Definition
A credit memo (or credit memorandum) is a formal document prepared by a lender that summarises a borrower's financial health, risk profile, and the lender's recommendation to approve, decline, or conditionally approve a loan. It is the core output of the credit underwriting process and serves as the official record for credit committee review.
Frequently asked questions
- What is a credit memo in commercial lending?
- A credit memo in commercial lending is a structured document that presents a borrower's financial analysis, risk assessment, and loan recommendation to a credit committee. It includes financial ratios, cash-flow analysis, collateral assessment, and the underwriter's recommendation.
- How long does it take to write a credit memo?
- Manually, writing a credit memo typically takes 4–8 hours per deal, depending on complexity. AI-powered tools like Crediflow can generate a complete, lender-branded credit memo in under 10 minutes by automating financial spreading and analysis.
- What should a credit memo include?
- A credit memo should include: borrower overview, purpose of the loan, financial analysis (income statements, balance sheets, cash flow), key ratios (DSCR, LTV, current ratio), collateral assessment, risk factors, covenant recommendations, and the underwriter's final recommendation.
- Can AI write a credit memo?
- Yes. AI credit underwriting platforms like Crediflow can generate a complete credit memo by ingesting financial documents, spreading the data automatically, running ratio and cash-flow analysis, and producing a lender-branded memo with full audit trail — reducing a multi-hour task to minutes.
- What is the difference between a credit memo and a loan application?
- A loan application is submitted by the borrower requesting credit. A credit memo is prepared by the lender's underwriting team after analysing the borrower's financial documents — it is an internal document recommending whether to approve the loan.
- How does Crediflow automate credit memo generation?
- Crediflow ingests financial statements and tax returns in any format, automatically spreads and analyses the data, runs DSCR, LTV, and ratio analysis, then generates a customisable credit memo in under 10 minutes — reducing underwriting time by 90% compared to manual processes.