Cash flow first, everything else second
Question number one is not "what will they put up as collateral?" but "where is each monthly payment going to come from?" Ask for proof of income (pay stubs, account statements, tax returns) and apply the capacity rule: servicing all their debts — including yours — should not exceed 30–35% of their verifiable net income. Numbers, not promises: our repayment capacity calculator does the arithmetic in seconds. A borrower with no cash flow is a lawsuit waiting to happen, however good the collateral.
The collateral: coverage, liquidity and paperwork
- Coverage (aforo): asset value ÷ loan amount. Sound practice seeks a margin — ideally 2.5 to 1 — because the foreclosure value is always lower than the appraisal, and the balance grows with default interest and court costs.
- Asset liquidity: an apartment in a sought-after area sells; ultra-specialized machinery, who knows. Discount the coverage based on how sellable the asset is.
- Title and liens: a certificate of no encumbrances for real estate, a search of the RUG (Mexico's Sole Registry of Movable-Property Collateral) for movable assets, the original invoice. Collateral pledged by someone who is not the owner guarantees nothing.
- Proper perfection: a mortgage by public deed plus registration; a pledge registered with the RUG. Unregistered collateral = standing in line with the unsecured creditors.
Record, references and consistency
With the applicant's authorization you can check their bureau (SICs grant access to registered users; alternatively, ask them for their recent Special Credit Report — it's free for them). Read patterns, not snapshots: recurring late payments weigh more heavily than an old stumble. And cross-check consistency: does their lifestyle match the declared income? Does the business they claim to have actually exist, issue invoices, have an address? Fifteen minutes of verification prevents fifteen months of litigation.
The purpose of the loan matters more than it seems
Lending for working capital, to pay off expensive debt, or for a productive asset has repayment logic built in. Lending "for a business an acquaintance is about to set up" or to plug the hole of another loan that is already overdue is financing a spiral. The screening question: does this loan improve or worsen the borrower's situation? If it worsens it, your portfolio will inherit it.
Red flags that are not up for negotiation
- Extreme haste and irritation at basic questions.
- Refusal to document the loan or to ratify it before a notary ("what, you don't trust me?").
- Collateral they cannot show physically or whose paperwork is "being processed".
- A history of previous lenders "who betrayed them".
- They need the money to pay off another overdue loan — you're buying someone else's default.
And the administrative reminder: if you lend habitually, you are engaged in a vulnerable activity (LFPIORPI 17-IV) — the identification file the law requires is, conveniently, the same one good analysis was already asking of you.