What is credit memo?

A credit memo, also called a credit approval memorandum or credit write-up, presents a loan request to the people who will approve it. It typically covers the purpose and structure of the loan, background on the borrower and its management, financial and cash flow analysis, collateral and guarantor support, industry and market factors, key risks and mitigants, the proposed risk rating, any policy exceptions and a recommendation.

The credit memo is the primary record of why a lender made a credit decision. Approvers with delegated authority or a credit committee rely on it to decide, and loan reviewers and examiners read it later to judge whether underwriting was sound. Institutions often use standard templates so that memos address required topics consistently.

Weak credit memos describe the borrower at length but do not analyze repayment risk. Other common problems include unsupported projections, policy exceptions that are not clearly identified, inconsistencies between the memo and the underlying spreads, and risk ratings that do not match the analysis. Memos written to justify a decision already made, rather than to evaluate it, undermine the purpose of the document.