CASHFLOW SCIENCE

Weekly Insights from Sol Berkoff
Principal at Charleston Capital, Inc.

One evaluates a business’ creditworthiness using two factors – its cashflows and its assets. 

Valuing assets can be difficult.  Very few assets have the benefit of transparent pricing.  Also, anyone who has ever sold a distressed asset knows that liquidity both giveth and taketh away.

Evaluating cashflows can be tedious.  Historically, one had to reconcile many years of inflows and outflows by hand. 

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We at CCI have access to years of small business cashflows.  We are sharpening our tools to NOWCAST small business performance. 

We are replacing the art of cashflow underwriting with the science of cashflow underwriting.

To give you an idea of how technology is changing cashflow underwriting, we include above a graph from a recent JPMorgan report on small business cashflows.  It illustrates that average daily inflows and outflows can vary significantly across industries.  This sort of analysis was impossible before modern computing power.

We at CCI have access to both the performance of individual small businesses as well as the performance of a variety of originators.

As we improve cashflow science we hope to scale small business finance!