Lending organization

Credit policy and lending process.

Lending organization - activities to streamline all processes related to the movement of credit in time and space in accordance with the principles of lending. It involves solving two independent problems:

1) formation of the company’s credit policy, 2) organization of the credit process and its management.

Credit policy of the company (credit organization) - a system of measures aimed at establishing priorities for the development of credit relations, rational organization and management of the lending process to various categories of borrowers in order to ensure high profitability and minimize credit risk. Designed to determine the main priorities in establishing and developing credit relations with various categories of borrowers, to rationally organize relationships with them on a long-term and mutually beneficial basis + to determine the basic economic and legal framework for the implementation of credit transactions by business entities: forms of credit documents and methods of ensuring the fulfillment of loan obligations. The establishment of general approaches, standards and procedures for lending to specific categories of borrowers is the basis of the loan management process. Includes:

1) terms of credit (credit transactions, including the level of interest rates), 2) standards of creditworthiness, 3) security of loans (methods of ensuring the fulfillment of loan obligations, 4) measures to ensure repayment of the loan and collection policy (collection).

Terms of credit, credit transactions - a combination of established terms of the loan and the interest rate (discount level).

Interest rate level - the price of the loan, formed by the conditions of lending. This price can be defined as the costs that the firm will incur if it refuses to pay immediately (payment for goods at a discount), because then the buyer will pay more. The annual price of refusal to use the discount is the annual price of the loan:

(C/100%-C)x(365/T_k-T_c), where С is the amount of the discount in %, Т_к - term of the loan, T_с - duration of the discount.

The loan term in commercial lending is the period of time that the company gives customers to pay for the purchased goods (usually 30, 60, 90 days).

The company's determination of the terms of the loan depends on:

1) the level and rate of inflation, 2) the nature of industry competition, 3) existing market lending conditions, 4) the scale of sales, the level of profitability of sales and the overall profitability of the company, 5) the conditions for obtaining a commercial loan from suppliers, 6) the availability of equity capital required for financing, 7) the ratio of the company's accounts payable and receivable and the availability of bank lending.

Interest rate policy. It is influenced by general and particular factors.

Are common:

1. the ratio of supply and demand in the money market and the capital market

2.change in the official discount rate of the Central Bank

3. Level and rate of inflation

4. rates and conditions of the interbank credit market

Private:

1. the nature of the bank's deposit policy, the structure of the funds it raises (the resource base of the bank).

2. the amount of the bank's own funds

3.profitability of banking

4. term and amount of the loan

5.client's solvency

6.type of loan security

The principle of credit policy: Interest income must be higher than interest payments.

Credit standards - requirements for financial stability, which borrowers must have in order to obtain a loan. To establish them - credit risk assessment and determination of the probability of delay in payment of the loan or its non-payment. => methods of credit analysis.

Measures to ensure the return of the loan and the policy of collection of payments (collection) - a set of legal procedures and operations that companies and credit institutions use in relation to customers who have overdue debts (tightening measures for granting loans, increasing the interest rate).

Lending process. It is divided into several stages:

1. consideration of a loan application for a loan

2.assessment of the credit risk and creditworthiness of the borrower

3.choice of loan collateral

4. making a decision on the advisability of issuing a loan and its conditions

5. registration of a loan agreement or obligation and issuance of a loan

6. control over the fulfillment of the terms of the loan and its repayment

7.final repayment of the loan

Credit application. To obtain a loan, the following documents are required:

1.financial report, including the bank's balance sheet (shows the structure of assets) and profit and loss account for 1-3 years (information on income, expenses, net profit of the company)

2. cash flow report (shows how the company used resources, the time and amount of cash release, the formation of the need for additional financing)

3. interim (quarterly) financial reports (dynamics of changes in the company's need for resources, a detailed analysis of the company's financial position)

4. bank statements and certificates from the tax office (determining the presence/absence of tax arrears and accounts payable)

5. business plan (sources of loan repayment and tax payment).

The borrower also draws up an application for a loan - it contains information about the required loan.

Author: Shevchuk D.A.

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