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Credit Analysis Basics


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Information on the five C's of credit, bankruptcy proceedings, credit policy, credit investigations, credit fraud, credit decisions, customer visits, the sales department, and the vredit department.

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Credit Analysis Basics

  2. 2. Author/Lecturer <ul><li>DAVID L. OSBURN </li></ul><ul><li>David is the founder and managing member of David L. Osburn & Associates LLC, a Las Vegas-based business training and contract CFO firm that provides seminar/keynote speeches for various groups including CPAs, bankers, attorneys, credit union employees, credit managers, trade groups, and businessowners. He also serves as a contract CFO for a large multi-state construction company and co-manages a bank educational program with the University of Nevada Las Vegas (UNLV). </li></ul><ul><li>His extensive professional background encompasses over 25 years in banking, finance, and marketing. His bank commercial lending credentials include comprehensive loan underwriting, management, customer development, and loan workout experience. </li></ul><ul><li>In addition, David is an Adjunct Professor for Regis University, an accredited MBA program and the College of Southern Nevada, a community college. He has taught college courses for over 24 years, covering Finance, Accounting, Economics, Marketing, Banking, Business Law, and Management. </li></ul><ul><li>He earned an MBA in Finance/Marketing from Utah State University and a BS in Finance from Brigham Young University. He is also a graduate of the University of Oklahoma National Commercial Lending School. </li></ul><ul><li>David L. Osburn & Associates, LLC </li></ul><ul><li>A Business Training & Contract CFO Firm </li></ul><ul><li>David L. Osburn, MBA </li></ul><ul><li>Managing Member </li></ul><ul><li>7521 Enchanted Hills Ct. </li></ul><ul><li>Las Vegas, Nevada 89129 </li></ul><ul><li>Direct: (702) 655-1187 </li></ul><ul><li>Fax: (702) 382-2298 </li></ul><ul><li>E-Mail: [email_address] </li></ul><ul><li>Web: </li></ul>
  3. 3. <ul><li>CREDIT ANALYSIS BASICS </li></ul><ul><li>I. The Five “Cs” of Credit </li></ul><ul><li>II. The Credit Department, Legal Environment, </li></ul><ul><li>Credit Policy, Credit Investigations, and Credit </li></ul><ul><li>Fraud </li></ul><ul><li>III. Credit Decisions, Customer Visits, and The Sales </li></ul><ul><li>Department </li></ul><ul><li>IV. Bankruptcy Proceedings </li></ul>
  4. 4. <ul><ul><ul><li>I. The Five “Cs” of Credit </li></ul></ul></ul><ul><ul><ul><li>A. Capacity: </li></ul></ul></ul><ul><ul><ul><li>B. Capital: </li></ul></ul></ul><ul><ul><ul><li>C. Collateral: </li></ul></ul></ul><ul><ul><ul><li>D. Conditions: </li></ul></ul></ul><ul><ul><ul><li>E. Character: </li></ul></ul></ul>
  5. 5. II. The Credit Department : II. The Credit Department : A. Centralized vs. Decentralized B. Management Responsibilities C. Leadership Legal Environment : A. Antitrust Regulation B. The Fair Credit Reporting Act C. The Fair Debt Collection Practices Act D. The Truth in Lending Act (Reg Z) E. The Equal Credit Opportunity Act (Reg B)
  6. 6. <ul><li> Credit Policy : </li></ul><ul><li> A. Definition: A general course of “credit” action developed </li></ul><ul><li> for recurring situations and designed to achieve </li></ul><ul><li>established objectives. </li></ul><ul><li> B. POLICIES </li></ul><ul><li> Purpose, Organizational Expectations, Level of Understanding, Investment, Corporate Goals, Intentions, </li></ul><ul><li>Established Ground Rules, and Stability </li></ul><ul><li> </li></ul><ul><li> Credit Investigations : </li></ul><ul><li> A. Direct Investigations Ex. Bank Request for Information </li></ul><ul><li> B. Indirect Investigations Ex. NACM, D&B </li></ul>
  7. 7. <ul><li>Credit Fraud: </li></ul><ul><li>A. Unsolicited Orders </li></ul><ul><li>B. Unauthorized Use of Credit Reference </li></ul><ul><li>C. NSF Checks </li></ul><ul><li>D. F/S Irregularities </li></ul><ul><li>E. Skip Tracing </li></ul><ul><li> </li></ul>
  8. 8. <ul><li>III. Credit Decisions : </li></ul><ul><li>A. Underwriting </li></ul><ul><li>B. Credit Scoring </li></ul><ul><li>C. F/S Analysis </li></ul><ul><li>D. Routine/Non-Routine Credit Decisions </li></ul><ul><li>Customer Visits : </li></ul><ul><li>A. Relationship Building </li></ul><ul><li>B. Facilities Observation </li></ul>
  9. 9. <ul><li>The Sales Department : </li></ul><ul><li>A. Credit As a Sales Tool </li></ul><ul><li>B. The Three “Cs” of the Credit/Sales Relationship: </li></ul><ul><li> 1. Cooperation </li></ul><ul><li> 2. Communication </li></ul><ul><li> 3. Courtesy </li></ul>
  10. 10. <ul><li>IV. Bankruptcy : </li></ul><ul><li> A. Chapter 7 </li></ul><ul><li> B. Chapter 9 </li></ul><ul><li> C. Chapter 11 </li></ul><ul><li> D. Chapter 12 </li></ul><ul><li> E. Chapter 13 </li></ul>
  11. 11. <ul><li>Final Thought : </li></ul><ul><li>Credit is vital to : </li></ul><ul><li>A. An economy- world, national, regional, local </li></ul><ul><li>B. An industry </li></ul><ul><li>C. An individual company </li></ul><ul><li>D. A household </li></ul><ul><li>E. An individual person </li></ul><ul><li> </li></ul>