Definitions
A process that helps lenders to make informed decisions, prioritize loan applications, and reduce the time and resources needed to underwrite the loan fully.
What is Pre-Underwriting
Do you use credit score or credit ratings within the commercial loan process?
What is credit rating
Data analytics platform or software that simplifies how firms collects, analyze & store credit data.
What is CreditLens
Provides insight into a company's financial performance and profitability
What is an income statement
Define Loan covenant
What is a promise by the borrower to abide by certain terms and conditions outlined in the Loan Agreement
The resources that a company owns and uses to generate revenue
What is assets?
Define Credit Rating
What is the risk assessments of borrowers, businesses and governments, expressed as letter grades that reflect the creditworthiness of a business or government entity in general terms or with respect to a specific financial obligation.
BRR (Basic Risk Rating) is used typically for which business structures?
What is sole proprietorship, partnerships, single member LLC's or LLP's
Summarizes the amount of cash and cash equivalents entering and leaving a company.
What is a cash flow statement?
Positive and negative refer to what?
What is two types of loan debt Covenants
Financial Spreading
What is the process by which a bank transfers information from a borrower's financial statements into the bank's financial analysis program. it provides a comprehensive and up-to-date view of a potential borrower's financial performance, which can help with risk management and decision-making
True or False: Credit ratings assess the likelihood a borrower will pay back the lender and the interest rate it may have to pay in return.
What is True
Define FRR (Fundamental risk rating)
What is a more advanced method used by lenders and financial institutions to assess the credit risk associated with a potential borrower. It involves a more comprehensive analysis of a borrower's financial condition, industry, market conditions, and other factors that may affect the borrower's ability to repay a loan.
True or False: A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time.
What is true
The purpose of a covenant
What is to protect the interests of the lender or investor and ensure that the borrower meets certain financial targets and obligations. To ensure that the borrower has enough collateral to secure the loan. To limit the risk associated with lending and investing
Operational Covenant
What is maintaining specific insurance coverage throughout the loan. Regular Updates regarding operations/financial performance. Maintain accurate financial records and allow lender to audit.
Three major credit rating agencies
What is Fitch Ratings, Moody's Investors Service, and S&P Global Ratings
Another name for Moody's credit rating
What is Moody's investor service credit rating
Assets, liabilities, and equity are what?
What is the three main components of a balance sheet
The lender may have the right to accelerate the loan and demand immediate repayment, or take other remedial actions to protect its interests
What is the borrower breaching a covenant
Difference between Credit Scores and Credit Rating
What is the following: credit ratings are risks assessments of borrowers, business and governments expressed as letter grade that reflects the creditworthiness of a business or government entity in general terms or with respect to a specific financial obligation.
Credit Scores, on the other hand apply to individuals and are reported as a number, generally ranging from 300-850.
A credit rating system that assigns a letter grade to each issue of bonds or other securities to indicate the level of credit risk associated with the investment.
What is Moody's
Used in conjunction with other factors such as loan purpose, borrower's payment history, and future financial projections.
What is BRR(basic risk rating)
Define Liabilities
What is the debts that a company owes to others
Covenants that require the borrower to take specific actions, such as maintaining certain financial ratios, making timely payments, and providing regular financial statements
What is an affirmative financial covenant