CAMPARI – old school lenders underwriting

CAMPARI stands for Character, Ability, Means, Purpose, Amount, Repayment, Interest and Insurance 

It was also a popular drink in the late 70’s and early 80’s but that’s not what this article is about LOL

If you are applying for a commercial mortgage facility, chances are the person making the decision will be trained to use the CAMPARI underwriting method. Knowing how they will assess your application will improve your chances of success as you will be able to structure your business plan accordingly 😉

C=Character
The background and experience of the individuals or business can be a pointer to the potential for success. This includes integrity, past performance, and evidence of financial acumen. No business proposition can be viewed in isolation from the people who will put it into action, and the bank manager will scrutinize both closely.

A=Ability
The likelihood of the business being able to repay the money. This will often depend on the skills and abilities of the owners. On the personal side, intelligence, training and determination should all be considered.
On the business front, the bank will look at profitability, capital requirements, and above all cashflow.

M=Means
The means and resources to run the business, and to do so in a way that allows the bank to see what is going on. You may be asked for quarterly or monthly summaries of how the business is doing. Could you provide them?

P=Purpose
Explain in detail why you wish to borrow money. The bank will want to know that you have thought it through, and that it seems sensible.

The banker may comment on your purpose in general terms. Remember that you ought to know far more about your type of business than any banker, and treat any advice accordingly. Bankers can offer you knowledge of business theory but they have no practical experience of running their own businesses. Asking for practical business advice from a banker is like seeking guidance on seduction techniques from a eunuch.
However, the bank should tell you whether the form of finance you have asked for is the most suitable.

A=Amount
Make sure that you establish the correct amount you need, allowing a margin for error in your forecasts. Be realistic: don’t ask for too little or ‘just enough to get by’. If you have to come back for an emergency second bite, the bank will really have the drains up to see what’s gone wrong.
The bank will look to the business to put some of its own money in. This shows the borrower’s commitment.

R=Repayment
You will usually need to fill in the bank’s cash flow forecast forms, to show that your business can afford repayments on the amount you wish to borrow.

I=Interest and Insurance
Many lending schemes offer reducing loans over an agreed period and have fixed rate of interest. If you are borrowing on overdraft, the bank will set the interest rate to reflect its view of the risk – and what it thinks it can get.
Risk takes us to insurance. The bank may ask if security is available. They may also ask you to consider taking out insurance cover, against illness for instance. Illness of a key player can be a major risk to a new business.

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