A credit memo has one job: let a committee make a sound decision on a loan without reopening the file. Most weak memos fail the same way — they restate the borrower’s package instead of underwriting it, and they bury the decision under description. Here is the complete structure, section by section, in the order committees actually read.
One page, at the front. Borrower and guarantors, property and location, loan purpose, requested amount and proposed structure (rate basis, term, amortization, interest-only period, recourse), sources and uses, and the headline metrics: underwritten NOI, DSCR, debt yield, LTV/LTC. Close it with the recommendation in one sentence. A committee member should be able to read this page alone and know what is being asked and why the underwriter supports it — or doesn’t.
Who stands behind the loan. Entity structure and ownership, sponsor track record relevant to this asset class and business plan, and the guarantor financial analysis: personal financial statement, verified liquidity, net worth, schedule of real estate owned, contingent liabilities, and global cash flow across the portfolio. The distinction that separates real underwriting from restatement: the PFS is the borrower’s claim; the memo’s job is to show what survives verification.
The property as it actually operates: asset type, vintage, unit or tenant mix, occupancy, and physical condition. For income property, the rent roll analysis — in-place rents versus market, lease expirations and rollover exposure, tenant concentration, and TI/LC exposure where relevant. Then value: as-is and, where the business plan supports it, stabilized value, with the cap rate and the basis for it. If an appraisal exists, the memo should state whether the underwriter agrees with it and why — an appraisal review, not an appraisal restatement.
The heart of the memo. Start from the trailing twelve, normalize it — one-time items out, mark-to-market where defensible, real vacancy, management fees and reserves in — and land on underwritten NOI, with each adjustment from the borrower’s number shown and justified. Then size the loan against the shop’s constraints: DSCR, debt yield, and LTV/LTC, showing which constraint binds. For bridge and construction loans, add the exit: the refinance test at stabilized NOI and today’s takeout terms, or the sale case at a defensible cap rate.
Every memo should show the file under pressure, not just at the underwritten case: rate shocks on floating debt, vacancy and rent stress, exit cap expansion on the refinance test. The committee question this section answers is precise — how much has to go wrong before coverage breaks or the exit fails, and is that margin acceptable for this credit?
Name the real risks specifically — rollover concentration in year two, guarantor liquidity thin relative to the completion obligation, submarket supply pipeline — and pair each with its actual mitigant: structure, reserves, covenants, pricing. Then the conditions: what must be true or delivered before closing (holdbacks, escrows, minimum liquidity covenants, completion guarantees) and any exceptions to credit policy, flagged explicitly with the compensating factors. A memo that lists no risks is not describing a riskless loan; it is describing an underwriter who stopped looking.
Approve, approve with conditions, or decline — stated plainly, with the two or three factors that drive it. The recommendation should follow inevitably from everything above it. If it doesn’t, the memo isn’t finished.
The fastest way to calibrate your own format is to read a finished one. We publish a complete sample borrower credit underwriting memo and a sample credit committee presentation, built on anonymized representative data. If your shop needs memos like this on every file without adding headcount, that is exactly what our outsourced CRE underwriting for lenders service delivers.
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