A lender CIM, or confidential information memorandum, is the document a borrower's adviser sends to lenders after they have signed a confidentiality agreement. It describes the business, its customers and management, analyzes its historical and projected financial results, sets out the collateral, and states the financing request: amount, structure and use of proceeds, usually with a sources and uses table. Unlike a sale CIM, which sells a company to buyers, a lender CIM is written for a credit decision. It explains how the loan will be repaid and what could go wrong, with the numbers to back each point.
- Purpose
- To get a credit decision, not to sell the business
- Who receives it
- Lenders who have seen the blind teaser and signed a confidentiality agreement
- Core contents
- Business, customers, management, financials, adjustments, projections, collateral, structure, risks
- Companion documents
- Blind teaser, financing model, underwriting memo
- What it replaces
- A stack of raw documents the lender would otherwise have to assemble itself
- Transparent's timing
- Built with the rest of the package in a day once documents are in
A lender CIM is not a sale CIM
The term comes from investment banking. When a bank sells a company, it writes a confidential information memorandum for prospective buyers: a long document about the business's strengths, its growth opportunities and why it deserves a high price. When a bank raises debt for a company, it writes a different document for lenders. It often carries the same name, or is called a lender presentation or information memorandum, but it has a different job.
A buyer asks what the business could be worth. A lender asks how its loan gets repaid and what happens if things go badly. So a lender CIM spends less space on upside and more on the durability of cash flow, the quality of the earnings, the collateral, and the risks with their mitigants. A sale document that is simply forwarded to lenders tends to raise more questions than it answers, because it was written to persuade rather than to be underwritten.
For most private businesses in the lower middle market, no one writes either document. The owner sends tax returns, a profit and loss statement and a balance sheet to a banker, and the banker builds the picture. That is the gap Transparent was built to fill: an investment-bank-grade package, including the lender presentation, for businesses investment banks do not serve. See the package.
What a lender CIM contains
Formats vary, but a good lender CIM covers the same ground in roughly the same order, because it follows the order in which an underwriter thinks.
| Section | What it shows | The credit question it answers |
|---|---|---|
| Executive summary and request | The business in a paragraph; the amount, type and purpose of the financing | Is this a deal we do? |
| Transaction overview | Structure, sources and uses, pro forma capitalization | How much is debt, and who else has money in? |
| Business overview | What the company sells, to whom, how, and how long it has done it | Will the business still exist and earn in five years? |
| Customers and revenue | Concentration, contract terms, retention, recurring versus project revenue | How fragile is the revenue? |
| Industry and competition | Market position, cyclicality, regulation and licensing | What could hit the whole sector? |
| Management and ownership | Who runs it, depth below the owner, succession, the buyer's background | Who repays us if the owner leaves? |
| Historical financials | Three years plus year to date, tied to tax returns, with margins and trends | Are the numbers real and stable? |
| Earnings adjustments | A bridge from reported profit to adjusted EBITDA, each add-back explained | What does the business really earn? |
| Projections and sensitivities | A base case and a downside, with debt service coverage in each | Does the loan survive a bad year? |
| Collateral | Receivables, inventory, equipment and real estate, with values and their basis | What do we recover if cash flow fails? |
| Key credit considerations | Risks stated plainly, each with its mitigant | What are we being asked to accept? |
Appendices usually carry the detail: monthly results, the debt schedule, receivables and payables agings, equipment lists, and, in an acquisition, the key terms of the letter of intent. What a lender needs for each financing type is covered in what lenders need to finance an acquisition.
What makes it lender-grade
Plenty of documents look like a CIM. The ones that move a credit decision share a few properties that have nothing to do with design:
- The numbers tie. Revenue and profit reconcile to the tax returns, and any difference is explained. An underwriter who finds one unexplained gap discounts every other number in the document.
- Every add-back is supported. Each adjustment in the EBITDA add-backs is named, sized and backed by a source document. Aggressive or vague add-backs are the fastest way to lose a lender's trust.
- There is a downside case. Lenders run their own stress tests. A CIM that shows the business covering its debt service in a weaker year answers the question before it is asked.
- Risks are stated, not hidden. A customer that is a large share of revenue, a key employee without a contract, a lease that expires soon: lenders find these in diligence. Named up front with a mitigant, they are underwritten. Discovered later, they reopen the file.
- The request fits the numbers. The amount and structure asked for should be supportable on the earnings shown. A request far outside what the numbers carry signals that the adviser has not done the work.
Why story and numbers should arrive together
A lender reading a bare set of financial statements sees numbers without reasons. Revenue fell one year: was it a lost customer, a deliberate exit from a low-margin line, or a one-time project that inflated the year before? Margins improved: pricing, mix, or a cost that was deferred? Without answers, an underwriter has two choices. It can ask, one question at a time, or it can assume the worse explanation and price or size the loan accordingly.
Delivering the explanation with the numbers changes that. The lender can screen the deal quickly, decide whether it fits its criteria, and give a firmer answer, because fewer of its assumptions are guesses. It also shortens what follows: an underwriter writing the lender's internal credit memo needs the same sections a good CIM supplies, so much of the analysis can be verified rather than rebuilt.
A risk the borrower names, with its mitigant, gets underwritten. The same risk found by the lender in diligence reopens the file.
It also changes how many lenders can look. A deal that must be explained on the phone reaches only as many lenders as there are hours to call them. A deal that explains itself can be shown to every lender whose criteria fit. Transparent's lender book holds 1,800+ lenders, and the teaser and CIM are what allow a deal to be matched to the right ones.
Teaser, CIM, model and memo
The CIM is one of four documents in a complete lender package, and each has a distinct role:
- Blind teaser. One page, with no company name, sent first so a lender can say whether it wants to see more before any confidential information is shared.
- Lender CIM. The full presentation, sent after a confidentiality agreement.
- Financing model. The spreadsheet behind the CIM: historical results, adjustments, sources and uses, projections, debt service and covenant tests, so the lender can run its own cases.
- Underwriting memo. The analysis written the way a lender's credit officer would write it, with strengths, risks, mitigants and the proposed structure. See how we underwrite.
Once a borrower's documents are in, Transparent builds all four in a day. Built by hand, the same package takes at least a week. Lenders then respond with questions or a term sheet, and the package is what those answers rest on.
Confidentiality
The word confidential in the name matters. A lender CIM contains the company's full financial picture, its customer relationships and its owners' plans. It goes only to lenders who have signed a confidentiality agreement, after a blind teaser has confirmed their interest. Some details, such as the names of the largest customers, are often shown in coded form until a lender is seriously engaged. In an acquisition, the seller's confidentiality agreement with the buyer usually governs what the buyer may share with lenders, so the buyer should confirm that financing sources are permitted recipients before sending anything.
Common questions
- Do I need a CIM for an SBA loan?
- SBA does not require one. SBA lenders ask for tax returns, financial statements, a debt schedule, personal financial statements and, in an acquisition, the letter of intent and the target's figures. A CIM organizes those into a case the lender can underwrite quickly, which matters most when the file has something to explain.
- How long is a lender CIM?
- Long enough to answer the credit questions and no longer. For a lower-middle-market business that is usually a presentation of a few dozen pages with appendices, rather than the much longer documents written for company sales.
- Can I send lenders the CIM the business broker prepared?
- You can, but it was written to sell the business to buyers. Lenders will still need the historical financials tied to tax returns, supported add-backs, a downside case, collateral detail and the financing structure, which a sale document rarely provides.
- What is the difference between a CIM and a credit memo?
- The CIM is written on the borrower's side and sent to lenders. The credit memo is the lender's internal document, written by its underwriter for its credit committee. A good CIM anticipates the credit memo's sections.
- Who should see the CIM?
- Only lenders who have signed a confidentiality agreement and whose lending criteria fit the deal. Sending it widely without screening exposes confidential information for no benefit.