This chapter discusses principles of corporate lending. It covers applying lending criteria, structuring loan proposals, importance of financial statements, and managing the loan portfolio. The document outlines key aspects of corporate lending including the purpose of lending, assessing borrowers using the 5 Cs and PARSER methods, product structures, required skills of loan officers, and lessons from experienced credit managers.
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Credit management is the process of granting credit , setting the term its granted on, recovering this credit when its due and ensuring compliance with company credit policy.
The difference in the rate of interest that a bank charges on the amount lent and the rate it pays to the depositors is technically called spread or interest rate spread.
This spread bank has to use to meet all its overheads and interest on deposit but also provide for NPA.
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Watch full video on YouTube -
https://youtu.be/f3VgVOgAUoE
Credit management is the process of granting credit , setting the term its granted on, recovering this credit when its due and ensuring compliance with company credit policy.
The difference in the rate of interest that a bank charges on the amount lent and the rate it pays to the depositors is technically called spread or interest rate spread.
This spread bank has to use to meet all its overheads and interest on deposit but also provide for NPA.
Thank You For Watching
Subscribe to DevTech Finance
Commercial credit analysis can introduce a lot of complexities into the banking organization: additional underwriting standards, new financial data to collect and interpret, complex relationships with multiple entities and commingled incomes, additional regulatory focus, etc.
Sageworks Senior Consultant Peter Brown covers some of the basics that come with credit analysis including what data to consider, how to analyze the data, when to introduce benchmarking and automation and other topics.
Topics include components of a credit policy, steps used in establishing a credit policy, how a credit policy is implemented, types of credit policies, components of a credit manual, etc.
Commercial credit analysis can introduce a lot of complexities into the banking organization: additional underwriting standards, new financial data to collect and interpret, complex relationships with multiple entities and commingled incomes, additional regulatory focus, etc.
Sageworks Senior Consultant Peter Brown covers some of the basics that come with credit analysis including what data to consider, how to analyze the data, when to introduce benchmarking and automation and other topics.
Topics include components of a credit policy, steps used in establishing a credit policy, how a credit policy is implemented, types of credit policies, components of a credit manual, etc.
Mortgage Pledge Hypothetication Lien Charge(1st and 2nd Charge) Fixed & float...Study Guide Pro
This PPT is for BMS and Banking student . It consist of following Terms with suitable example.
Mortgage
Pledge
Hypothetication
Lien
Charge(1st and 2nd Charge)
Fixed & floating charge
Pari passu
PlR
Margin money
Accounting 2 - Financial Accounting, Ch. 10 Reporting and Analyzing.pdffashiionbeutycare
Accounting 2 - Financial Accounting, Ch. 10: Reporting and Analyzing Liabilities : What factors
should management consider in determining if borrowing funds is a viable solution? In acquiring
funds to finance major projects, how should management choose from among the alternatives?
Solution
1) What factors should management consider in determining if borrowing funds is a viable
solution?
Answer: Following factors needs to be considered:
--Reason for borrowing - Why does the business require capital ? Expansion of business in the
same vertical or deleveraging to other business? or Is the capital required urgently or a part of
promoters equity can be slowly used for expansion eliminating debt need?
--Nature of cash flows, poor cash flows may result insolvency of a company
--Rates of interest to will determine the viability because high interest rates will discourage
management borrowing funds
--Impact of borrowing to the business, for example if business is seasonal then the short term
borrowing will be viable.
--Growth and expansion of the business also determine the viability of borrowing finances
-- Type of funding such as project term loan or private equity.Both have their advantages and
disadvantages
--Debt servicing is available on quarterly mode ?
2) In acquiring funds to finance major projects, how should management choose from among the
alternatives?
Answer: Choosing an appropriate source of to finance major projects can be a difficult and time-
consuming task. The important factors to consider when choosing methods of financing among
various alternative that aim at having an optimal capital structure are as follows:
--Repayment Terms: loans with shorter terms can require larger periodic payments wheras the
longer loans can build up a significant amount of interest over time . Thus the management need
to consider the periodic payment amount and how often you are required to pay
--Interest and Fee Structures: It is important the all costs are added associated with each
financing method before making a decision.
--Financing Requirements: Management should pursue financing from sources whose
requirements business meet in full. Common financing requirements include credit score
requirements and typical financial ratio tests, such as the interest coverage ratios or debt-to-
equity..
As per PTU B.Com Entrepreneurship Development Syllabus , Unit No. 2: Identification of Business Opportunities and tests of feasibility Project Management Feasibility and Viability analysis – Technical -Financial – Network – Appraisal and Evaluation – Project Report Preparation, Mobilizing resources for start-up. Basic start-up problems.
Capital One presents on lending opportunities at the Washington, DC Economic Partnership's (WDCEP) Entrepreneur Roadmap Starting a Franchise seminar (5/14/14).
Small Business Finance- Monica Kenney- IGNITE Conference Frost BankRandall Chase
Monica Kenney has over seventeen years of experience in the financial services industry. Currently, she
serves a Vice President and Commercial Banker at Frost Bank for the southern sector of Dallas. Her
responsibilities include investment activities, regional market growth support, community engagement
and portfolio management. She has held insurance and securities licenses.
Monica Kenney is an active member of her community and participates in the local Chambers of
Commerce, the Rotary, and the Lions Club. She also serves on the committees for several civic
organizations. Monica is a graduate of Leadership Southwest.
Monica Kenney is pursuing a Bachelor of Business Administration in Management degree.
Small Business Finance- What is needed from loan preparation, small business challenges, types of business loans, short term and long term financing and more.
Pinnacle Training Group: SME credit masterclass - Lending & financial analysi...George Staicu
A two days intensive masterclass on
SME lendng and financial analysis presented by George Staicu.
By the end of this course, participants will:
• Understand the nature of financial risk, how and why banks take risk,
how it is measured, and how it is applied to SME borrowers;
• Appreciate how "Tops Down" analysis and detailed financial and credit analysis of the borrower interrelate and impact SME borrowers;
• Know how to read, adjust and understand SME financial statements, and to apply that understanding to the objectives of their credit analysis of a borrower;
• Be able to determine the relationship between credit analysis and the type of facility to be recommended for SME borrowers, and the key issues in determining what documentation and security should support
that facility;
• Know what to do after the transaction has been approved, documented and drawn down.
Dear readers
@Top 10 Lesson learned from the Book “The Art of the Good Life”
1. Peak-end Rule:
You remember the high point and the end point of your holiday, but the rest is forgotten.
Remind to make them as sweet as possible.
2. Plans are nothing. Planning is everything.
A good life is not a stable state or condition.
The good life is only achieved through constant readjustment.
3. Inflexibility as a Stratagem
When it comes to important issues, flexibility isn’t an advantage – it’s a trap.
Use radical inflexibility to reach long-term goals that would be unrealizable if their behavior were more flexible.
4. Reality Doesn’t Care About Your Feelings
Accepting reality is easy when you like what you see, but you’ve got to accept it even when you don’t – especially when you don’t.
5. Counter-productivity
A basic rule of the good life is as follows: if it doesn’t genuinely contribute something, you can do without it.
Next time, try switching on your brain instead of reaching for the nearest gadget.
6. Do Nothing Wrong and the Right Thing Will Happen
So do your best to systematically eliminate the downside in your life – then you’ll have a real chance of achieving a good life.
There are old pilots and there are bold pilots, but there are no bold old pilots.
7. Why You Didn’t Earn Your Successes
Your success are fundamentally based on things over which you have no control whatsoever.
Stay humble. Remind yourself daily that everything you are, everything you have and can do, is the result of blind chance.
8. Don’t make your emotions your compass.
Because our emotions are so unreliable, a good rule of thumb is to take them less seriously – especially the negative ones.
9. THE Authenticity Trap
Restrict authenticity to keeping your promises and acting according to your principles.
The rest is nobody else’s business.
10. THE 5 Second No
Once Seneca said: “All those who summon you to themselves, turn you away from your own self.”
So give the five-second no a trial run. If you cannot say ‘Yes’ to something in five seconds, the answer is ‘No’.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
Honest Reviews of Tim Han LMA Course Program.pptxtimhan337
Personal development courses are widely available today, with each one promising life-changing outcomes. Tim Han’s Life Mastery Achievers (LMA) Course has drawn a lot of interest. In addition to offering my frank assessment of Success Insider’s LMA Course, this piece examines the course’s effects via a variety of Tim Han LMA course reviews and Success Insider comments.
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
This presentation provides a briefing on how to upload submissions and documents in Google Classroom. It was prepared as part of an orientation for new Sainik School in-service teacher trainees. As a training officer, my goal is to ensure that you are comfortable and proficient with this essential tool for managing assignments and fostering student engagement.
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
Acetabularia Information For Class 9 .docxvaibhavrinwa19
Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
3. Learning Objectives
• Apply the principles of corporate
lending
• Explain the application of lending
criteria
• List the contents of the loan
structuring proposal
3
4. Learning Objectives
• Discuss the importance of financial
information
• Explain the importance of managing
the loan portfolio
• Demonstrate awareness of available
loan products
4
5. Introduction
• Corporate lending is still more of an
art than a science
• Credit scoring techniques still being
developed, although a percentage
of loans will still go bad
• The lifecycle of loans highlights
differences between lending and
corporate entities
5
6. An Overview of
Corporate Lending
• Many issues in corporate lending
– High end of the portfolio mix
– Fiercely competitive
– Potential overexposure to segment
– Must carefully follow lending criteria
as principles of lending still apply
– When taking risks, occasional losses
are not only likely, but expected
6
7. The Purpose of
Corporate Lending
• Aim is to grow loan book in a way that
maximises shareholder wealth
– The Loan Portfolio
• Should contain a good mix of interest rates,
cashflows and maturities including:
– Diversification of asset mix, geographical
composition and loan types
– Expertise of staff in market segments, policy,
competition elements, environmental issues (e.g.
economic, demographic) and accept delegation
– Appropriate loans audit and review
7
8. The Principles of
Corporate Lending
• Lending is a risk/reward trade-off;
must manage those risks well
– Encourages corporations to include ‘hurt
money’ as first source of funding
8
9. The Principles of
Corporate Lending
– Three Overarching Principles
• Safety – Ability to repay the loan
• Suitability – Purpose and amount of loan,
hurt money and repayment schedule
• Profitability – Sufficient return on
investment
9
10. The Principles of
Corporate Lending
• Methods of lending assessment
– Two key methods applied, namely the 5 Cs
and PARSER approaches
10
11. The Principles of
Corporate Lending
– 5 Cs
• Character
– The character of a corporation very
important
– How was company set up and by whom?
– What is the reputation of the company and
its management?
– Does management have a good relationship
with its bankers and stakeholders?
11
12. The Principles of
Corporate Lending
• Capacity
– Lender should consider not just the
capacity to service the loan but also the
capacity to borrow
• Collateral
– Borrower must demonstrate commitment
to the project and also provide ways out
for lender
12
13. The Principles of
Corporate Lending
• Conditions
– Lender must consider internal and
external forces likely to affect the
project
• Capital
– Requires careful analysis of company’s
financials
13
14. The Principles of
Corporate Lending
– PARSER
• Personal Element
– Assesses the integrity, culture and ethics of the
firm and its board
• Amount Required
– Is amount sufficient for the proposed purpose?
• Repayment
– Should not be based solely on cashflows
– Need to consider trend analysis, detailed
cashflow projections and alternative repayment
options considering the turnover of the firm
14
15. The Principles of
Corporate Lending
• Security
– Assets supporting the loan representing a
second or third way out for the lender
• Expedience
– How does opportunity fit into the funding and
target market segments of the lender?
• Remuneration
– Does the loan fit well with the credit criteria
determined by the credit committee?
– How profitable is the loan given the interest
rate, application fees, commitment fees, etc?
15
16. The Principles of
Corporate Lending
• The Lending Cycle
– Covers the birth (loan approval) to
death (repayment) of the loan
– Contains three key elements
• 1 – Origination
• 2 – Funding
• 3 – Managing
– These elements may be further refined
16
17. The Principles of
Corporate Lending
• Identification/exploitation of target markets
• Success of origination depends on finding
clients and delivering the right products
• Evaluating proposals via credit analysis
• Successfully negotiating terms/conditions
• Advising loan applicant of success/failure
• Preparation and exchange of documents
• Disbursement of funds
• Loan administration and review
• Determining if payments received on time
17
18. The Principles of
Corporate Lending
– Should loan not perform
• Prior planning should provide strategies to
quickly handle adverse credit events
• If remedial actions fail, appropriate courses
of action must be determined
• Workout Situation
– Can alternatives lead to increased recovery
such as change repayment arrangements,
exercise of liens over property, etc?
• Write-off outstanding amounts
18
19. The Principles of
Corporate Lending
– Structuring the Loan Proposal
• It should address the following questions
– Is loan amount sufficient for task?
– Is cash available and repayment
identifiable?
– Is term of debt long (>12 months) or
short-term?
19
20. The Principles of
Corporate Lending
– If long-term, will cashflow projections
support repayment and does purpose
match term?
– If short-term, does asset conversion
cycle and working capital allow
repayment?
– Does the borrower have seasonal
funding requirements of is it ‘hard-core’
debt?
20
21. The Principles of
Corporate Lending
– Small Corporate Entities
• Market segmented according to turnover,
employee numbers, etc.
• Many have unaudited financial statements
and financials must be treated with caution
– Large Corporate Entities
• Different banking relationship due to direct
access to global capital markets
• Requires more innovative solutions to
enhance corporate financing activities
21
22. The Principles of
Corporate Lending
– Product Structure and Application
• Popular high-end products include
– Revolving Credit: Flexible facility with a
limit that may be drawn, repaid and used
again
– Standby Lines: Funds that may be drawn
down when required with guaranteed
access
22
23. The Principles of
Corporate Lending
– Revolving Underwriting Facilities:
Funds available on demand and
reinstated on repayment
– Syndicated Facilities: Mixture of
product offerings shared by multiple
lending firms
– Project Finance: Specific funding for
single large-scale projects
23
24. The Principles of
Corporate Lending
– Project Finance Characteristics
• Project is distinct financial entity
• Project often highly geared (75% debt)
• Loans linked directly to project’s assets
and cashflows
• Sponsor’s guarantees expire with project
• End-users and suppliers may provide credit
• Lender’s recourse limited to project’s assets
• Finance generally longer-term
24
25. Credit Rating Agencies
• Credit rating is a formal credit
opinion provided by rating agency
for financial markets
• Generally for large corporates and
sovereign borrowers
• Ratings used in conjunction with
other credit criteria
25
26. Skills Required of
the Loan Officer
• Appropriate skill set includes
• Understanding loan portfolio complexity
• Subjective and objective in risk assessment
• Sound credit administration and record-
keeping
• Strong focus on loan monitoring and credit
judgment
• Technologically competent
• Clear thinker who is good at early problem
recognition and decisive solution-finding
26
27. The Importance of
Financial Statements
• Accounting, as with lending, is
something of an art
– Behind the numbers lie key questions
• Are financial statements and cashflow
projections reliable?
• Are cashflows sufficient to sustain
operations and ultimately repay debt?
• Will cashflows allow repayments to occur
when required under loan agreement?
27
28. Managing the Loan Portfolio
• What can go wrong?
• 30% of bad loans were unsound when loan
made – facts missed or analysis was faulty
• Much greater risk of errors in loan approval
process than fraud
• Risks are
– External: Changes to regulations/legislation,
technological, globalisation, economic, etc.
– Internal: Poor planning, organisation, profit
planning/cost control and resource management
28
29. Advice from the Past
• What are some of the key lessons
from experienced credit managers?
• Always try to work in a team for credit
decisions
• Allow sufficient time for reasoned decisions
• Verify ALL facts and figures
• Segregate the selling and approval of loans
• Be firm with the client and don’t be forced
into bad decisions
29
30. Advice from the Past
• Never promise what you cannot deliver
• Always consider client’s quantitative AND
qualitative aspects
• Volume is not necessarily profit. The client
must also add to profitability
• The purpose of the loan should also indicate
the repayment ability
• Visiting client’s firms adds to your
understanding and allows business creation
30
31. Advice from the Past
• Record all relevant facts as soon as
possible, and not from memory, as files
may become evidence
• Try to confine client dealings to
professional matters only
• Timely and careful gathering of information
• Be proactive, not lazy and reactive
• All loans should provide at least two ways
out – cashflows and security
31