Writing a Credit Memo & Presenting to Loan Committee

Everything this platform teaches about underwriting -- reading a rent roll, sizing a loan, stress-testing NOI -- eventually has to be written down and defended in front of people who didn't work the deal. That document is the credit memo, and writing one well (and then presenting it to a loan committee that will look for exactly what it's underselling) is its own distinct, learnable skill, separate from the underwriting math itself.

A credit memo isn't a free-form essay -- it's organized, explicitly or implicitly, around the 5 Cs of Credit, a framework nearly as old as commercial lending itself:

Character -- the sponsor's track record, reputation, and integrity: has this sponsor done deals like this before, and delivered on what they said they would?

Capacity -- the ability to service the debt: both the property's cash flow (DSCR, debt yield) and the sponsor's own financial capacity to support the deal if the property underperforms.

Capital -- the sponsor's own equity contribution and net worth: how much of their own money is actually at risk in this deal, and do they have the balance sheet to weather a problem?

Collateral -- the property's value and marketability: if the loan has to be recovered through the collateral, how liquid and defensible is that value really?

Conditions -- the market and economic environment: is this a loan being made into a strengthening market and a supportive rate environment, or against the grain of both?

A well-written memo doesn't just recite facts under each heading -- it makes an explicit argument for why the combination of the five, taken together, supports approval, and is honest about where any one of them is weaker than the others.

The single most scrutinized section of a real credit memo is risk factors and mitigants: a candid list of what could go wrong with the deal, paired with the specific structural or underwriting response to each one. A memo that only lists strengths and glosses over weaknesses reads as either naive or dishonest to an experienced committee -- the strongest memos actively surface the deal's real risks (a rollover cliff, a thin sponsor balance sheet, a softening submarket) and show exactly how the structure (a reserve, a lower leverage point, a personal guaranty, a shorter term) addresses each one. This is the section where an underwriter's judgment, not just their spreadsheet, is actually on display.

Presenting to loan committee is not reading the memo aloud. Committee members -- credit officers who didn't work the deal -- are specifically listening for what the memo might be underselling, and the strongest presenters anticipate the two or three hardest questions before anyone asks them, addressing them proactively in the presentation rather than getting caught flat-footed. Common hard questions worth preparing for: 'What's the sponsor's Plan B if the lease-up takes twice as long as underwritten?' 'What have comparable deals in this submarket actually done in the last downturn?' 'Why is this leverage point right, not just the maximum the numbers happen to support?' A presenter who has already thought through the committee's likely objections builds far more credibility than one who is visibly encountering the question for the first time.