INTRODUCTION
The
overall goal of this course is to build analytic skills needed to evaluate
the credit standing of small and medium sized enterprises. The training will
demonstrate how to combine a qualitative assessment of the company and its
management with a quantitative analysis of its performance.
COURSE OBJECTIVES
·
By the end of
this course the participants will be able to:
·
Apply a structured approach to assess the
creditworthiness of a small or medium sized company
·
Evaluate the commercial viability of the
business model and management’s ability to deliver to plan
·
Assess the performance of a SME company based on
qualitative and quantitative frameworks and tools
·
Use a cash flow approach to ascertain a
company’s ability to service/refinance its debt as it comes due
·
Understand the key funding sources available to
SMEs
WHO SHOULD ATTEND
Anyone
with an interest in building or further enhancing analytic skills needed to
assess SME exposures: Financial professionals in a credit risk, asset
investment or relationship management role, as well as those engaged in the
assessment of counterparty risk from an underwriting viewpoint or trade debtor
exposure. Regulators or those in a supervisory role with an interest in
understanding the underlying credit assessment needed in the organizations or
departments they assess. Participants are expected to be familiar with
financial statements.
DURATION
5 Days
COURSE CONTENT
Module 1 Analytic Overview
Introduction
of the four-step approach to any risk exposure: Purpose of transaction, sources
of repayment, risks to repayment and the structure of debt or exposure needed
to safeguard repayment.
Application: Identify
the true purpose of borrowing, the source(s) and risk of repayment, and the
expected structure of the debt for several SME companies using company
descriptions and key financials
Macro Considerations
· Macro risks in the
operating environment and industrial or service sector a borrower operates in.
· Location: Country risk
and market where a borrower operates
·
Sector: Competitive intensity of the sector a
borrower operates in – structure, key players, basis of competition, risk of
new entrants, substitution and relative bargaining power of buyers and
suppliers
·
Long-term growth potential and volatility of
demand
·
Application: Illustration case study
provided as pre-course material
·
Application: Identify asset configurations,
funding structures and earnings of SME companies in different sectors
Management and Ownership
·
The role and strategy of the management team as
well as the influence and control of shareholders are assessed.
·
Different types of SME ownership; owners’ and
stakeholders’ support and influence
·
Owner competence and integrity; potential effect
on the company’s creditworthiness
·
Management’s business and financial strategy and
performance goals
·
Quality of financial reporting and management
information
·
Application: Illustration case study
provided as pre-course material
Module 2 Business Profile
·
Understanding a company’s business strategy in the
context of sector, country of operation and shareholder requirements.
·
Diversity of services/products, geographical
markets, customer and suppliers.
·
Competitive position: ‘Unique selling points’
and a company’s relative market position. Comparative size and possible
operating efficiencies.
·
Sector-specific success factors that need
addressing.
·
Application: Illustration case study
provided as pre-course material.
Financial Profile –
Cash Flow and Profitability
·
Assessment of the quality and stability of earnings
and cash flows from operations needed to finance operations and capital
investments (‘Business Risk’).
Earnings and cash flow
·
Internal and/or external factors impacting
revenues and core profitability
·
Impact on performance by non-operating items
·
Looking beyond EBITDA at sustainability of funds
flow from core operation (e.g. funds from operations – before changes in
working capital)
·
Application: Illustration case study using
additional financial ratio and, where possible, sector peer information
·
Potential additional application: Derive a
cash flow statement based on a SME’s balance sheet and profit and loss
statement
Financial Profile – Cash Flow and Profitability
·
Asset investment and efficiency
·
Working capital management, cash conversion
cycle and supplier finance
·
Application: Comparison of cash conversion
of companies operating in the same sector
·
Cash flow impact of the company’s working
capital management stability of cash flow from operations
·
Expansion or replacement asset investment in
on-balance sheet fixed and intangible assets
·
Industry-specific utilization measures and
off-balance sheet ‘assets’
·
Application: Illustration case study using
additional financial information
Financial Profile – Funding Structure and Financial Flexibility
·
Evaluation of the appropriateness of a company’s
funding structure and ability to service its financial obligations (‘Financial
Risk’).
·
Capital structure and funding instruments used
·
SME dependency on short term bank finance
·
Alternative asset-based financing
·
Potential effect of withdrawal of credit
insurance, supplier credit or shareholders loans on a SME’s financial position
·
Financial leverage
·
Application: Illustration case study using
additional financial information
Financial Profile – Financial Flexibility
·
Debt service capability: Affordability of the
level of debt – meeting interest and debt repayments obligations (debt service)
from internally generated cash over the past years and based on future cash
flow available for debt service.
·
Application: Assessment of the capital
structure and debt service capability for several SME companies.
·
Foreign exchange exposure, hedging strategies
and potential impact on cash flow and debt servicing capability.
·
Refinancing risk and liquidity: Ability to meet
short-term financial obligations as they fall due from current operations. The
impact of short-dated debt maturity profiles of SMEs.
·
Seasonal need of funding and the use of account
information to detect liquidity problems.
·
Application: Illustration case study using
additional financial ratio and sector peer information.
Module 3 Debt Structure
·
Overview of main elements of debt structures
used in SME financing.
·
Exposure profile: The appropriateness of the
structure in terms of amount, currency, maturity and type of financial instrument
(or commercial exposure)
·
Ranking vs. other obligors: Legal, structural
and constructive subordination
·
Collateral and personal guarantees used to
achieve seniority
·
Impact of shareholder loans on lenders – the use
of subordination/inter-creditor agreements
·
Safeguards: The use of documentation and
covenants to mitigate risk
·
Credit pricing: The risk – return profile of the
transaction
·
Exercises and examples
GENERAL
NOTES
·
This course is delivered by our seasoned trainers who have
vast experience as expert professionals in the respective fields of practice.
The course is taught through a mix of practical activities, theory, group works
and case studies.
·
Training manuals and additional reference materials are
provided to the participants.
·
Upon successful completion of this course, participants will
be issued with a certificate.
·
We can also do this as tailor-made course to meet
organization-wide needs. Contact us to find out more: training@skillsforafrica.org
· The training will be conducted at SKILLS FOR AFRICA TRAINING
INSTITUTE IN NAIROBI KENYA.
· The training fee covers
tuition fees, training materials, lunch and training venue. Accommodation and
airport transfer are arranged for our participants upon request.
·
Payment should be sent to our bank account before start of
training and proof of payment sent to: training@skillsforafrica.org
Dates | Fees | Location | Apply |
---|---|---|---|
09/09/2024 - 13/09/2024 | $1500 | Nairobi |
Physical Class Online Class |
14/10/2024 - 18/10/2024 | $2950 | Kigali |
Physical Class Online Class |
11/11/2024 - 15/11/2024 | $1500 | Mombasa |
Physical Class Online Class |
09/12/2024 - 13/12/2024 | $1500 | Nairobi |
Physical Class Online Class |