Structuring credit facilities for short term loans and lines of credit is more challenging for commercial bankers compared to structuring long-term loans. Since loan-term loans are utilized to fund capital asset purchases, all you need is an appraisal, evaluation, invoice, sales contract, etc. to establish the value for the capital asset, then proceed to apply your bank’s loan to value margins to set the lendable amount. For Short-term loans and lines of credit, it is not that simple.
Short-term loans and lines of credit require examination of several factors to reach the proper amount required. This is very important because under funding or over funding the amount a borrower requires to fund their operations can cause a problem.
This course is designed to demonstrate the factors required to consider in establishing the proper loan amount for short-term needs, and not rely solely upon a formula-driven approach. This is the essence of short-term loan structuring. During this session, the participant will learn how to calculate the length of the financing gap, which is the time between receipt of cash from the operating cycle and the time required to pay creditors.
Specifically, the course will demonstrate the key financial ratios to determine the financing gap, and how to utilize this data to determine the Asset Conversion Cycle and the Operating Cycle. The course will then proceed to calculate the amount required to fund the financing gap by determining the Net Working Investment and the potential sources of cash to fund the gap before bank’ funds are deployed.
- Define the Asset Conversion Cycle, Operating Cycle and Fixed Asset Cycle
- Calculate the Financing Gap by Utilizing Financial Ratio Analysis
- Determine Sources of Cash to Fund the Financing Gap Before the Bank’s Funds are Required
- Address Why a Revolving Line of Credit Not Revolving
- Know the Common Causes of a Line of Credit Becoming Permanent Working Capital
- Negotiate More Effectively With Borrowers Requesting Short-Term Funding
Who Should Attend?
Credit Analysts, Commercial Lenders, Consumer Lenders, Branch Managers, Loan Review Personnel, Senior Loan Officer, Senior Credit Officer, Bank Directors, Members of the Executive Management Team.
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