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Credit Bootcamp Part 4: Cashflow Assessment & Repayment - Term Loan Analysis

Credit Bootcamp 4

A term loan request requires multiple layers of analysis by the banker to properly assess the repayment viability of the borrower. It is more than just adherence to credit policy. Understanding that today’s loan is repaid with tomorrow’s cash is critical. This requires a keen recognition of how the self-liquidating asset should work.

The banker must understand the duration of the asset, the capacity of the asset as well as residual cash flow from the operations of the borrower. Before you can set the loan amount and term of the loan, you must uncover all the sources of future cash. This includes looking at a global cash flow, the UCA cash flow, traditional cash flow as well as the cash generated by the self-liquidating asset.


  • Recognize the credit risk of term lending.

  • Review the core cash drivers which every firm has.

  • Assess the quality of the self-liquidating asset.

  • Process through the various cash flow assessment models.

  • Lay out a model to reach the right loan amount and amortization.


  • Provide a clear process path to provide the right loan amount and term.

  • Understand the cash flow models and when to use each in your analysis.

  • Set expectations of how the self-liquidating asset should work for future monitoring.

  • Build the right structure for the banking relationships.

  • Enhance communications of risk issues in credit memos.

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