Corporate Finance Institute – Boss Brewing Inc. – Connecting Capital Structure & Credit Structure
Step into the shoes of a SME lender and explore an interesting and common scenario – where the business owner has their mind made up about a borrowing request, but they don’t totally understand the risk implications. Together, we will:
- Explore criteria against which we can evaluate credit requests.
- Use an analysis tool to calculate financial ratios for various borrowing scenarios.
- Interpret financial ratios and recommend an appropriate credit structure.
Understanding a borrowing request and its associated risks is a critical skill for commercial lenders. In this practice lab, we’ll step into the shoes of a SME lender to analyze a borrowing request from both the lender and borrower’s perspectives, with an eye to understanding how the proposed credit structure may impact the client’s capital structure and other important financial ratios.
We’ll analyze the client’s financial statements and look to identify how their priorities may differ from those of the lender, before working towards a proposal that will satisfy the needs of both parties.
This lab is a great building block for early career business and commercial bankers, including relationship managers, analysts, and adjudicators. Other credit professionals like asset-based lenders, commercial real estate lenders, equipment finance professionals, and commercial loan brokers will also get enormous value.
What You’ll Learn In Connecting Capital Structure & Credit Structure?
- Appreciate how dramatically the intended purpose of loan proceeds can impact a borrower’s capital structure.
- Compare multiple borrowing scenarios and calculate key lending ratios.
- Think critically about how credit structure and capital structure are connected.
- Make appropriate recommendations around a credit structure that satisfies both client needs and bank guidelines.
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