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  • Term Loans: Assets and WC Margins

    Diunggah oleh

    Srinidhi Rangarajan
    26 tayangan11 halaman
    Term loans are a source of debt finance that is generally repayable in more than one year and less than ten years. They are used to finance the acquisition of fixed assets and working capital needs. Term loans carry fixed interest rates and have monthly or quarterly repayment schedules with a set maturity date. Credit appraisal involves an investigation by the bank to assess the commercial, financial, and technical viability of a proposed project before providing loans. It evaluates the customer's ability and capacity to repay the loan by considering factors like age, income, employment history, repayment capacity, and previous loans. The three C's of credit - character, capacity, and collateral - must be assessed. Financial evaluation sums up the credit appraisal

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    Term loans are a source of debt finance that is generally repayable in more than one year and less than ten years. They are used to finance the acquisition of fixed assets and working capital needs. Term loans carry fixed interest rates and have monthly or quarterly repayment schedules with a set maturity date. Credit appraisal involves an investigation by the bank to assess the commercial, financial, and technical viability of a proposed project before providing loans. It evaluates the customer's ability and capacity to repay the loan by considering factors like age, income, employment history, repayment capacity, and previous loans. The three C's of credit - character, capacity, and collateral - must be assessed. Financial evaluation sums up the credit appraisal

    Hak Cipta:

    Attribution Non-Commercial (BY-NC)
    Unduh sebagai PPT, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    26 tayangan11 halaman

    Term Loans: Assets and WC Margins

    Diunggah oleh

    Srinidhi Rangarajan
    Term loans are a source of debt finance that is generally repayable in more than one year and less than ten years. They are used to finance the acquisition of fixed assets and working capital needs. Term loans carry fixed interest rates and have monthly or quarterly repayment schedules with a set maturity date. Credit appraisal involves an investigation by the bank to assess the commercial, financial, and technical viability of a proposed project before providing loans. It evaluates the customer's ability and capacity to repay the loan by considering factors like age, income, employment history, repayment capacity, and previous loans. The three C's of credit - character, capacity, and collateral - must be assessed. Financial evaluation sums up the credit appraisal

    Hak Cipta:

    Attribution Non-Commercial (BY-NC)
    Unduh sebagai PPT, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    dari 11

    TERM LOANS

    Also referred as Term Finance, represents a source of debt finance, which is generally repayable in more than one year and less than ten years. Employed to finance acquisition of Fixed Assets and WC margins. Carry fixed interest rates, monthly or

    quarterly repayment schedules and a set


    maturity date
    1

    TERM LOAN
    Acquisition of New P &M, Expansion, Modernization, Technology up gradation; Debt swap

    SHORT TERM LOAN Repayable within 3 years MEDIUM TERM LOAN Repayable in more than 3 years and less than 6 years LONG TERM LOAN Repayable in more than 6 years 2

    WHAT IS CREDIT APPRAISAL?


    Credit appraisal means an investigation/assessment done by the bank prior before providing any loans & advances/project finance & also checks the commercial, financial & technical viability of the project proposed.

    Proper evaluation of the customer is preferred which measures the financial condition & ability to repay back the loan in future Credit appraisal is the process of appraising the credit worthiness of the loan applicant

    WHAT IS CREDIT APPRAISAL? (CONTD)


    Factors like: Age Income Number of dependents Nature of employment Continuity of employment Repayment capacity Previous loans, etc. are taken into account while appraising the credit worthiness of a person. 3 C of credit are must be kept in mind for lending funds: Character Capacity Collateral If any one of these are missing in the lending officer must question the viability of credit

    What to look at ?

    Credit Worthiness

    Cash Flows

    Risk

    Financial Evaluation
    This is the ultimate part of the evaluation process where all the things are summed up in the terms of money.

    The cash flows are estimated, the instalments periods are fixed, the interest rate is computed and the project is made bankable.

    Credit Worthiness
    Personality of the borrower

    Repayment capacity of the borrower

    Willingness to repay

    Management talents

    Results of economic activities

    FACTORS THAT BANKS CONSIDER Credit worthiness of the borrower Integrity/reputation Credit risk profile Sensitivity to economic and market developments Liquidity Solvency Profitability of business Resource efficiency
    8

    CREDIT DECISIONS
    Safety of loans is directly related basis on which decision to lend is taken type and quantum of credit to be provided terms and conditions of the loan Two-pronged approach Pre-Sanction appraisal To determine the bankability of each loan proposal Post-Sanction control To ensure proper documentation, followup and supervision
    9

    Concerned with measurement of risk(iness) of a loan proposal Financial Analysis past and projected Cash Flow Analysis Credit Rating Assessment of credit needs Income tax and other tax returns/ assessments Confidential reports from other banks and financial institutions Credit Report (CR) needs to be regularly updated Appraisal should reveal whether a loan proposal is a fair banking risk 10

    PRE-SANCTION CREDIT DECISIONSFINANCIAL APPRAISAL

    Financial Appraisal (Contd.)


    The objectives of Financial Appraisal: Assess credit risk profile of the borrower Stipulation of terms and conditions Assess utilization of credit facility Establish sound well defined credit granting criteria Ensure safety of bank funds Purpose of analysis of financial ratios Ascertaining overall financial position of a business organisation Interpretation of key information in the financial statements
    11

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