Joshua Galyon
Daniel Selby is a recent graduate of New York University whose academic background and early professional experience are closely aligned with private credit underwriting. After completing his studies in economics at NYU, where he earned dean’s list recognition each semester and participated in the Global Leadership Program, Selby developed a strong foundation in financial analysis and business evaluation. His involvement in the Economics Society and his leadership role as founder and president of the Pizza Club provided additional exposure to organizational management and analytical decision making. Today, Daniel Selby works as an underwriter at a private credit firm in New York City, where he evaluates financial statements from small and medium-sized businesses. In this role, he applies structured analysis to assess creditworthiness, understand risk, and support disciplined lending decisions within the private credit market.
The Role of Financial Statement Analysis in Private Credit
Financial statement analysis is an important element of private credit underwriting. Financial statement analysis is important because private lenders do not have similar standardized public disclosures or the same regulatory safety net as banks, so they usually rely on the detailed analysis of financial statements available to them to determine a borrower’s creditworthiness, price risk, and set loan terms. Good financial statement analysis might turn raw filings into a good view of a borrower’s ability to service debt and preserve collateral value.
Analyzing financial statements can help underwriters determine a borrower’s cash generation, financial position, and profitability. The income statement often shows recurring earnings and margin trends that inform how much cash a business generates. The balance sheet shows capital structure, current liabilities, and tangible assets that affect recovery prospects and liquidity. The cash flow statement often reconciles accounting profit with actual cash movement and highlights capital spending, operating cash generation, and financial flows.
Private lenders usually convert borrower statements into a standardized “spread” so analysts can compare periods and peers consistently. Financial spreading often places historical income, cash flow line items, and balance into a repeatable template that makes room for ratio calculation, stress testing, and trend analysis. Common-size analysis, a method of financial statement evaluation where each line item is expressed as a percentage of a key total, exposes structural differences that raw figures tend to hide.
Underwriters usually rely on a compact set of ratios that check repayment risk. Taking advantage of metrics like debt to EBITDA and debt to equity often shows how much debt a company is bearing compared to its earnings or ownership value. These numbers usually help lenders to understand whether their business has enough financial cushion for new borrowing. Coverage ratios such as interest coverage and debt service coverage help lenders determine whether a company generates sufficient income to cover regular interest and debt payments.
Not all earnings reflect true financial strength. Underwriters take reported results and adjust them for one-time events, discretionary owner spending, non-cash items, and accounting differences. By doing so, they model future performance by including the effects of the loan itself, such as interest costs, fees, and covenant requirements. These adjustments help lenders focus on the cash a business can reliably generate after real operating needs, rather than relying on headline accounting profit.
Collateral quality plays a major role when loans are backed by assets. Lenders closely review balance sheet details to understand how much value they can recover if a borrower defaults. This includes assessing the condition and usefulness of fixed assets, the ability to sell inventory quickly, how likely receivables are to be collected, and whether any liens already exist on the assets. They also apply loan-to-value tests and account for liquidation costs to estimate true recovery value.
Stress testing protects lenders from unexpected downturns. Analysts create scenarios that model how the borrower’s cash flow and financial health might change if interest rates rise, demand falls, or key suppliers fail. These exercises help lenders understand how resilient the business is under pressure.
Covenant planning goes hand in hand with stress testing. Based on scenario results, lenders design financial covenants that act as early warning signals and encourage responsible financial behavior. They may set financial performance thresholds, require more frequent updates during difficult periods, or limit risky activities. Thoughtfully designed covenants ensure that lenders can intervene early if performance declines, supporting a more stable lending relationship and improving the likelihood of recovery.
About Daniel Selby
Daniel Selby is an underwriter at a private credit firm in New York City, where he reviews financing requests from small and medium-sized businesses. He earned his economics degree from New York University after graduating from Friends Academy on Long Island. During his time at NYU, Selby was named to the dean’s list each semester, participated in the Global Leadership Program, and remained active in student organizations. His academic training and early professional experience center on evaluating financial statements to support credit decisions.
