Credit memos are documents used by banks to assess the risk of a loan. They are typically used for loans over $200,000 and are read by a loan committee to determine whether or not to approve the loan. Credit memos are important because they help reduce confusion and increase the probability of a loan closing.
In this article, Matt from Deal Camp explains what a credit memo is, why it is important, and how to create one. He also provides tips on how to make sure the credit memo is organized and easy to read for the loan committee.
What is a Credit Memo?
A credit memo is a document used by banks to assess the risk of a loan. It is typically used for loans over $200,000 and is read by a loan committee to determine whether or not to approve the loan. Credit memos are important because they help reduce confusion and increase the probability of a loan closing.
The credit memo includes information about the loan, the company, and the collateral. It also includes information about the acquisition, the use of proceeds, the management team, and the growth plan. This information is used to make sure the loan meets the bank's lending policy.
Creating a Credit Memo
Creating a credit memo is an important step in the loan process. It helps organize the documentation and ensures that all the necessary information is included. It also helps the loan committee understand the deal and make an informed decision.
When creating a credit memo, it is important to include information about the loan, the company, and the collateral. This includes the loan amount, interest rate, amortization, and balloon payment. It also includes information about the acquisition, the use of proceeds, the management team, and the growth plan.
It is also important to include financial information such as balance sheets, tax returns, and personal financial statements. This information is used to make sure the loan meets the bank's lending policy.
Conclusion
Credit memos are important documents used by banks to assess the risk of a loan. They are typically used for loans over $200,000 and are read by a loan committee to determine whether or not to approve the loan. Creating a credit memo is an important step in the loan process and should include information about the loan, the company, and the collateral. It is also important to include financial information such as balance sheets, tax returns, and personal financial statements. By creating a credit memo, you can help reduce confusion and increase the probability of a loan closing.
If you would like to get a copy of a credit memo from Deal Camp, you can contact them at contact@dealcamp.com or leave a comment below.