Writing Credit Memos & Loan Write-Ups with AI

The credit memo is where your analysis becomes a decision. It's also one of the most time-consuming documents a lender produces — a structured narrative that walks the loan committee through the borrower, the request, the collateral, the repayment sources, the risks, and your recommendation. AI can take you from scattered notes to a polished, committee-ready draft in minutes, letting you spend your time on the analysis rather than the prose.

What You'll Learn

• How to turn underwriting notes into a structured credit memo narrative
• How to write each standard section: borrower, request, analysis, risks, mitigants
• How to make memos consistent with your institution's template and tone
• How to keep the memo factual, balanced, and audit-ready

From Notes to Narrative

You've done the work — pulled credit, spread the financials, inspected the collateral, talked to the borrower. Now it has to become readable prose. Dump your redacted bullet notes into AI and let it structure them:

You are a commercial credit analyst. Turn the following underwriting
notes into a structured credit memo narrative for a loan committee.

NOTES: [PASTE REDACTED BULLET NOTES — request, use of proceeds,
borrower background, financials/ratios, collateral, repayment sources]

Produce these sections, each as a short paragraph:
1. Loan Request & Use of Proceeds
2. Borrower & Management Background
3. Financial Analysis (reference the ratios I provided; do not invent
   any numbers)
4. Collateral & Loan-to-Value
5. Repayment Sources (primary and secondary)
6. Risks & Mitigants

Professional, objective tone. Use only the facts I provided. If a
section lacks information, write "Additional information required."

The "do not invent any numbers" and "use only the facts I provided" guards are critical. The AI's job is to organize and articulate what you give it, not to fill gaps with plausible fiction.

Nailing the Risks & Mitigants Section

The risks section is what separates an approval from a decline at committee — and it's the section AI helps most with, because it's easy to be one-sided when you want the deal to close. Force balance:

For this credit, list the five most significant risks honestly,
even ones that weaken the deal. For each risk, state a realistic
mitigant if one exists, or write "no mitigant — accept or decline
factor" if it does not. Cover at least: cash flow/DSCR, collateral
quality, industry/market, management depth, and concentration.
Be objective — do not downplay risk to make the loan look better.

A memo that names risks honestly and addresses them is more persuasive to a committee than one that hides them — and it protects you if the loan later sours. AI's willingness to surface uncomfortable risks (when you ask it to) is a genuine asset here.

Matching Your Institution's Template

Every bank has its own memo format. Teach the AI yours once:

Here is our credit memo template and a sample of a well-written past
memo (redacted): [PASTE]. Rewrite the draft narrative below to match
this exact section order, headings, and house tone. [PASTE DRAFT]

Even better, save your template and a strong example inside a Claude Project or Custom GPT (covered in Module 4) so every future memo starts in your house style automatically.

Writing the Recommendation

The recommendation ties it together. Keep it tightly factual:

Write a 4-5 sentence recommendation paragraph for this credit. State
the recommended action, the key strengths supporting it, the primary
risk and how the structure mitigates it, and any proposed conditions
or covenants (e.g., minimum DSCR covenant, personal guaranty, annual
financial reporting). Base it only on the facts in the memo above.
Do not state an approval threshold or rate — those come from policy.

You still make the call — AI just drafts the language around the decision you've already reached.

Summarizing for an Executive or Committee Cover

Busy committee members appreciate a tight summary. After the full memo is done:

Write a 5-line executive summary of this credit memo: borrower, request
and use, key financial highlight, primary risk, and recommendation.
No more than 90 words total.

Keeping Memos Audit-Ready

Credit memos are examined by auditors and regulators. Three rules keep AI-drafted memos clean:

1. Every number traces to a source. No figure should appear in the memo that you can't tie to a tax return, financial statement, appraisal, or credit report in the file.
2. Balanced, not promotional. The memo documents a credit decision; it is not a sales pitch. Auditors notice when risks are glossed over.
3. You own it. Your name is on the memo. Read every line, confirm every fact, and edit anything that doesn't reflect your actual analysis. AI drafts; you are accountable.

Used with discipline, AI cuts credit memo drafting from hours to a focused review — and the consistency it brings often makes files easier to examine, not harder.

Key Takeaways

• AI turns redacted underwriting notes into a structured, committee-ready memo — instruct it to use only your facts and invent no numbers.
• Force balance in the Risks & Mitigants section; an honest memo is more persuasive and more defensible.
• Teach AI your institution's template and tone, or save it in a Project/Custom GPT for automatic house style.
• Keep memos audit-ready: every number traces to a source, the tone is balanced not promotional, and you read and own every line.