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Credit Bootcamp Part 3: Cashflow & Repayment -  The Line of Credit

Credit Bootcamp 3

In assessing a line of credit loan request the banker must understand where the repayment is coming from. This requires identifying the cause of the cash shortfall as well as the characteristics of the self-liquidating asset that will repay the loan.

In financing the firm’s short-term needs, we must assess the cash-to-cash cycle, the interactions that exist between the balance sheet and income statement as well as set realistic expectations on how the short-term assets that repay the debt will act.


  • Detail the source of the cash flow in a short-term loan request.

  • Build the analysis of the cash-to-cash cycle.

  • Set expectations on how the self-liquidating assets should operate.

  • Lay out a model of arriving at the right line of credit amount.


  • Understand how to match short term loans with short term assets.

  • Recognize the key financial ratios used to analyze the risk in a line of credit.

  • Properly structure the financing to solve the client’s problem.

  • Set expectations to understand the cash-to-cash cycle for manufacturing, distribution, service, and retail clients.

  • Enhance communications of risk issues in credit memos.

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