Commercial Loan Annual Credit Review

Annual inspection template for reviewing borrower financial performance, covenant compliance, collateral status, and relationship risk rating for commercial lending relationships.

Review Scope and Borrower Identification

• Borrower legal name and relationship type confirmed
  Record the legal borrower name, related entities reviewed, and whether the relationship is operating company, holding company, or guarantor-based.
• Review period and due date verified
  Confirm the annual review date, statement dates used, and whether the review is current within policy requirements.
• Loan type and current exposure documented
  Document facility type, commitment amount, outstanding balance, and any unused availability.
• Prior review exceptions carried forward and resolved
  Verify whether prior exceptions, waivers, or action items have been closed or remain outstanding.

Financial Performance Review

• Current financial statements received and reviewed
  Confirm receipt and review of current-year financial statements, interim statements, and tax returns as required by policy.
• Revenue, EBITDA, and net income trend assessed
  Summarize year-over-year trend analysis and note material changes in profitability or cash flow.
• Liquidity and working capital position evaluated
  Document current ratio, quick ratio, cash balance, and working capital adequacy relative to obligations.
• Debt service capacity remains acceptable
  Rate the borrower's ability to service debt based on cash flow, leverage, and coverage metrics.
• Material adverse changes identified
  Indicate whether any material adverse change in operations, market conditions, litigation, or management has been identified.
• Borrower financial statements show going-concern or audit concerns
  Flag any going-concern language, qualified opinions, scope limitations, or other audit concerns requiring escalation.

Covenant Compliance and Exceptions

• Financial covenants tested against required thresholds
  Verify compliance with leverage, debt service coverage, liquidity, tangible net worth, or other financial covenants.
• Reporting covenants satisfied on time
  Confirm required borrowing base certificates, financial statements, tax returns, and compliance certificates were delivered on time.
• Covenant exceptions documented and approved
  List any covenant breaches, waivers, amendments, or temporary exceptions and identify approval authority.
• Borrowing base or collateral reporting remains accurate
  Confirm borrowing base calculations, inventory/receivables reporting, and collateral eligibility are accurate and supportable.
• Covenant testing date and source documents recorded
  Document the measurement date, source statements, and any adjustments used in covenant calculations.
• Covenant compliance status
  Overall covenant status for the review period.

Collateral, Guarantor, and Credit Support

• Collateral values and lien position reviewed
  Document collateral type, latest valuation or appraisal date, and lien priority status.
• Insurance coverage remains in force and adequate
  Verify required property, casualty, liability, flood, or other insurance is current and lender interests are properly evidenced.
• Guarantor financial support remains sufficient
  Assess whether guarantor strength continues to support the exposure.
• Collateral perfection and UCC filings verified
  Confirm lien filings, perfection status, and any required renewals or continuations are current.
• Appraisal, valuation, or collateral review is current
  Confirm the latest appraisal, valuation, or collateral review meets policy timing requirements.

Payment History, Credit Updates, and Risk Rating

• Payment history reviewed for delinquencies or defaults
  Review payment performance, past due status, and any default events during the review period.
• External credit reports and public records reviewed
  Confirm updated credit bureau, litigation, bankruptcy, lien, judgment, or adverse news checks were completed where required.
• Relationship risk rating remains appropriate
  Rate the current relationship risk based on financial performance, collateral, management, industry, and repayment behavior.
• Risk rating change justified and approved
  If the risk rating changed, document the rationale, approval authority, and effective date.

Conclusion, Actions, and Sign-Off

• Overall review conclusion
  Select the final disposition of the annual credit review.
• Corrective actions and due dates documented
  List all follow-up items, responsible parties, and target completion dates.
• Reviewer signature
  Signature of the credit officer, analyst, or reviewer completing the annual credit review.
• Review completion timestamp
  Record the date and time the review was completed and submitted.