Commercial banking and credit: applied workshop

Bank business and client needs

Use bank business and client needs to make decisions inspectable.

Distinguish deposits, lending, payments and business-client needs.

Teaching example: Growing sales can still create a working-capital need.. Predict the result, independently check the key step, and compare these assumptions with the actual role. Do not use demonstration results as real-world advice.

Statements and cash flow

Use statements and cash flow to make decisions inspectable.

Separate profit from cash available for repayment.

Teaching example: Credit sales can generate profit before cash arrives.. Predict the result, independently check the key step, and compare these assumptions with the actual role. Do not use demonstration results as real-world advice.

Credit ratios and definitions

Use credit ratios and definitions to make decisions inspectable.

Calculate liquidity and interest coverage ratios with definitions.

Teaching example: EBIT 120 and interest 30 give coverage of 4x.. Predict the result, independently check the key step, and compare these assumptions with the actual role. Do not use demonstration results as real-world advice.

Repayment and maturity

Use repayment and maturity to make decisions inspectable.

Map loan use, operating cash and repayment timing.

Teaching example: Equipment investment and working capital have different maturities.. Predict the result, independently check the key step, and compare these assumptions with the actual role. Do not use demonstration results as real-world advice.

Credit risk scenarios

Use credit risk scenarios to make decisions inspectable.

Assess slower sales, delayed collection and higher interest scenarios.

Teaching example: Slower receivables consume cash even when profit is unchanged.. Predict the result, independently check the key step, and compare these assumptions with the actual role. Do not use demonstration results as real-world advice.

Credit memo

Use credit memo to make decisions inspectable.

Draft purpose, repayment capacity, risks and missing facts.

Teaching example: Collateral does not replace analysis of primary repayment cash.. Predict the result, independently check the key step, and compare these assumptions with the actual role. Do not use demonstration results as real-world advice.

Client questions and diligence

Use client questions and diligence to make decisions inspectable.

Prepare five questions that clarify cash-flow uncertainty.

Teaching example: Ask about customer concentration and terms, not only sales.. Predict the result, independently check the key step, and compare these assumptions with the actual role. Do not use demonstration results as real-world advice.

Worked example · fictional

From a problem to inspectable work

Synthetic borrower: cash available for debt service 180, interest 30 and principal 90. Stress reduces cash by 25%; covenant DSCR minimum 1.2.

1. DSCR = (180×0.75)/(30+90) = 135/120 = 1.125, below 1.2. Debt service includes principal, not interest alone.
2. Further judgment: Base cash covers service. Is that sufficient for lending?
3. Check stressed cash, covenants, collateral and repayment sources before a conditional recommendation

Deliver fictional business credit memo: the calculation reference is 1.125; the recommendation must respect Check stressed cash, covenants, collateral and repayment sources before a conditional recommendation. Separate numbers, inference and unknowns.

Failure case and repair

In Repayment and maturity, copy tool output without definitions, then retain the conclusion when asked: Base cash covers service. Is that sufficient for lending?

Even a result of 1.125 does not explain when Check stressed cash, covenants, collateral and repayment sources before a conditional recommendation is supported.

DSCR = (180×0.75)/(30+90) = 135/120 = 1.125, below 1.2. Debt service includes principal, not interest alone. Then test assumptions in Credit memo.