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PRINCIPLES OF LENDING AND LENDING BASICS (chap 1) - Coggle Diagram
PRINCIPLES OF LENDING AND LENDING BASICS (chap 1)
The principals of Good Lending
Three basic principals
Suitability of loan purpose
Profitability
Safety of loan
The five C’s (Now it is 6C or even 7C
Capacity
Capital
Character
Collateral
Conditions
Coverage or Control ( 6C or 7C)
Two popular rating agencies
Moody’s Aaa, Aa1, Baa1
Standard & Poor’s AAA, AA, BB
A framework for credit and leanding decisions
Lending – institution specific factors
The loan budget
Staff availability
The lending policy
Borrower – specific factors
External factors
Macroeconomics
Industry – specific
General law of the land
The reserve bank act of 1959
The Lending Process (10 steps)
Characteristics of Different Types of Advance/Loans
Traditional types of advance
Loans
Overdrafts
Modern types of advance businesses
Equipment leasing
Loan syndication
Factoring
Equity participation
Different Types of Borrowers
Business borrowers
Special type of borrower
Personal borrowers
Structuring of Advances
Debt covenants
Pricing issues
Security
Credit Culture
Value driven
Current-Profit driven
The fundamental principles
Market-Share driven
Designing an Advances Portfolios
Historical and recent loss experience
Standards based on maximum loss tolerance relative to capital
Risk-adjusted return on capital