[dpFund]

Hey Folks,

A few weeks ago a broker brought a MS based auto sales client to me for funding. Client financials looked good at first glance but there were some glaring questions that would jump out at a seasoned underwriter. For example, they claimed to have NET income of $7.5M in 2015...but no money in the bank. Their financials also showed they had earned net income north of $1M in the first quarter of 2016...with no deposits to substantiate.

When I asked the client to explain they dodged and weaved, delivering a story about how they invested all the money into another company. OK...I asked for financials of that company so I could verify the story. Then I noticed a "forced debit" on their April bank statement for 100% of the money in their account.

When I sent them a follow up email asking for financials on this other company they supposedly dropped all $7.5M into, along with an explanation of the forced debit, the owner immediately responded and stated they had received all the money they are seeking and are no longer in need of funds.

I have seen this deal come across my desk at least a half dozen times in the last couple weeks, so they are shopping hard, trying to deceive another lender. I just saw the deal again this morning.

I will not publicly mention this company's name for all the obvious reasons. But I have provided enough info here for you to do your own due diligence. Just hate to see one of you guys get burned. Consider this a public service announcement! Caveat Emptor.

[J.Celifarco]

Hey Folks,

A few weeks ago a broker brought a MS based auto sales client to me for funding. Client financials looked good at first glance but there were some glaring questions that would jump out at a seasoned underwriter. For example, they claimed to have NET income of $7.5M in 2015...but no money in the bank. Their financials also showed they had earned net income north of $1M in the first quarter of 2016...with no deposits to substantiate.

When I asked the client to explain they dodged and weaved, delivering a story about how they invested all the money into another company. OK...I asked for financials of that company so I could verify the story. Then I noticed a "forced debit" on their April bank statement for 100% of the money in their account.

When I sent them a follow up email asking for financials on this other company they supposedly dropped all $7.5M into, along with an explanation of the forced debit, the owner immediately responded and stated they had received all the money they are seeking and are no longer in need of funds.

I have seen this deal come across my desk at least a half dozen times in the last couple weeks, so they are shopping hard, trying to deceive another lender. I just saw the deal again this morning.

I will not publicly mention this company's name for all the obvious reasons. But I have provided enough info here for you to do your own due diligence. Just hate to see one of you guys get burned. Consider this a public service announcement! Caveat Emptor.

Thank you DP. Wish more people were looking out for others the way you are here..

[Michael I]

this is why i never understood why some companies are so hooked on financials when any good accountant can fudge it . On the flip side also ,if the business shows a loss and it is clear they are making money . why does it hurt them ? we are not the irs .
dan seems to be smarter then the rest so this is not really a question on him , more on the rest of the industry .

[dpFund]

Thank you DP. Wish more people were looking out for others the way you are here..

You're welcome John. While we really don't have any restricted industries, I will have to admit I look closer at some industries, like trucking and auto sales. But clearly there are good clients within those industries. We have funded $1.5M of truckers this month, with a $500k auto dealer at underwriting right now that will probably fund next week. Just burns me up when I see obvious deceit from clients or anywhere else. While it may seem counterintuitive to some, I love my competitors and want everyone to succeed.

[dpFund]

this is why i never understood why some companies are so hooked on financials when any good accountant can fudge it . On the flip side also ,if the business shows a loss and it is clear they are making money . why does it hurt them ? we are not the irs .
dan seems to be smarter then the rest so this is not really a question on him , more on the rest of the industry .

You are right that a good accountant (or even a lousy one) can fudge financials. But a good underwriter will catch it. :-)