Credit memo template
A credit memo is the document a credit team writes to support a lending decision. It covers the borrower, the request, the numbers, the risks and a recommendation. Use this template, then copy it as text or print it.
Free for lenders. This is a credit memo in the lending sense, not an accounting credit note.
Credit memo
- Borrower
- Date
- Prepared by
Borrower
- Who is the borrower? Give the legal name, the registration number and the legal form.
- What does the business do, and where does its money come from?
- Who owns it and who runs it? Name each owner and director.
- Is there a group behind it, and does the group stand behind this loan?
Request and purpose
- How much is the borrower asking for, for how long, and in what product?
- What is the money for? Say what it buys or pays off.
- How will it be paid back, and how often?
- Why now? Say what changed to bring this request to us.
History
- How long has the business traded?
- What is its record with us and with other lenders? Note any late payments or breaches.
- What has gone wrong before, such as losses, restructures or disputes, and what changed after?
Financial analysis
- How have turnover and profit moved over the last few years? Say why.
- How much cash does the business make, and how much of it goes on debt payments? Give the ratio you use.
- What other debt does it carry? List each loan and lease.
- Do the bank statements agree with the accounts? Note every difference.
- How recent are the figures, and which are forecasts?
The 5 Cs
- Character: can we trust the people? What do their track record and references show?
- Capacity: can the business pay the loan from its own cash?
- Capital: how much have the owners put in, and how much can they lose?
- Collateral: what do we hold if the loan is not repaid?
- Conditions: how do the market, the sector and the purpose of the loan affect the risk?
Security
- What is pledged, and who owns it?
- What is it worth, who valued it and when?
- What is the loan as a share of that value?
- Do we rank first? Are there guarantees, and from whom?
Risks and mitigants
- List the main risks. For each one, say how likely it is and how much it would cost.
- For each risk, say what reduces it, such as a covenant, security or a limit.
- Say which risks are left over after those steps.
Conditions
- What must be true before the money is paid out?
- What must the borrower keep doing after that, such as covenants and reporting?
- Who checks each condition, and when?
Recommendation
- Do you recommend that we approve, decline or ask for more? Say it in one sentence.
- State the amount, term, price and security you recommend.
- Give the two or three reasons that matter most.
- Who prepared this memo, who reviewed it and who decides?
How to write a credit memo.
Start with the request
Say what is asked for and why before anything else. The reader should know the deal in one minute.
Put facts before opinions
Fill in the borrower, the history and the numbers first. Note where each fact came from.
Name the risks
Write down the risks you see and what reduces each one. A memo with no risks is not finished.
End with a clear recommendation
Say approve, decline or ask for more, with the terms and the reasons. Name who decides.
What a template cannot do.
- Check that the numbers in the memo match the documents.
- Find the document that is missing or out of date.
- Update the memo when the borrower sends something new.
Klarefi does that work during the application. It collects the documents, checks them against each other and links every fact to its source, so the memo starts from a complete file. The credit team still writes the recommendation and makes the decision.
Questions about credit memos.
What is a credit memo?
A credit memo is the document a credit team writes to support a lending decision. It sets out the borrower, the request, the analysis, the risks and a recommendation.
Is a credit memo the same as a credit note?
No. A credit note is an accounting document that cancels or reduces an invoice. This page is about the lending meaning, a document that supports a decision on a loan.
What are the 5 Cs of credit?
They are character, capacity, capital, collateral and conditions. Credit teams use them to look at a borrower from five sides. The template has a prompt for each one.
Related.
- Loan document checklist
The documents to ask a business for, each with the reason.
- Klarefi for independent business lenders
How Klarefi completes the application file before it reaches your credit team.
- Business loan origination software
What the different kinds of lending software do, and where intake fits.
A case file ready for your credit team.
The form says turnover was 2.4 million. The annual accounts say 2.18 million. Klarefi reads the application, the accounts and the bank statements together, asks the applicant about the difference while they are still applying, and adds the answer to the file.
net turnover for the year of €2,184,300 from continuing operations
Free to start. Data stored in the EU by default.
Send applicants one link
They upload the accounts, the bank statements and the rest of your list, from any device.
Klarefi checks each application
It reads every document, compares the numbers, and asks the applicant in a chat for anything missing or unclear.
Your credit team reviews one file
Every number links to the line it came from. Anything still open stays visible for review.