List down the minimum eligibility criteria to be fulfilled by borrower to obtain loan

 1. Credit-worthiness: These will be treated on behalf of applicant‘s credit

history, capacity to repay, collateral value as eligibility criteria.

2. Business and Credit history: The eligibility may be judged by business track records and also qualifying for the different types of credit history like type of credit facility, credit limit, repayment records, etc.

3. Working capital: The present working capital may be considered that can be thought of as cash at hand and bank.

4. Collateral: Collateral securities which are assets will be evaluated as secured

assets and pledge or hypothecation of inventory.

5. Keen money management skills: This includes a solid cash flow, the ability to live, and skills of keeping accurate and timely financial records.

6. Earning power: The earnings of borrower to be given out as loan are some of the determining factors in granting the loans.

7. Ability to repay: The borrower should have to ability to repay the loans from

his business and personal income.

8. Experience and character: The borrower should have experience in business to run that should have business skills and managerial experience.

In selecting a borrower , it is perfectly made , ― loan cannot be turned into bad elaborate your comments

What do you mean by a prospective borrower? In selecting a prospective borrower, what are the points to be taken into consideration

 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.