The credit rating of a person or a company is a sound indicator of the stature of that person or company. A person or a company that had established a high credit rating receive invitations to avail of loans from lending companies instead of them seeking financial assistance. Borrowers with acceptable credit ratings could easily obtain new loans.
Among lending institutions, banks have the most reliable credit departments. Banks employ well-trained specialist to carry out the various lending procedures; a Credit Committee- consisting of senior officials- decides what to do with loan proposals. The Committee may require additional requirements or approve/disapprove the loan proposal.
Established banks send credit investigators to obtain relevant data from other banks, companies or person with whom the borrower had or likely had dealings. Court or police records are reviewed if necessary.
A Bank Appraiser will estimate the current market value of the properties offered as collateral by the borrower and determine if these are encumbered. The Appraiser also determines the value and encumbrances of other known properties of the borrower.
After the Credit Investigation and Appraisal reports are completed, a Project Analyst will study the reports to determine the borrower’s rating on: Character, Collateral and Credit Experience. He will prepare a projected financial performance with the infusion of the requested loan proceeds. If the study finds a good chance the business could generate sufficient income to repay the loan, the borrower’s character and credit handling are acceptable and the collateral’s value is sufficient to cover the loan in case of foreclosure, the Project Analyst will recommend the approval of the proposed loan.
The Credit Committee- consisting of The Loans Division Chief, the Accountant and the Manager-will approve or disapproved the loan proposal. If the loan proposal is approved, the properties submitted as securities for the loan will be registered as encumbered and the loan proceeds will be released after the completion of the loan agreement.