Credit mgmt
Individual or Entrepreneurs (SME’s)
Steps
1.Formulate credit policy
2.Initiate credit
3.Evaluate credit & manage risk
4.Monitor & control credit
Goals
1.Assess & manage credit risk
2.Achieve target cashflows
Processes
1.Appraisal
2.Approval
3.Documentation
4.Administration
5.Disbursement
6.Monitor & ctrl indiv results
7.Monitor overall cred portfolio
8.Classification
9.Managing problem credits/recovery
Who may apply?
1.Working Capital(maintain)
2.Expansion Projects(growth)
3. Leasehold improvements
4.Acquisition of capital assets
Types of Borrowers
1.
2.Business orgztns reg w/ SEC (Partnrsp & corp)
Basic Consideration
1.Co op profitably last 3 yrs (track record)
2.Religous sector, charity, educational
institutions (deal with caution)
3.Lawyers, men in uniform, & politicians (PEP-
politically exposed persons)
4.Real estate sector (real estate bubble)
5.Borrowers w/ connection too high ranking
members of the bank (character loans)
Origination of Transaction
1.initiative of borrower (loan application)
2.initative of lender (aggressive marketing)
Documentary Requirements
Company Profile (commercial)
1.Background
2.Purpose of loan
3.Ownership structure/ percentage distribution
4.Management team/BoD & Exec Officers
5.Affiliates and other related companies
6.Company Business Operations
Security or Collateral
1. Hilights of properties / fixed assets
2.For real estate property(loc, size,
improvements, diff valuations)
3.For chattel or personal property (desc,
certificate of registration, official receipts,
others)
Financials
1. Hilights of financials
2.Vertical/horizontal analysis
3.Ratios & percentages
Profitability
Activity/Asset Efficiency
Liquidity
Solvency
Highlights of financial projections
Overall analysis
Future growth/ business prospects
Annexes/ Attachments (supporting documents)
MKTG Divison
Offer var products & services of the bank to
prospective clients
1.Solicit accts (new accts)
2.Probe(gather info)
3.Package (fit application)
4.Recommend account (endorse)
5.Close Transaction(documentation to release)
6. Service & monitor acct (collection &
repayment)
7.Cross selling
8. Repeat business
9. Conduct Remeddial / default management
Credit Criteria
1.Busienss track record (vs peers)
2.Key financial indicators
3.Target obligor risk grade (rating)
4. Terms & conditions
Credit Limit- based on credit strength
Credit Granting
1.Credit assessment
2.Structuring of credit transactions
3.Approval by management
4.Completion of legal document
5.Disbursement
Credit Review (credit verification)
Credit Department
Functions
1.Collection/ acquisition of info
2.Preparation & analysis of info
3.Monitoring of acct (terms & cond)
4.Maintenance of cred records (future use)
Credit Investigation Report (bkgd check/
verification)
1.Lead bank/creditor banks
2.Key officers/ stockholders of the companies
3.Affiliated companies
a.capacity & capital of client
b.client’s idenitity Real estate- construction, acquisition, expansion
/ improvement of real estate properties
both:
Credit Loan- 1 time; housing, car, salary,
a.credit dealings/ past experiences calamity, project loans
b.credit investigation report Credit Line- renewable- credit card, working
c.interview capital, bridge financing

Classifications of Credit Ordinary Terms

Term of Credit Personal, housing, calamity, education, loans

1.Short-term- less than 1 yr
2.Medium/ Intermediate term- 1-5yrs
3.Long term- more than 5 yrs
for renovation, car, refinancing
Project Financing
Fixed asset acquisition, construction proj,
specialized lending & gov’t funded proj

To accommodation of Risk Loan Syndication

Secured-collateral-backed 1.Lead syndicate

Hard –personal and real properties 2.Participants

Soft-Intangible property, warranty, working 3.Proponents

capital
Loan Agreement
Unsecured-granted merely on character of
borrower 1.commitment

As to purpose 2reference rate

Commercial-purchase of goods, productive, 3.prepayments

profitable 4.collateral
Agricultural-farm
5.affirmative covenant
Investment- capital goods 6.negative covenant
Consumer- consumption purposes 7.events of default
Speculative- making profit thru favorable price Mortgage trust Indenture-pooling debtor’s
change collateral
Export credit- cash isn’t paid on or b4 shipment Trustee- take care of proponent’s collateral
of goods out of country
Mortgage participation certificate- by trustee to
any proponent’s creditor

RCL Facilities

1.Working Cap Line / Loan Line/ PN Line

Aka Bridge Financing Facilities

Op Cycle- pd bet acquisition of inv & coll of cash

fr receivable

Cash cycle- pd bet cash disbursements and cash

collection

2. Domestic Bills Purch Line / DAUD Line

DAIF and DAUD

3.Import & Domestic Letter of Cred- Trust

Receipt (LC-TR) Line

-Letter of Cred- finance exports & imports ->

bank intervention

Trust Receipt Facility- importer get hold of

docu, release goods fr. Pier Consignor-
Consignee Rel

SBLC- issued by bank for satisfaction &

fulfillment of given obligation under spec.
agreement

4. Export Packaging Credit Line

5. Foreign Exchange Settlement Line

Spot r8- int r8/ exchange r8 currently in trading

mkt

Forward r8- r8 applicable to fin transaction that

takes place in the future

Forward contract- agreement of 2 parties giving

buyer obligation to purch an asset & seller an
obligation to sell asset @ an agreed upon price
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