DETERMINANT OF BANK LENDING TO THE MANUFACTURING

SECTOR
Meon1ng o] bonK 1end1ng
A siiuaiion wIcrc diffcrcni forms of lanl lcnding sucI as lilaicral,
clul, and syndicaicd loans commiiicd or uncommiiicd, rcvolving
faciliiics and laclsios or siandlys. Trcasurcrs also Iavc
rcsonsililiiy for iIc loan icrms and condiiions, covcnanis, sccuriiy
wIciIcr sulordinaicd or unsulordinaicd and iIc ncgoiiaiions and
rclaiionsIi managcmcni wiiI lcndcrs.
DetermInant OI Bank LendIng To Tbe ManuIacturIng Sector
O CoIIateraI:
TIc manufaciuring comany musi osscss adcquaic nci
woriI or own cnougI qualiiy asscis io rovidc adcquaic
suori for iIc loan? TIc loan officcr is ariicularly scnsiiivc
io sucI fcaiurcs as iIc agc, condiiion, and dcgrcc of
sccializaiion of iIc manufaciurcr's asscis.
O !erIectIng tbe Bank's CIaIms to CoIIateraI:
anl musi Iavc immcdiaic acccss io iIc collaicral or can
acquirc iiilc io iIc rocriy involvcd if iIc loan agrccmcni is
dcfaulicd.
O !reparIng a Loan Agreement:
Oncc iIc loan and iIc rooscd collaicral arc saiisficd, iIc
noic and oiIcr documcnis iIai malc u a loan agrccmcni arc
rcarcd and arc signcd.
O CondItIons:
TIc loan officcr and crcdii analysi musi lc awarc of rcccni ircnds
in iIc manufaciurcr's linc of worl or indusiry and Iow cIanging
cconomic condtons migIi affcci iIc loan. To asscss indusiry and
cconomic condiiions, mosi lanls mainiain filcs of informaiion-
ncwsacr cliings, magazinc ariiclcs, and rcscarcI rcoris-on iIc
indusirics rcrcscnicd ly iIcir major lorrowing cusiomcrs.
O ControI:
Conirol ccnicrs on sucI qucsiions as wIciIcr cIangcs in law
and rcgulaiion could advcrscly affcci iIc lorrowcr and
wIciIcr iIc loan rcqucsi mccis iIc lanl's and iIc rcgulaiory
auiIoriiics' siandards for loan qualiiy.

O inancial Siaicmcnis and Documcniaiion nccdcd for Loan
Evaluaiion, including. comlcic financial siaicmcnis and,
loard of dircciors' rcsoluiions auiIorizing iIc ncgoiiaiion of a
loan wiiI iIc lanl.
O Oncc iIc loan and iIc rooscd collaicral arc saiisficd, iIc
noic and oiIcr documcnis iIai malc u a loan agrccmcni arc
rcarcd and arc signcd ly all ariics io iIc agrccmcni.
O TIc ncw agrccmcni will lc moniiorcd coniinuously io cnsurc
iIai iIc icrms of iIc loan arc lcing followcd and iIai all
rcquircd aymcnis of rincial and/or inicrcsi arc lcing madc
as romiscd.
O or largcr manufaciuring crcdiis, iIc loan officcr will visii iIc
cusiomcr's lusincss criodically io cIccl on iIc firm's
rogrcss and io scc wIai oiIcr scrviccs iIc cusiomcr may
nccd.
O TIc manufaciuring sccior of sucI couniry musi lc
ccdtuotI.
O TIc loan agrccmcni lc rocrly siruciurcd and documcnicd
so iIai iIc lanl and iIc manufaciuring scciors arc
adcquaicly roiccicd and Iavc a IigI rolaliliiy of lcing allc
io scrvicc iIc loan wiiIoui cccssivc sirain?
O TIc crcdii analysis musi lc uscd io dcicrminc wIciIcr iIc
manufaciuring sccior Ias sufficicni casI flows and laclu
asscis io rcay loans.