LENDING & CREDIT FACILITIES

CREDIT EVALUATIONTOPIC OUTLINES:Principles of good lending7Cs- credit analysisLoan cycleCAMPARI modelCredit Checking- CTOS14 STAGES OF A LOAN CYCLE24 Stages of A Loan CycleBusiness DevelopmentCredit officer market for potential business opportunitiesCredit EvaluationPotential borrowers identifiedDo a credit analysis using a sound lending principlesQuantitativeQualitativeDocumentation processLegal aspect of securityRelationship incomeCapital Adequacy

34 Stages of A Loan CycleLoan AdministrationYearly basis reviewNew Offer Letter for any changes in terms & conditions

Loan RecoveryWinding upEnforcement of guaranteesReceivershipForeclosureTurnaround service

4Principles of Good Lending

PurposeAmountDurationRepaymentKnow-howMarket stabilityFinancial positionBanks positionSecurityMonitoring

5Principles of Good Lending

6Principles of Good Lending7Principles of Good Lending8Principles of Good Lending

97Cs in Credit Evaluation CharacterQuality that makes the borrower want to pay or intend to pay when a debt is dueSuch as: honesty, reasonableness, responsibility, correct attitude & virtuousCapacityLegal status to enter into a contractAge of majority (individual), incorporated (company), by-lawsBankrupt, wind-up order: no capacity107Cs in Credit Evaluation CapitalBorrowers money that he puts into a projectAmount reflects his commitment

ConditionEconomic condition, industry outlook & government policy

CollateralRefers to assets which may be charged or pledged to the bank as security for the loansCharge placement, mobility, value & disposable

117Cs in Credit Evaluation CapabilityThe ability of the borrower to repay loanRepresented by incomeIndividual: salary, wealth, qualifications, business acumen, health, industriousnessBusiness: technical skills, raw materials, business acumen, aggressiveness, judgmentCollectivityOverall position of recoveryGoing concern versus gone concern

12Commercial Lending Processes13Commercial Lending ProcessesLoan Approval Process

Approval criteria:Value of client relationshipFinancial statement benchmarksStrategic factorsQuality of managementRisk exposureIndustry & economic outlookOther factors14Commercial Lending ProcessesLoan Monitoring ProcessVariables:Timing of interest & principal repaymentsValue of assets held as securityCompliance with covenantsLoan Classification:CurrentEspecially mentionedSubstandardDoubtfulLossRestructuring Decisions

15Commercial Lending ProcessesLoan Termination Process

Accounting for loanCompleting repaymentWriting-off of part or whole of interest & principal

Relationship with clientContinueDiscontinue16Consumer Lending Process17Consumer Lending ProcessInitial contactPotential borrower approaches the lenderCredit applicationDetailed information clearly stated in the banks prescribed formReview of applicationVerification of information furnished against relevant documents, bodies or 3rd. parties

18Consumer Lending ProcessCredit appraisalCheck against the internal & external guidelinesStability of the borrowerHealthy repayment scheduleMonitoring & controlMonthly basisCheck for defaultersProper follow-up

19CAMPARI Model for Consumer Lending CharacterAbility to repayMargin of financePurposeAmountRepayment termsInsurance 20CAMPARI Model for Consumer Lending CharacterWillingness versus ability to payAbility to repayAdequate cash flow to meet repaymentMargin of financeBorrower must introduce a certain degree of commitmentPurposeMust be clearly defined & supported by relevant documents21CAMPARI Model for Consumer Lending AmountAmount of commitment the financial institution is prepared to risk on the applicantRepayment termsThe structure & terms of repaymentInsurance A pay-out source22CREDIT CHECKINGCTOS(Convergent Technologies Operating System)

CTOSCTOS collates factual information into an electronic media for easy, instantaneous, and accurate retrieval.

Core users of the CTOS system are bankers, financiers, traders, securities firms, insurance companies, credit and charge card companies and legal firms CTOSCTOS does not rank, rate or give any opinions as to the character, integrity, credit standing and worthiness, capability of individuals and companies.

That judgment and decision is wholly and exclusively in the credit grantors domain. CTOSWhat is acceptable to one organization may be unacceptable to another. In every case, it reflects the differing attitudes to risks, differing perception, motivations, business policies and strategies of the various credit grantors.CTOS FundamentalsBusiness extending credit must effectively deal with three fundamental credit processes.Evaluatea) Verify information about the customer b) Know if risk is within your acceptance levels

CTOS FundamentalsMonitor

"Customer's risk profile can change... anytime" Be Aware Of Changing Risks Track all customers, sponsors for adverse changes DAILY

CTOS FundamentalsRecover"You are in business for profits not losses" Turn Losses Back To Profits Successful recovery improves profits & cash flow Lower debt recovery costs Enhance debt recovery effectiveness

CTOS: Procedure for doing Self Check For Individual Download and complete Self Check Form - Individual Get copy of IC and have form verified by the Commissioner of Oaths You can come to CTOS office personally to conduct self-check

CTOS: Procedure for doing Self Check For Company Download Self Check Form - Company Complete the form and affix Company stamp Provide IC of Director doing the Self Check Provide certified copy of company Form 9 and Form 49 Provide Company Authorization Letter signed by Director to conduct company self-check.