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Learn the framework for assessing and managing credit risk. Throughout this newly updated six-part series, we address financial statement analysis, qualitative analysis, cash flow, proper credit structure, and discuss best practices for managing the credit risk of your credit portfolio.
Each session acts as a building block that culminates into a curriculum for those ready to master their credit portfolio.
The Credit Boot Camp series is led by Brad Stevens. Brad has been leading the credit industry as an analyst, trainer, and consultant for more than 30 years. He is a strong believer in bankers training bankers.
Purchase the entire series or only the session that you need.
Learn the framework for assessing and managing credit risk. Throughout this newly updated six-part series, we address financial statement analysis, qualitative analysis, cash flow, proper credit structure, and discuss best practices for managing the credit risk of your credit portfolio.
To properly assess the risks associated with loan repayment, we need to understand how the business has performed over the past several periods. This is called trending. The data needed for this process is several years of financial statements, also known as the borrower’s story about how they have managed their business activities.
The risks of a line of credit are not in the financial statements, but in the reasons for how the financial statements appear. We receive an excessive quantity of numbers in financial statements. However, it is actually the events that produce the numbers that contain the risks.
In assessing a line of credit loan request the banker must understand where the repayment is coming from. This requires identifying the cause of the cash shortfall as well as the characteristics of the self-liquidating asset that will repay the loan.
A term loan request requires multiple layers of analysis by the banker to properly assess the repayment viability of the borrower. It is more than just adherence to credit policy. Understanding that today’s loan is repaid with tomorrow’s cash is critical. This requires a keen recognition of how the self-liquidating asset should work.
Bankers are not order takers. We add value by solving our clients' problems. Fully analyzing the loan request and recognizing that each request starts with a cash shortfall is crucial.
Managing credit risk does not stop at closing, it is only beginning. By staying close to your client, inspecting what you expect and working to solve their problems, you will enhance the relationship.