Any active Credit Analysts (lending) here?
I have been searching but found mainly inactive users. Most threads had relatively recent posts, but mainly people trying to figure out a few things.
Would be good to hear from you. And, if you could drop some tips on how to hit the ground running that would awesome.
Hey Papa Harambe (great name btw), I'd suggest grabbing any new money deals you can get your hands on. These are typically the most in-depth analysis you'll do of any company. Stay close to anything that is leveraged, sponsor owned, or agented by your bank. That being said, also be very flexible in what work comes your way. Try not to say no and ask for more things if you feel your work load lightening up. Also, try to be a fly on the wall for any meetings that could be educational for you.
A book recommendation would be "Credit Analysis 102" It highlights the expected attitude and skill set of a good analyst.
Which business line are you in? Large corporate, commercial real estate, middle market, etc.?
Credit analysis 102- Check.
I am searching for entry level positions so I am not in any particular line at the moment. For entry level the main thing tends to be SBA.
I've been working at a regional middle market bank as a credit analyst for almost 2 years since finishing undergrad. Work life balance is pretty good, pay is subsequently less.
A legit understanding of accounting will take you a long way here - much more so than finance...AR, Inventory, and AP days outstanding (cash conversion cycle) is good to know.
Make sure you are comfortable with how amortization works, and how it relates to the term(maturity) of whatever credit facility you are working with (typically amort is longer than term of facility from what I have seen.. say 5 year term and 25 year amortization.. requires what is called "balloon" payment at end of 5 years which likely will lead to refi, additional business for the bank). Familiarize yourself with revolving lines of credit (essentially just large credit cards) and different styles of term loans.
Learn what a borrowing base is, and how it is used to collateralize a loan.
At the end of the day - assuming a traditional commercial banking transaction - it comes down to the question of whether or not the borrower can make the monthly or quarterly (or whatever interval) debt payments ("service debt").. a traditional metric is debt service coverage ratio which looks at whether or not cash flow generated by the business can cover debt payments at some multiple.. a 1.5x DSCR would be healthy (generally) whereas ratios closer to 1.0x indicate some sort of financial distress - internally generated cash flow is nearing the point where the company's business is not supported by this capital structure. Cash flow here is usually EBITDA with some add backs that the borrower and banker come to agree on ( see loan documents).. EBITDA is not cash flow from operations, and is not free cash flow (this probably is not helpful for your role, but good to understand).
Let me know what else I can help with.
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