How to Prepare a Bank Credit File: A 10-Part Structure
A good credit file is not a company presentation. It is a decision file that lets the bank see the source of repayment, the risks, the collateral and the stress case quickly.
Corporate credit applications usually run on the pattern of “the bank asked for documents, the finance team sent them”. That approach creates information gaps, repeat requests and a loss of confidence. The better method is to prepare a standard credit file from the outset. The file should not merely market the company; it should evidence repayment capacity and how the risks are managed.
The 10-part credit file
- Executive summary: the product requested, amount, tenor, purpose and source of repayment.
- Company and ownership: activities, group structure, management, ultimate beneficial owner, material changes.
- Sector and business model: revenue drivers, customer and supplier concentration, competitive advantage.
- Financial performance: at least three years of income statement, balance sheet, cash flow and normalised metrics.
- Working capital: receivable, inventory and supplier days, and seasonality.
- Debt map: bank, product, currency, interest, tenor, collateral and repayment schedule.
- Cash flow projection: base and stress scenarios.
- Debt service capacity: DSCR, leverage, covenants and headroom.
- Collateral package: value, liquidity, legal and operational status.
- Risks and actions: the risks management knows about and a concrete mitigation plan.
The financial consistency test
The credit analyst's first check is whether the numbers tie to one another. There has to be an explainable bridge between revenue growth and the movement in receivables, inventory and payables, between EBITDA and operating cash, and between capex and the change in fixed assets. If the forecasts are detached from historical data, the credibility of the file weakens.
Why does adding a stress scenario build confidence?
A good file does not contain only an optimistic budget. It should show the effect on liquidity and DSCR of shocks that are meaningful for the company: sales -10, gross margin -2 points, collections +20 days or interest +200 basis points. Management not hiding the downside shows that it recognises the risk and has planned for it.
Three answers the bank wants before it has to ask
- Which cash source will repay the loan?
- If the plan does not go as expected, what is the second source of repayment or the fallback action?
- Why is the risk acceptable to the bank and capable of being priced?
A corporate credit file is also a test of the company's own financial governance. A cash movement that cannot be explained to the bank is usually one that is not being tracked well enough internally either. Credit preparation can therefore be a valuable discipline for the finance function.
Official sources and further reading
Write the file in the order the credit committee decides
Management usually starts by telling the company's history. The credit committee starts with risk: what is the request, what is the source of repayment, what happens in a weak scenario, how much does the collateral protect, and how much visibility does management provide? The first 2–3 pages of the file should answer those questions.
The single source of truth principle
If sales in the presentation, sales in the Excel model and sales in the audited accounts differ, confidence is damaged however good the rest of the file is. Every table should be fed from the same “source of truth” file, with normalisations and management adjustments shown separately in a bridge table.
Quality control checklist
- Does the balance sheet tie across the statements, and does the cash movement reconcile?
- Does the interest and principal model in the debt table match the bank statements?
- Is projected sales growth reflected in working capital and CAPEX?
- Are exchange rate assumptions applied consistently to revenue, costs and debt balances?
- Are the credit request and repayment capacity recalculated under the stress scenario?
- Are collateral values current in terms of date and independence?
Do not hide weakness in the management narrative
The credit analyst will generally find the weak point. A strong file identifies the risk rather than hiding it, and links it to a management action. Where customer concentration is high, for example, the contract term, payment behaviour, product dependence and alternative sales plan for the top five customers can be presented together.
Matching the tenor requested to the purpose of the financing
Financing a permanent working capital gap with a 3-month spot loan, or long-lived CAPEX with short-term revolving lines, creates a maturity mismatch. One of the most valuable contributions of a credit file is justifying the product and tenor structure against the company's cash conversion cycle.
A sample executive summary for the credit committee
A good executive summary sets out this framework in 1–2 pages: what the company does, how much financing is requested and for what purpose, which cash source will repay it, how turnover, EBITDA and cash flow developed over the past three years, what the level of indebtedness is, and the three most important risks together with the actions taken against them. This section is the map to the analysis in the rest of the file.
Three levels in the collateral narrative
- Nominal value: the appraisal or book value.
- Liquidation value: the realistic value achievable in a stressed sale.
- Availability: legal priority, existing encumbrances, insurance, title and time to convert into cash.
High-value collateral does not automatically mean a strong credit. The bank looks to operating cash as the primary source of repayment and treats collateral as a second layer of protection. The file should preserve that order of priority.
Projection consistency tests
| Test | Question to ask |
|---|---|
| Growth | Have the capacity, headcount and inventory needed for sales growth been modelled? |
| Margin | Is the effect of raw materials, exchange rates and inflation reflected in gross margin? |
| Collections | As turnover grows, how do receivable days and the funding requirement change? |
| CAPEX | Has the investment that growth requires been entered into the cash flow? |
| Debt | Has the interest and principal schedule of the new loan been applied to every period? |
A data room approach to presenting the file
The core credit file should stay readable; supporting documents belong in a separate data room. If financial statements, bank statements, tax and social security documents, customer contracts, key supplier agreements, appraisals and management reports are indexed, the bank gets answers to follow-up questions faster. Speed and traceability are part of credit quality too.
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