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The Five Cs Of Commercial Credit: The Basic Elements Of Credit And Lending
Financial Performance
- Operating performance
- Revenue
- Sustainable sales growth
- Break-even sales
- Sales productivity
- Profitability
- Financial condition
- Liquidity
- Leverage
- Solvency
- Cash flow
Financial Projections
- Basics of projections
- Viability of underlying assumptions
- Linkage of the income statement to balance sheet to cash flow
- Projecting income statement
- Projecting balance sheet
- Projecting cash inflows and outflows
- Sufficiency of cash flows to repay debt, reward owners, and sustain enterprise
Shareholder Value
- Role of shareholder value as a reward to owners
- Key drivers in the projection of enterprise shareholder value growth
- Sales growth rate
- Tax rate
- Profitability
- Working capital investment
- Fixed asset investment
- Weighted cost of debt and equity capital
- Short-term and long-term alternatives to accelerate shareholder value growth
Overview of the webinar
First, banking commercial borrowers require lenders to evaluate both repayment abilities, and, in turn, necessitates analyzing both the short-term and long-term potential of borrowers. Enough positive cash flow to repay creditors and reward owners comes from solid financial performance, sustainable operating performance, and a stable financial condition.
Second, projecting a borrower’s financial performance means analyzing the underlying assumptions, e.g., revenue growth rate, productivity, profitability ratios, cost of debt and equity capital, etc., and employing these factors to forecast the income statement, balance sheet, and cash flow statement to quantify the future cash flow available for debt repayment, dividends, working capital and fixed asset investment sufficient to keep the borrower operating successfully.
Third, building shareholder value keeps the owners engaged and committed to sustaining the business. What is the discounted value of those future cash flows? What are the key drivers? See how well working capital management—inventory, receivables, payables—can build up shareholder value faster and how productive capital expenditures can enhance shareholder value.
Who should attend?
- Credit analysts
- Loan underwriters
- Commercial bankers
- Loan review officers
- Credit department managers
- Senior lenders
- Chief credit officers.
- Credit analysts
- Credit managers
- Credit risk managers
- Loan review officers
- Risk managers
- Enterprise risk managers
- Chief credit officers
- Senior lenders
- Senior lending officer
- Bank director
- Chief executive officer
- President
- Board chairman
Why should you attend?
- The first four C’s -
capacity, conditions, collateral, and character- evaluate a borrower’s ability to repay, but character forces the lender to examine closely the borrower’s willingness to repay. - Learn how to employ the first four C’s to analyze repayment ability
- Learn how to use the fifth C- character - to judge a borrower’s willingness to repay
- Capacity is measured by the ability to repay from cash flow
- Conditions evaluated in terms of how borrowing needs change over the business cycle and what makes some industries more vulnerable to downturns than others
- Collateral analysis in terms of relative liquidation values
- Capacity considered in terms of the borrower’s equity cushion and the degree of relative leverage possible
- Character assessed in terms of willingness to repay as evidenced by payment history as well as tips for fraud prevention
Faculty - Mr.Dev Strischek
A frequent speaker, instructor, advisor and writer on credit risk and commercial banking topics and issues, Martin J. "Dev" Strischek is principal of Devon Risk Advisory Group based near Atlanta, Georgia. Dev advises, trains, and develops for financial organizations risk management solutions and recommendations on a range of issues and topics, e.g., credit risk management, credit culture, credit policy, credit and lending training, etc. Dev is also a member of the Financial Accounting Standards Board’s (FASB’s) Private Company Council (PCC). PCC’s purpose is to evaluate and recommend to FASB revisions to current and proposed generally accepted accounting principles (GAAP) that are more appropriate for privately held firms. He also serves as the PCC’s representative to FASB’s Credit Losses Transition Resource Group supporting the new current expected credit loss (CECL) standard. Dev is the former SVP and senior credit policy officer at SunTrust Bank, Atlanta. He was responsible for developing, implementing, and administering credit policies for SunTrust’s wholesale lines of business--commercial, commercial real estate, corporate investment banking, capital markets, business banking and private wealth management.