Case Link Question (8) Directions: Click the Case Link above and use the information provided in the Melissa Carter case to answer this question: You are considering a $1 million loan to Carter Distributors, Inc. for remodeling. What value would Melissa Carter's unsecured guarantee add to this loan request? O Melissa Carter has excellent liquidity, which indicates that she would be able to support a guarantee by liquidating marketable securities. O Given the level of illiquid assets on the personal financial statement, Melissa Carter's guarantee would provide no value for the lender. O It would add some financial value; although most of her liquid assets are directly related to her ownership of Carter Distributors, her guarantee would be important to tie her personal financial well-being to the repayment of the loan. O Because of her significant income and net worth, Melissa Carter's guarantee would provide strong support for the loan. Borrower name: Melissa Carter Address: 1110 Jackson Ave. Co-borrower name: Address: $ S I(we) make the following statement of all my (our) assets and liabilities as of the 31st day of December, 20Y3_and give other material information for the purpose of obtaining credit with you on notes and bills bearing my (our) signature, endorsement, or guarantee. I (we) hereby certify that this statement presents a true, complete, and correct statement of my (our) financial condition as of the date shown and does not omit any pertinent information. I (we) understand that alimony, child support, and separate maintenance need not be revealed, unless I (we) wish to have it considered as a basis for repaying the requested credit. I (we) understand that misrepresenting information on this (or the attached) statement is a criminal offense under federal law. Instructions: Complete all schedules on pages 2 and 3, then enter any additional information on this page. Complete all blanks; enter 0, no, or none if appropriate. ASSETS LIABILITIES & NET WORTH Short-term and demand notes payable to banks and Cash on hand and in banks (Sch. 1) $ 65,000 others (Sch. 10) $ 40,000 Government securities (guaranteed) S Margin debt (Sch. 11) S Listed securities (Sch. 2) $ 750,000 Unpaid taxes and interest due this year $ Unlisted securities (Sch. 3) $ 3,600,000 Other current liabilities (list below) S Accounts and notes receivable (Sch. 4) $ 18,000 $ TOTAL LIQUID ASSETS 4,433,000 S Residential real estate (Sch. 5) S 505,000 Residential real estate mortgages (Sch. 5) S 172,130 Non-residential real estate (Sch. 6) S 1,350,000 Non-residential real estate mortgages (Sch. 6) S 860,655 Cash value of life insurance $ Auto loans (Sch. 7) $ 8,200 Automobiles (Sch. 7) $ 24,000 Other loans and obligations (Sch. 12) S Household furnishings & personal property S 100,000 Credit cards (Sch. 13) S 5,000 Other assets (Sch. 8 & 9) $ Other (list) Retirement accounts (401(k), Keogh, IRA, etc.) $ 200,000 TOTAL LIABILITIES $ 1,085,985 TOTAL ASSETS S 6,612,000 NET WORTH $ 5,526,015 ANNUAL INCOME ANNUAL EXPENSES Salary S 400,000 Mortgage payments, residential RE (Sch. 5) S 31,476 Interest $ 1,250 Mortgage payments, non-residential RE (Sch. 6) 70,752 Dividends S 29,200 Other loan & credit card payments (Sch. 7, 10, 12, 13) $ 52,590 Residential real estate income (Sch. 5) S Required partnership contributions S Non-residential real estate income (Sch. 6) $ 120,000 Taxes: Income, real estate, etc. 366,000 Other business income (Sch. 3 and 8) $ 335,000 Insurance premiums $ 5,200 Other recurring income (Sch. 9) S Living expenses, etc. S 30,000 Non-recurring or variable income Alimony, child support, separate maintenance S Commissions and bonuses Charitable contributions S 10,000 Other: Capital gains, net of losses $ 73,000 Other contractual obligations (tuition, etc.) S Other: $ Other (attach list) $ TOTAL S 958,450 TOTAL 566,018 PERSONAL INFORMATION GENERAL INFORMATION Enter Yes or No Business or occupation: Are any assets pledged? List. Owner & President, Carter Distributors, Inc. Homes, commercial real estate, auto, jewelry Yes Partner or officer in other venture(s) (List); Are you defendant in any suits or legal action? No Caffeine Connections, Inc. Have you ever made a composition settlement? No Name(s) and age(s) of dependents Have you taken bankruptcy? If yes, when? No Katie (11), Cliff (8) Are any assets held in trust? Yes CONTINGENT LIABILITIES Enter Yes or No Circumstances and potential liability As endorser, co-maker, or guarantor? Yes Guarantor for various loans to Carter Distributors, Inc. Pending legal claims against you? No Borrower's signature Co-borrower's signature Melissa Carter 1/12/14 Date Date In addition to signing above, if this is an application for JOINT CREDIT, please initial below. (Do NOT initial below if this is an application for an individual credit.) We intend to apply for joint credit. Borrower's initials We intend to apply for joint credit. Co-borrower's initials $ $ $ Melissa Carter SUPPLEMENTARY SCHEDULES 1-6 (Attach separate sheets if necessary) Sch. 1, Assets: List cash on hand if significant, and all bank accounts Ownership Financial institution Type of account Balance (Individual, Joint) Mid Town Bank Checking $32,000 MidTown Bank Money market $33,000 Interest income last year Amount pledged To whom pledged $1,250 Sch. 2: Assets: Listed securities (other than guaranteed government securities) Face value (bonds) Description of security or Ownership Income received or # of shares managed by (Individual, Joint) last year Various Schwab brokerage account I $29,200 Present market If pledged, amount value pledged and to whom $750,000 n/a Sch. 3, Assets: Unlisted securities, ownership interest in private corporations Face value (bonds) Percent of or # of shares Description of security ownership Current value 1,000 Carter Distributors, Inc 100% $3,470,000 Non-salary income rec'd last year Basis for valuation Valued at 2 times sales for year just $335,000 ended Valued at 2 times sales for year just ended 400 Caffeine Connections, Inc 40% $130,000 Sch. 4, Assets: Notes receivable Name of debtor and relationship to applicant Henry Carter, nephew Amount owing Age of debt $18,000 1 year Description of nature of debt Tuition loan Description of collateral held none When is payment expected? 3-5 years Annualized payments Annual income, net of expenses, before debt service Sch. 5, Assets and liabilities: Residential real estate and mortgages payable Description of property and Current market Balance of related ownership % value debt Lienholder Years to maturity Primary residence 100% $350,000 $110,655 MidTown Bank 27 Vacation home, 100% $155,000 $61,475 Mid Town Bank 7 $11,604 $19,872 Sch. 6, Assets and liabilities: Non-residential real estate and mortgages payable Description of property and Current market Balance of related ownership % value debt Lienholder Years to maturity Land and building leased to Carter Distributors, 100% $1,350,000 $860,655 Metrobank 12 Annual income, net of expenses, before debt service Annualized payments $70,752 $120,000 Melissa Carter Personal Financial Statement PERSONAL FINANCIAL STATEMENT, continued SUPPLEMENTARY SCHEDULES 7-13 (Attach separate sheets if necessary) Melissa Carter Sch. 7, Liabilities: Autos and auto loans vehicle (year, model, Current market Balance of related Annualized make) Original cost value debt payments Lienholder Years to maturity 2041 Volvo C70 $30,000 $15,000 $8,200 $7,590 First Credit 1.3 2010 Ford Explorer $43,000 99,000 SO Sch. 8, Assets and Income: Other business income (partnership distributions, capital withdrawals, etc.; exclude corporations) Business name and ownership Amount received Future annual percentage Value of your share last year income Type of income Shown in tax return? Form or Schedule: Sch. 9, Assets and Income: Other significant assets and recurring income (trust income, annuities, pensions, etc.) Other asset or Current market Income received ruture annual source of income value last year income Type of income Shown in tax return? Form or Schedule: Sch. 10, Liabilities: Short-term notes payable to banks and others Name of lender Outstanding Maturity date Collateral Tiffany & Co. $40,000 12/31/Y4 Jewelry Purpose, comments Sch. 11, Liabilities: Margin debt Name of lender Original amount Present balance Rate Payment terms Maturity Collateral Sch. 12, Liabilities: Other loans and obligations Name of lender Original amount Present balance Rate Annualized payments Maturity Collateral Sch. 13, Liabilities: Credit cards Name of lender Credit limit Capital One Visa $20,000 American Express Present balance $4,000 $1,000 Rate 7.25% Annualized payments $5,000 Notes Paid in full monthly? No Yes used in place of cash Case Link Question (8) Directions: Click the Case Link above and use the information provided in the Melissa Carter case to answer this question: You are considering a $1 million loan to Carter Distributors, Inc. for remodeling. What value would Melissa Carter's unsecured guarantee add to this loan request? O Melissa Carter has excellent liquidity, which indicates that she would be able to support a guarantee by liquidating marketable securities. O Given the level of illiquid assets on the personal financial statement, Melissa Carter's guarantee would provide no value for the lender. O It would add some financial value; although most of her liquid assets are directly related to her ownership of Carter Distributors, her guarantee would be important to tie her personal financial well-being to the repayment of the loan. O Because of her significant income and net worth, Melissa Carter's guarantee would provide strong support for the loan. Borrower name: Melissa Carter Address: 1110 Jackson Ave. Co-borrower name: Address: $ S I(we) make the following statement of all my (our) assets and liabilities as of the 31st day of December, 20Y3_and give other material information for the purpose of obtaining credit with you on notes and bills bearing my (our) signature, endorsement, or guarantee. I (we) hereby certify that this statement presents a true, complete, and correct statement of my (our) financial condition as of the date shown and does not omit any pertinent information. I (we) understand that alimony, child support, and separate maintenance need not be revealed, unless I (we) wish to have it considered as a basis for repaying the requested credit. I (we) understand that misrepresenting information on this (or the attached) statement is a criminal offense under federal law. Instructions: Complete all schedules on pages 2 and 3, then enter any additional information on this page. Complete all blanks; enter 0, no, or none if appropriate. ASSETS LIABILITIES & NET WORTH Short-term and demand notes payable to banks and Cash on hand and in banks (Sch. 1) $ 65,000 others (Sch. 10) $ 40,000 Government securities (guaranteed) S Margin debt (Sch. 11) S Listed securities (Sch. 2) $ 750,000 Unpaid taxes and interest due this year $ Unlisted securities (Sch. 3) $ 3,600,000 Other current liabilities (list below) S Accounts and notes receivable (Sch. 4) $ 18,000 $ TOTAL LIQUID ASSETS 4,433,000 S Residential real estate (Sch. 5) S 505,000 Residential real estate mortgages (Sch. 5) S 172,130 Non-residential real estate (Sch. 6) S 1,350,000 Non-residential real estate mortgages (Sch. 6) S 860,655 Cash value of life insurance $ Auto loans (Sch. 7) $ 8,200 Automobiles (Sch. 7) $ 24,000 Other loans and obligations (Sch. 12) S Household furnishings & personal property S 100,000 Credit cards (Sch. 13) S 5,000 Other assets (Sch. 8 & 9) $ Other (list) Retirement accounts (401(k), Keogh, IRA, etc.) $ 200,000 TOTAL LIABILITIES $ 1,085,985 TOTAL ASSETS S 6,612,000 NET WORTH $ 5,526,015 ANNUAL INCOME ANNUAL EXPENSES Salary S 400,000 Mortgage payments, residential RE (Sch. 5) S 31,476 Interest $ 1,250 Mortgage payments, non-residential RE (Sch. 6) 70,752 Dividends S 29,200 Other loan & credit card payments (Sch. 7, 10, 12, 13) $ 52,590 Residential real estate income (Sch. 5) S Required partnership contributions S Non-residential real estate income (Sch. 6) $ 120,000 Taxes: Income, real estate, etc. 366,000 Other business income (Sch. 3 and 8) $ 335,000 Insurance premiums $ 5,200 Other recurring income (Sch. 9) S Living expenses, etc. S 30,000 Non-recurring or variable income Alimony, child support, separate maintenance S Commissions and bonuses Charitable contributions S 10,000 Other: Capital gains, net of losses $ 73,000 Other contractual obligations (tuition, etc.) S Other: $ Other (attach list) $ TOTAL S 958,450 TOTAL 566,018 PERSONAL INFORMATION GENERAL INFORMATION Enter Yes or No Business or occupation: Are any assets pledged? List. Owner & President, Carter Distributors, Inc. Homes, commercial real estate, auto, jewelry Yes Partner or officer in other venture(s) (List); Are you defendant in any suits or legal action? No Caffeine Connections, Inc. Have you ever made a composition settlement? No Name(s) and age(s) of dependents Have you taken bankruptcy? If yes, when? No Katie (11), Cliff (8) Are any assets held in trust? Yes CONTINGENT LIABILITIES Enter Yes or No Circumstances and potential liability As endorser, co-maker, or guarantor? Yes Guarantor for various loans to Carter Distributors, Inc. Pending legal claims against you? No Borrower's signature Co-borrower's signature Melissa Carter 1/12/14 Date Date In addition to signing above, if this is an application for JOINT CREDIT, please initial below. (Do NOT initial below if this is an application for an individual credit.) We intend to apply for joint credit. Borrower's initials We intend to apply for joint credit. Co-borrower's initials $ $ $ Melissa Carter SUPPLEMENTARY SCHEDULES 1-6 (Attach separate sheets if necessary) Sch. 1, Assets: List cash on hand if significant, and all bank accounts Ownership Financial institution Type of account Balance (Individual, Joint) Mid Town Bank Checking $32,000 MidTown Bank Money market $33,000 Interest income last year Amount pledged To whom pledged $1,250 Sch. 2: Assets: Listed securities (other than guaranteed government securities) Face value (bonds) Description of security or Ownership Income received or # of shares managed by (Individual, Joint) last year Various Schwab brokerage account I $29,200 Present market If pledged, amount value pledged and to whom $750,000 n/a Sch. 3, Assets: Unlisted securities, ownership interest in private corporations Face value (bonds) Percent of or # of shares Description of security ownership Current value 1,000 Carter Distributors, Inc 100% $3,470,000 Non-salary income rec'd last year Basis for valuation Valued at 2 times sales for year just $335,000 ended Valued at 2 times sales for year just ended 400 Caffeine Connections, Inc 40% $130,000 Sch. 4, Assets: Notes receivable Name of debtor and relationship to applicant Henry Carter, nephew Amount owing Age of debt $18,000 1 year Description of nature of debt Tuition loan Description of collateral held none When is payment expected? 3-5 years Annualized payments Annual income, net of expenses, before debt service Sch. 5, Assets and liabilities: Residential real estate and mortgages payable Description of property and Current market Balance of related ownership % value debt Lienholder Years to maturity Primary residence 100% $350,000 $110,655 MidTown Bank 27 Vacation home, 100% $155,000 $61,475 Mid Town Bank 7 $11,604 $19,872 Sch. 6, Assets and liabilities: Non-residential real estate and mortgages payable Description of property and Current market Balance of related ownership % value debt Lienholder Years to maturity Land and building leased to Carter Distributors, 100% $1,350,000 $860,655 Metrobank 12 Annual income, net of expenses, before debt service Annualized payments $70,752 $120,000 Melissa Carter Personal Financial Statement PERSONAL FINANCIAL STATEMENT, continued SUPPLEMENTARY SCHEDULES 7-13 (Attach separate sheets if necessary) Melissa Carter Sch. 7, Liabilities: Autos and auto loans vehicle (year, model, Current market Balance of related Annualized make) Original cost value debt payments Lienholder Years to maturity 2041 Volvo C70 $30,000 $15,000 $8,200 $7,590 First Credit 1.3 2010 Ford Explorer $43,000 99,000 SO Sch. 8, Assets and Income: Other business income (partnership distributions, capital withdrawals, etc.; exclude corporations) Business name and ownership Amount received Future annual percentage Value of your share last year income Type of income Shown in tax return? Form or Schedule: Sch. 9, Assets and Income: Other significant assets and recurring income (trust income, annuities, pensions, etc.) Other asset or Current market Income received ruture annual source of income value last year income Type of income Shown in tax return? Form or Schedule: Sch. 10, Liabilities: Short-term notes payable to banks and others Name of lender Outstanding Maturity date Collateral Tiffany & Co. $40,000 12/31/Y4 Jewelry Purpose, comments Sch. 11, Liabilities: Margin debt Name of lender Original amount Present balance Rate Payment terms Maturity Collateral Sch. 12, Liabilities: Other loans and obligations Name of lender Original amount Present balance Rate Annualized payments Maturity Collateral Sch. 13, Liabilities: Credit cards Name of lender Credit limit Capital One Visa $20,000 American Express Present balance $4,000 $1,000 Rate 7.25% Annualized payments $5,000 Notes Paid in full monthly? No Yes used in place of cash