operator?

Reporting requirements and information rights

%

Monthly/quarterly financials, rent rolls, compliance certificates. Real deadlines with teeth?

Amortization / interest-only profile and term fit

%

Does principal come down during the term, or is 100% riding on the balloon?

Use of proceeds — is our money funding the right thing

%

Growth, acquisition, and refi are different risks. Are we cashing out the sponsor's equity?

Equity kicker / warrant / preferred participation terms

%

Warrant coverage, exit fee, profit participation, conversion. Clean to value and to enforce?

Prepayment and call protection

%

Lockout, yield maintenance, minimum multiple, or free to repay in month two and kill our return?

Question weights are relative within the section.

Recovery in a realistic default scenario

%

Liquidate at a distressed price, net of costs and carry — do we get 100c? Show the math.

Workout and enforcement path — and its timeline

%

Judicial vs. non-judicial foreclosure? Months to possession? Bankruptcy stay risk? Cost to enforce?

Refinance and take-out risk at maturity

%

Will the market lend against this in N years at these rates? What if it won't?

Stress test — how far can value fall before we lose principal

%

Break-even decline from today. A 35% cushion is a different loan than a 10% one.

Our ability and willingness to own the collateral

%

If we foreclose, can WE run it or sell it? A loan we can't take back is worse than it looks.

Extension options and structural flexibility

%

Extension rights, and what they cost. Room to restructure without a total loss?

Legal environment for enforcement in this jurisdiction

%

Creditor-friendly state/country? Borrower-friendly courts? Redemption rights? Anti-deficiency rules?

Question weights are relative within the section.

Yield versus the risk actually taken

%

Would you make this loan at this rate ten times? The coupon must pay for the losses on the bad ones.

All-in return including fees, OID, and any equity kicker

%

Coupon + origination + exit fee + warrants, to the EXPECTED life, not the stated maturity.

Relative value vs. comparable credit opportunities

%

What do similar-risk loans pay today? Is the spread over treasuries/SOFR defensible?

Rate structure — fixed vs. floating, floors and caps

%

Who carries rate risk? Is there a floor? If floating, can the borrower still cover at higher rates?

Fee load and expense reimbursement

%

Are our legal/diligence costs covered? Deposit taken? Fees paid at close or accrued (and at risk)?

Duration and liquidity fit for us

%

Does the term match our liquidity needs? Any secondary market or participation to exit early?

Question weights are relative within the section.

Loan documentation quality

%

Our counsel's paper or theirs? Note, security agreement, guaranty, and title all consistent?

Intercreditor / subordination terms

%

Standstill length, payment blockage, purchase option, right to cure — or are we silently subordinated?

Borrower entity structure and bankruptcy remoteness

%

SPE with independent manager? Separateness covenants? Substantive-consolidation risk?

Tax treatment of the interest and any equity participation

%

UBTI/ECI exposure? OID accrual (phantom income)? State withholding? Right lending entity?

Lending licensing, usury, and regulatory compliance

%

Do we need a lender license in that state? Usury caps? Consumer/Reg-Z exposure? Broker licensed?

Question weights are relative within the section.

Interest-rate and refinancing-market risk

%

Rate moves against the borrower's plan? Credit markets closed at maturity?

Industry / asset-market risk affecting the borrower

%

Sector downturn, oversupply, technology shift, tariff or input-cost shock?

Fraud and misappropriation risk

%

Can they divert draws, double-pledge collateral, or fake a borrowing base? What stops them?

Concentration — total exposure to this borrower/sponsor across our book

%

Do we already lend to them elsewhere? Correlated collateral? Single-sponsor concentration?

Regulatory and legal-change risk

%

Rent control, licensing, zoning, lending rules, or industry regulation that could impair repayment?

Servicing and administration risk

%

Who services the loan, tracks covenants, and chases payments? Backup servicer if they fail?

Environmental and ESG exposure through the collateral

%

Would foreclosure hand us an environmental liability? Phase I done? Lender-liability protections?

Question weights are relative within the section.

Overall excitement about this deal

%

On a visceral level, does this fire you up? Or feel like settling?

Trust in the people across the table

%

Would you want to be in a foxhole with these people? Eye contact, handshake feel.

Would this be your only investment this year?

%

If you could only make ONE bet, would it be this one?

Portfolio fit and strategic alignment

%

Does this complement our existing investments? Fill a gap?

LP/partner explainability

%

Could you confidently explain this to investors at the next meeting?

Too-good-to-be-true meter

%

10 = no suspicion at all. 1 = something feels off. Trust your spider sense.

Timing and urgency — is the window right?

%

Right time in the cycle? Market conditions favorable? Or are we chasing?

Differentiation vs. other opportunities

%

How does this compare to other deals you've seen recently?

Sleep-at-night factor

%

Can you sleep well after wiring the money? Or will it keep you up?

Regret minimization — would you regret passing?

%

In 5 years, would you kick yourself for not doing this deal?

Information quality — do you know enough?

%

Do you feel well-informed? Or are there big unknowns?

Question weights are relative within the section.

💵 Credit weights