Prospective borrower: An individual, organization or company having requirement of additional fund for utilization and have the ability to borrow the same is treated as potential borrower.
Selecting a prospective borrower: Not all banks are giving concentration on the
same area for all time to select a
borrower, but many of them focus on the same areas throughout the loan review process.
Following points to be taken into consideration in selecting a prospective
borrower-
a. Borrower (himself)
analysis
i. Man behind the business
to
be judged(Character, willingness)
ii. Management integrity, quality, and competencies;
iii. Majority share holders
& relation among the owners;
b. Industry Analysis:
i. Industry Situation
ii. Borrower‘s
position into the industry‘
iii. Production capacity
iv. Product distribution & marketing;
v. Market Competition
vi. Demand Supply situation
c. Supplier/Buyer
analysis:
Any concentration on
buyer
or supplier to be checked which may disrupt the borrower performance in future.
d. Historical
financial
analysis: An analysis of historical financial statement of
the
borrower to be conducted to ascertain the profitability, liquidity and solvency of
the
borrower.
e. Projected financial analysis: Borrower‘s projected financial to be analyzed
to check whether
borrower will be able to meet their
future debt obligation. f.
Account conduct: the historic performance in meeting repayment obligation
(Trade repayment, interest, principal, cheque repayment)
g.
Adherence to lending guideline: the credit facility to be proposed must
comply with the internal & regulatory guideline.
h. Loan Pricing: Total earning from
the client is
also important to sanction any loan.
i. Debt structure: the loan amount, tenor of the
proposed loan to be justified with the repayment ability of
the customer.
j. Security: The proposed loan to be secured enough so that loan can be fully
adjusted incase of liquidating the security.