Commercial Credit Memo Template and Decision Framework

A credit memo should help an authorized approver reach and defend a decision. It should distinguish verified evidence from management statements, model outputs, analyst assumptions, and policy exceptions.

The structure below keeps the requested decision visible while preserving enough evidence for independent review. Adapt it to the institution's policy, product, approval authority, and regulatory requirements.

1. Decision summary

Put the borrower, facility, purpose, amount, term, pricing, collateral, guarantees, recommendation, authority level, and material exceptions on the first page.

Requested and recommended structures

Primary and secondary repayment sources

Top decision drivers

Conditions precedent

Approval authority and expiry

2. Business and management assessment

Describe what the business sells, how it earns cash, customer and supplier dependencies, ownership, management depth, operating history, and the purpose of the borrowing. Separate facts from judgment.

3. Financial and cash-flow analysis

Present historical performance, normalized cash flow, leverage, liquidity, working-capital cycle, existing debt, projections, and sensitivities. Reconcile every material adjustment to a source.

4. Risk, mitigants, and policy exceptions

Frame each risk as a path to repayment impairment. State the evidence, likelihood or materiality, mitigant, residual risk, monitoring measure, and policy consequence.

5. Conditions and post-close monitoring

List closing deliverables, covenants, reporting requirements, review dates, early-warning triggers, and escalation actions. Assign ownership rather than relying on narrative intent.

Credit memo completion checklist

Decision and authority stated

Repayment thesis supported

Sources and dates identified

Cash-flow bridge included

Downside case explained

Risks linked to repayment

Exceptions and mitigants approved

Conditions and monitoring assigned