The “Hot Stove League” is an expression that describes the six month hiatus from baseball, beginning the day after the final World Series game and extending through the cold winter months until Spring Training opens in March. There is plenty of time and opportunity for baseball fans to roll up their general manager sleeves and discuss the relative merits of potential roster moves on and off their fantasy teams.
And that is where the five tools come into play.
Five tools is a commonly used benchmark used by Pro Scouts, General Managers, George Will, and self-proclaimed fantasy baseball nerds. It measures past and present position players (pitchers excluded) according to five essential criteria:
- Arm Strength
Of the thousands of professional athletes who have graced the diamond, fewer than 100 are widely considered to be 5 tool players. According to Bleacher Report, the King of Swat, Babe Ruth, ranks #9 among all players, past and present. Number 1? More about that later.
Similarly, many banks employ a 5 tool scoring matrix when reviewing an application for a business acquisition loan. The five tools of loan worthiness are:
- Cash Flow: Can the projected debt service coverage be adequately covered by projected net income.
- Collateral: Does the collateral pledged against the loan represent a significant percentage of liquidation value to loan.
- Management: Does the borrower have significant experience owning and managing a business in the same or related industry.
- Credit: Does the borrower have excellent credit history.
- Down Payment: What percentage loan to value using unborrowed cash is the borrower prepared to inject in the deal.
Each of the five tools is scored on a scale of 5 to 1. For example, in the case of cash flow, a debt service ratio (net cash after tax income divided by total annual debt service) of 1.75 scores a 5, while a ratio of 1.0 scores a 1. A total score of 20 or more is considered excellent. A 25 may get you inducted into the Hall of Fame (and a favorable loan).
More information regarding the five tools and the measurements that distinguish the scoring system is available by calling Don Ross at 707-778-0210.
Incidentally, William Howard Mays (‘Willie’) is regarded as the all time #1 Five Tooler, according to Bleacher Report.