Answer One
The most important factors to be considered during appraisal of
project loan proposal are
as
follows:
1. Professional profile:
Evaluate the ability to manage the project that must have the experience, skills,
determination and
self-confidence necessary to successfully carry out the project.
2. Project's viability: It should have a business plan that is clear, structured and short, but
also covers all the elements of business. It needs to present few years
of financial projections as well as an analysis of market size, market potential and
positioning.
3. Financial strength: It will have to know the personal and business net worth, so bank can judge the ability to meet financial obligations. Bank will also look at
past credit history to gauge the future.
4. Collateral: Banks often also look for assets to secure a loan. The collateral ensures the safely lending to the customer in case of
bad-debt arises in future.
Answer Two
1. Borrower Analysis: Share holding, reputation, education, experience – success history, net worth, age etc.
2. Industry Analysis: Position, prospect,
Risk factors, share
in
the industry, strength, weakness etc.
3. Supplier/Buyer Risk Analysis
4. Demand Supply position
5. Technical/ Infrastructural feasibilities
6. Management Teams Competence
7. Seasonality of demand
8. Debt-Equity Ratio
9. Historical financial
analysis Earning, cash flow, leverage, profitability, etc.
10.Projected Financials Ability to debt repayment, debt service coverage ratio
11.Allied/ sister concern involved, other business
12.Pricing: Effective rate of return, Return on investment.
13.Loan structuring: Amount, tenor, interest rate, etc.
14.Security: Guarantee/s, Un-dated/
Post-dated cheque
with
IGPA, collateral security, etc.
15.Adherence to Bank’s credit policy & guidelines
16.Mitigating Factors i.e. risk factors
17.Environmental factor.
18.Employment generation and
contribution to the national economy.