What do Credit Analysts Do?

A credit analyst position is a person at a commercial/consumer bank that underwrites, and sometimes approves loans. For example, when a customer or business requests a loan, they have to provide financial statements to prove they have the capacity to repay the debt. Sometimes tax returns will be provided, but the most trust worthy statements are audited statements by a third party CPA. The credit analyst will then analyze the data, adding back all non-cash expenses, to see if they could have historically re paid the loan. Non-cash items are amortization, depreciation, and interest expense. After you find the company’s free cash flow, in some cases EBITDA, you can then see if they were able to re pay the proposed debt. The major way to measure a business’ cash flow ability is to figure out their global debt service coverage ratio. This ratio is simply free cash flow divided by the company’s current and proposed debt payments annually. This number should definitely be at least one, however, my bank likes a cushion and prefers 1.20x coverage.

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