Loan origination
The credit memo writes itself — the credit officer still owns the file. On a middle-market C&I deal, an underwriter spends ~60% of their time on assembly: spreading, pulling comparables, mapping covenants to policy, formatting the memo. Agents do the assembly and draft the memo with every covenant cited against the policy clause and the closest comparable in your book. The credit committee still approves.
Where the assembly goes
- Assembly (spread, comps, format)60%
- Judgment (rating, covenants, exceptions)25%
- Client & relationship15%
- Assembly (spread, comps, format)25%
- Judgment (rating, covenants, exceptions)55%
- Client & relationship20%
LO-2026-08842 · Meridian Industrial Components, Inc.
Purpose · Refinance existing senior debt ($14.2M, maturing Sep-2026), fund $5.8M plant-automation capex, and consolidate $2.5M of working-capital lines into a committed revolver.
| FY23 | FY24 | FY25 | LTM | |
|---|---|---|---|---|
| Revenue | $48.2M | $52.1M | $58.7M | $61.4M |
| Gross margin | 28.4% | 29.1% | 30.6% | 31.2% |
| EBITDA | $6.4M | $7.1M | $8.9M | $9.6M |
| EBITDA margin | 13.3% | 13.6% | 15.2% | 15.6% |
| Capex | $1.1M | $1.4M | $2.0M | $5.8M |
| Free cash flow | $4.2M | $4.6M | $5.7M | $2.4M |
| Total debt | $13.8M | $14.5M | $14.2M | $22.5M |
| Debt / EBITDA | 2.16× | 2.04× | 1.60× | 2.34× |
| Interest coverage (EBITDA / Int.) | 6.8× | 7.4× | 8.1× | 5.9× |
| DSCR (LTM pro-forma) | — | — | — | 1.42× |
- Refi existing senior debt$14,200,000
- Plant automation capex (2 cells)$5,800,000
- Working-capital line consolidation$2,500,000
- Senior secured term loan (this facility)$18,000,000
- Revolver — committed (this facility)$4,500,000
| Deal | Size | Rating | Pricing | DSCR | Leverage | Vintage | Outcome | Weight |
|---|---|---|---|---|---|---|---|---|
CMP-2024-0612 Tier-2 stamping shop · Indiana | $19.5M | 4 (Pass) | SOFR + 295 | 1.38× | 2.4× DEBT/EBITDA | 2024 | Performing | 92% |
CMP-2023-1108 Precision machining · Wisconsin | $22.0M | 4 (Pass) | SOFR + 285 | 1.45× | 2.1× DEBT/EBITDA | 2023 | Performing | 88% |
CMP-2023-0418 Aero-fabrication · Ohio | $25.0M | 5 (Pass/Watch) | SOFR + 325 | 1.28× | 2.8× DEBT/EBITDA | 2023 | Risk-rated down | 71% |
CMP-2022-0903 Tool & die · Michigan | $16.5M | 4 (Pass) | SOFR + 275 | 1.52× | 1.9× DEBT/EBITDA | 2022 | Refi at maturity | 64% |
- Within policyDSCR minimum≥ 1.30×, tested quarterly on rolling 4QPolicy clauseCCP-4.2 §3a — Senior secured C&I DSCR floor
C&I senior secured facilities $10–50M require minimum DSCR of 1.25× at origination, stepping to 1.30× by end of year 1.
Closest comparableCMP-2024-0612 (1.38× actual)Closest sector-match · same risk rating
Agent rationalePro-forma DSCR 1.42× provides 12 pp cushion to the proposed 1.30× floor. Two of three sector comparables hold ≥1.38×. Tighter than CCP-4.2 origination minimum but consistent with how the credit committee priced 2024 vintage.
- Tighter than policy floorTotal leverageDebt/EBITDA ≤ 2.75×, step-down to 2.50× by Q4 2027Policy clauseCCP-4.2 §3b — Maximum leverage
Maximum 3.25× DEBT/EBITDA for risk-rated 4 borrowers in cyclical industrial sectors. Step-downs required when capex spike is bridged by senior debt.
Closest comparableCMP-2023-1108 (2.1×) / CMP-2023-0418 (2.8×)Step-down structure matches 2023 cohort
Agent rationaleClosing leverage 2.34× is inside policy. The step-down to 2.50× by Q4 2027 mirrors the structure used for CMP-2023-1108. CMP-2023-0418 (no step-down, 2.8× held) is the comparable that risk-rated down — the agent flags this as the structural lesson to preserve here.
- Within policyCapex capMaintenance capex ≤ $2.5M / yr; growth capex requires lender consent above $1.0MPolicy clauseCCP-4.2 §3d — Capex governance for refi-with-capex deals
When a refinance bundles growth capex >20% of facility, growth-capex consent rights are required.
Closest comparableCMP-2023-1108 ($1.5M maint. / consent at $1.0M)Identical structure on a same-sector deal
Agent rationaleCapex composition shifts from $2.0M (LTM) to $5.8M closing — the $3.8M lift is single-event automation, not run-rate. Cap separates maintenance from growth; consent threshold matches CMP-2023-1108.
- Concentrations flagSector concentration exceptionBank book exposure to NAICS 332710 currently 4.1% — within 5.0% limit but adds $18M to a tight bucket.Policy clauseCCP-7.1 §2 — Single-NAICS concentration ceiling
Aggregate exposure to a single 6-digit NAICS code must remain ≤5.0% of total C&I outstandings.
Closest comparablePortfolio-level check · Bank Loan PortfolioHeadroom: 0.9% (~$42M) at current outstandings
Agent rationaleClosing this deal lifts NAICS 332710 share from 4.1% to ~4.4%. Within policy but the agent surfaces it for the Concentrations Committee log; no exception requested.
- 1Documents extracted & spread
Pulled 3 yrs audited financials (PwC) + LTM management accounts. Spread into bank's standard template. EBITDA reconciled to add-backs schedule; one $0.4M non-recurring legal cost normalized.
- 2Comparables retrieved
Queried bank's loan portfolio for closing 2022–2024 in NAICS 332710 ± adjacent. 4 matches retrieved, weighted by sector, size, vintage, and risk rating proximity.
- 3Policy mapped to deal structure
Each proposed covenant tied to a Commercial Credit Policy clause (CCP-4.2, CCP-7.1). One exception surfaced: NAICS concentration moves from 4.1% to 4.4% — within ceiling, logged to Concentrations Committee.
- 4Risk rating modelled
Recommended risk rating 4 (Pass). PD model output 0.78%; LGD 32% (secured). Three-of-four comparables in same bucket hold rating; the fourth (CMP-2023-0418) downgraded to 5 — root cause was no leverage step-down, which this draft includes.
- 5Credit memo drafted
8-paragraph memo drafted with every covenant, rating component, and exception linked back to source. Posted to nCino case file as v0.1 draft. Credit Officer reviews, edits, and presents to Credit Committee. Agent will NOT approve — human owns the file.
Memo will draft after the agent completes its analysis.
Financials spread against the bank's template. Comparables retrieved from the bank's own loan book. Memo drafted with every covenant grounded in a policy clause and the closest comparable. Posts as v0.1 to nCino.
Credit Officer owns the file and edits the draft. Credit Committee approves every deal — no agent recommendation auto-funds. Risk Rating model output is governed under SR 11-7; the Officer signs the rationale.
Every recommended term links back to the policy clause (CCP-4.2, CCP-7.1, …) and the comparable that informed it. Defensible to a credit committee, an OCC Heightened Standards review, and an SR 11-7 model-governance audit.