"Just Right" Credit Training for Branch Bankers




Banks who prepare branch staff to engage in conversations with business owners are at a key advantage in gaining additional wallet share. Research shows getting the whole relationship, both business and personal, is three or more times more profitable than having just the consumer relationship.

Building staff confidence and competence to engage with business owners often involves providing some credit training. In most cases, the deep knowledge and skill levels needed to dissect financial statements and tax returns and know as much as the underwriter, is unnecessary and overkill for branch managers (and can overwhelm a novice). The “Just Right” level provides bankers with training to know just enough about financial issues that they are comfortable talking to customers about their business and don’t get lost in or intimidated by the conversation.

What combo is “Just Right”?

Accounting – Many branch bankers and retail lenders have taken an accounting class. If so, do they really need to go through debits and credits, again? The answer is no. What is really important is understanding the difference between cash and accrual accounting, how the income statement and balance sheet connect through retained earnings. and the difference between compiled, reviewed and audited statements. You don’t need a semester of accounting to understand this. Even those who have never had an accounting class can readily grasp these basic concepts.
Industry and Business Risk – Branch staff engaging with business customers need to know some basic differences between wholesalers, retailers, manufacturers and service companies to feel comfortable talking to a business owner about their business strategy and future plans.

Corporate Structure – Bankers need to understand some basics on corporate structure to see how cash flows from the owner’s business to them personally. Doing so can provide baseline confidence. to begin formulating good questions about business and personal cash flows.

Financial Statement Analysis – Branch bankers don’t need to know every single financial ratio to get into meaningful conversations with the customer about their financial statements. A thorough grounding in six ratios that drive cash flow can give them confidence and enable them to have very good conversations with their customers: sales growth, gross profit margin, operating profit margin, accounts receivable days, inventory days and accounts payable days.

Cash flow analysis training in the beginning should be limited to the debt service coverage ratio and how to read a cash flow statement. More complicated cash flow analysis is typically done by underwriting.

Loan structuring should be limited to understanding the asset conversion cycle, why businesses borrow short term and long term, and the loan products the bank has to meet those needs.

Commercial real estate should be limited to basic information about the cash flows and structuring options for owner occupied vs developer real estate loans.

That’s it.

More sophisticated training in financial statement analysis, cash flow analysis, tax returns, loan structuring and real estate risks can come after bankers have used the basic skills for some time.

Getting Started:
Training – Many of our customers find a “Just Right” training combo blends e-learning with classroom follow up on technical training to practice and refine skills. Classroom training should enhance, not replicate, the e-learning. Realistic case studies and role-plays enable participants to practice the skills they learned. Some organizations may have unworkable logistical considerations or simply lack the training dollars to do follow-up classroom training. In those circumstances, at a minimum, the follow up can be done virtually.

This “Just Right” combo provides credit essentials and follow up to give participants the confidence to talk with customers and prospects about their businesses and financial needs.

Written by Tom Carlin, Managing Partner at Eensight.


About the author

Tom Carlin

Tom Carlin is a Managing Partner at Eensight, offering e-learning and classroom based credit training programs for the financial services industry. He has worked with major financial institutions and regulatory agencies over the last thirty years. Tom is an instructor at the ABA’s Stonier School of Banking, and he is the author of two books, “Consumer Lending”, published by The Center for Financial Training in 2015 and “Financial Statement Analysis” published by the American Bankers Association in 1994.

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