Private Credit Modeling Practice
Any insight on where to go or how to get some practice reps in would be much appreciated. Looking to get more familiar with how modeling in PC works.
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To get started with private credit modeling practice, here are some actionable steps based on the most helpful WSO content:
WSO Free Modeling Series: Take advantage of the 9 Free Financial Modeling Lessons offered by WSO. These lessons are taught by experienced private equity professionals and bulge bracket investment bankers. They cover essential topics like financial statement modeling, DCF, M&A, LBO, Comps, and Excel modeling. This is a great way to build foundational skills that are transferable to private credit.
Financial Modeling Templates: Download the 27 financial modeling templates available in the WSO swipe file. These templates can help you practice building models from scratch or refining your skills with pre-built frameworks.
Elite Modeling Package: Consider enrolling in the WSO Elite Modeling Package, which provides comprehensive training on various financial modeling techniques. While not specific to private credit, the skills learned here (e.g., LBO modeling) are highly relevant.
Case Studies: Look into Private Credit Case Studies and Secondaries Case Study Insights available on WSO. These resources can provide practical examples and help you understand the nuances of private credit modeling.
Networking and Forums: Engage with the WSO Community Forums. There are threads and discussions specifically about private credit modeling where professionals share insights, tips, and even practice materials.
Attention to Detail Practice: Modeling in private credit often requires a high level of precision. Use resources like the Practicing Attention to Detail section on WSO to refine your accuracy and analytical skills.
By leveraging these resources, you can gain hands-on experience and deepen your understanding of private credit modeling.
Sources: Insight on Bain’s Private Credit team, Best way to learn PE relevant finance: I've done modeling practice, but it's going over my head, Private Credit out of undergraduate?, Private Credit Case Study, Private Credit Questions
have a few examples, feel free to d.m. me
hey can't dm, can you share? thx
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have a few past / mock examples, feel free to d .m. me
Would ignore the d.m. me comments trying to sell you cases. The modeling is no different than the equity side (i.e. LBO), just tack on debt returns and include a downside to the management case. Most often than not lenders take Sponsor model and apply worst case scenario (top customer leaves, GFC level event, etc.). Think about how the business flexes in that scenario and what are key drivers of topline and bottom line.
Basically an operating model with focus on base / downside cases and calculate some key metrics like Debt / EBITDA, DSCR, current ratio, L / TNW or whatever your financial covenants in loan agreement would include.
Depending on borrower profile you may need to make monthly projections vs. annual to really stress test the cashflows. The model essentially helps to arrive conclusions on 1) whether the company has enough cashflows to repay your debt; 2) whether other refinancing needed to service existing debt; 3) whether the company's leverage / cashflows support its capex plans.
Sensitivity tables typically also focuses on covenant metrics mentioned above, such as margin compression vs. interest rate etc.
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