Learning Objectives
By the end of this module, you will be able to:
Understand the Role of Financial Forecasting in Commercial Lending
Explain how forecasting supports forward-looking commercial credit analysis.
Understand how forecasts help assess future profitability, cash flow, liquidity and debt servicing capacity.
Recognise how forecast analysis informs facility structure, repayment terms, covenants and ongoing monitoring.
Evaluate and Validate Forecast Assumptions
Compare forecast assumptions with historical performance, current trading results and underlying business drivers.
Assess whether key assumptions relating to revenue, expenses, working capital and capital expenditure are reasonable.
Identify assumptions that may be optimistic, unsupported or inconsistent with the borrower’s operating environment.
Complete and Interpret Base Case and Downside Scenarios
Complete base case and downside scenarios using an integrated three-way financial model.
Interpret forecast Profit & Loss, Balance Sheet and Cash Flow results.
Assess the impact of forecast performance on liquidity, leverage and repayment capacity.
Apply Sensitivity and Scenario Analysis
Test changes in key forecast drivers including revenue, margins, costs, interest rates and working capital.
Assess how downside movements affect cash flow, liquidity, covenant compliance and debt servicing capacity.
Identify the assumptions and financial indicators most likely to increase credit risk.
Apply Forecast Insights to Credit Assessment and Structuring
Align facility structure and repayment terms with the borrower’s projected cash flow and repayment capacity.
Identify appropriate covenants, conditions and monitoring requirements arising from forecast analysis.
Use forecast insights to support a balanced and well-reasoned credit recommendation.
