SME Credit Risk and Loan Structuring Training Course

Participants can assess how an SME business model and industry conditions affect credit risk.

• Revenue drivers, cost structure and operating cycle mapped visually
• Porter’s Five Forces applied to borrower industry profitability
• PESTLE factors translated into specific borrower cash flow effects
• Customer concentration measured through revenue dependency and contract durability
• Supplier dependence, substitution risk and procurement terms assessed
• Seasonality patterns incorporated into turnover, inventory and repayment analysis

Participants can evaluate borrower character, ownership structure, governance and management capability.

• Beneficial ownership traced through shareholders, related parties and nominee arrangements
• Management track record tested against strategy, controls and succession plans
• 5 Cs of Credit applied to character assessment
• Governance red flags identified from board oversight and decision concentration
• Related-party transactions reviewed for cash diversion and hidden obligations
• Know-your-customer findings integrated into the borrower risk narrative

Participants can assess the reliability of SME financial statements before relying on reported results.

• Audited, reviewed and management accounts compared for assurance quality
• Accounting policies examined for revenue recognition and inventory valuation effects
• Qualified audit opinions interpreted for credit decision implications
• Reconciliation of management accounts, tax returns and bank statements
• Off-balance-sheet obligations identified through notes, leases and guarantees
• Earnings quality tested against cash conversion and recurring income

Participants can spread SME accounts and interpret credit-relevant financial ratios.

• Standardised spreading converts borrower accounts into lender analysis format
• Common-size analysis identifies shifts in margins, assets and funding
• Liquidity ratios calculated using current assets, liabilities and stock quality
• Profitability ratios tested against industry norms and historical trends
• Gearing and capital structure assessed for financial resilience
• Trend analysis separates one-off movements from persistent deterioration

Participants can identify primary repayment sources and assess cash available for debt service.

• Operating cash flow reconciled from profit, working capital and noncash items
• Cash conversion cycle calculated from receivables, inventory and payables days
• Debt service coverage ratio calculated from sustainable operating cash flow
• Primary and secondary repayment sources distinguished for each facility
• Owner drawings, dividends and related-party transfers assessed for cash leakage
• Cash flow weaknesses linked to appropriate structural mitigants

Participants can construct borrower forecasts and test resilience under adverse assumptions.

• 13-week rolling cash forecast built from receipts, payroll and supplier data
• Integrated profit, balance sheet and cash flow forecast assumptions
• Base-case forecast aligned with credible operational and market evidence
• Downside scenarios model revenue decline, margin pressure and collection delays
• Sensitivity analysis tests covenant headroom and debt service capacity
• Forecast variance analysis compares approved assumptions with actual performance

Participants can structure working-capital facilities against an SME’s trade cycle and asset conversion.

• Working capital requirement calculated from operating cycle funding gaps
• Receivables ageing analysed for concentration, disputes and collection quality
• Inventory quality assessed through turnover, obsolescence and valuation evidence
• Payables patterns reviewed for stretched suppliers and hidden liquidity stress
• Borrowing base methodology applied to eligible receivables and inventory
• Trade finance facilities matched to purchase orders, shipments and collections

Participants can determine sustainable debt capacity after considering existing obligations and contingent liabilities.

• Existing facilities mapped by lender, amount, tenor, security and purpose
• Debt maturity profile assessed for refinancing and bullet repayment risk
• Fixed charge coverage ratio tested against interest and principal obligations
• Contingent liabilities reviewed from guarantees, litigation and letters of credit
• Intercreditor priorities identified where multiple lenders share collateral
• Sustainable borrowing calculated from cash flow and collateral constraints

Participants can evaluate collateral quality, enforceability considerations and realisable recovery value.

• Collateral types compared by liquidity, volatility and control characteristics
• Forced-sale value distinguished from market value and insurance value
• Independent valuation scope reviewed for assumptions, date and methodology
• Haircuts applied to collateral values using liquidity and legal risks
• Security perfection requirements identified before facility drawdown
• Collateral monitoring triggers set for revaluation, insurance and inspections

Participants can select credit protections and translate them into enforceable approval conditions.

• Personal guarantees assessed through guarantor net worth and enforceability
• Corporate guarantees reviewed for authority, capacity and financial strength
• Negative pledge clauses restrict unapproved security granted to other lenders
• Conditions precedent defined for registration, insurance and documentary evidence
• Representations and warranties linked to material borrower risk disclosures
• Legal counsel opinions used to confirm capacity and security enforceability

Participants can design facilities that match borrower needs, repayment sources and risk mitigants.

• Term loan tenor matched to asset life and projected cash generation
• Overdraft limits structured around seasonal working-capital peaks and troughs
• Revolving credit facilities designed with clean-down and review requirements
• Amortisation profiles aligned with forecast cash flows and asset replacement
• Grace periods justified by project completion and revenue commencement dates
• CAMPARI framework used to test facility structure and conditions

Participants can contribute to risk-based loan pricing and relationship profitability assessment.

• Risk-based pricing components include funding cost, capital, losses and margin
• Expected loss estimated from probability, exposure and recovery assumptions
• Fee structures assessed for commitment, processing and trade services
• Relationship profitability considers deposits, transactions and ancillary income
• Pricing concessions tested against approval authority and documented rationale
• Return on risk-adjusted capital compared across proposed lending opportunities

Participants can assign and defend an SME risk rating using qualitative and quantitative evidence.

• Internal rating grades linked to probability of default assessment
• Quantitative score drivers include leverage, coverage, liquidity and profitability
• Qualitative overlays capture management, industry and governance concerns
• Rating migration triggers identified from financial and behavioural deterioration
• IFRS 9 staging concepts connected to significant credit risk increases
• Expected credit loss inputs distinguished between PD, LGD and EAD

Participants can prepare concise, evidence-based credit memoranda for approval committees.

• Credit memorandum structure presents request, rationale, risks and recommendation
• Executive summary states exposure, repayment source and decisive mitigants
• Financial analysis converts ratios and forecasts into credit conclusions
• Risk-mitigation table assigns each concern to a condition or covenant
• Approval conditions drafted with measurable evidence and clear ownership
• Committee questions anticipated through alternative scenarios and challenge points

Participants can establish monitoring requirements that detect borrower deterioration early.

• Financial covenants set thresholds for leverage, liquidity and debt service
• Information covenants specify accounts, management reports and compliance certificates
• Positive covenants require insurance, tax compliance and security maintenance
• Early-warning indicators include arrears, cheque returns and declining turnover
• Account conduct analysis identifies excesses, irregular credits and payment stress
• Watchlist escalation criteria define ownership, review frequency and remedial actions

Participants can diagnose distressed SME exposures and recommend proportionate restructuring or recovery actions.

• Distress diagnosis separates temporary liquidity pressure from insolvency risk
• Forbearance options evaluated through affordability, viability and borrower cooperation
• Restructuring plans revise tenor, amortisation, covenants and security requirements
• Standstill arrangements preserve information rights and creditor negotiating position
• Recovery strategy prioritises repayment, collateral realisation and legal remedies
• Post-restructure monitoring tests compliance with revised cash flow assumptions

Participants can recognise conduct risks and improve the quality of SME credit decisions.

• Conflict-of-interest declarations protect approval integrity and customer fairness
• Undue influence risks identified in relationship-led lending decisions
• Documentation standards distinguish evidence, assumptions, opinions and conclusions
• Confirmation bias countered through independent challenge and disconfirming evidence
• Exception governance records rationale, compensating controls and expiry dates
• Fair-treatment principles applied to vulnerable borrowers during collections

Participants can adapt credit analysis and facility structures to common SME sector characteristics.

• Wholesale trading risks assessed through margins, stock turns and customer concentration
• Manufacturing borrowers analysed for capacity utilisation, equipment and input costs
• Service businesses evaluated through contracts, payroll intensity and recurring revenue
• Construction exposures tested for certification delays, retention and project overruns
• Agribusiness lending assessed for weather, harvest cycles and commodity price risk
• Sector-specific covenants matched to the borrower’s principal operational risks

Participants can build, review and present a complete SME credit assessment and loan structuring pack for committee approval.

• Borrower information organised into a decision-ready credit file
• Financial statements spread and reconciled with cash flow evidence
• Forecast model tested under base-case and downside assumptions
• Facility structure designed around purpose, tenor, repayment and availability
• Security, guarantees, covenants and conditions documented as risk mitigants
• Credit memorandum presented, challenged and revised for committee decision