Commercial Lending interview prep.

A commercial lender / credit officer is the steward of the bank's loan book on the relationship side: source the borrower, underwrite the credit, structure the facility + covenants, price it to a risk-adjusted return, and manage it if it sours.

What interviewers look for

  • Can the candidate underwrite cash-flow first - leverage, coverage, liquidity - and land a money-good vs not view, not a description of the business?
  • Do they structure for downside - covenants (financial + negative + affirmative), security, MAC clause - so the bank gets a seat at the table early if things slip?
  • Do they price to a risk-adjusted return (RAROC / hurdle), not just to the spread - and frame the relationship economics (deposits, fees, cross-sell) alongside the credit?
  • Are they portfolio- and concentration-aware - sector concentration, vintage, classified-asset trends, and the cycle?
  • Do they handle a deteriorating credit with discipline - early warning, covenant action, restructuring vs workout, and clear documentation?
  • Can they grow a relationship - call plan, banker as primary contact for the firm's specialists, retention + cross-sell - and operate within the bank's regulatory + compliance frame?

Behavioural questions to expect

  1. Walk me through your CV.

    What it tests: Story coherence + genuine fit for credit + relationship work. Commercial banking teams want evidence of analytical rigor (the credit side) + commercial instinct (the relationship side) - not pure transactional finance or pure analyst-only experience.

  2. Tell me about a difficult credit or financing decision you've owned.

    What it tests: Credit judgment + the willingness to take a money-good vs not view and defend it. Tests whether the candidate weighed the borrower, the structure, the price, and the downside - rather than describing a deal.

  3. Tell me about a weakness, a failure, or feedback you've received and worked on.

    What it tests: Self-awareness + credit discipline. Cross-role canonical. Fake weaknesses downgrade immediately. Credit mistakes (the loan that defaulted, the covenant that was too loose) compound across the book; honesty about a judgment error and the process fix matters.

  4. Why commercial banking - and why this seat vs IB or markets?

    What it tests: Authentic fit for the long-horizon, relationship + credit role: own the borrower across the cycle, lend the bank's balance sheet, and live with the credit decision. Tests whether the candidate is drawn to credit + relationship - vs banking's transactions or markets' trading.

  5. Which borrower segment would you want to cover, and why?

    What it tests: Genuine fit + grasp of how segments differ. Tests whether the candidate has a reasoned preference (SME = high-touch + community; middle-market = the canonical commercial banking seat; large corporate = syndicated, capital-markets-adjacent) rather than a random one.

  6. Why this firm?

    What it tests: Whether the candidate has done the homework. Bar: firm-specific evidence from the segment, the sectors, the credit performance, the platform, and the people - not generic 'strong bank'.

  7. How would you describe this firm's commercial book and credit culture in your own words?

    What it tests: Whether the candidate has internalized HOW the bank makes commercial credit - segment, sector, structure, and the credit-vs-RM balance - not just that it 'has a commercial bank'. Tests whether they've read its results / disclosures.

  8. How does a commercial bank actually make money on a relationship?

    What it tests: Whether the candidate understands relationship economics: NII (loan spread - cost of funds), fees (commitment, prepayment, M&A advisory if applicable), treasury / cash-management revenue, FX / hedging, and the deposit economics; the loan is often a loss-leader to win the wallet.

Technical concepts to master

Loan structures + facilities

Term loan
A fixed-amount loan amortising over a set period (typically 3-7 years), with scheduled principal + interest payments.
Revolving credit facility (revolver / RCF)
A committed line the borrower can draw, repay, and redraw up to a limit; pays a spread on drawn + a commitment fee on undrawn.
Asset-based lending (ABL)
Revolver secured by a borrowing base (typically accounts receivable + inventory), with advance rates and continuous monitoring.
CRE / construction + capex loans
Term + draw facilities tied to a specific asset (CRE) or capex programme, sized to LTV / cost-to-complete with milestone draws.

Covenants + structure

Financial covenants
Metric-based tests the borrower must satisfy periodically (e.g. max total leverage, min DSCR / FCCR / ICR, min EBITDA, min liquidity).
Affirmative + negative covenants
Affirmative: things the borrower MUST do (deliver audited financials, maintain insurance, comply with laws). Negative: things the borrower MUST NOT do without lender consent (incur debt, grant liens, pay dividends, sell assets, change control).
Maintenance vs incurrence vs springing
Maintenance: tested every period regardless. Incurrence: tested only when the borrower takes an action (new debt, dividend). Springing: tested only on a trigger (e.g. revolver utilisation > threshold).
Security + MAC clause
Security: lien position + collateral (all-asset, specific asset, or unsecured). MAC: material adverse change clause lets the bank pull commitments / accelerate on a material deterioration.

The credit lifecycle + workout

Origination -> underwriting -> approval
RM sources + screens; credit officer underwrites the memo (5 Cs + financials + structure + price + RAROC); credit committee or delegated authority approves.
Monitoring + early warning
Periodic reporting (financials, covenant certificates, borrowing base) + watch-list reviews; early warning signs (working-capital build, customer loss, slow reporting) trigger action before a covenant trip.
Restructuring + workout
On a covenant trip or default: waiver / amendment (tighter terms in exchange for forbearance), restructuring (modified principal / rate / tenor), or workout (transfer to special-assets group, recovery via paydown / sale / DIP / bankruptcy).
Classification + allowance / CECL
Classified-asset trend feeds the bank's allowance under CECL (US) / IFRS 9 (international) - lifetime expected credit loss recognised when risk materially increases.

Loan pricing + RAROC + relationship economics

Spread + benchmark
Coupon = benchmark (SOFR / SONIA / EURIBOR) + spread + fees (upfront, commitment, unused, prepayment); fixed-rate loans price the swap spread alongside.
RAROC + the hurdle
Risk-Adjusted Return on Capital = (net interest income + fees - expected loss - opex) / allocated economic capital; clears the hurdle when it exceeds the bank's cost of equity (typically ~12-15%).
Relationship economics
Loan + deposits + treasury / cash-management + FX + capital-markets + ancillary fees, evaluated together; the loan often prices thin to win the wallet.
Pricing in context: prepay + cycle + competition
Spreads compress in a soft market + when liquidity is abundant; the disciplined banker holds the floor and walks from underpriced business that doesn't clear RAROC.

Practical drills

  • A middle-market borrower has EBITDA of $40m, total debt of $150m (of which $20m is cash, so net debt is $130m), interest expense of $9m, scheduled principal amortisation of $5m, and capex of $8m. Covenants are: max net leverage 4.0x, min ICR 3.0x, min FCCR 1.25x. (a) Compute gross leverage, net leverage, ICR, and FCCR. (b) Test each covenant. (c) What's the EBITDA decline that trips the FIRST covenant?
  • A borrower in the bank's segment is requesting a $30m 5-year term loan + $10m revolver to refinance existing debt and fund a small acquisition. Walk me through how you'd underwrite this and what the credit memo would recommend.
  • A borrower has tripped the max-leverage covenant (now at 4.5x vs 4.0x covenant) on a soft trading quarter; the sponsor proposes a waiver. Walk me through what you'd ask for - and where you'd hold the line.

Smart-question anchors

  • Segment + sector - the bank's target borrowers, sector concentration, and how the lending team is built around them
  • Credit culture - cash-flow vs asset-based lean, the credit / RM balance, delegated authority, and the approval process
  • Cross-sell + relationship economics - treasury / FX / capital markets / wealth fit alongside lending, and how relationship RAROC is measured
  • Credit cycle + portfolio - recent NPL / classified-asset trends, where the bank is leaning in vs remediating, and how the team navigates the cycle
  • Workout + special-assets - how problem credits are handled, when they move to workout, and what the case officer's role is

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