The procedure for obtaining a bank loan by an enterprise. Stages of issuing a loan. The most important stages of the credit process are
1. Application and interview with the client
A client applying to a bank for a loan submits an application containing the initial data on the required loan: purpose, loan amount, type and term of the loan, expected security. The bank requires that documents be attached to the application and financial reports, serving as a justification for a request for a loan and explaining the reasons for contacting a bank. The package of accompanying documents includes: Balance sheet, GTC, ODDS for the last 6 months. The application goes to the loan officer, who conducts a conversation directly with the applicant. He must accurately study the applicant's business activities, the procedure for doing business, discuss the subtleties and the lending process.
2. Credit study and risk assessment
Credit risk assessment is carried out on the basis of the rating system developed by the Bank. The rating system for assessing payments and creditworthiness of customers is based on methods developed by the Bank.
The financial condition is assessed based on the analysis:
- - property indicator of the Client
- - liquidity
- - financial stability
- - Accounts receivable
- - Accounts payable
- - Arrived
Business assessment - indicators is based on the analysis of:
- - Business activity
- - Profitability
- - Sales and turnover on bank accounts
- - Credit history
- - Quality management and business reputation
- - Market position
- - Assessment of competitors
The loan project is evaluated based on the analysis:
- - actual cash flow for the last reporting year
- - construction of the predicted cash flow of a special corrective risk coefficient for the credit project.
The following are assessed as collateral:
- - pledges
- - warranty
- - guarantees
If the loan is secured by real estate individual, all its owners sign a pledge agreement, and their spouses must provide a notarized consent to the pledge of this property. When real estate is pledged, the owners of which are minor children specified in title documents, the consent of the guardianship and guardianship authority for the pledge must be provided with the right to extrajudicial sale of the above property.
3. Authorization of loans.
The credit authorization system uses a combination of three main methods:
- - Validation by the credit committee.
- - Collective approval - the loan is approved by two or more persons;
Members of the Credit Committee review the creditworthiness of the business, check the correctness of the calculations, assess all risks according to the established methodology, and make the final decision on issuing a loan and its conditions.
The decision is recorded and signed by all members of the credit committee. The composition and powers of the credit committee are established by a separate order, or by a decision of an authorized body, in accordance with internal normative documents Jar.
The decision of the credit committee before the loan is issued remains valid for 1 month.
Credit transactions are concluded with the obligatory approval of the Treasury in terms of funding.
Member of the Management Board of the Bank in charge of the regional network.
4. Preparation and conclusion of the contract.
The loan agreement indicates the amount, term, form of loans, the conditions on which it is issued, security (if any), procedure and sources of repayment. The agreement also provides for the provision of borrowers financial reporting during the use of the loan, all sanctions and measures that will be taken in case of delay in planned payments on the loan or its non-repayment are specified, the procedure for repaying overdue debts is indicated. The loan agreement is accompanied by an estimated debt repayment schedule with a description of the procedure and terms of repayment.
When drawing up a loan agreement, special attention should be paid to ensuring that there are no contradictory or mutually exclusive clauses, as well as clauses that allow double interpretation. For all issued loans or orders of the management, the employee of the credit department must control the exact observance of the conditions for issuing a loan, fixed in the loan agreement, the minutes of the decision of the Credit Committee.
From the side of the bank, the agreement is endorsed by the heads of the credit department and the legal department, signed by the Chairman of the Board, and in his absence by an authorized deputy.
The loan agreement is drawn up in 3 copies: the first, endorsed by the head of the credit department and the head of the legal department, is placed in the borrower's credit file, the second is transferred to the borrower, the third is for registration at the notary's office.
An urgent obligation signed by the head and chief accountant of the borrower and certified by the borrower's seal according to the card with sample signatures. The borrower's account is indicated, from which the bank, upon the due date of payment, has the right to write off the loan, interest for using it and possible fines specified in the urgent obligation.
The pledge agreement is drawn up in 3-5 copies with an inventory of the pledged property, which indicates the quantity, value and location of this property. The pledge agreement is endorsed by the executor and the head of the credit department, the head of the legal department.
An employee of the credit department checks the authority of the representative of the mortgagor signing the pledge agreement. The first copy, endorsed and signed, is placed in the credit file, the second is transferred to the pledgor, the third remains in the notary's office, the fourth - in the registration office, the fifth - in the BGUZRPNI.
After registration of the above documents, the employee of the credit department forms a credit case, including:
- - Charter of the enterprise (notarized copy, if not a client of the Bank);
- - Memorandum of Association (notarized copy, if not a client of the Bank);
- - Registration certificate;
- - Card of samples of signatures and seal imprint (if not a client of the Bank);
- - Financial statements certified by the tax office;
- - Letter of application for a loan;
- - Business plan or feasibility study and other documents characterizing the object of lending;
- - Copies of contracts and agreements;
- - Documents confirming the right of ownership and the absence of encumbrances on the property pledged;
- - Loan agreement (copy);
- - Pledge agreement (copy);
- - Pledge registration certificate.
Based on the available documents, in accordance with the recommendations of the National Bank of the Kyrgyz Republic, a credit file is compiled for each client, which should contain the following information:
5. Credit monitoring.
Monitoring the progress of loan repayment and payment of interest on it is an important step in the entire lending process. It consists in the periodic analysis of the borrower's credit file, revision loan portfolio bank, assessing the status of loans and conducting audits.
The system for monitoring the implementation of loan agreements contains measures to ensure:
- - Tracking by the Bank of all changes in the current financial condition Client;
- - Provision of all loan products in accordance with existing conditions loan agreements;
- - Exclusive use by the Client loan funds for the purposes specified in the loan agreement;
- - Fulfillment by the Client (if any) of the conditions and obligations stipulated in the loan agreement;
- - Sufficiency cash flows Client for servicing the loan;
- - Adequate collateral coverage credit obligations Client;
- - Timely recognition of problem loans;
- - Adjustment of reserves for possible losses on loans depending on the size of problem loans;
Monitoring schedule for all loan product Bank is determined in accordance with the procedure established by the Bank.
If the assessment of credit risk during monitoring reveals an increase in credit risk caused by a deterioration in the financial condition of the Client, the monitoring results are documented and subject to a report to the Credit Committee of the appropriate level, as well as to the credit risk management department no later than the next day after the discovery of the increase.
Based on the monitoring results, a set of measures is developed, if necessary, to improve the quality of the loan and ensure the timely and complete fulfillment by the client of its obligations to the Bank, up to the early withdrawal of debt on the loan (by decision of the body or official authorizing the provision of the relevant loan, or the main credit Bank committee).
If in the process of monitoring the implementation of the loan agreement, high probability if the Client fails to fulfill its obligations to return funds, then the credit unit that issued the loan is obliged to inform the Treasury about this in order to exclude the amount of the return from the cash plan or postpone it to a later date.
Reserves and guarantees for possible losses are established in the amount not less than required, in accordance with the regulation National Bank on the procedure for the formation and use of a reserve for possible losses on loans.
To streamline the issued loans by quality, it is necessary to classify the loan portfolio and conduct its regular monitoring. All this together will allow those involved in the analysis structural divisions bank to see in more detail the pattern of loan recovery and the possibility of loss of income from the presence of bad debts on certain types of loans.
The organization of a bank loan transaction with a borrower is a procedure adopted in a particular bank for considering a client’s request for a loan and making a decision, concluding a loan agreement, issuing and repaying a loan, monitoring the completeness and timeliness of its return.
The mechanism of lending and the organization of the corresponding work by each bank are determined independently on the basis of the current recommendations of the Central Bank, and are reflected in the Regulations on lending approved by the bank.
This process of issuing a loan is divided into a number of interrelated stages, at each of which the bank has to solve special problems.
Stage 1 . The initial stage of organizing a loan transaction is the submission of a loan application, the submission by the client of the necessary documentation.
To obtain a loan, the borrower applies to the loan officer of the bank, who, in the course of a preliminary conversation, decides on the consideration of the loan application. If the decision is positive, the client is provided with a memo with a list of documents required for consideration of the application.
To obtain a loan, borrowers provide to the bank the following documents:
- application to the name of the head of the bank with a request for a loan(in any form, indicating the amount, term, purpose of the loan, proposed collateral, sources of repayment);
- loan application on standard bank letterhead;
- interview questionnaire on standard bank letterhead;
In the questionnaire, in addition to general information (name of the enterprise, legal address and actual location, organizational and legal form, main founders and their shares in the authorized capital, dates of formation and start of operation, the presence of branches and subsidiaries, names of banks in which settlement accounts are located ) Borrowers must report:
§ about the main activities, products, services(type of business, period of work in this area of business, name of the main product, its share in the total volume, supply, sales, warehousing policies used; share of exports patents, trademarks; tax benefits and other benefits);
§ about the company's position in the market(the main markets of the enterprise, their capacity; monopoly in the sales market; seasonality of sales, market development forecast; list and characteristics of the main suppliers and buyers, their concentration; main competitors of the enterprise, its advantages and disadvantages over them, current account turnover for the last 6 months, etc.);
§ on the effectiveness of economic activity(for previous years and for the working period of the current year): sales volume (sales), including on the foreign market, balance sheet profit, production cost, profitability (to fixed assets, to cost), average turnover working capital.
- copies of constituent and registration documents, notarized (if the borrower is not a bank client);
certified in tax office balance sheet for two reporting periods with application financial statements;
- breakdowns of the balance sheet items "Debtors", "Creditors", "Fixed Assets";
- valid loan agreements, including all extensions; pledge agreements with annexes (lists of pledged goods) relating to the said loan agreements; other agreements concluded within the framework of loan agreements;
- feasibility study for the use of credit (technical description project, calculation of the borrower's costs associated with the implementation of the project, sources of loan repayment, calculation of the expected income from the implementation of the loan project, the period required for the implementation of the project, etc.);
- support documents:
§ In the case of a pledge of inventory items: a list of inventory items (specifications) transferred as collateral with an indication of the specific price and date of purchase; warehouse certificate confirming the availability of goods; documents confirming the ownership of this product.
§ In the case of a pledge of property: an inventory of the property being pledged, with insurance attached to the said property against the main types of risk.
§ In case of a pledge production equipment: list of equipment, year and country of origin, book value, degree of wear; inventory list fixed assets.
§ In the case of real estate mortgage: real estate documents.
§ In case of a pledge valuable papers: list of securities offered as collateral, par value, year of issue, information about the issuer, date of redemption.
§ In the case of guarantees from other banks and third parties: guarantee (guarantee) of the bank signed by the first and second persons with the seal of the bank; the guarantor's balance sheets for the last two reporting periods, broken down by terms of attracting and channeling funds, including off-balance sheet accounts.
- documents confirming the purpose of the loan:
§ For trade and purchasing operations: a purchase contract indicating the terms of payment and delivery, possible penalties, with a specification and bank details; warehouse certificate of the availability of goods from the seller; quality certificates for the purchased goods; an agreement for the sale of the purchased goods indicating the terms of payment and delivery, possible penalties, with a specification and bank details, in case of its absence - a protocol of intent or other implementation options.
§ To replenish working capital: purchase contracts indicating the terms of payment and delivery with specifications and bank details; invoices and other documents confirming payment for the goods.
§ For the development of production: business plan.
§ For the purchase of real estate: a package of documents for the purchase of real estate, including an indication of the purchase price and the application of permits.
§ For investments in securities: a list of securities that are supposed to be purchased on borrowed funds; information about the issuer and the seller.
- proposed schedule for the selection of credit funds(in the case of an application for a loan under a credit line);
- documents certifying the powers of persons negotiating on behalf of the borrower;
- passport details of the head of the company and the chief accountant;
When considering an application, the bank has the right to require the borrower to provide additional documents needed to make a loan decision.
Stage 2. Consideration of a loan application.
According to the provided package of documents, the credit, collateral, legal service and security service work simultaneously.
At this stage, the following is carried out:
analysis of the financial condition of the client;
collateral analysis;
checking the integrity of the client.
When considering an application, various sources of information are used:
materials received from the client;
· materials about the client available in the bank;
information of suppliers, buyers, creditors, other banks;
information provided by the security service;
· printing materials;
Credit histories obtained from credit bureaus.
Each service considering the package of documents gives its opinion on the loan application. The conclusion on the issuance of a loan must contain generalized information, on the basis of which a decision is made to issue or reject an application for a loan.
Stage 3. Credit authorization
The loan is sanctioned by the coordinating (credit) committee of the Bank. At the meeting of the committee, the conclusion on the loan application is considered. A loan officer considering a loan application must himself attend the coordinating committee and defend his decision, as well as answer all questions of interest to the committee.
The authorization process ensures that the decision made meets the Bank's requirements for the quality of the loan portfolio, as well as to make sure that the price of the loan corresponds to the degree of risk assumed by the bank, and that resources are allocated in such a way as to achieve maximum profit within the stated risk.
Stage 4. Conclusion of a loan agreement.
Having made a positive decision, the bank negotiates with the client and develops a version of the loan agreement that suits both parties. Each bank has standard forms of a loan agreement, which may be amended depending on the specific conditions of the loan. As a rule, a loan agreement contains the following sections:
the rights and obligations of the borrower;
the rights and obligations of the bank;
the responsibility of the parties;
· settlement of disputes;
· contract time;
· legal addresses sides.
Stage 5. Issuance of credit.
In accordance with the Regulation of the Bank of Russia No. 54-P dated August 31, 1998 "On the procedure for the provision (placement) of funds by credit institutions and their return (repayment)", credit is granted to legal entities only in without cash order by crediting funds to the settlement (current) account of the borrower, including when providing a loan to pay for payment documents and pay salaries. Individuals can receive a loan both non-cash (by crediting to a bank account) and in cash (through the bank's cash desk). Loans in foreign currency issued to legal entities and individuals only in non-cash form.
Stage 6. Loan monitoring.
An important stage of lending is control over the spending of funds provided on a loan, which increases when the bank has doubts about the prospects for repayment of the loan.
Control is carried out in the following areas:
for the targeted spending of funds taken on credit;
the financial position of the borrower;
for the quality of collateral (in the case of using collateral as a form of collateral for repayment of a loan).
Stage 7. Loan repayment.
The return (repayment) of the loan and the payment of interest on it can be made by writing off funds from the borrower's current account - legal entity on his payment order, as well as debiting funds in the order of priority based on the bank's payment request. In the latter case, the borrower, when concluding a loan agreement, must document his consent to the direct debiting of funds from the current account to repay the loan.
Repayment of loans and payment of interest on them by individual borrowers is carried out by:
Transfers of funds from the accounts of borrower clients on the basis of their written instructions,
Transfer of clients' funds through communication agencies or other credit organizations,
Contribution by the last cash to the cash desk of the creditor bank on the basis of income cash warrant,
As well as deductions from the amounts due for wages to borrower clients who are employees of the creditor bank (at their request or on the basis of an agreement).
Repayment (refund) of funds in foreign currency is carried out only by bank transfer.
If there is a shortage of funds in the borrower's current account, the bank first collects interest on the loan, then the principal debt.
If the borrower fails to pay the due amount within the terms established by the agreement, its principal and interest debt is transferred to the account of overdue principal and interest. For overdue loans, the bank sets an increased interest rate.
If it is impossible to collect the loan and interest from the borrower, the bank proceeds with the sale of collateral for the loan.
If this is not possible or the entire amount of the debt is not covered by the sale of the security, the bank repays the debt in accordance with the established procedure at the expense of the reserve for possible losses on loans. If the amount of the reserve is not enough to repay the entire debt, the outstanding part of the loan is attributed to the bank's losses.
The lending process consists of several stages that you need to know. Since the bank is a system, it is necessary to fulfill its requirements for processing and issuing a loan.
Stages of issuing a loan
The process of issuing a loan can be conditionally divided into several stages, each of which is important for the borrower:
- 1. Studying a loan application. This is the initial stage at which the employee studies the application you filled out, gets acquainted with the purpose of obtaining a loan.
- 2. Assessment of solvency. The bank will not issue a loan to a borrower who cannot fulfill the terms of the agreement, so each employee must evaluate the borrower according to his ability to pay the loan.
- 3. Preparation of the contract. If the bank is satisfied with everything, the borrower can fulfill the terms of the loan agreement and with his credit history everything is fine. That is where the contract is being drawn up. At this stage, all its conditions and adjustments are negotiated.
- 4. Getting money.
- 5. Control of the borrower by the bank. A bank employee monitors how accurately the terms of the agreement are observed, whether the borrower pays a mandatory payment.
- 6. If the borrower fails to comply with the terms of the loan, the bank is obliged to work until the termination of the loan agreement.
What is included in a loan application
As mentioned above, at the first stage, the borrower fills out a loan application, in which he indicates the following information:
- Target;
- Loan amount;
- For how long is requested;
- The interest rate the borrower is willing to receive.
Also, the borrower must prepare a certain package of documents. The inspector reviews the application for one or two days, after which he informs the borrower whether the bank satisfies his request or not. In a conversation with a bank employee, you need to make a favorable impression in order to make a good initial time about you.
What to do if the bank requires early repayment of the contract
Sometimes there are cases when the bank requires the borrower to repay the loan ahead of schedule. It is clear that not a single person is preparing for this and, as a rule, cannot pay the remaining amount in a lump sum. To do this, you need to reread your loan agreement. Usually it should be written there whether the bank has the right to demand early repayment.
But there are situations when the payer regularly violates the terms of the contract. Based on this, the bank requires early repayment. Under what conditions can a creditor claim it?
- Violation by the payer of the deadline for paying monthly payments;
- Loan arrears for at least 3 months;
- The loss by the payer of a place of work and the inability to find a new one within three months;
- If a criminal case has been opened against the borrower;
- If the accounts of a legal entity have been seized;
- If the borrower has new monetary obligations that will not allow him to fulfill the terms of the contract;
- If the fact of forgery by the borrower of the document that he provides bank employee; or if the information turned out to be false.
STAGES OF LENDING
The main terms of the loan are as follows:
Compliance with the requirements for the main elements of lending;
Coincidence of interests of both parties of the credit transaction;
The ability of the creditor bank and the borrower to fulfill their obligations;
Compliance with the principles of lending;
The possibility of realizing the pledge and the availability of guarantees;
Ensuring the commercial interests of the bank;
Planning of mutual relations of the parties of the credit transaction.
The loan process starts from the day the loan is issued. However, before this moment and after it, there is a significant work between the borrower and the lender. It includes the following steps:
1. Loan negotiations. A loan offer can come from both the client and the bank.
2. Consideration of a specific project. Instability economic situation leads to special care in assessing by the bank the creditworthiness of the client, the object of lending and the reliability of collateral, the quality of collateral and guarantees. In CB, these tasks are assigned to the credit department (management). Large loans, as a rule, are considered at a meeting of the bank's credit committee. All economic and legal issues, the final decision is made, the specific terms of lending are determined.
3. Registration of credit documentation. CB employees draw up a loan agreement, write out an order for a bank to issue a loan, and create a dossier on the borrower (credit case).
4. Use of credit and control over credit operations. Control includes: compliance with the credit limit (credit line), control over the intended use of the loan, payment of loan%, completeness and timeliness of loan repayment. At this stage, the CB does not stop work on the operational analysis of creditworthiness and financial results client's work.
Creditworthiness- this is the opportunity available to the enterprise for the timely repayment of loans. The main indicators for assessing the creditworthiness of an enterprise are:
1. Ratio of sales volume to net current assets:
K1 = Sales volume / Net current assets.
Net current assets are current assets minus the company's short-term debt. Coefficient K1 shows the efficiency of the use of current assets.
2. The ratio of sales volume to equity:
K2 = Sales volume / Equity capital.
This indicator characterizes the turnover of own sources of funds.
3. Attitude short-term debt to equity:
K3 = Short-term debt / Equity.
This ratio shows the share of short-term debt in the company's equity capital. If short-term debt is several times less equity, then you can pay off all creditors in full.
4. Attitude accounts receivable to sales revenue:
K4 = Accounts receivable / Sales volume.
This indicator gives an idea of the size of the average period of time spent on receiving money due from buyers. Acceleration of receivables turnover, i.e. a decrease in the K4 indicator can be considered as a sign of an increase in the creditworthiness of the enterprise.
5. The ratio of liquid assets to short-term debt:
K5 = Liquid assets / Short-term debt.
Lending method can be defined as a set of techniques by which a bank issues and repays loans. There are 3 methods:
1) the method of lending by turnover;
2) by balance;
3) turnover balance method.
Turnover method. Credit follows the movement, turnover of the object of credit. The loan advances the costs of the borrower until the release of his resources. The size of the loan increases as the objective need for a loan increases and is repaid as this need decreases.
Balance lending method. Credit is interconnected with the balance of inventory and costs that caused the need for a loan. This type of lending covers a smaller range of lending objects, mediates one of the objects, while lending by turnover is associated with the movement of not a separate, but an aggregate lending object.
Reverse balance method combines the previous 2. A loan at the 1st stage is issued as the need for it arises, and at the 2nd stage it is repaid within strictly defined terms, which may not coincide with the amount of resources released.
The movement of the loan is reflected in the loan account of the client, which the bank opens for him. It reflects the issuance and repayment of loans, as well as the current debt of the client.
Loan deal requires documentation. Oral negotiations conducted by the client with the bank at the preliminary stage end with the submission of a written application to the CB - justification for the need for a loan for certain purposes. The application (feasibility study) contains the client's request for a loan, indicating the purpose, the required amount,%, term. The application is considered as part of other accompanying documents that allow the bank to determine the financial position of the client and his creditworthiness. The client provides a balance sheet for the last 2-3 years, as well as a profit and loss statement.
In addition, tanks require: notarized copies of constituent documents; cash flow statement; internal financial reports; data of internal operational accounting; funding forecast; tax returns and business plan.
Loan agreement- the most important document that defines the rights and obligations of participants in a credit transaction. The loan agreement must be concluded in writing, otherwise it will be declared invalid. It is signed by persons authorized to conclude such contracts, which must be confirmed by a power of attorney.
The loan agreement determines the legal and economic conditions of the loan transaction. It is based on 4 principles:
Strong base;
Voluntary entry into the transaction;
Mutual interest of the parties;
Agreement on the terms of the deal.
These principles take into account the structure of the loan agreement, which includes the following parts:
1. Introductory part.
2.1 General provisions.
3.1. Subject and amount of the contract.
4.1. Procedure for issuing and repaying a loan
5.1. Loan fee.
6.1. Ways to ensure the repayment of the loan.
7.1. Rights and obligations of the parties.
8.1. Responsibility of the parties.
9.1. Additional terms of the contract.
10.1 Dispute resolution.
11.1. The term of the contract.
12.1. Legal addresses, details and signatures of the parties.
The contract is considered concluded when the parties have reached agreement on all its essential terms.
The first among the essential conditions is the subject of the contract. It is in this section that the agreement of the parties on the amount of the loan is fixed, which is determined by the financial needs and capabilities of the lender and the borrower. The essential conditions include such as the terms and purposes of the loan.
The terms for obtaining and repaying a loan under the agreement are calculated:
¨from the moment of conclusion of the contract;
¨from the moment the funds are transferred by the lender or borrower;
¨from the moment the funds are received by the lender or borrower.
When determining loan rates KB takes into account:
· the refinancing rate on loans (the Central Bank provides the CB);
· average interest rate on interbank loans;
· average % rate on deposit accounts (bank pays);
the structure of the bank's credit resources (the higher the share of borrowed funds, the more expensive the loans);
supply and demand for a loan (the lower the demand and the greater the supply, the cheaper the loan);
term and type of loan (degree of risk for the bank);
stability monetary circulation in the country (the higher the inflation rate, the higher the loan fee).
As in the case of issuing a loan, there is no single model for repayment. Practice gives rise to various loan repayment options:
1.Episodic repayment based on term liabilities. It is used when the return is timed in advance to a certain date (or a series of dates). When the loan matures, the CB debits the corresponding amounts from the client's account.
2.Repayment as you actually accumulate own funds and reducing the need for a loan from the borrower's current account. Funds are debited from the borrower's current account within a predetermined timeframe. This option is used for PP with a seasonal nature of work.
3.Systematic repayment based on pre-fixed amounts(planned payments). It is applied at an intensive payment turnover. Write-off of planned (predetermined for a month or quarter) amounts from the current account is carried out by agreement with the client (daily or 1 time in 3-5 working days.
4.Postponement of loan repayment. It can be made in the case when the client cannot repay the loan provided to him in a timely manner. In international practice, the delay is from 15 to 30 days, in Russia - from 1 to 5 days.
5.Transfer of overdue debts to a special account "Overdue loans". This means that from the moment the debt is transferred, the borrower will pay a higher loan percentage. Such a situation arises when the time of deferment is exhausted or the deferment is impossible due to the futility of waiting for the return of the loan in the near future.
6.Writing off overdue debts at the expense of the bank's reserve. It is made in the case when the debts turned out to be bad, when the bank does not receive payment for previously granted loans for a long time and the return itself is not real.
The lending process can be divided into several stages, each of which contributes to quality characteristics loan and determines the degree of its reliability and profitability for the bank:
- - consideration of an application for a loan and an interview with a future borrower;
- - studying the creditworthiness of the client and assessing the risk on the loan
- - preparation and conclusion of a loan agreement;
- - control over the fulfillment of the terms of the agreement and the repayment of the loan.
Credit application
A client applying to a bank for a loan submits an application that contains the initial information about the required loan: purpose, loan amount, type and term of the loan, expected collateral.
The bank requires that documents and financial statements be attached to the application to justify the request for a loan and explain the reasons for applying to the bank.
These documents are a necessary part of the application. Their thorough analysis is carried out at subsequent stages, after the bank representative conducts a preliminary interview with the applicant and concludes that the transaction is promising.
The package of accompanying documents submitted to the bank along with the application includes the following:
- 1. Financial report. Includes the bank's balance sheet and profit and loss account for the last 3 years. The balance sheet is compiled as of the date (end of the year) and shows the structure of the company's assets, liabilities and capital. The profit and loss statement covers a one-year period and provides detailed information about the company's income and expenses, net profit, its distribution (deductions to reserves, payment of dividends, etc.).
- 2. Report on the movement of cash receipts. It is based on a comparison of the company's balance sheets for two dates and allows you to determine the changes in various items and the movement of funds. The report gives a picture of the use of resources, the timing of the release of funds and the formation of a shortfall in cash receipts, etc.
- 3. Internal financial reports. They characterize in more detail the financial position of the company, the change in its need for resources during the year (quarterly, monthly).
- 4. Internal management reports. Balancing takes a lot of time. The bank may require operational accounting data, which are contained in notes and reports prepared for the company's management.
These documents relate to operations and investments, changes in accounts receivable and accounts payable, sales, stock values, etc.
5. Forecast of financing. The forecast contains estimates of future sales, expenses, production costs, receivables, inventory turnover, demand for cash, investments, etc.
There are two types of forecast: estimated balance sheet and cash budget. The first includes the forecast version of balance accounts and the profit and loss account for future period, the second predicts the receipt and expenditure of cash (by weeks, months, quarters).
- 6. tax returns. This is an important source of additional information. It may contain information not included in other documents. In addition, they can characterize the borrower if it is found that he evades taxes on part of the profits.
- 7. Business plans. Many loan applications involve financing start-up businesses that do not yet have financial statements and other documentation. In this case, a detailed business plan is provided, which should contain information about the goals of the project, methods of conducting operations, etc.
In particular, the document must include:
- - description of products or services to be offered on the market (including patents, licenses); research and development plans, etc.;
- - industry and market forecasts (description of markets, other companies that offer a similar product, state regulation relevant industries, advantages and weaknesses of competitors);
- - marketing plans (goals, advertising, the cost of the company to promote the product to the market, etc.);
- - production plan (need for production capacity and labor force, available equipment, etc.);
- - management plan (company structure, governing bodies, consultants, etc.);
- - financial plan(operating and investment budget forecast, cash flow forecast, prospective balance sheet for five future years).
The application goes to the appropriate loan officer, who, after considering it, conducts a preliminary conversation with the future borrower - the owner or representative of the company's management.
This conversation is of great importance for resolving the issue of a future loan: it allows CI not only to find out many important details loan application, but also to draw up a psychological portrait of the borrower, to find out the professional readiness of the company's management, the realism of its assessments of the situation and prospects for the development of the enterprise.
Client Interview
During the conversation, the interviewer should not seek to find out all aspects of the company; it should focus on the key, basic issues of greatest interest to the bank. It is recommended to distribute the questions into 4-5 groups. Sample questions are provided below.
- 1. Information about the client and his company:
- - whether the firm is a sole proprietorship, partnership or corporation;
- - How long has the company been established?
- - what are its products;
- - who are the owners, how many shares they have;
- - What is the experience and qualification of managers;
- - Is the company profitable?
- - who are the main suppliers and buyers;
- - under what conditions the product is sold.
- 2. Questions about applying for a loan:
- - how much money the company intends to receive from the bank;
- How is this amount calculated?
- - whether the forecast of financial needs is accurately drawn up;
- - whether the terms under which the client wants to receive a loan take into account the life of the assets financed by the loan;
- - whether the terms of the loan take into account the client's ability to repay the loan on time.
- 3. Issues related to loan repayment:
- - how the client intends to repay the loan;
- - how much cash the company receives during the operating cycle;
- - whether the client has a special source of loan repayment;
- - Are there persons willing to give a guarantee and what is their financial situation.
- 4. Questions about securing a loan:
- - what security will be pledged;
- - who is the owner of the security;
- - where the collateral is stored;
- - is the bottom under the control of the client and can it be sold;
- - whether someone's special permission is required to sell the collateral;
- - how the valuation of the property offered as security was made;
- - whether the provision is subject to damage;
- - what are the costs of keeping the collateral.
- 5. Questions about the client's relationships with other banks:
- - which banks are currently used by the client;
- - whether he applied to other banks for a loan;
- - - why the client came to this bank;
- - Are there outstanding loans and what is their nature.
Creditworthiness study and risk assessment
After the conversation, the loan officer must decide whether to continue working with loan application or refuse. If the client's proposal differs in some important aspects from the principles and guidelines of the bank's policy in the area of credit operations, then the application should be strongly rejected. In this case, it is necessary to explain to the applicant the reasons why the loan cannot be granted. If the loan officer, based on the results of the preliminary interview, decides to continue working with the client, he fills out a credit file and sends it, along with the application and documents submitted by the client, to the credit analysis department. There is an in-depth and thorough examination. financial position borrowing company. In this case, the loan officer must decide which of the employees of the department is best suited for the examination.
For example, if we are talking about the valuation of the security offered by the client, then the opinion of an experienced analyst is required, since the valuation of property is a complex procedure. If it is required to obtain information from a credit agency, then a less qualified worker can do this. The effectiveness of the work of a loan officer is determined by his ability to give instructions to those bank employees who are best suited for this.
When analyzing creditworthiness, different sources of information are used:
- - materials received directly from the client;
- - materials about the client, available in the archive of the bank;
- - information provided by those who had business contacts with the client (its suppliers, creditors, buyers of its products, banks, etc.);
- - reports and other materials of private and public institutions and agencies (credit reports, industry analytics, investment guides, etc.).
The experts of the credit department, first of all, turn to the archives of their bank. If the applicant has previously received a loan from a bank, then the archive contains information about delays in repaying the debt or other violations.
Important information can be obtained from banks and other financial institutions with whom the applicant was dealing.
Banks, investment and financial companies can provide material on the size of the company's deposits, outstanding debt, accuracy in paying bills, etc. The company's trading partners report data on the size of the provided commercial loan, and from this data it is possible to judge whether the client is effectively using other people's funds to finance working capital.
The Credit Department may also contact specialized credit agencies and receive from them a report on the financial position of the enterprise or individual (in the case of a personal loan). The report contains information about the history of the company, its operations, product markets, affiliates, bill payment regularity, debt levels, etc.
The most popular among external sources information is used by requests from other banks serving this client, and from his trading partners. This information is especially valuable because it is based on past experience of direct communication with this company.
Please note that intentional misrepresentation or misuse confidential information may cause significant harm to the parties involved.
Disclosure of the received information is especially dangerous. For example, if a client finds out that a bank has received an unflattering review about him from his supplier, he is likely to refuse the services of this supplier. If the case with the disclosure of confidential information receives a wide response, no one will provide information of this kind to the bank.
Therefore, in business world the rules for the transfer of confidential information are strictly observed.
When examining a loan application, a loan officer may conduct an on-site inspection of the firm and interview key officials.
It is very important to find out the level of competence of the people who head the financial, operational and marketing services, the administrative apparatus.
During a visit to the company, you can find out many technical questions that were not touched upon during the preliminary interview, as well as to get an idea of the condition of the property, buildings and equipment of the company, the habits and behavior of employees, etc.
Preparation for the conclusion of the contract
In case of a favorable conclusion, the bank proceeds to develop the terms of the loan agreement. This step is called loan structuring. In the process of structuring, the bank determines the main characteristics of the loan:
- - type of loan;
- - amount;
- - term;
- - method of repayment;
- - provision;
- - the price of the loan;
- - other conditions.
Structuring can have a major impact on the success of a loan deal. If the bank has specified in the contract too tense loan repayment terms, then the borrower may be left without the capital necessary for normal functioning. As a result, production output will not grow according to the original plans. On the contrary, if the bank provides too liberal conditions for debt repayment (say, if cash to repay a semi-annual loan will be received within one month), then the borrower will use the loan received uncontrollably for a long time.
Incorrect determination of the loan amount can also cause serious problems.
If the amount is underestimated (for example, 100 thousand rubles were received instead of the required ZOO thousand rubles), then the borrower will soon need another 200 thousand rubles, and the original loan will not be repaid on time. In the opposite situation (200 thousand rubles were issued, when 100 thousand rubles are needed), the client will have excess amounts, and will spend them on financing expenses not provided for by the loan agreement.
The first step that a loan officer must take when developing the terms of a future loan is to determine the type of loan. It depends on the purpose of the loan, the nature of the operations for which the loan is taken, the possibility and sources of repayment of the loan.
Commercial loans can be used to finance working capital and to finance a company's fixed assets. Funds for loan repayment in these two cases are accumulated differently.
If a loan is taken to finance inventories or receivables, then the funds necessary to repay it are formed after the sale of these inventories or the payment of bills by buyers of products.
In the second case, the loan is used to purchase equipment, buildings, etc., and the funds to repay the loan will be received during the long-term operation of these elements of fixed capital.
Clearly, when financing inventories or receivables, the client needs short term loan, repaid within several months, while in the second case, the loan must correspond to the service life of the equipment and, accordingly, have more long term- from 1 to 25 - 30 years.
The Bank offers the client the type of loan and the terms of repayment that best suit the nature of the transaction underlying the loan. In the first case, it can be a seasonal loan, a revolving credit line, a permanent loan to replenish working capital, in the second case, an urgent loan, a leasing agreement, a mortgage loan, etc.
Loan repayment can be made in a lump sum at the end of the term or in equal installments throughout the entire period of the loan. In the latter case, a repayment scale is developed in accordance with the terms of capital turnover.
Much attention is paid to the issue of the cost of the loan, which includes the determination of the interest rate, the size of the compensatory balance on the account, commissions for issuing and processing a loan, etc.
When determining the loan rate, various factors should be taken into account: the cost for the bank of funds raised (deposits and non-deposit sources); the reliability of the borrower and the degree of risk associated with the loan; expenses for registration and control over the repayment of the loan; the nature of the relationship between the bank and the borrower and a number of other points.
When the loan structuring work is completed, the loan officer must make a fundamental decision: whether to proceed to final negotiations on the conclusion of a loan agreement or to refuse to issue a loan.
It must be emphasized once again that if at one of the stages of the examination and preparation of materials it becomes clear that some important characteristics of the loan (purpose, amount, collateral, repayment terms) do not comply with the bank's lending policy and accepted standards, you should refuse to provide loan.
Therefore, having completed the structuring of the loan, the loan officer must once again evaluate all available information (archives, materials, interviews with the borrower, credit reports, balance sheet ratios, etc.) and make a final decision on the appropriateness of the loan. If the conclusion is positive, then the work proceeds to the stage of negotiations on the final terms of the loan agreement, after which the draft agreement must be submitted to the loan committee of the bank for approval.
Loan agreement
It is a detailed document signed by both parties to the loan transaction and containing a detailed statement of all the terms of the loan.
Its main sections:
- - certificates and guarantees;
- - characteristics of the loan;
- - binding conditions;
- - forbidding conditions;
- - failure to comply with the terms of the loan agreement;
- - sanctions in case of violation of the conditions.
The Certifications and Guarantees section certifies that the borrower:
- - has a certificate;
- - has the power to conclude loan agreements and sign debt obligations;
- - has no tax debts;
- - has the right to dispose of assets;
- - has no pledged assets other than those known to the bank;
The Loan Characteristics section details the terms of the loan, namely the type of loan, amount, interest rate, repayment scale and collateral. All participants in the transaction are indicated, reference is made to the debt obligation and the loan security document.
In the "Binding conditions" section, the rules are formulated that the borrower must adhere to during the entire period of the loan:
- - maintain a certain level of working capital;
- - maintain a stable level of share capital;
- - comply with the established balance ratios (liquidity ratio, etc.);
- - regularly submit financial statements prepared in compliance with all generally accepted accounting rules;
- - inform the bank about any deterioration in the financial situation and any adverse shifts;
- - provide the necessary insurance against accidents, fire, etc.;
- - regularly pay taxes and other obligations, which, in case of non-payment, may lead to seizure of property;
- - keep in order and ensure the necessary repairs of buildings and equipment;
- - provide bank employees with the opportunity to examine the company's accounting books in order to identify their identity with the data given in the reports;
- - inform the bank about any legal action taken against the company or planned.
The "Prohibiting Conditions" section indicates actions that should not be performed by the borrower:
- - not sell or pledge assets (except when it is required for the normal operation of the company);
- - do not buy stocks or bonds (except for obligations of the federal government);
- - not to pay remuneration to employees and dividends to shareholders above the stipulated maximum;
- - not to carry out option transactions with the company's shares or other transactions with deferred reimbursement of funds;
- - not to issue guarantees for the debts of other enterprises;
- - not to expand the system of participation in other enterprises;
- - not to participate in mergers and acquisitions;
- - not to make such changes in the governing bodies of the company that would affect its policy.
In the section "Non-fulfillment of the terms of the loan agreement" there are cases that should be interpreted as "non-fulfillment" or "violation" of the agreement:
- - non-payment of the next loan payment;
- - violation of one of the limiting or prohibiting conditions;
- - declaration of bankruptcy or liquidation of the case;
- - death of the borrower.
The section "Sanctions in case of violation of the terms of the agreements" lists the following:
- - requirement of immediate repayment of the entire remaining amount of the debt and interest on it;
- - requirement for additional security or guarantees;
- - the right of the bank to repay the remaining debt at the expense of the funds available on the current account of the borrower.
Not all loan agreements contain all of these sections and clauses, but some points - the characteristics of the loan, the obligations of the lender and the borrower, which is understood as a breach of the agreement - are necessarily present in the loan transaction document.
The agreement is signed by representatives of the bank and the company, and if necessary - by the guarantor. After that, a set of all documents is transferred to the client, and another set with accompanying documents goes to the bank's credit file. Then all company reports, correspondence, records of telephone conversations, etc. are filed into this dossier.