Financial Forecasting to Determine Repayment Capability on Long Term Loans

Banks often extend loans to borrowers with terms exceeding one year. These Term Loans generally finance capital assets used to generate revenue for the firm. Unlike short term Lines of Credit, where the primary source of repayment is derived from conversion of assets, Term Loans are repaid from expected Cash Flow of the prospective borrower.

Bankers’ analyses generally consist of examining historical Cash Flow, which may or may not indicate what may happen during the next fiscal year. To properly predict the outcome of expected performance, Financial Forecasting and Cash Budgeting are important tools.

Learn skills to develop Financial Forecasts and Cash Budgets. We'll start by analyzing historical Cash Flow and using this information to project expected Cash Flow as a means of repaying Term Loans. A key component of developing a reasonable forecast is management’s assumptions.

Projections are used for the following broad purposes: 

  1. To develop a range of expected performance
  2. To validate key risks identified
  3. To establish loan covenants
  4. To test work out strategies

Covered Topics:

  • Understand Cash Flow Analysis as a basis for developing Financial Forecasts
  • Determine the timing of cash inflow and outflow as a basis for developing a Cash Budget
  • Determine if management’s assumptions are reasonable in the development of Financial Forecasts
  • Use historical performance to determine the likely future outcome
  • Perform sensitivity analysis to test the reasonableness of the financial forecast

Who Should Attend?

Commercial Loan Officers, Consumer Loan Officers, Senior Credit Officers, Loan Review Officers, Compliance Officers, Branch Managers, Credit Analysts, Loan Support Personnel


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