Commercial Lending interview prep.

Behavioural questions to expect

1. Walk me through your CV.
2. Tell me about a difficult credit or financing decision you've owned.
3. Tell me about a weakness, a failure, or feedback you've received and worked on.
4. Why commercial banking - and why this seat vs IB or markets?
5. Which borrower segment would you want to cover, and why?
6. Why the firm?
7. How would you describe the firm's commercial book and credit culture in your own words?
8. How does a commercial bank actually make money on a relationship?

Technical concepts to master

• Loan structures + facilities

  Term loan · Revolving credit facility (revolver / RCF) · Asset-based lending (ABL) · CRE / construction + capex loans

• Covenants + structure

  Financial covenants · Affirmative + negative covenants · Maintenance vs incurrence vs springing · Security + MAC clause

• The credit lifecycle + workout

  Origination -> underwriting -> approval · Monitoring + early warning · Restructuring + workout · Classification + allowance / CECL

• Loan pricing + RAROC + relationship economics

  Spread + benchmark · RAROC + the hurdle · Relationship economics · Pricing in context: prepay + cycle + competition

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

Sourced from

Corporate Finance Institute — 5 Cs of Credit + commercial lending fundamentals · Interview Baba — Commercial Banking Interview Questions · Nortridge — How to Structure Loan Covenants for Commercial Loans · SouthState Correspondent / RAROC literature · Abrigo — Commercial Credit Analysis 101 · Comptroller / FDIC Handbook — Commercial Real Estate Lending