Commercial loan financial analysis is a process wherein different resources are analyzed in terms of the loan that has been taken and the related decision making process is enhanced. This analysis essentially deals with the work sheets, formulas and guidelines that are required for the particular loan concerned. It is important to understand the nature of the commercial loan that is largely taken up by small and large corporations for various reasons. The process involves looking at the qualitative and quantitative aspects of the loan and the analysis procedure as well.

This is not purely a mathematical process as it is also used for revealing the different financial aspects of the loan. Hence, it is quite an exhaustive process and must be done in a careful and meticulous manner. The analysis is conducted so that it can be applied in practical areas both while on the job or during other relevant analysis. This is a comprehensive look into the fundamentals of borrowing and lending of a large sum of money for different commercial purposes.

Sample Commercial loan financial Analysis

Financial Institution: Gloria World Bank

Borrowing Company: Sea Face Pvt. Ltd.

Purpose of Borrowing Loan: For production of new product (Model: 12233)

Loan Amount: $234,000

Determination of Loan: The cash flow is an important factor in determining repayment ability of the company. Statement of Cash Flows will be required before any suitable decision can be made.

The company must also produce:

Fund Sources:

  • Revenue on the Income Statement
  • Increased Equity due to payment of capital
  • Decrease of Assets or payment receipt
  • Increased Liabilities due to other loans

Fund Usage:

  • Loss stated in the Income Statement and the Expenses
  • Assets increase due to purchase of equipment
  • Liabilities decrease due to payment of loan
  • Equity decrease due to payment of dividend

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