Is change in executive staff a red flag for business lenders?

November 10, 2014 9:50 PM

I would like to know what happens when a lender finds a recent change in leadership during due diligence for a loan, such as a business loan or a real estate loan to an organization.

It would be helpful to have links to examples or actual risk assessment checklists from the point of view of a lender that describe the risk associated with a change in executive staff (such as a principal owner, executive director or CEO). It's intuitive that this is a red flag but I would like to see places where this is listed or examples of times where it was a factor.

posted by anonymous to Work & Money (1 answer total)

One thing people like myself look at in terms of management changes is: do the people who left have a fiduciary responsibility? In other words, could the people who left be prosecuted for wrong doing or knowingly allowing wrong doing? CFO's leaving in a sudden way not associated with a major event (IPO, new funding) is a big red flag, for example. Unfortunately I don't have any specific examples for you.
posted by digitalprimate at 6:29 AM on November 11, 2014 [1 favorite]