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:
- To develop a range of expected performance
- To validate key risks identified
- To establish loan covenants
- To test work out strategies
- 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
Commercial Loan Officers, Consumer Loan Officers, Senior Credit Officers, Loan Review Officers, Compliance Officers, Branch Managers, Credit Analysts, Loan Support Personnel
Jeffery W. Johnson started his career with SunTrust Bank in Atlanta as a Management Trainee and progressed to Vice President and Senior Lender of SouthTrust Bank and Senior Vice President and Commercial Banking Division Manager for Citizens Trust Bank of Atlanta.
Most of his career has been spent in Credit Administration, Lending, Business Development, Loan Review, Management and Training & Development. He has managed loan portfolios representing a cross section of loan types including: Large Corporate, High Net Worth Individual, Middle Market Companies, Small Business, Real Estate and Non-Profit Organizations.
Mr. Johnson is now a training professional in the financial industry by leading various seminars covering important topics relating to issues in financial institutions. He teaches actively for fifteen state banking associations in the United States, Risk Management Association (RMA) and individual financial institutions nationwide. He co-authored a training course entitled “Lending to Service and Other Professional Organizations” for RMA in 2001.
Mr. Johnson earned a B.A. Degree in Accounting from Morehouse College in Atlanta; a MBA in Finance from John Carroll University in University Heights, Ohio; Banking diploma from Prochnow School of Banking at the University of Wisconsin and a Graduate Certificate in Bank Management from the Wharton School of Business at the University of Pennsylvania.
Institute of Certified Bankers: Visit http://www.icbmembers.org/login.aspx for instructions regarding self-reporting. Estimated credits: 2.5 CE Credits
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