credit analysis commercial lending

Financial Analysis

Financial Statements

Balance Sheet

Income Statement

Cash Flow Statement

Statement of Retained Earnings

Financial Ratios

Liquidity ratios (Current ratio, Quick ratio)

Profitability ratios (Gross margin, Net profit margin)

Efficiency ratios (Asset turnover, Inventory turnover)

Leverage ratios (Debt-to-equity ratio, Interest coverage ratio)

Trend Analysis

Analyzing financial statement data over multiple periods

Identifying trends in revenue, expenses, and profitability

Cash Flow Analysis

Analyzing the company's ability to generate cash

Assessing cash flow from operations, investing activities, and financing activities

Working Capital Analysis

Evaluating the company's ability to cover short-term obligations

Assessing working capital levels, including current assets and liabilities

Debt Analysis

Evaluating the company's outstanding debt obligations

Assessing debt repayment capacity and debt service coverage ratios

Business Analysis

Industry Analysis

Understand the industry dynamics and trends
Identify key competitors and market conditions

Understanding the industry dynamics and trends

Identifying key competitors and market conditions

Management Analysis

Evaluate the management team's experience and qualifications
Assess their strategic vision and decision-making abilities

Evaluating the management team's experience and qualifications

Assessing their strategic vision and decision-making abilities

Market Analysis

Analyze the company's target market and customer base
Assess market demand and growth potential

Analyzing the company's target market and customer base

Assessing market demand and growth potential

Competitive Analysis

Identify the company's competitive advantages and disadvantages
Assess the competitive landscape and potential threats

Identifying the company's competitive advantages and disadvantages

Assessing the competitive landscape and potential threats

SWOT Analysis

Assessing the company's strengths, weaknesses, opportunities, and threats

Collateral Analysis

Asset Evaluation

Assessing the value and quality of the collateral offered by the borrower

Analyzing the market value and liquidity of the collateral

Legal Documentation

Reviewing the legal documents related to the collateral

Ensuring proper ownership and lien rights

Insurance Coverage

Verifying the borrower's insurance coverage on collateral assets

Ensuring adequate coverage for potential risks

Reviewing any liens on the collateral

Examining the priority of the liens on the collateral

Ensuring sufficient collateral coverage for the loan

Monitoring the collateral value

Assessing any changes in the value of the collateral over time

Risk Assessment

Credit History

Reviewing the borrower's credit history and repayment track record

Assessing any past defaults or delinquencies

Industry Risks

Identifying potential risks specific to the borrower's industry

Assessing the impact of industry trends on the borrower's business

Market Risks

Identifying potential risks related to market conditions

Assessing the borrower's ability to withstand market fluctuations

Operational Risks

Assessing potential risks related to the borrower's operations

Evaluating the company's operational efficiency and risk management processes

Conclusion

Credit Decision

Summarizing the analysis and making a credit recommendation

Assessing the overall creditworthiness of the borrower

Additional Considerations

Any additional factors that may impact the credit decision

Providing a comprehensive assessment of the borrower's creditworthiness