FINPACK offers a wealth of tools and functionality, and it can be hard to know where to start. Our step-by-step guide offers a broad overview of the tools and the best way to approach credit analysis in FINPACK. You’ll find links throughout to more detailed guides for each section as well as our white paper in the FINPACK Knowledge Base.
Data Sources
Everything in FINPACK begins with the Data Sources. The first step in using FINPACK is to gather the information your client has provided, then decide which data source you will use to get that information into FINPACK — Detailed or Summary Balance Sheets, Tax Forms, or Income Statements. For Balance Sheets, you can choose to complete a detailed Balance Sheet or opt for a Summary Balance Sheet. Your decision will depend on the amount and quality of the information you have access to, and the kinds of analysis you plan to do. For tax forms, you can enter Schedule Cs, Es, Fs, and K-1s, and Forms 1040s, 1065s, and 1120s. The data entry for each of these matches its respective tax form layout. Tax Forms allow you to complete analyses such as Schedule F Cash to Accrual, C & I Business Analysis, and Global Cash Flow. You can also calculate Debt Coverage directly on the tax-form input. Finally, FINPACK also allows you to enter data in the format of an income statement you might receive from a client. The income statement layout in FINPACK allows for the entry of pro forma, accountant-reviewed, or internally prepared statements.
Financial Analysis Tools
Once data sources are entered into FINPACK, the next step is to decide which Financial Analysis tool(s) you are going to use. These tools are used to analyze the past performance of the particular client. FINPACK has specific Financial Analysis tools available for agricultural and commercial customers. In an Ag file, tools include Earned Net Worth Analysis, Schedule F Cash to Accrual Analysis, or Global Cash Flow. Commercial Credit Analysis tools allow you to use the balance sheet and income statement information received from a commercial business client to analyze past performance. Tools available for commercial credits include C & I Business Analysis, Commercial Real Estate Analysis, Earned Net Worth Analysis, and Global Cash Flow Analysis. Earned Net Worth Analysis and Global Cash Flow Analysis function exactly the same for agricultural or commercial credits.
Projections
At this point, you have entered Data Sources into FINPACK, and you’ve completed your look at your client’s past performance with the program’s Financial Analysis tools. The next step is to predict what you can expect for your client’s financial situation in the near future. Cash flow projections are used to project the customer’s expected performance for the coming year. Typically cash flow projections are completed annually during renewal season. You may complete a single year projection or build out a multi-year plan. These projection tools can be used to review repayment capacity for the coming year and during times of great uncertainty to give a clearer picture of expected outcomes for the customer.
Credit Analysis
Finally, FINPACK provides users with several valuable credit analysis tools. Each of these tools provides the user with a great degree of flexibility to best fit their unique credit culture. FINPACK’s Collateral Analysis tool allows the financial institution to determine the best collateral analysis approach for their needs. The Risk Reports (or Risk Rating) tool in FINPACK is designed to be customized and allows the user to replicate the current risk rating model already established by the lending institution. A variety of data, both numbers and ratios, from FINPACK and elsewhere (including information outside of FINPACK) can be used when building custom Risk Reports. Similar to Risk Reports, the Credit Decision Scorecard tool in FINPACK provides a substantial degree of flexibility for users. Depending on the model used, the principal(s) concerned, and the nature of the loan request, FINPACK Credit Decision Scorecards allows the user to determine if an application meets minimum requirements so as to proceed to the next step of the lending process or determine if the applicant is so strong and the request carries so little risk, that the Scorecard will suffice and no greater credit scrutiny is required.
Finally, the Loan Presentation tool in FINPACK allows for a consistent and concise loan presentation format customized to your institution’s needs. Loan Presentation Templates allow users to pull information directly from other places in FINPACK and combine this with the specific loan narrative components. Multiple templates can be created to fit the various credit evaluation needs of your institution.
FINPACK Knowledge Base
The FINPACK Knowledge Base has a complete overview of the steps above as well as multiple other resources you and your team might find useful. And of course, please feel free to contact us with any questions. We’re happy to help!
Connect with FINPACK
Don’t forget to follow FINPACK on Facebook, Twitter, and Instagram, or connect with us on LinkedIn, and be sure to subscribe to FINPACK News email updates. If you have any questions about the resources described above, please contact us and we would be happy to assist!
Pauline Van Nurden is currently the Associate Director for the FINPACK Team. She has been with the team since 2017 as an Economist.
Prior to joining the FINPACK Team, she worked as a lender. This provides her valuable industry experience and knowledge in her work with FINPACK. Pauline holds a Master’s Degree in Agricultural Education and Bachelor’s Degree in Applied Economics, both from the University of Minnesota.
David Maguire helps Ag and Commercial lenders across the country understand the value of using FINPACK for credit analysis and loan management. David has worked in the marketing, training and education fields in Minnesota, Ireland and Germany.