This probably won't gauge as much interest as other posts, but I'll give it a shot.
BACKGROUND:
1.) Recent grad. Started as a credit analyst and moved to an Underwriter/Underwriting Analyst position after 8 months. Non-target (employers in this line of business will give any competent grad a shot). Accounting and Finance degrees are preferred, but Mathematics or Economics majors are hired as well.
1.) I work in the commercial lending department at the captive finance subsidiary of a large auto company (think Ford, Mercedes-Benz, Toyota, BMW, etc.) with $50~ billion in assets. We provide "floorplan" inventory financing to dealerships (small businesses) for our manufacturer. We also provide real estate loans, term loans, revolving lines of credit, and assist automotive groups with financing asset purchase transactions. Typical credit lines range from $2-$50M for one dealership, $50-75M for dealership groups (2-4 dealers) and $75-$150M for large auto groups (5+ dealerships owned by a group of investors).
CAREER PATHS:
1.) There are several departments within the Commercial Credit division of the business. Most recent graduates start out as credit analysts assisting with basic preliminary credit analysis, loan documentation, or administrative tasks within the credit division. After 1-3 years, a credit analyst will move on to an Underwriting, Business Development, or portfolio management position. There are also entry-level analysts on the Business Development side in commercial credit, formally referred to as a "support analyst". An entry-level analyst may move to an "Analyst II" or "Senior Analyst" within their department.
SALARY:
1.) Depending on the geographic area, entry-level salaries range from $46-$52K base, plus bonus. Analysts starting out on the higher end of that range will bring home almost $60K all-in, with 2-3% yearly raises. Analyst "II" salaries generally range anywhere from $52-58K base. Salaries are highly negotiable (i.e. An entry-level analyst may end up with the same salary as an Analyst II, depending on their background.) Senior Analysts will make at a minimum, $60K base, and as much as $75K all-in.
WORK:
1) Pretty straight forward. The credit side consists of credit analysis, negotiating terms and conditions in loan agreements and/or promissory notes (with the assistance of legal counsel), preparing documentation, reviewing Uniform Commercial Code filings, and gathering all required items to ensure a deal takes place. Tax returns, bank statements, and all financial statements are analyzed. Once the financial statements are analyzed, adjustments are made. Business Development is primarily sales, with preliminary credit analysis before the "meat and potatoes" is analyzed by underwriters.
2.) Dealerships are not required to utilize the captive finance subsidiary for financing. Smaller dealerships will finance their operations using a small community bank. Mid-to-large size dealerships will use larger banks (Bank of America, JP Morgan Chase, Ally Financial, BMO Harris, etc.). A large part of the business consists of "stealing" business from other lenders, which essentially means courting the client and convincing them to change their lender. This process can be very gritty, as the current lender will obviously try to retain the dealership account by lowering interest rates, adjusting language in loan documentation to fit the account's needs, etc. Often times the existing lender will not cooperate with the lender that plans to "steal" their business, even after the client has stated that they are switching lenders. This process can drag out for days while terms are being negotiated.
Let me know if you have any questions.
If you are trying to take business away from the client's existing lenders, I believe that you are trying to take over all future lending activities? In this scenario, does your client have to pay for any penalties to switch over to borrow from you?
Yes. Our client does not have to pay any penalties. We foot the bill for any reasonable penalty. Usually, there is a prepayment premium/penalty that applies for any term loan or real estate loan that the existing lender is paid off for before the maturity date. In most cases, this penalty is marginal. However, we will not takeover financing from the existing lender if the prepayment premiums are substantial ($100K+).
When we take business away from the client's existing lender(s), we are taking over all future lending activities. We payoff the lender for all existing obligations to our new client, and add those existing loans to our books. They are usually refinanced. A "payoff agreement" is signed (before any funds are transferred) in which the existing lender agrees to release their security interest in the dealership once all obligations have been satisfied.
Thank you for doing this. Im very interested. how did you get an interview? what are your exit opps, like can you move to a bank?
Yes, I think it's definitely possible to move to a bank. When I was unsure about the position, I searched around and received an offer from BAML in their Global Markets division as a Credit Risk Portfolio analyst. Also received an offer from BMO Harris, a few MM lenders, and a boutique bank as a Credit Risk analyst. I ultimately chose to stay with my company because I would be able to move up the ladder faster and jump to $80K or so in two years. Other analysts have taken roles at these companies, and a few have taken higher roles at small community banks as Commercial Lenders.
I applied online and got a interview. The company was expanding a lot and I was able to get in as a credit analyst. I started a small business which stood out on my resume and had a few other financial analyst internships, but nothing major. The company will train the right employee if they are driven and competent.
nice.. were you solely looking at credit analyst roles when you first applied, and did you use sites like indeed?
I have worked as a senior credit review analyst in Transportation Finance and am currently a senior credit underwriter in equipment finance (construction) at a top 3 bank. I have spoken with an individual who was able to exit to IBD in my bank and is now an associate. Most underwriting will give you useful knowledge that will be helpful in ibd interviews such as the ability to truly understand how cash flows in and out of the business, how the 3 statements flow together, and depending on which group you are in, you could produce DCF models and analyze EV. In FIG groups you will get exposure to the markets as you underwrite traded products exposure, learn your way around Bloomberg, and see the process of a syndicated deal soup to nuts. Salary is 85 - 95 with 15% bonus guaranteed, working 8:30 - 5:30 M-F
+1. Auto business is highly profitable. Can you detail on what sort of models do you use for underwriting ?
Basic DCF modeling when we are financing a dealership group's acquisition of another dealership, nothing deeper than that. We also take a look at a dealership's FCCR (fixed charge coverage ratio), DSI (days sale of inventory), and other simple ratios. "Blue sky" value is given some consideration as well depending on the structure of the deal.
We're strictly transaction driven, and the support of our parent company (think Ford, GM, Toyota, Mercedes-Benz) makes it a little easier to add accounts (dealerships) to our books. A lot of these financing "takeovers" are quite profitable.
Something else I'll touch on:
Banks are able to offer much lower interest rates, for obvious reasons. We face an uphill battle trying to woe our clients because of this reason alone. Despite that, we're still able to add accounts to our books even at higher rates, because of the full support of our parent company. The auto industry is tight-knit. I've see a lot of things happen that I'd assume would never happen in another industry (offering an unsecured LOC or term loan to dealership owners, financing a client's vacation home to secure a deal, etc.)
Double post.
hey I just found this and added it to the frontpage, hope you're still taking questions!
What are the usual exit opps for something like this? Or I guess a better question would be what do you want to do after this stint? What kind of skills (compared to IB) do you get that you can transfer to another industry, etc.?
thanks
This is vague, but we thoroughly analyze the financial statements. We reconcile the client's trial balance with their financial statements that they report to the manufacturer. We also analyze corporate tax returns and identify any material variance between retained earnings, net profit, etc. A lot of the work is making adjustments to what the client shows on their balance sheets and income statements. There's also general cash flow analysis.
After all analysis is done, we draft proposals (5-7 pages long) recommending approval or denial of the client's financing request. These proposals are then reviewed by a manager, AVP, and finally, a VP. Any errors or corrections found are pushed back to the analyst.
The most common exit opp I've seen people move into is a position at a bank in a credit research or credit risk position. The banks pay more, and are willing to give substantial pay bumps to our analysts because of the specific experience. Like I said before, I've seen other analysts go into Credit Research jobs, and leveraged finance roles with a little networking.
Banks like Fifth Third, SunTrust, BMO Harris, Wells Fargo, and UBS (not as common, but these are research jobs covering the auto industry) hire former analysts. I would like to go into a similar position eventually
What's the lifestyle in this career? How many hours per week are you working? How are the people you work with? Do you find the job stressful? Thanks.
Typical 9-5, unless you are assigned a large request. 40-45 hours on a regular basis, 45-55 when you are swamped with new deals. The work is stressful when you are trying to juggle multiple requests at one time. The typical analyst juggles 3-5 deals at once. This environment attracts "lifers", but the Type A employees tend to move up faster. I've seen employees go from analysts to managers in as little as two years, and managers move to AVP's in as little as 1 year. If you have the drive, you can make decent money ($65-85K) after doing two years at the analyst level. After 5 years, you'll hit $100-120K easily if you are promoted to a "manager".
What is the typical(if there is one) promotion structure for a credit underwriter?
Not sure about other companies, but this is the general promotion structure that I've seen at most auto finance subsidiaries on the commercial side of things. There is no set structure, it is largely dependent on what you want to do next.
Some analysts choose to stay in credit underwriting and advance to a "level II" analyst, senior analyst, and lastly, a manager. After the manager level, you are either promoted to AVP of another department within the Credit side, or jump ship.
Other analysts choose to move to the relationship side of things and take Portfolio Manager (or Account Manager) positions. This position involves managing a portfolio of accounts in an assigned territory and meeting their needs. There is less financial analysis at this level. You'll be on the phone all day, flying out to visit clients monthly, and generally communicating with the dealership owners to meet their needs. As an underwriting analyst, you can reach this level after 1.5-2 years.
Just to give people an idea of the base pay at each level (bonuses range between 12-20% of salary)
Analyst - $46-52K Analyst II - $52-58K Senior Analyst - $60-64K Manager - $90-100K (the biggest pay bump occurs at this level) AVP - $110-120K
Portfolio Manager - $58-63K Portfolio Manager II - $63-67K Senior Portfolio Manager - $67-$72K
While the pay is lower than other industries, how fast you climb the ladder is up to you. You can literally be promoted to each level in as little as one year, often times 6-8 months. The turnover rate is fairly high because analysts are constantly being poached by regional or community banks offering substantial pay bumps (surprisingly, you can make pretty good money being a Commercial Lender at a small bank)
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