I work as a certified professional bookkeeper with veterinary clinics. The video is very informative, however I would add a couple minor corrections to the Working Capital Ratio. The ratio as you suggested measures overall current assets vs current liabilities + current portion of long term debt. If you want a stricter definition of cash liquidity for debt service, I would suggest the Cash Ratio or the Quick Ratio (although that does take receivables into account). The Receivables Turnover Ratio (COGS or Sales vs. Average Inventory) and Days Sales Outstanding (DSO) combined with the Cash Ratio (Cash + Cash Eqv. vs Current Liabilities) would probably give you a better outlook on a business's cash liquidity position. Again, I would like to stress the video is very informative -- Kudos :)
I always thought working capital = current assets - current liability, and current assets/current liability = current ratio. But thanks for the video :)
Part 2 of the 10 Commercial Banking Terms You Need to Know is now up, see the link below! Thanks for your support. th-cam.com/video/BlfcshR2a7U/w-d-xo.html
Great work on your channel regarding commercial banking. There is a dearth of commercial banking YT channels, while IB channels are dime-a-dozen. In reality, commercial banking is as relevant as IB or even more. All the best. Keep the videos flowing.
Thank you! I agree, lots of stuff to cover regarding commercial banking and there are so many people working in the sector. If you have any video topic suggestions please let me know!
Might be worth doing a video on the different types of loans (term, bridge, etc.) and FCCR. Also would be nice to see some financial modeling content as well if possible
I just found your page as I had just started a job as a Commercial Loan Support Specialist from being a Bank Teller. I’ve been so lost couldn’t keep up with all the new information at my new job. Your videos have been a god send and I’m so glad I found you! Thank you!
1:00 summary of terms: - amortization - term - balloon payment - interest rate - covenant - debt service coverage - working capital ratio - borrowing base - loan-to-value, LTV
Usually a loan broker can provide an opinion on an existing agreement and provide feedback. If you are based in Canada, I can refer you to some people I work with. Please LMK.
in 22:00 , for the interest on debt on the numerator, is this the total interest the company pays for all outstanding debt ? and second to that , the denominator sum of interest, is that also total interest or simply interest specific as it relates to the loan only ?
Does the amount of interest being PIK-ed apply to the increase in a floating interest rate? I assume it would seeing as the principal amount is increasing in this case - meaning more risk?
It would be great to see you pull apart a central bank balance sheet to see which are the most informative metrics to keep an eye on.... Also if you've never heard of the book new paradigm in macroeconomics you'll thank me down the line
Ha if I had that time, this is probably something I would do. In the meantime, thanks for the book recommendation, I have added it to the list, sounds interesting.
@@financekid3163Put it to the top of the list I guarantee it blows your mind. He even had issues getting it published as it uses empirical research to bring much of what we think we know about money and credit into disrepute. Your far better versed than me so I think it's going to have a profound impact on your future outlook.
Great video! I just had a question regarding the WCR, you said a low WCR means a business is struggling to convert sales/receivables into cash. But even if that’s the case, i don’t see how that’s reflected in the WCR as higher accounts receivables would still increase the WCR even if they’re not converted into cash?
Great question, think of a typical sale. I sell a product, 1) I incur an expense from the supplier side & pay my staff (AP increases), 2) I use up resources to sell the product (Inventory decreases) and 3) I finance the purchase so AR increases. Over time, if AR builds up and I dont have cash to finance AP or INV either my WC declines because I cant sell more or my AP increases as well because I need to rely on supplier financing which offsets the increase in AR. Its a downwards cycle. However, yes in the short term you may see AR increasing for a period of time which falsely looks like WCR is increasing. Thats why most bankers look at multiple periods of AR to check if past accounts have converted to cash or not. Good question BTW!
Hey ! During LBOs the debt r usually balloon payments right? Also majority of the companies that get LBOd usually refinance that debt while paying balloon payment right?
Usually there is a balloon payment yes because the amortization is longer than the term. Most cash flow loans (used in LBOs) will have a term of 3-7 years while amortization, in current market, is in the 7-10 year range so there is usually a balloon payment to deal with. Yes balloon payments are usually refinanced, lenders call it "blend and extend" where groups of refinanced loans are grouped together and extended into a new single loan facility.
Also, I would love to see a video of a DCF step by step valuation of a private company because there aren’t any that I’ve been able to find. This is because I’m interested in private business valuation so a video on that would be awesome.
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I work as a certified professional bookkeeper with veterinary clinics. The video is very informative, however I would add a couple minor corrections to the Working Capital Ratio. The ratio as you suggested measures overall current assets vs current liabilities + current portion of long term debt. If you want a stricter definition of cash liquidity for debt service, I would suggest the Cash Ratio or the Quick Ratio (although that does take receivables into account). The Receivables Turnover Ratio (COGS or Sales vs. Average Inventory) and Days Sales Outstanding (DSO) combined with the Cash Ratio (Cash + Cash Eqv. vs Current Liabilities) would probably give you a better outlook on a business's cash liquidity position. Again, I would like to stress the video is very informative -- Kudos :)
I always thought working capital = current assets - current liability, and current assets/current liability = current ratio. But thanks for the video :)
Part 2 of the 10 Commercial Banking Terms You Need to Know is now up, see the link below! Thanks for your support.
th-cam.com/video/BlfcshR2a7U/w-d-xo.html
Great work on your channel regarding commercial banking. There is a dearth of commercial banking YT channels, while IB channels are dime-a-dozen. In reality, commercial banking is as relevant as IB or even more. All the best. Keep the videos flowing.
Thank you! I agree, lots of stuff to cover regarding commercial banking and there are so many people working in the sector. If you have any video topic suggestions please let me know!
Could you make a video explaining the loan docs?
Might be worth doing a video on the different types of loans (term, bridge, etc.) and FCCR. Also would be nice to see some financial modeling content as well if possible
Good idea! I will add it to the list. Thanks.
Love the channel bro. Helps a lot
wow bro does this video have enough commercials?
I just found your page as I had just started a job as a Commercial Loan Support Specialist from being a Bank Teller. I’ve been so lost couldn’t keep up with all the new information at my new job. Your videos have been a god send and I’m so glad I found you! Thank you!
Thanks for watching! I am glad to hear it was helpful.
Thank you very much
Took you some time to post a new video! 😉 Happy new year
1:00 summary of terms:
- amortization
- term
- balloon payment
- interest rate
- covenant
- debt service coverage
- working capital ratio
- borrowing base
- loan-to-value, LTV
Where can a borrower go to find someone who can advise and review a commercial loan agreement
Usually a loan broker can provide an opinion on an existing agreement and provide feedback. If you are based in Canada, I can refer you to some people I work with. Please LMK.
in 22:00 , for the interest on debt on the numerator, is this the total interest the company pays for all outstanding debt ? and second to that , the denominator sum of interest, is that also total interest or simply interest specific as it relates to the loan only ?
Does the amount of interest being PIK-ed apply to the increase in a floating interest rate? I assume it would seeing as the principal amount is increasing in this case - meaning more risk?
It's a good beginner to learn banking business. Here to learn banking nuances for an upcoming assignment for a banking customer
It would be great to see you pull apart a central bank balance sheet to see which are the most informative metrics to keep an eye on.... Also if you've never heard of the book new paradigm in macroeconomics you'll thank me down the line
Ha if I had that time, this is probably something I would do. In the meantime, thanks for the book recommendation, I have added it to the list, sounds interesting.
@@financekid3163Put it to the top of the list I guarantee it blows your mind. He even had issues getting it published as it uses empirical research to bring much of what we think we know about money and credit into disrepute. Your far better versed than me so I think it's going to have a profound impact on your future outlook.
Great channel and great video! Do you have any book recommendations to learn more about commercial banking?
Great video! I just had a question regarding the WCR, you said a low WCR means a business is struggling to convert sales/receivables into cash. But even if that’s the case, i don’t see how that’s reflected in the WCR as higher accounts receivables would still increase the WCR even if they’re not converted into cash?
Great question, think of a typical sale. I sell a product, 1) I incur an expense from the supplier side & pay my staff (AP increases), 2) I use up resources to sell the product (Inventory decreases) and 3) I finance the purchase so AR increases. Over time, if AR builds up and I dont have cash to finance AP or INV either my WC declines because I cant sell more or my AP increases as well because I need to rely on supplier financing which offsets the increase in AR. Its a downwards cycle. However, yes in the short term you may see AR increasing for a period of time which falsely looks like WCR is increasing. Thats why most bankers look at multiple periods of AR to check if past accounts have converted to cash or not. Good question BTW!
Hey ! During LBOs the debt r usually balloon payments right? Also majority of the companies that get LBOd usually refinance that debt while paying balloon payment right?
Usually there is a balloon payment yes because the amortization is longer than the term. Most cash flow loans (used in LBOs) will have a term of 3-7 years while amortization, in current market, is in the 7-10 year range so there is usually a balloon payment to deal with. Yes balloon payments are usually refinanced, lenders call it "blend and extend" where groups of refinanced loans are grouped together and extended into a new single loan facility.
Great stuff. Thanks for putting this out there
Also, I would love to see a video of a DCF step by step valuation of a private company because there aren’t any that I’ve been able to find. This is because I’m interested in private business valuation so a video on that would be awesome.
Coming soon! However for private company valuations, DCFs are not the most effective method of valuation. Stay tuned for that video.
@@financekid3163 Sounds awesome bro
Hey man do you offer career coaching services?
No sorry, this would not be my expertise. I might do a Q&A video on my commercial banking career one day so maybe that will help you out.