ESSENTIALS OF SME CREDIT ANALYSIS

TRAINING COURSE OUTLINE

This training programme is designed to provide lending and credit risk management professionals with a thorough understanding of the essential principles of SME credit analysis. The programme is designed to strengthen and expand the professional skills of lenders with Corporate, SME and Retail experience. It has been specially tailored to address the needs of lenders operating in emerging and fast-growing market, where they must cope with the greater challenges stemming from the rapidly changing business and information environment.

LONDON

WASHINGTON DC

SINGAPORE

GLOBAL EXPERIENCE, PRACTICAL EXPERTISE

COURSE OUTLINE: SME CREDIT ANALYSIS

COURSE DESCRIPTION
Hours Target Audience
35 (5 days) The Essentials of SME Credit Analysis programme is targeted to lending and credit risk management professionals with three or more years of credit experience with a variety of customer segments or recent entrants to lending with a strong background in financial analysis. The programme has also been designed to benefit experienced Relationship Managers and Credit Risk Managers, who believe or whos supervisor believe that attending the training would enhance their ability to coach or mentor junior staff members. Specifically, the course benefits: Managers and executives of lending divisions; Lending officers; Relationship managers; and Credit risk managers.

Description

The Essentials of SME Credit Analysis programme is an intensive five-day programme, designed to provide lending and credit risk management professionals a comprehensive understanding of the credit process, including gathering relevant information from customers, evaluating loan requests, assessing a companys ability to service debt, and structuring loans. The Course Directors are financial service professionals with outstanding experience in credit risk appraisal. Their intention is to stimulate discussion amongst participants so that learning and experiences can be shared. At the conclusion of the programme the participants will be able to: Understand and discuss loan appraising tools and concepts used to assess borrowers and their business plans; Understand and discuss how to assess the appropriateness and logic of financial information provided by a customers, by using benchmarking techniques; Identify, understand and discuss non-financial business risks that could adversely affect a company's operations and ability to repay debt; Understand, discuss and apply techniques used to conduct client interviews that facilitate the gathering of relevant financial and nonfinancial information needed to make sound credit decisions; Understand and discuss techniques used to address/mitigate accounting risk, i.e., the risk that the information provided by a borrower is presented in an inaccurate or misleading manner; Understand and discuss how making adjustments to information received from borrowers can enhance the analysis of creditworthiness; Understand and discuss how the DuPont Model is used to perform and guide the analysis of financial ratios; Understand and discuss how lending rationales, i.e., asset conversion, cash flow and asset protection, are used to determine the required analytical tools to use, when assessing a commercial loan requests; Understand and discuss how to assess a borrower's ability to repay debt by using the direct cash flow statement;

Objectives

GLOBAL EXPERIENCE, PRACTICAL EXPERTISE

COURSE OUTLINE: SME CREDIT ANALYSIS

Understand and discuss terms and conditions that are typically negotiated when structuring a loan (i.e., amount, tenor and covenants); Understand and discuss how cash flow and asset protection lending rationales are used in structuring loans; Understand and discuss cash flow lending tools used to determine the appropriate loan tenor and repayment schedule; Understand and discuss how the concept of creditworthiness is applied to loan structuring; and Understand and discuss issues that covenants attempt to influence, including: Disclosure of information, Maintenance of financial condition, Management, Preservation of corporate existence and characteristics, and Specific or unique risks of individual companies

Assessment Language Prerequisites

There will be no formal assessment, but participants will be expected to contribute actively to the discussions. GBRW will provide eligible participants with an attendance certificate. All presentations and hand-outs will be in English. A sound understanding of accounting, including the various accounts included on the profit and loss statement and the balance sheet; Prior exposure and familiarity with calculating basic financial ratios, as well as ratio analysis techniques; Basic understanding of the credit process (as it is practiced in their institution) and current involvement in lending and/or relationship management.

GLOBAL EXPERIENCE, PRACTICAL EXPERTISE

COURSE OUTLINE: SME CREDIT ANALYSIS

COURSE OUTLINE
Day 1
Overview of Commercial Lending This session is designed to provide the participants with a fundamental understanding of the (credit) risk analysis process; including the terminology and techniques employed in defining, assessing and managing credit risk. Participant Welcome and Program Orientation Discussion of Rainbow Market Case Study The Credit Process and Strategic Planning Introduction of Concepts and Terminology Risk Management Creditworthiness The 5 "C"s of Credit Asset Conversion Cycle (ACC) Non-financial Business Risks and Mitigants Accounting Essentials Pre-course Assignment Friends Electronic Shop Case Study (Construction of Balance Sheet and Income Statement) Homework Assignment (To Be Determined)

Day 2

Financial Analysis (Part I) This session is designed to introduce the participants to the fundamental prerequisites of financial statement analysis, including identifying nonfinancial business risks and assessing appropriate mitigants, conducting effective credit interviews to gather relevant information on a company's business and operations, and mitigating the risk associated with less than transparent financial information. Summary of Key Points Discussed During Day One Review of Homework Assignment Business Risks / Mitigants Exercise Introduction of Concepts and Terminology (cont.) Statement Logic Business Characteristics and their Impact on the Financial Statements Statement Recognition Exercise # I The Evaluation Process Conducting the Interview Understanding the Lender's and Borrower's Objectives Using the ACC as a Tool in the Interview Process Necessary Information Business Plan Financial Statements Assessing the Quality of the Financial Information - Accounting Risk Homework To Be Determined

GLOBAL EXPERIENCE, PRACTICAL EXPERTISE

COURSE OUTLINE: SME CREDIT ANALYSIS

Financial Analysis (Part II) This session is designed to introduce the participants to the essential elements of financial statement analysis, including the importance of systematically spreading company prepared financial information, the importance, use and interpretation of standard financial ratios and an introduction to the direct cash flow statement as a tool to assess a company's debt servicing ability. The participants will be given the opportunity to analyse financial ratios and will be introduced to the benefits and logic of the direct cash flow statement. Summary of Key Points Discussed During Day Two Review of Homework Assignment Review of Financial Statement Recognition Exercise #2 Review of Spreading Exercise Financial Statement Analysis Preliminary Considerations Obtaining, Process and Spreading Information Fact Sheet Format Ratio Mechanics Review of Rainbow Market Ratio Financial Ratios - Homework Assignment Importance of Adopting Standardized Analytical Tools Cash Flow Analysis - Direct Cash Flow Statement Introduction of Background and Benefits Homework To Be Determined

Day 3

Day 4

Financial Analysis (Part III) This session is designed to build upon the information introduced during Day Three (Financial Analysis - Part II). During this session the mechanics of constructing the direct cash flow statement will be reviewed and the need of forecasting the financial statements will be discussed. The participants will be given the opportunity to construct and analyse a direct cash flow statement. In addition, the participants will be introduced to the Monthly Cash Budget, an effective tool for assessing seasonal cash needs and the ability of "start-up" companies to service debt. Summary of Key Points Discussed During Day Three Review of Homework Assignment Cash Flow Background Mechanics Analysis Projections (Overview) Monthly Cash Budget Background Mechanics Analysis Homework To Be Determined

GLOBAL EXPERIENCE, PRACTICAL EXPERTISE

COURSE OUTLINE: SME CREDIT ANALYSIS

Day 5

Conclusion This session is designed to bring together the tools and techniques presented in the training program. During this session the participants will be introduced to the essentials of loan structuring. The day concludes with a role playing activity where teams of participants assume the roles of some of the key players introduced in the Rainbow Market Case Study (Loan Officer, Loan Committee, Buyer, Seller, Business Development Professional) and negotiate the sale and required financing of a SME. Summary of Key Points Discussed During Day Four The Lending Decision Lending Rationales Asset Conversion Cash Flow Secured Lending Loan Structuring Amount Tenor Covenants Rainbow Market Role Playing Activity Program Evaluation

GLOBAL EXPERIENCE, PRACTICAL EXPERTISE

COURSE OUTLINE: SME CREDIT ANALYSIS

COURSE PRESENTER
Nate Dickerson, Principal Consultant, GBRW Consulting
Nate Dickerson has thirty-five years of experience within the financial service industry as a commercial lender as well as a consultant and training and development specialist to commercial banks. Nate has specialist expertise in developing and delivering SME banking training and has successfully completed many courses. As a commercial lender, Nate enjoyed a fifteenyear career with The Chase Manhattan Bank, N.A., where his experiences included commercial lending, corporate finance, as well as domestic and international debt restructuring. For three years Nate was a manager within Chases Credit Training Department. Nate has provided training and advisory services both internationally and within the United States. Internationally, he has provided technical assistance promoting financial and structural reform of institutions in Bosnia and Herzegovina, China, Jamaica, Kazakhstan, Laos, Moldova, Mongolia, South Korea, Sri Lanka, Thailand, Ukraine, and Vietnam. Domestically, Nate has provided technical assistance in urban, rural, and Native-American communities throughout the United States. Engagements undertaken by Nate have frequently included technical and managerial training for financial-sector professionals. Nate has designed and delivered numerous training programs for banking professionals. Nate has developed and delivered to the staff and management of commercial banks, within the region, the following training programmes: Marketing the SME Customer Base, SME Lending Risk Management, Strategic Marketing for Senior Management, Business Planning and Performance Measurement, Credit and Noncredit Risk Management (from the Branch Prospective), Asset Liability Management, Credit Risk Management, Managing a Mediumterm Loan Portfolio, Understanding and Appraising a Business Plan, Project Management and Appraisal, and Risk Management in Banking.

CONTACT DETAILS

To discuss your Banks needs in more detail, or to find out more, please contact one of the GBRW Consulting Banking Practice team. Nate Dickerson, Principal Consultant nate.dickerson@gbrw.com Mike Coates, Director michael.coates@gbrw.com GBRW Ltd, 27 Throgmorton Street, London EC2N 1AQ, United Kingdom www.gbrw.com Phone: +44 (0)20 7382 9900

GLOBAL EXPERIENCE, PRACTICAL EXPERTISE